<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 24, 1997
REGISTRATION NO. 333-22923
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
INFORMATION MANAGEMENT ASSOCIATES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
CONNECTICUT 7372 06-1289928
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL CLASSIFICATION IDENTIFICATION NUMBER)
INCORPORATION OR CODE NUMBER)
ORGANIZATION)
----------------
ONE CORPORATE DRIVE, SUITE 414
SHELTON, CONNECTICUT 06484
(203) 925-6800
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
ALBERT R. SUBBLOIE, JR.
PRESIDENT AND CHIEF EXECUTIVE OFFICER INFORMATION MANAGEMENT ASSOCIATES, INC.
ONE CORPORATE DRIVE, SUITE 414 SHELTON, CONNECTICUT 06484 (203) 925-6800 (203)
925-1170 (FACSIMILE)
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPIES TO:
THOMAS L. FAIRFIELD, ESQ. KEITH F. HIGGINS, ESQ.
LEBOEUF, LAMB, GREENE & MACRAE, L.L.P. ROPES & GRAY
GOODWIN SQUARE, 225 ASYLUM STREET ONE INTERNATIONAL PLACE
HARTFORD, CONNECTICUT 06103 BOSTON, MASSACHUSETTS 02110
(860) 293-3500 (617) 951-7000
(860) 293-3555 (FACSIMILE) (617) 951-7050 (FACSIMILE)
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF ANY OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
MARCH 24, 1997
4,500,000 Shares
[LOGO OF IMA APPEARS HERE]
Common Stock
--------
Of the 4,500,000 shares of Common Stock offered hereby, 2,625,000 shares are
being sold by Information Management Associates, Inc. (the "Company") and
1,875,000 shares are being sold by certain selling shareholders (the "Selling
Shareholders"). The Company will not receive any of the proceeds from the sale
of shares by the Selling Shareholders. See "Principal and Selling
Shareholders." Prior to this offering, there has been no public market for the
Common Stock. The Company has applied to have the Common Stock approved for
quotation on the Nasdaq National Market under the symbol "IMAA." It is
currently estimated that the initial public offering price will be between $
and $ per share. See "Underwriting" for a discussion of the factors to be
considered in determining the initial public offering price.
--------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 6.
--------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
================================================================================================
PRICE UNDERWRITING PROCEEDS PROCEEDS TO
TO DISCOUNTS AND TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) SHAREHOLDERS(2)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share....................... $ $ $ $
- ------------------------------------------------------------------------------------------------
Total(3)........................ $ $ $ $
================================================================================================
</TABLE>
(1) The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses of the offering payable by the Company, estimated
to be $1,000,000.
(3) Certain Selling Shareholders have granted the Underwriters a 30-day option
to purchase up to 675,000 additional shares of Common Stock solely to cover
over-allotments, if any. To the extent the option is exercised, the
Underwriters will offer the additional shares at the Price to Public shown
above. If the option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to Selling Shareholders
will be $ , $ and $ , respectively. See "Underwriting."
--------
The shares of Common Stock are offered by the several Underwriters named
herein, subject to prior sale, when, as and if delivered to and accepted by
them, and subject to their right to reject orders in whole or in part. It is
expected that delivery of certificates for such shares of Common Stock will be
made at the offices of Alex. Brown & Sons Incorporated, Baltimore, Maryland, on
or about , 1997.
Alex. Brown & Sons
INCORPORATED
Robertson, Stephens & Company
SoundView Financial Group, Inc.
THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE>
[DIAGRAM/FLOWCHART OF INFORMATION MANAGEMENT ASSOCIATES, INC.'S
MARKETPLACE,APPLICATIONS AND TECHNOLOGY TO BE INSERTED]
------------
As used in this Prospectus, the term the "Company" refers to Information
Management Associates, Inc. and its wholly-owned subsidiary, Information
Management Associates Limited, unless the context otherwise requires. EDGE(R)
and TeleBusiness(R) are registered trademarks of the Company. This Prospectus
also includes tradenames, trademarks and registered trademarks of companies
other than the Company.
The Company intends to furnish its shareholders with annual reports
containing audited consolidated financial statements and an opinion thereon
expressed by its independent auditors, and with quarterly reports for the
first three quarters of each fiscal year containing unaudited summary
financial information.
------------
Certain persons participating in this offering may engage in transactions
that stabilize, maintain or otherwise affect the price of the Common Stock,
including over-allotment, stabilizing and short-covering transactions and the
imposition of penalty bids. For a description of these activities, see
"Underwriting."
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements, including the Notes
thereto, appearing elsewhere in this Prospectus. Prospective investors should
consider carefully the information discussed under "Risk Factors."
THE COMPANY
The Company develops, markets and supports customer interaction software
designed to increase the productivity and revenue-generating capabilities of
mid-size to large-scale telephone call centers. The Company's EDGE TeleBusiness
software ("EDGE") is a suite of applications and tools that enable businesses
to automate telebusiness activities (telemarketing, telesales, account
management, customer service and customer support) on an enterprise-wide basis.
The Company complements its EDGE products by offering its clients professional
consulting, technical support and maintenance services. EDGE has been licensed
to over 175 customers in a range of industries, including teleservices
outsourcing, telecommunications and financial services. Significant customers
include APAC Teleservices, Inc., AT&T Corp., Belgacom, S.A., Bose Corporation,
SITEL Corporation, Sprint PCS, United Parcel Service General Services Co.,
Wells Fargo Bank, N.A. and ING Bank, N.V.
Businesses are increasingly using telephony-based customer interaction, from
initial marketing and sales activities to post-sales service and support, as a
key competitive component to increase sales, reduce costs, enhance customer
service, distinguish products and services and receive and process valuable
customer information. Telebusiness activities are generally conducted through
call centers that are typically designed and equipped with special
telecommunications and computer hardware and software. Businesses are seeking
call center customer interaction solutions which are based on an open
client/server architecture, provide broad functionality, can be deployed and
updated rapidly throughout the organization, are scalable to meet the needs of
growing businesses, and seamlessly integrate and leverage telephony technology.
Additionally, the Company believes that call center customer interaction
solutions will be required to support and incorporate emerging customer
interaction channels and computing platforms such as the Internet and
corporate-based intranets as such technologies become more commercially
significant. In a May 1996 research report, the Aberdeen Group, Inc., an
independent market research firm, projected that the market for customer
support software will grow at an average annual compounded rate of 40%, from
$260 million in 1995 to $1.0 billion in 1999.
The Company's objective is to become the global leader in providing flexible,
technologically advanced, feature-rich customer interaction software and
services to mid-size and large-scale call centers. To achieve this objective,
the Company is pursuing the following strategies: targeting specific industries
by utilizing its knowledge of the business processes and requirements of those
industries; extending its call center technology leadership by continuing its
product development efforts; broadening its international distribution network
including its indirect distribution channels and direct sales force; increasing
revenues generated from its existing client relationships; leveraging strategic
relationships with leading systems integration and technology companies; and
embracing Internet technology to expand the scope of its customer interaction
solutions.
The Company's EDGE products are designed to provide superior functionality,
flexibility, integration, scalability and speed of deployment. Based upon an
open systems software architecture, EDGE supports multiple hardware platforms,
operating environments, database management systems, network topologies,
desktop standards, and legacy system and computer-telephony middleware. The
Company's products provide call center agents with real-time data and guidance
needed to manage increasingly complex
3
<PAGE>
processes for selling products and servicing customers. For example, EDGE
offers scripting to support order-taking, cross-selling and up-selling, enables
agents to track and resolve customer service problems and facilitates the
collection of valuable customer information that can be disseminated on an
enterprise-wide basis. The Company's professional consulting, technical support
and maintenance services include application development, systems integration,
systems and database design and construction and software training. The Company
believes that these services significantly differentiate the Company from its
competitors and complement its EDGE products to provide a total solution for
mid-size and large-scale call centers.
The Company markets its software and services in the United States through a
direct sales organization. The Company also works closely with strategic
consulting and systems integration companies such as Deloitte & Touche LLP,
Ernst & Young LLP, International Business Machines Corporation ("IBM") and A.T.
Kearney, Inc., a subsidiary of Electronic Data Systems Corp. ("A.T. Kearney"),
to increase market awareness and acceptance of the Company's products. The
Company markets its software internationally in Europe, the Pacific Rim,
Canada, Mexico and Latin America through remarketing and distribution
relationships which it supplements with a direct sales force in certain
regions.
Until September 1996, the Company developed, marketed and supported a
telemarketing and telesales automation software application called Telemar
which runs on the IBM AS/400 platform. Due to the substantial growth in EDGE
software license fees and client/server open system software market
opportunities, the Company elected to focus exclusively on its EDGE products
and sold Telemar and certain related assets and liabilities on September 1,
1996.
The Company was incorporated in Connecticut in 1990. The Company's principal
executive office is located at One Corporate Drive, Suite 414, Shelton,
Connecticut 06484, and its telephone number is (203) 925-6800.
THE OFFERING
<TABLE>
<C> <S>
Common Stock offered by the Company............... 2,625,000 shares
Common Stock offered by the Selling Shareholders.. 1,875,000 shares
Common Stock to be outstanding after the offering. 8,900,538 shares (1)
Use of proceeds................................... For repayment of
indebtedness, working
capital and other general
corporate purposes. See
"Use of Proceeds."
Proposed Nasdaq National Market symbol............ IMAA
</TABLE>
- --------
(1) Based upon the number of shares of Common Stock outstanding as of January
31, 1997. The number of shares outstanding excludes (i) 1,509,235 shares of
Common Stock issuable upon the exercise of outstanding stock options at a
weighted average exercise price of $5.02 per share and (ii) 6,750 shares of
Common Stock issuable upon the exercise of outstanding warrants at an
exercise price of $4.89 per share. See "Management--Stock Option Plans" and
Note 9 of Notes to Consolidated Financial Statements.
4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except per share data)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1992 1993 1994 1995 1996
------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA (1):
Revenues:
EDGE revenues:
License fees..................... $2,125 $ 5,550 $ 4,703 $ 8,368 $12,180
Services and maintenance......... 752 2,209 7,872 10,342 11,643
------ ------- ------- ------- -------
Total EDGE revenues............. 2,877 7,759 12,575 18,710 23,823
------ ------- ------- ------- -------
Telemar revenues:
License fees..................... 3,636 1,916 2,690 2,457 842
Services and maintenance......... 2,652 3,276 3,087 2,642 1,612
------ ------- ------- ------- -------
Total Telemar revenues.......... 6,288 5,192 5,777 5,099 2,454
------ ------- ------- ------- -------
Total revenues................. 9,165 12,951 18,352 23,809 26,277
Operating income (loss)........... (58) (2,462) (3,034) (2,586) 62
Net loss.......................... (293) (2,955) (4,083) (3,786) (1,047)
Pro forma net loss per share (2).. $ (0.17)
Pro forma shares used in net loss
per share calculation (2)........ 6,007
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
------------------------
ACTUAL AS ADJUSTED(3)
-------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................. $ 3,073 $24,113
Working capital....................................... 1,210 27,676
Total assets.......................................... 17,281 37,749
Short-term debt....................................... 5,444 251
Long-term debt........................................ 2,803 386
Senior redeemable convertible preferred stock......... 9,431 --
Redeemable common stock warrants...................... 2,865 --
Total shareholders' equity (deficit).................. (10,906) 29,701
</TABLE>
- --------
(1) On September 1, 1996, the Company sold Telemar and certain related assets
and liabilities. As a result, the Summary Consolidated Financial
Information does not include any Telemar revenues or expenses after this
date.
(2) Computed as described in Note 2 of Notes to Consolidated Financial
Statements.
(3) Adjusted to give effect to the receipt and application of the estimated net
proceeds of this offering based on an assumed initial public offering price
of $12.00 per share. See "Use of Proceeds."
------------
Except as otherwise indicated, all information contained in this Prospectus
(i) has been adjusted to give effect to a 2.25-for-1 split of the Common Stock,
no par value (the "Common Stock"), to be effected prior to the closing of this
offering; (ii) reflects the conversion of all outstanding shares of the
Company's Series A and Series B Senior Convertible Preferred Stock
(collectively, the "Convertible Preferred Stock") into an aggregate of
1,532,161 shares of Common Stock upon the closing of this offering; (iii)
reflects the filing of an Amended and Restated Certificate of Incorporation
(the "Certificate of Incorporation") upon the closing of this offering to
eliminate the Convertible Preferred Stock; (iv) reflects the issuance of 34,690
shares of Common Stock pursuant to the exercise of stock options upon the
closing of this offering; (v) reflects the issuance of 415,308 shares of Common
Stock pursuant to a cashless exercise of warrants upon the closing of this
offering; and (vi) assumes no exercise of the Underwriters' over-allotment
option. See "Description of Capital Stock" and Notes 7, 8 and 9 of Notes to
Consolidated Financial Statements.
5
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, prospective
investors should carefully consider the following risk factors in evaluating
the Company and its business before purchasing the shares of Common Stock
offered by this Prospectus. This Prospectus contains forward-looking
statements and the Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of numerous
factors, including those set forth in the following risk factors, and
elsewhere in this Prospectus.
History of Operating Losses; Uncertainty of Future Operating Results. The
Company has incurred significant net operating losses in each of 1992, 1993,
1994 and 1995 and had an accumulated deficit of $16.7 million as of December
31, 1996. The Company's operating history makes the prediction of future
operating results difficult or impossible. Accordingly, although the Company
has recently experienced revenue growth, such growth should not be considered
indicative of future revenue growth, if any, or of future operating results.
There can be no assurance that any of the Company's business strategies will
be successful or that the Company will be able to achieve or sustain
profitability on a quarterly or annual basis in the future. See "Selected
Consolidated Financial Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Fluctuations in Quarterly Performance. The Company's quarterly operating
results have varied significantly in the past and may vary significantly in
the future depending upon a number of factors, many of which are beyond the
Company's control. These factors include, among others, the ability of the
Company to develop, introduce and market new and enhanced versions of its
products on a timely basis; the demand for the Company's products; the lengthy
sales cycle for full implementation of its products; the size, timing and
contractual terms of significant orders; the timing and significance of
product enhancements and new product announcements by the Company or its
competitors; changes in the Company's business strategies; budgeting cycles of
its potential customers; customer order deferrals in anticipation of
enhancements or new products; changes in the mix of products and services
sold; changes in the amount of revenue attributable to domestic and
international sales; changes in foreign currency exchange rates; the level of
product and price competition; the cancellations or non-renewals of licenses
or maintenance agreements; investments to develop marketing and distribution
channels; or changes in the level of operating expenses. The Company is
dependent upon obtaining orders in any given quarter for delivery in that
quarter in order to achieve its quarterly revenue objectives. The timing of
revenue recognition can be affected by many factors, including the timing of
contract execution and delivery, post-delivery obligations and customer
acceptance. See "--Lengthy Sales and Implementation Cycles; Post-Delivery
Obligations." A significant portion of the Company's revenues in any quarter
are typically derived from non-recurring, large license fees received from a
relatively small number of customers. Although particular customers may vary
from quarter to quarter, the Company expects that sales to a limited number of
customers will continue to account for a significant percentage of its revenue
in any quarter for the foreseeable future. Therefore, the loss, deferral or
cancellation of a contract, or a failure of a customer to honor its
contractual obligations (and for which the Company's reserves and allowances
may be inadequate), could have a significant impact on the Company's operating
results in a particular quarter. Conversely, to the extent that significant
sales occur earlier than expected, operating results for subsequent quarters
may be adversely affected. In addition, the Company's business has experienced
and is expected to continue to experience seasonality, with stronger demand
during the quarters ending in June and December than during the quarters
ending in March and September, and a substantial portion of orders being
received in the last month or weeks of any given quarter.
Due to the foregoing factors, quarterly revenues and operating results are
not predictable with any significant degree of accuracy. The Company's expense
levels are based in significant part on the Company's expectations as to
future revenues and are therefore relatively fixed for the short term. If
revenue levels are below expectations, the Company's business, operating
results, and financial condition
6
<PAGE>
are likely to be materially adversely affected. As a result, the Company
believes that period-to-period comparisons of its results of operations are
not necessarily meaningful and should not be relied upon as indications of
future performance. There can be no assurance that the Company will be able to
achieve or sustain profitability on a quarterly or annual basis in the future.
Due to all of the foregoing factors, it is likely that in some future quarter
the Company's total revenues or operating results will be below the
expectations of public market analysts and investors. In such event, or in the
event that adverse conditions prevail or are perceived to prevail generally or
with respect to the Company's business, the price of the Common Stock would
likely be materially adversely affected. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Selected Quarterly
Operating Results."
Product Concentration. Substantially all of the Company's revenues are
attributable to the licensing of EDGE and the provision of professional
consulting, technical support and maintenance services relating to EDGE. The
Company currently expects that the licensing of EDGE products and the
provision of such related services will account for significantly all of its
revenues for the foreseeable future. As a result, factors adversely affecting
the pricing of or demand for EDGE products and services, such as competition
or technological changes, could have a material adverse effect on the
Company's business, operating results and financial condition. The Company's
future financial performance will depend, in significant part, on the
continued market acceptance of its EDGE products and the successful
development, introduction and client acceptance of new and enhanced versions
of EDGE products. There can be no assurance that the Company will continue to
be successful in developing and marketing EDGE. See "--Competition," "--
Dependence on Proprietary Technology" and "Business--Products and Services,"
"Business--Sales and Marketing," "Business--Product Development" and
"Business--Competition."
Lengthy Sales and Implementation Cycles; Post-Delivery Obligations. The
licensing and implementation of the Company's products generally involves a
significant commitment of resources by customers and often requires the
Company to provide a significant level of education to prospective customers
regarding the use of the Company's products. As a result, the Company's sales
process is often subject to delays associated with lengthy customer approval
processes that typically accompany significant capital expenditures. For these
and other reasons, the sales cycle associated with the license of the
Company's products is often lengthy and may be subject to a number of
significant delays over which the Company has little or no control. In
addition, the time required to implement the Company's products can vary
significantly with the needs of its customers and generally extends for
several months or, for larger, more complex implementations, multiple
quarters.
Depending on the contract terms and conditions, licensing fees are
recognized upon delivery of the product if no customer acceptance conditions
or significant post-delivery obligations remain and collection of the
resulting receivable is probable. However, if post-delivery obligations exist,
or if the product is subject to customer acceptance, revenue will be deferred
until no significant Company obligations exist or acceptance has occurred.
When the Company has provided consulting services to implement certain larger
projects, in the past some customers have failed to honor their contractual
obligations by delaying payments of a portion of license fees until
implementation was complete and in some cases have disputed the consulting
fees charged for implementation. There can be no assurance that the Company
will not experience delays, cancellations or disputes regarding payment in the
future, which could have a material adverse effect on the Company's business,
operating results and financial condition and cause its quarterly operating
results to vary significantly in the future. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business--
Sales and Marketing."
Dependence on Proprietary Technology. The Company's success and ability to
compete is dependent in part upon proprietary technology. The Company relies
primarily on a combination of copyright and trademark laws, trade secrets,
nondisclosure agreements and technical measures to protect its proprietary
rights. The Company typically enters into confidentiality or license
agreements with its
7
<PAGE>
employees, distributors, clients and potential clients, and limits access to
and distribution of its software, documentation and other proprietary
information. There can be no assurance that these steps will be adequate to
deter misappropriation or independent third-party development of its
technology or to prevent an unauthorized third party from obtaining or using
information that the Company regards as proprietary. In addition, the laws of
some foreign countries do not protect or enforce proprietary rights to the
same extent as do the laws of the United States. Policing unauthorized use of
the Company's products is difficult and, while the Company is unable to
determine the extent to which piracy of its software products exists, software
piracy can be expected to be a persistent problem. There can be no assurance
that the Company's means of protecting its proprietary rights will be adequate
or that the Company's competitors will not independently develop similar
technology. Although the Company believes that its products and technology do
not infringe on any existing proprietary rights of others, the use of patents
to protect software has increased, and there can be no assurance that third
parties will not assert infringement claims in the future or, if infringement
claims are asserted, that such claims will be resolved in the Company's favor.
The Company expects that software product developers will increasingly be
subject to infringement claims as the number of products and competitors in
the Company's industry segment grows and the functionality of products in
different industry segments overlaps. Any such claims, with or without merit,
could be time-consuming, result in costly litigation, cause product shipment
delays or require the Company to enter into royalty or licensing agreements.
Such royalty or licensing agreements, if required, may not be available on
terms favorable to the Company or at all, which could have a material adverse
effect on the Company's business, operating results and financial condition.
Any infringement claims resolved against the Company could have a material
adverse effect upon the Company's business, operating results and financial
condition. In addition, litigation may be necessary in the future to protect
the Company's trade secrets or other intellectual property rights, or to
determine the validity and scope of the proprietary rights of others. Such
litigation could result in substantial costs and diversion of resources and
could have a material adverse effect on the Company's business, operating
results and financial condition. See "Business--Intellectual Property and
Other Proprietary Rights."
The Company has entered into agreements with a small number of its customers
requiring the Company to place its source code in escrow. These escrow
agreements typically provide that customers have a limited, non-exclusive
right to use such code in the event that there is a bankruptcy proceeding by
or against the Company, if the Company ceases to do business or if the Company
fails to meet its support obligations. The escrow agreements, and any that the
Company may enter into in the future, may increase the possibility of
misappropriation by third parties. In addition, the Company utilizes a third-
party contractor for selected product development projects which may also
increase the possibility of misappropriation by third parties.
Dependence on Indirect Marketing and Distribution Channels; Potential
Conflicts. The Company maintains co-marketing relationships with consulting
and systems integration companies to expand the visibility of its products in
the United States and internationally and distributes its products outside the
United States through remarketers and distributors. Such co-marketers,
remarketers and distributors are not under the direct control of the Company
and install and support the product lines of a number of companies. In
addition, the co-marketers, remarketers and distributors are not subject to
any minimum purchase requirements and can discontinue marketing the Company's
products at any time without cause. The consulting and systems integration
companies may also sell or co-market potentially competitive products.
Accordingly, the Company must compete for the focus and sales efforts of these
third party entities. Additionally, selling through indirect channels may
limit the Company's contacts with its customers, potentially hindering its
ability to accurately forecast sales and revenue, evaluate customer
satisfaction and recognize emerging customer requirements. There can be no
assurance that co-marketers, remarketers and distributors will continue to
distribute or recommend the Company's products or do so successfully, or that
the Company will succeed in increasing the use of these indirect channels
profitably. There can also be no assurance that one or more of these companies
will not begin to market products in competition with the Company. The
termination of one or more of these relationships or the failure of
8
<PAGE>
the Company to establish additional relationships could adversely affect the
Company's business, operating results and financial condition. See "Business--
Sales and Marketing."
The Company's strategy of marketing its products directly to end-users and
indirectly through remarketers and distributors may result in distribution
channel conflicts. The Company's direct sales efforts may compete with those
of its indirect channels and, to the extent different resellers target the
same customers, resellers may also come into conflict with each other.
Although the Company has attempted to manage its distribution channels in a
manner to avoid potential conflicts, there can be no assurance that
distribution channel conflicts will not materially adversely affect its
relationships with existing remarketers and distributors or adversely affect
its ability to attract new remarketers and distributors. See "Business--Sales
and Marketing."
Need to Expand Marketing and Distribution Channels. The Company sells its
products both through its direct sales organization and through remarketers
and distributors. Part of the Company's strategy is to increase its use of
remarketers and distributors to sell its products internationally and to
expand its existing co-marketing relationships and establish new relationships
with other consulting and systems integration companies. The Company is also
seeking to expand its existing international direct sales force in order to
take advantage of international growth opportunities. The Company's ability to
achieve revenue growth in the future will depend on its success in recruiting
and training sufficient direct sales personnel and attracting and retaining
qualified remarketers and distributors. The Company has at times experienced
and continues to experience difficulty in recruiting qualified personnel, and
there can be no assurance that the Company will be able to expand successfully
its direct sales force or other remarketing and distribution channels or that
any such expansion will result in an increase in revenues. Any failure by the
Company to expand its direct sales force or other remarketing and distribution
channels could materially and adversely affect the Company's business,
operating results and financial condition. See "--Management of Growth," "--
Dependence on Key Personnel," "Business--Strategy" and "Business--Sales and
Marketing."
Emerging Markets for Call Center Customer Interaction Software; Dependence
on Increased Use of Products by Existing Customers. The market for call center
customer interaction software is relatively new and is characterized by
ongoing technological developments, frequent new product announcements and
introductions, evolving industry standards and changing customer requirements.
The Company's future financial performance will depend in large part on
continued growth in the number of organizations adopting call center customer
interaction software products on an enterprise-wide basis and on the number of
applications and software components developed for such use. There can be no
assurance that the call center customer interaction software market will
continue to grow. If this market fails to grow, or grows more slowly than the
Company currently anticipates, the Company's business, operating results and
financial condition could be materially and adversely affected.
In addition, certain of the Company's larger customers have licensed the
Company's software on an incremental basis and there can be no assurance that
the Company's customers will expand their use of the Company's software on an
enterprise-wide basis or license new or enhanced software products introduced
by the Company. The failure of the Company's software to perform according to
customer expectations or otherwise to be deployed on an enterprise-wide basis
could have a material adverse effect on the ability of the Company to increase
revenues from existing customers. See "Business--Industry Background" and
"Business--Strategy."
Rapid Technological Change. The call center customer interaction software
market is characterized by rapid technological change, frequent introductions
of new products, changes in customer demands and evolving industry standards,
any of which can render existing products obsolete and unmarketable. As a
result, the Company's position in its existing markets or other markets that
it may enter could diminish rapidly by product advancements. The life cycles
of the Company's products are difficult to estimate. The
9
<PAGE>
Company's product development and testing efforts are expected to require,
from time to time, substantial investments by the Company and there can be no
assurance that it will have sufficient resources to make the necessary
investments. The Company's customers have adopted a wide variety of hardware,
software, database and networking platforms, and as a result, to gain broad
market acceptance, the Company must continue to support and maintain its
products on a variety of such platforms. The Company's future success will
depend on its ability to address the increasingly sophisticated needs of its
customers by supporting existing and emerging hardware, software, database and
networking platforms and by developing and introducing enhancements to its
existing products and new products on a timely basis that keep pace with
technological developments, changing customer requirements and evolving
industry standards. The success of the Company's products may also depend, in
part, on its ability to introduce products which are compatible with the
Internet, and on the broad acceptance of the Internet as a viable customer
interaction channel. There can be no assurance that the Internet will become a
viable customer interaction channel or that the demand for Internet-related
products and services will increase in the future. In addition, there can be
no assurance that the Company will be successful in developing and marketing
enhancements to its products that respond to technological developments,
changing customer requirements or evolving industry standards, that the
Company will not experience difficulties that could delay or prevent the
successful development, introduction and sale of such enhancements, or that
such enhancements will adequately meet the requirements of the marketplace and
achieve any significant degree of market acceptance. If release dates of any
future product enhancements or new products are delayed or if these products
or enhancements fail to achieve market acceptance when released, the Company's
business, operating results or financial condition could be materially and
adversely affected. In addition, the introduction or announcement of new
product offerings or enhancements by the Company, the Company's competitors or
major hardware, systems or software vendors may cause customers to defer or
forego licenses of the Company's products, which could have a material adverse
effect on the Company's business, operating results and financial condition.
The Company's ability to remain competitive and respond to technological
change is also dependent upon the products of other software vendors,
including certain system software vendors, such as Microsoft Corporation, and
relational database software vendors. In the event that the products of such
vendors have design defects or are unexpectedly delayed in their introduction,
the Company's business, operating results and financial condition could be
materially adversely affected.
Management of Growth. The Company is currently experiencing a period of
rapid growth that could place a significant strain on its management and other
resources. The Company's senior management has not had experience in managing
publicly traded companies. The Company anticipates that continued growth, if
any, will require it to recruit, hire, train and retain a substantial number
of new and highly skilled product development, managerial, finance, sales and
marketing and support personnel. Competition for such personnel is intense and
the Company expects that such competition will continue for the foreseeable
future. There can be no assurance that the Company will be successful at
hiring or retaining such personnel. The Company's ability to compete
effectively and to manage future growth, if any, will depend on its ability to
continue to implement and improve operational, financial and management
information systems on a timely basis and to expand, train, motivate and
manage its work force. There can be no assurance that the Company's personnel,
systems, procedures and controls will be adequate to support the Company's
operations. If the Company's management is unable to manage growth
effectively, the quality of the Company's products and its business, operating
results and financial condition could be materially adversely affected. See
"--Need to Expand Marketing and Distribution Channels," "--Dependence on Key
Personnel" and "Business--Employees."
Competition. The market for telemarketing, telesales and customer service
software is intensely competitive, rapidly evolving and highly sensitive to
new product introductions or enhancements and marketing efforts by industry
participants. The Company competes with a large number of competitors ranging
from internal information systems departments to packaged software application
vendors. The
10
<PAGE>
Company believes that as the United States and international software markets
continue to grow, a number of new vendors will enter the market and existing
competitors and new market entrants will attempt to develop applications
targeting additional markets. Competitors have established and may in the
future establish cooperative relationships or alliances which may increase
their ability to provide superior software solutions or services. In addition,
consolidation within the call center customer interaction software industry
could create new or stronger competitors.
Increased competition resulting from new entrants, consolidation of the call
center interaction software industry, cooperative relationships or alliances
could result in price reductions, reduced operating income or loss of market
share, any of which could materially adversely affect the Company's business,
operating results or financial condition. Many of the Company's current and
potential competitors have significantly greater financial, technical,
marketing, service, support and other resources, generate higher revenues and
have greater name recognition than the Company. There can be no assurance that
the Company's current or potential competitors will not develop products
comparable or superior to those developed by it or adapt more quickly than the
Company to new technologies, evolving industry trends or changing client
requirements. There can be no assurance that the Company will be able to
compete effectively against current or future competitors or that competitive
pressures faced by the Company would not materially and adversely affect its
business, operating results or financial condition. See "Business--
Competition."
Dependence on Key Personnel. The Company's business involves the
development, marketing and installation of technologically complex software
products and the delivery of professional services and is labor intensive. The
Company's success will depend in large part upon its ability to attract,
retain and motivate highly skilled employees. There is significant competition
for employees with the skills required to perform the services needed by the
Company in order to operate its business successfully. If the Company is
unable to hire and retain sufficient numbers of highly skilled employees, the
Company's business, operating results and financial condition could be
materially and adversely affected. In addition, the loss of Albert R.
Subbloie, Jr., the President and Chief Executive Officer, or Gary R. Martino,
Chairman of the Board and Chief Financial Officer, or some of the Company's
other key personnel could have a material adverse effect on the Company's
business, operating results or financial condition, including its ability to
attract employees and secure and complete engagements. The Company maintains
key-man life insurance policies with respect to certain of its executive
officers, including Mr. Subbloie and Mr. Martino. See "Business--Employees."
Risk of Product Defects. Software products frequently contain errors,
especially when first introduced or when new versions are released. Although
the Company conducts extensive product testing during product development, the
Company has at times been forced to delay commercial release of software until
problems were corrected and, in some cases, has provided enhancements to
correct errors in released software. The Company could, in the future, lose
revenues as a result of software errors or defects. There can be no assurance
that, despite testing by the Company and by current and potential customers,
errors will not be found in software or releases after commencement of
commercial shipments, resulting in loss or delay of revenue, delay in market
acceptance, diversion of development resources, damage to the Company's
reputation, or increased service and warranty costs, any of which could have a
material adverse effect upon the Company's business, operating results and
financial condition. See "--Product Liability."
Risks Associated with International Operations. The Company intends to
expand its international sales activity, which will require significant
management attention and financial resources and will require the Company to
establish additional foreign operations and hire additional personnel. There
can be no assurance that the Company will be able to maintain or increase
international market demand for its products and, to the extent the Company is
unable to do so, its business, operating results or financial condition could
be materially adversely affected. The Company's international sales are
currently
11
<PAGE>
denominated in U.S. dollars with respect to sales outside of the United
Kingdom and Europe, and generally in pounds sterling with respect to sales in
the United Kingdom and Europe. An increase in the value of the U.S. dollar or
pound sterling relative to other currencies could make the Company's products
more expensive and, therefore, potentially less competitive in foreign
markets. Currently, the Company does not employ currency hedging strategies to
reduce this risk. In addition, the Company's international business may be
subject to a variety of other risks, including potentially longer payment
cycles and difficulties in collecting international accounts receivable,
difficulties in enforcement of contractual obligations and intellectual
property rights, potentially adverse tax consequences, increased costs
associated with maintaining international marketing efforts, costs of
localizing products for foreign markets, tariffs, duties and other trade
barriers, adverse changes in regulatory requirements, possible recessionary
economies outside of the United States and political and economic instability.
There can be no assurance that such factors will not have a material adverse
effect on the Company's future international sales and, consequently, on its
business, operating results or financial condition. See "--Dependence on
Indirect Marketing and Distribution Channels; Potential Conflicts" and "--Need
to Expand Marketing and Distribution Channels."
Dependence on Licensed Technology. The Company licenses, and expects to
license in the future, technology from other companies for use in and with its
products. The inability of the Company to license these products or other
necessary products for use in or with its products could have a material
adverse effect on the Company's business, operating results or financial
condition. In addition, the effective implementation of the Company's products
may depend in the future upon the successful operation of licensed products as
an integrated part of, or in conjunction with, the Company's products. Any
undetected errors in such licensed products could impair the functionality of
the Company's products or otherwise delay or prevent the implementation of an
installation or the introduction of new products, and injure the Company's
reputation, which could have a material adverse effect on its business,
operating results or financial condition. See "--Risk of Product Defects."
Increased Use of Third-Party Development Tools. The Company's EDGE products
include application development tools which are used to build and modify
applications. If third-party application development tools become more widely
used as a result of technological advances or customer requirements, the
Company could be required to make greater use of third-party tools in the
future, and to enter into license arrangements with such third parties, which
could result in higher royalty payments, a loss of product differentiation and
delays. Such effects or the inability of the Company to enter into
commercially reasonable licenses could have a material adverse effect on the
Company's business, operating results or financial condition. See "--Rapid
Technological Change" and "Business--Products and Services."
Dependence on Growth of Client/Server Computing Environment. The Company
markets its products to customers that have committed or are committing their
call center systems to client/server computing environments, or are converting
legacy systems, in part or in whole, to a client/server computing environment.
The Company's success will depend on further growth in the number of
organizations adopting client/server computing environments. There can be no
assurance that the client/server computing trends anticipated by the Company
will occur or that the Company will be able to respond effectively to the
evolving requirements of this market. If the client/server market fails to
grow, or grows at a rate slower than experienced in the past, the Company's
business, operating results or financial condition could be materially
adversely affected. See "--Rapid Technological Change" and "--Product
Development."
Industry Concentration. A substantial portion of the Company's revenues
historically have been derived from customers in the teleservices outsourcing,
telecommunications and financial services industries. The Company's strategy
is to further develop its knowledge of the business processes and
12
<PAGE>
requirements of other industries in order to establish additional market
opportunities, but there can be no assurance that the Company will be
successful in doing so. The failure of the Company to increase its customers
among a broader base of varied industries, or a downturn in one or more of the
teleservices outsourcing, telecommunications or financial services industries
could have a material adverse effect on the Company's business, operating
results or financial condition. See "Business--Strategy."
Product Liability. The Company's license agreements with its customers
typically contain provisions designed to limit the Company's exposure to
potential product liability claims. It is possible, however, that the
limitation of liability provisions contained in the Company's license
agreements may not be enforceable under the laws of certain jurisdictions. The
risk of product liability claims is inherent in the sale and support of
products, and there can be no assurance that the Company will not be subject
to such claims in the future. A successful product liability claim brought
against the Company could have a material adverse effect on the Company's
business, operating results and financial condition. See "--Risk of Product
Defects."
Regulatory Environment. Certain uses of outbound call processing systems are
regulated by federal, state and foreign law. Although the Company's systems
can be programmed to operate in compliance with these laws through the use of
appropriate calling lists and calling campaign time parameters, compliance
with these laws may limit the potential use of the Company's products. In
addition, there can be no assurance that future legislation further
restricting telephone solicitation practices, if enacted, would not adversely
affect the Company. See "Business--Regulatory Environment."
Control by Directors and Officers. Based upon the number of shares
outstanding as of January 31, 1997, upon completion of this offering the
Company's officers and directors, and their affiliates, will beneficially own
approximately 43.2% of the Company's outstanding Common Stock. These
shareholders, if acting together, may have the ability to elect the Company's
directors and to determine the outcome of corporate actions requiring
shareholder approval, irrespective of how other shareholders of the Company
may vote. This concentration of ownership may have the effect of delaying or
preventing a change in control of the Company. See "Management" and "Principal
and Selling Shareholders."
No Public Market. Prior to this offering, there has been no public market
for the Common Stock, and there can be no assurance that an active trading
market will develop or be sustained after this offering or that the market
price of the Common Stock will not decline below the initial public offering
price. The initial public offering price will be determined by negotiations
among the Company, the Selling Shareholders and the representatives of the
Underwriters. See "Underwriting" for a discussion of the factors to be
considered in determining the initial public offering price. The trading price
of the Common Stock could be subject to significant fluctuations in response
to quarterly variations in operating results, announcements of technological
innovations or new products by the Company or its competitors, changes in
financial estimates by securities analysts, and other events or factors. In
addition, investors should be aware that market prices for securities of
companies similar to the Company are highly volatile and such volatility is
sometimes unrelated to the operating performance of such companies. These
fluctuations, as well as general economic, market and political conditions,
may materially and adversely affect the market price of the Common Stock. See
"--Fluctuations in Quarterly Performance."
Shares Eligible for Future Sale; Registration Rights. Sales of substantial
amounts of Common Stock in the public market after this offering could
adversely affect the prevailing market price of the Common Stock. In addition
to the 4,500,000 shares of Common Stock offered hereby, as of the date of this
Prospectus (the "Effective Date"), based upon shares outstanding as of January
31, 1997, there will be approximately 4,400,538 shares of Common Stock
outstanding. Approximately 54,732 shares of Common Stock, which are not
subject to lock-up agreements with representatives of the Underwriters ("Lock-
up Agreements"), will be eligible for sale beginning 90 days following the
Effective Date subject to certain resale restrictions pursuant to Rule 144
under the Securities Act of 1933, as amended (the "Securities
13
<PAGE>
Act"). In addition, beginning 90 days after the Effective Date, approximately
327,791 shares of Common Stock will be available for sale without restriction
in reliance on Rule 144(k) under the Securities Act upon the expiration of 90-
day Lock-up Agreements. Beginning 180 days after the Effective Date,
approximately 3,982,015 shares of Common Stock will be available for sale upon
the expiration of 180-day Lock-up Agreements, of which approximately 3,566,598
shares will be subject to certain resale restrictions pursuant to Rule 144 and
approximately 451,417 shares will be available for sale without restriction
pursuant to Rule 144(k). As of the Effective Date, based on the number of
options outstanding at January 31, 1997, 880,547 shares of Common Stock will
be issuable pursuant to vested options under the Company's option plans, of
which approximately 831,400 shares will be subject to 180-day Lock-up
Agreements. Shortly after the Effective Date, the Company intends to file one
or more registration statements on Form S-8 to register under the Securities
Act shares issuable under the Company's option plans, upon which such shares
will generally be available for sale in the public market, subject to Rule 144
limitations and Lock-up Agreements, to the extent applicable. In addition,
holders of 2,581,734 shares of Common Stock will have certain rights to
registration of their shares under the Securities Act. See "Shares Eligible
for Future Sale."
Antitakeover Provisions. The Company's Certificate of Incorporation requires
that any action required or permitted to be taken by shareholders of the
Company must be effected at a duly called annual or special meeting of
shareholders and may not be effected by consent in writing except by unanimous
written consent, and requires advance notice by a shareholder of any matter
which such shareholder desires to present at any annual or special meeting of
shareholders. Special meetings of shareholders may be called only by the
Chairman of the Board, and shall be called by the Secretary of the Company at
the request of the Board or upon the written demand of the holders of 35% of
the voting stock entitled to vote at such special meeting. The Certificate of
Incorporation provides for a classified Board of Directors, and members of the
Board of Directors may be removed only for cause upon the affirmative vote of
holders of at least two-thirds of the shares of capital stock of the Company
entitled to vote. In addition, shares of preferred stock ("Preferred Stock")
may be issued in the future without further shareholder approval and upon such
terms and conditions, and having such rights, privileges and preferences, as
the Board of Directors may determine. The rights of the holders of Common
Stock will be subject to, and may be adversely affected by, the rights of any
holders of Preferred Stock that may be issued in the future. The Company has
no present plans to issue any shares of Preferred Stock. These provisions, and
other provisions of the Certificate of Incorporation, may have the effect of
deterring hostile takeovers or delaying or preventing changes in control or
management of the Company, including transactions in which shareholders might
otherwise receive a premium for their shares over then current market prices.
In addition, these provisions may limit the ability of shareholders to approve
transactions that they may deem to be in their best interests. See
"Description of Capital Stock--Antitakeover Effects of Provisions of the
Certificate of Incorporation, Bylaws and Connecticut Law."
Dilution. Purchasers of shares of Common Stock in this offering will suffer
an immediate and substantial dilution in the net tangible book value of the
Common Stock from the initial public offering price. See "Dilution."
14
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,625,000 shares of
Common Stock offered by the Company hereby are estimated to be approximately
$28.3 million, assuming an initial public offering price of $12.00 per share
and after deducting estimated underwriting discounts and commissions and
offering expenses payable by the Company. The Company will not receive any of
the net proceeds from the sale of Common Stock by the Selling Shareholders.
See "Principal and Selling Shareholders."
The principal purposes of this offering are to increase the Company's equity
capital, to create a public market for the Common Stock and to facilitate
future access by the Company to public equity markets. The Company intends to
use approximately $7.7 million of the net proceeds of the offering to repay in
full the outstanding indebtedness under the Loan and Security Agreement dated
October 26, 1995, as amended (the "Loan and Security Agreement"), between the
Company and People's Bank (the "Bank"). The Loan and Security Agreement
provides for a $6.0 million line of credit (the "Line of Credit") and a $2.5
million Term Note (the "Term Note"). The Line of Credit expires on June 1,
1997 and bears interest at a floating rate which was 9.25% per annum at
December 31, 1996. The Term Note is payable in monthly principal installments
through October 2002. The Term Note bears interest at 11.0% payable on a
current basis and accrues additional interest based upon a formula which
approximates 9.0%. The outstanding principal balances of the Term Note and the
Line of Credit, together with accrued interest thereon, are required to be
paid in full upon consummation of the offering. In addition, the Company
intends to use $250,000 of the net proceeds of the offering to repay in full a
note bearing an interest rate of 12.0% payable to Wand/IMA Investments, L.P.,
dated December 21, 1990, as amended.
The Company expects to use the remaining net proceeds from the offering for
working capital and other general corporate purposes. A portion of the net
proceeds may also be used for the acquisition of businesses, products and
technologies that are complementary to those of the Company. While the Company
engages from time to time in discussions with respect to potential
acquisitions, the Company has no plans, commitments or agreements with respect
to any such acquisitions as of the date of this Prospectus. The Company has
not as yet identified specific uses for such proceeds and will have discretion
over their use and investment. Pending such uses, the Company intends to
invest the net proceeds from this offering in short-term, investment grade,
interest-bearing instruments.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its capital
stock. The Company currently intends to retain earnings, if any, to support
its growth strategy and does not anticipate paying cash dividends in the
foreseeable future. Payment of future dividends, if any, will be at the
discretion of the Company's Board of Directors after taking into account
various factors, including the Company's financial condition, operating
results, current and anticipated cash needs and plans for expansion. The
Company is currently prohibited by the terms of the Loan and Security
Agreement from paying any cash dividends without the prior written consent of
the Bank.
15
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at December
31, 1996 (i) on an actual basis, (ii) on a pro forma basis giving effect to
the conversion of all outstanding shares of Convertible Preferred Stock into
1,532,161 shares of Common Stock, the issuance of 415,308 shares pursuant to
the cashless exercise of outstanding Common Stock purchase warrants, the
issuance of 34,690 shares of Common Stock pursuant to the exercise of stock
options, and the filing of an amendment to the Certificate of Incorporation to
eliminate the Convertible Preferred Stock and (iii) on a pro forma as adjusted
basis giving effect to the issuance and sale by the Company of 2,625,000
shares of Common Stock offered hereby at an assumed public offering price of
$12.00 per share and the receipt and application of the net proceeds
therefrom, after deducting estimated underwriting discounts and commissions
and offering expenses. See "Use of Proceeds." This table should be read in
conjunction with the Company's Consolidated Financial Statements and the Notes
thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
--------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Short-term debt:
Bank line of credit......................... $ 4,860 $ 4,860 $ --
Term note payable to bank................... 83 83 --
Subordinated note payable to shareholder.... 250 250 --
Capital lease obligations................... 251 251 251
-------- -------- --------
Total....................................... $ 5,444 $ 5,444 $ 251
======== ======== ========
Term note payable to bank, net of current
portion..................................... $ 2,417 $ 2,417 $ --
Capital lease obligations, net of current
portion..................................... 386 386 386
Series A senior redeemable convertible pre-
ferred stock, no par value (liquidation
preference of $4,500,000), 4,500 shares is-
sued and outstanding (actual); no shares au-
thorized, issued or outstanding (pro forma
and pro forma as adjusted).................. 5,145 -- --
Series B senior redeemable convertible pre-
ferred stock, no par value (liquidation
preference of $4,350,000), 4,350 shares is-
sued and outstanding (actual); no shares au-
thorized, issued or outstanding (pro forma
and pro forma as adjusted).................. 4,286 -- --
Redeemable common stock warrants............. 2,865 -- --
Shareholders' equity (1):
Preferred stock, undesignated, no par value,
500,000 shares authorized, no shares issued
or outstanding (actual, pro forma and pro
forma as adjusted).......................... -- -- --
Common Stock: no par value, 20,000,000 shares
authorized, 4,293,379 shares issued and out-
standing (actual); 20,000,000 shares autho-
rized (pro forma and pro forma as adjusted);
6,275,538 shares issued and outstanding (pro
forma); 8,900,538 shares issued and out-
standing (pro forma as adjusted)............ 5,795 18,107 46,402
Cumulative translation adjustment............ (9) (9) (9)
Accumulated deficit.......................... (16,692) (16,692) (16,692)
-------- -------- --------
Total shareholders' equity (deficit)........ (10,906) 1,406 29,701
-------- -------- --------
Total capitalization....................... $ 4,193 $ 4,209 $ 30,087
======== ======== ========
</TABLE>
- --------
(1) Based upon the number of shares of Common Stock outstanding as of December
31, 1996. The number of shares outstanding excludes (i) 1,301,659 shares
of Common Stock issuable upon the exercise of outstanding stock options at
a weighted average exercise price of $4.69 per share and (ii) 6,750 shares
of Common Stock issuable upon the exercise of outstanding warrants at an
exercise price of $4.89 per share. See "Management--Stock Option Plans,"
"Description of Capital Stock" and Note 9 of Notes to Consolidated
Financial Statements.
16
<PAGE>
DILUTION
Purchasers of the Common Stock offered hereby will experience immediate and
substantial dilution in the net tangible book value per share of Common Stock.
At December 31, 1996, the pro forma net tangible book value of the Company was
approximately $1.4 million, or $0.23 per share of Common Stock. Pro forma net
tangible book value per share is equal to the Company's total tangible assets
less total liabilities, divided by the number of shares of Common Stock
outstanding, after giving effect upon closing of this offering to (i) the
conversion of the Convertible Preferred Stock into 1,532,161 shares of Common
Stock, (ii) the issuance of 415,308 shares of Common Stock pursuant to the
cashless exercise of outstanding Common Stock purchase warrants and (iii) the
exercise of stock options for 34,690 shares of Common Stock by certain Selling
Shareholders. After giving effect to the sale by the Company of shares of
Common Stock offered hereby (at an assumed initial public offering price of
$12.00 per share) and the receipt and application of the net proceeds
therefrom, after deducting underwriting discounts and commissions and
estimated offering expenses payable by the Company, the pro forma net tangible
book value of the Company at December 31, 1996 would have been approximately
$29.7 million, or $3.34 per share. This represents an immediate increase in
pro forma net tangible book value of $3.11 per share to existing shareholders
and an immediate dilution of $8.66 per share to new investors purchasing
shares of Common Stock in this offering. The following table illustrates the
per share dilution:
<TABLE>
<S> <C> <C>
Initial public offering price per share........................... $12.00
Pro forma net tangible book value per share as of December 31,
1996............................................................ $0.23
Increase per share attributable to new investors................. 3.11
-----
Pro forma net tangible book value per share after the offering.... 3.34
------
Dilution per share to new investors............................... $ 8.66
======
</TABLE>
The following table summarizes, on a pro forma basis, as of December 31,
1996, the differences between existing shareholders and new investors with
respect to the number of shares of Common Stock purchased from the Company,
the total consideration paid to the Company and the average consideration paid
per share by the existing shareholders and by the new investors in this
offering (at an assumed initial public offering price of $12.00 per share):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
----------------- ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders(1).... 6,275,538 70.5% $14,479,758 31.5% $ 2.31
New investors............... 2,625,000 29.5 31,500,000 68.5 $12.00
--------- ----- ----------- -----
Totals.................... 8,900,538 100.0% $45,979,758 100.0%
========= ===== =========== =====
</TABLE>
- --------
(1) Sales of shares by the Selling Shareholders in the offering will reduce
the number of shares held by existing shareholders to 4,400,538 or 49.4%
(3,725,538 shares or 41.9% if the Underwriters' over-allotment option is
exercised in full) of the total number of shares of Common Stock
outstanding after the offering and will increase the number of shares held
by new investors to 4,500,000 or 50.6% (5,175,000 shares or 58.1% if the
Underwriters' over-allotment option is exercised in full) of the total
number of shares of Common Stock outstanding after the offering. The
foregoing computations assume no exercise of outstanding stock options at
or after December 31, 1996, except options for 34,690 shares of Common
Stock to be exercised by certain Selling Shareholders. Based upon the
number of shares of Common Stock outstanding as of December 31, 1996. The
number of shares outstanding excludes (i) 1,301,659 shares of Common Stock
issuable upon the exercise of outstanding stock options at a weighted
average exercise price of $4.69 per share and (ii) 6,750 shares of Common
Stock issuable upon the exercise of outstanding warrants at an exercise
price of $4.89 per share. See "Capitalization," "Management--Stock Option
Plans," "Description of Capital Stock" and Note 9 of Notes to Consolidated
Financial Statements.
17
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data as of December 31, 1994,
1995, and 1996, and for each of the years in the three-year period ended
December 31, 1996 are derived from financial statements which have been
audited by Arthur Andersen LLP, independent public accountants, which appear
elsewhere in this Prospectus. The selected financial data as of December 31,
1992 and 1993 and for the years ended December 31, 1992 and 1993 are derived
from audited financial statements not included in this Prospectus. This
selected financial data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements and Notes thereto included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1992 1993 1994 1995 1996
------ ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
License fees:
EDGE product line................ $2,125 $ 5,550 $ 4,703 $ 8,368 $12,180
Telemar product line............. 3,636 1,916 2,690 2,457 842
------ ------- ------- ------- -------
Total license fees.............. 5,761 7,466 7,393 10,825 13,022
------ ------- ------- ------- -------
Services and maintenance:
EDGE product line................ 752 2,209 7,872 10,342 11,643
Telemar product line............. 2,652 3,276 3,087 2,642 1,612
------ ------- ------- ------- -------
Total services and maintenance.. 3,404 5,485 10,959 12,984 13,255
------ ------- ------- ------- -------
Total revenues................. 9,165 12,951 18,352 23,809 26,277
------ ------- ------- ------- -------
Cost of revenues:
License fees...................... 60 165 462 700 709
Services and maintenance.......... 1,434 2,108 6,268 8,225 7,191
------ ------- ------- ------- -------
Total cost of revenues........... 1,494 2,273 6,730 8,925 7,900
------ ------- ------- ------- -------
Gross profit...................... 7,671 10,678 11,622 14,884 18,377
------ ------- ------- ------- -------
Operating expenses:
Sales and marketing............... 2,604 3,694 5,857 6,844 8,055
Product development............... 2,553 4,356 6,106 6,802 6,382
General and administrative........ 1,994 2,862 2,693 3,824 3,878
Amortization of acquired soft-
ware............................. 578 -- -- -- --
Write-off of acquired software.... -- 2,228 -- -- --
------ ------- ------- ------- -------
Total operating expenses......... 7,729 13,140 14,656 17,470 18,315
------ ------- ------- ------- -------
Operating income (loss)........... (58) (2,462) (3,034) (2,586) 62
Other income (expense)............ (223) (381) (917) (1,100) (1,079)
------ ------- ------- ------- -------
Loss before provision for income
taxes............................ (281) (2,843) (3,951) (3,686) (1,017)
Provision for income taxes........ 12 112 132 100 30
------ ------- ------- ------- -------
Net loss.......................... $ (293) $(2,955) $(4,083) $(3,786) $(1,047)
====== ======= ======= ======= =======
Pro forma net loss per share (1).. $ (0.17)
=======
Pro forma shares used in net loss
per share calculation (1)........ 6,007
=======
<CAPTION>
DECEMBER 31,
------------------------------------------
1992 1993 1994 1995 1996
------ ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents......... $ 234 $ 1,395 $ 446 $ 1,543 $ 3,073
Working capital (deficit)......... 276 63 (3,619) (1,233) 1,210
Total assets...................... 7,795 9,613 12,150 12,519 17,281
Short-term debt................... 1,174 2,962 5,499 3,871 5,444
Long-term debt.................... 2,139 1,926 1,423 3,042 2,803
Senior redeemable convertible pre-
ferred stock..................... -- -- -- 4,751 9,431
Redeemable common stock warrants.. 1,058 1,058 1,517 2,480 2,865
Total shareholders' equity (defi-
cit)............................. 1,285 (871) (4,200) (9,295) (10,906)
</TABLE>
- --------
(1) Computed as described in Note 2 of Notes to Consolidated Financial
Statements.
18
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
The pro forma consolidated statement of operations that follows is presented
to give effect to the sale of the Telemar product line on September 1, 1996,
as if the sale occurred on January 1, 1996. The pro forma information, which
reflects the elimination of identifiable revenues and expenses attributable to
the Telemar product line, does not purport to be indicative of the actual
results that would have been achieved had the sale taken place on January 1,
1996 or the results which may be achieved in the future.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-------------------------------
ACTUAL ADJUSTMENT PRO FORMA
------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
License fees:
EDGE product line.......................... $12,180 $ -- $12,180
Telemar product line....................... 842 (842)(1) --
------- -------
Total license fees....................... 13,022 12,180
------- -------
Services and maintenance:
EDGE product line.......................... 11,643 11,643
Telemar product line....................... 1,612 (1,612)(2) --
------- -------
Total services and maintenance........... 13,255 11,643
------- -------
Total revenues......................... 26,277 23,823
------- -------
Cost of revenues:
License fees................................. 709 (93)(3) 616
Services and maintenance..................... 7,191 (520)(4) 6,671
------- -------
Total cost of revenues...................... 7,900 7,287
------- -------
Gross profit.................................. 18,377 16,536
------- -------
Operating expenses:
Sales and marketing.......................... 8,055 (823)(5) 7,232
Product development.......................... 6,382 (1,070)(6) 5,312
General and administrative................... 3,878 (244)(7) 3,634
------- -------
Total operating expenses.................... 18,315 16,178
------- -------
Operating income.............................. 62 358
Other income (expense)........................ (1,079) (92)(8) (1,171)
------- -------
Loss before provision for income taxes........ (1,017) (813)
Provision for income taxes.................... 30 30
------- -------
Net loss...................................... $(1,047) $ (843)
======= =======
</TABLE>
- --------
(1) Represents the elimination of Telemar license fees.
(2) Represents the elimination of Telemar services and maintenance revenues.
(3) Represents the elimination of payroll, taxes and benefits of $66,000
related to employees dedicated to Telemar, as well as the elimination of
$27,000 of direct license costs.
(4) Represents the elimination of payroll, taxes and benefits of $455,000
related to employees dedicated to Telemar, as well as $20,000 of outside
consulting costs and $45,000 of other direct costs related to Telemar.
(5) Represents the elimination of payroll, taxes and benefits of $466,000
related to employees dedicated to Telemar, as well as $295,000 of related
travel costs, $49,000 of advertising and promotional costs and $13,000 of
other direct costs related to Telemar.
(6) Represents the elimination of payroll, taxes and benefits of $1,002,000
related to employees dedicated to Telemar, as well as $68,000 of direct
costs used in the research and development efforts related to Telemar.
(7) Represents the elimination of $28,000 of legal costs, $69,000 of equipment
depreciation expense, $60,000 of provision for doubtful accounts and
$87,000 of other direct costs related to Telemar.
(8) Represents the elimination of the gain on sale of Telemar.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations should be read in conjunction with the Consolidated
Financial Statements and the Notes thereto included elsewhere in this
Prospectus. The following discussion contains forward-looking statements and
the Company's actual results could differ materially from those anticipated in
these forward-looking statements as a result of certain factors, including
those set forth under "Risk Factors," "Business" and elsewhere in this
Prospectus.
OVERVIEW
The Company develops, markets and supports customer interaction software
designed to increase the productivity and revenue-generating capabilities of
mid-size and large-scale telephone call centers. The Company currently derives
substantially all of its revenues from licensing its EDGE suite of products
and providing services related to the implementation, deployment and
maintenance of EDGE. The Company's predecessor, Information Management
Associates (the "Partnership"), was founded in 1984 as a partnership, with a
focus on information systems consulting and software development and released
its first software product, called Telemar, a telemarketing application for
IBM mid-range computers, at the end of 1985. The Partnership transferred
substantially all of its software assets to the Company in connection with the
Company's formation in 1990. In 1991 the Company acquired the EDGE software
and related assets from Coffman Systems, Inc. and made available its first
client/server open system product offering in the fourth quarter of that year.
Since the acquisition of EDGE, the Company has engaged in significant product
development efforts related to the EDGE architecture and product features. The
Company's EDGE software license fees increased from approximately $4.7 million
in 1994 to $8.4 million in 1995 and to $12.2 million in 1996, which
represented year-over-year growth of 77.9% from 1994 to 1995 and 45.6% from
1995 to 1996. Due to the substantial growth in EDGE software license fees and
client/server open system software market opportunities, the Company elected
to focus exclusively on its EDGE products and, in September 1996, sold Telemar
and certain related assets and liabilities to Telemar Software International
LLC ("TSI"). The Company maintains its principal office in Shelton,
Connecticut and branch offices in Irvine, California, Lisle, Illinois,
Annapolis, Maryland and Roswell, Georgia. The Company's subsidiary,
Information Management Associates Limited, maintains an office in London,
England.
The Company realized operating losses in 1994 and 1995 which resulted
primarily from the Company's significant investments in product development
and increased services costs. The Company spent $6.1 million, $6.8 million and
$6.4 million on product development, representing 33.3%, 28.6% and 24.3% of
total revenues, in 1994, 1995 and 1996, respectively, primarily to enhance and
develop new components to the EDGE product line to support the complex
requirements of mid-size and large-scale call centers. The Company believes
that these investments have enhanced the competitiveness of its software
products and intends to continue to engage in substantial product development
activities for the foreseeable future. The Company expects that product
development expenses will increase, in absolute dollars, over time, although
the Company currently anticipates that such expenditures will remain the same
or decrease as a percentage of total revenues in the next two years. As a
result of investments in product development, growth in the client/server open
system software market and the sale of Telemar, the Company earned a small
operating profit in 1996.
The Company's revenue is derived from two sources: software license fees for
the use of the Company's software products, and services and maintenance fees
for implementation, consulting, support and training related to the Company's
software products. For all periods presented herein, the Company has
recognized license fee revenues in accordance with Statement of Position 91-1
entitled "Software Revenue Recognition" issued by the American Institute of
Certified Public Accountants. License fee revenues consist of revenues from
initial licenses for the Company's software products and license
20
<PAGE>
upgrades to existing customers for additional users or modules. The Company
recognizes initial license fee revenues upon licensing and delivery of the
software, if the software is not subject to customer acceptance or post-
delivery obligations. If the license is subject to customer acceptance or
post-delivery obligations, the license fee revenues are deferred until
customer acceptance has occurred or the post-delivery obligations have been
met.
The second component of the Company's revenues derives from professional
services associated with the implementation and deployment of the Company's
software products and maintenance fees for ongoing customer support. The
Company's professional consulting, technical support and maintenance services
include application development, systems integration, systems and database
design and construction and software training. The Company recognizes revenue
from professional services as such services are performed. Annual maintenance
fees are charged as a percentage of the license fee, and are recognized
ratably over the term of the maintenance agreement, which is usually twelve
months. The maintenance agreements are renewable at the discretion of the
customer and subject to change annually.
The Company markets its products in the United States through a direct sales
organization. The Company markets its products outside the United States in
Europe, the Pacific Rim, Canada, Mexico and Latin America through remarketing
and distribution relationships which it supplements with a direct sales force
in certain regions. The Company established sales and support operations in
the United Kingdom in 1990 to broaden its European distribution capabilities.
In 1996, United States and international revenues were approximately 74% and
26% of total revenues, respectively. See Note 15 of Notes to Consolidated
Financial Statements.
Although the Company has experienced significant growth in revenues during
the past three years, the Company does not believe prior growth is necessarily
indicative of future operating results. In addition, the Company expects
increased competition and intends to continue to invest in its business. The
Company believes that its existing working capital, operating activities and
business strategies will provide sufficient cash to fund its operations
through December 31, 1997. There can be no assurance that the Company will be
profitable on a quarterly or annual basis. Future operating results will
depend on many factors, including demand for the Company's products, the level
of product competition, competitor pricing, the size and timing of significant
orders, changes in pricing policies by the Company or its competitors, the
ability of the Company to develop, introduce and market new products on a
timely basis and changes in levels of operating expenses.
21
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth the percentage of total revenues for certain
items in the Company's consolidated statement of operations data for the years
ended December 31, 1994, 1995 and 1996.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
License fees:
EDGE product line................................. 25.6% 35.2% 46.4%
Telemar product line.............................. 14.7 10.3 3.2
------- ------- -------
Total license fees.............................. 40.3 45.5 49.6
------- ------- -------
Services and maintenance:
EDGE product line................................. 42.9 43.4 44.3
Telemar product line.............................. 16.8 11.1 6.1
------- ------- -------
Total services and maintenance.................. 59.7 54.5 50.4
------- ------- -------
Total revenues................................ 100.0 100.0 100.0
------- ------- -------
Cost of revenues:
License fees........................................ 2.5 2.9 2.7
Services and maintenance............................ 34.2 34.5 27.4
------- ------- -------
Total cost of revenues............................ 36.7 37.4 30.1
------- ------- -------
Gross profit......................................... 63.3 62.6 69.9
------- ------- -------
Operating expenses:
Sales and marketing................................. 31.9 28.7 30.7
Product development................................. 33.3 28.6 24.3
General and administrative.......................... 14.7 16.1 14.8
------- ------- -------
Total operating expenses.......................... 79.9 73.4 69.8
------- ------- -------
Operating income (loss).............................. (16.6) (10.8) 0.1
Other income (expense)............................... (5.0) (4.6) (4.1)
------- ------- -------
Loss before provision for income taxes............... (21.6) (15.4) (4.0)
Provision for income taxes........................... 0.7 0.4 --
------- ------- -------
Net loss............................................. (22.3)% (15.8)% (4.0)%
======= ======= =======
The following table sets forth for each component of revenue, the cost of
such revenue expressed as a percentage of such revenue for the periods
indicated:
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Cost of license fees.................................. 6.2% 6.5% 5.4%
Cost of services and maintenance ..................... 57.2 63.3 54.3
</TABLE>
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Revenues
Total revenues increased 10.4% from $23.8 million in 1995 to $26.3 million
in 1996.
License Fees. Total license fees increased 20.3% from $10.8 million, or
45.5% of total revenues, in 1995 to $13.0 million, or 49.6% of total revenues,
in 1996. EDGE license fees increased 45.6% from $8.4
22
<PAGE>
million in 1995 to $12.2 million in 1996. The increase in EDGE license fees
was primarily attributable to an increase in the average size of customer
licenses, increased market awareness and acceptance of the EDGE products, and
increased productivity resulting from expansion of the Company's sales and
marketing organization. Telemar license fees decreased 65.7% from $2.5 million
in 1995 to $842,000 in 1996. The decrease in Telemar license fees was due to a
decrease in demand for Telemar software and the sale of the Telemar product
line in September 1996.
Services and Maintenance. Services and maintenance revenues increased 2.1%
from $13.0 million, or 54.5% of total revenues, in 1995 to $13.3 million, or
50.4% of total revenues, in 1996. EDGE services and maintenance revenues
increased 12.6% from $10.3 million in 1995 to $11.6 million in 1996. The
increase in EDGE services and maintenance revenue was primarily attributable
to the significant increase in EDGE software licenses, all of which involved a
consulting services component, offset in part by the substantial completion of
several large service projects in 1995. Telemar services and maintenance
revenues decreased 39.0% from $2.6 million in 1995 to $1.6 million in 1996.
The decrease in Telemar services and maintenance revenue was due to decreased
demand for Telemar software and the sale of the Telemar product line on
September 1, 1996.
Cost of Revenues
Cost of revenues decreased 11.5% from $8.9 million in 1995 to $7.9 million
in 1996.
Cost of License Fees. Cost of license fees is comprised of the costs of
media packaging, documentation, third party software and software production
personnel. Cost of license fees increased from $700,000, or 6.5% of total
license fees, in 1995 to $709,000, or 5.4% of total license fees, in 1996.
Cost of Services and Maintenance. The cost of services and maintenance
consists of salaries, wages, benefits and other costs related to installation,
implementation, training and maintenance support of the Company's software
products. The cost of services and maintenance decreased 12.6% from $8.2
million, or 63.3% of services and maintenance revenues, in 1995 to $7.2
million, or 54.3% of services and maintenance revenues, in 1996. The
improvement in services and maintenance margin was primarily due to a
reduction in the use of subcontractors to supplement the Company's internal
client services organization. In 1995, the Company incurred costs of
approximately $650,000 for third party subcontractor fees for services
provided in connection with a customer installation pursuant to the terms of a
fixed price services contract entered into in December 1993, without realizing
any corresponding revenue. Since 1993 the Company has not entered into any
large fixed price contracts.
Operating Expenses
Sales and Marketing. Sales and marketing expenses consist primarily of
commissions, salaries, bonuses and other related expenses for sales and
marketing personnel as well as marketing, advertising and promotional
expenses. Sales and marketing expenses increased 17.7% from $6.8 million, or
28.7% of total revenues, in 1995 to $8.1 million, or 30.7% of total revenues,
in 1996. This increase was primarily attributable to the hiring of additional
sales and marketing personnel as well as increased print advertising,
participation in trade shows, travel expenses and other sales and marketing
expenses. Sales and marketing expenses are expected to continue to increase in
connection with the planned expansion of the sales and marketing staff during
the remainder of 1997.
Product Development. Product development expenses consist primarily of
salaries, bonuses and other related personnel expenses, as well as the cost of
facilities and equipment. Costs related to product development are expensed as
incurred. Product development expenses decreased 6.2% from $6.8 million, or
28.6% of total revenues, in 1995 to $6.4 million, or 24.3% of total revenues,
in 1996. The reduction of product development expenses in absolute dollars was
primarily attributable to the sale of the Telemar product line on September 1,
1996, after which no Telemar product development expenses were
23
<PAGE>
incurred. The absolute dollar amount of product development expenses related
to EDGE increased from $5.1 million in 1995 to $5.3 million in 1996, although
the amount of such investment as a percentage of EDGE revenues declined
slightly.
General and Administrative. General and administrative expenses represent
the costs of executive, finance and administrative support personnel, the
portion of occupancy expenses allocable to administration, unallocated
corporate expenses such as fees for legal and auditing services and bad debt
expense. The Company's general and administrative expenses increased slightly
from $3.8 million, or 16.1% of revenues, in 1995 to $3.9 million, or 14.8% of
revenues, in 1996. The relatively consistent expense levels from 1995 to 1996
reflect an increase in personnel costs offset by a decrease in the provision
for doubtful accounts.
Other Income (Expense)
Interest Expense. Interest expense consists of interest on debt and
equipment financing less interest earned on cash. Interest expense increased
53.3% from $764,000 in 1995 to $1,171,000 in 1996 primarily as a result of the
accrual of interest on the Term Note, increased borrowings under the Line of
Credit and interest paid on monies borrowed from certain executive officers.
Other Items. The Company incurred expenses of $113,000 in 1995 in connection
with losses relating to the disposal of certain office equipment and the sale
of an office building in Trumbull, Connecticut which had been leased by the
Company and with respect to which the Company had guaranteed the repayment of
a mortgage loan. See "Certain Transactions." In 1996, the Company realized a
gain of $92,000 in connection with the sale of Telemar and certain related
assets and liabilities to TSI. In connection with the sale of Telemar, the
Company received a promissory note from TSI in the principal amount of
$650,000 (the "TSI Note") payable in five equal annual installments commencing
October 1997 and which bears interest at 8.0% per annum. The Company has fully
reserved for the TSI Note because collectibility, based on the start-up nature
of TSI operations, was not ascertainable at the time of sale. The Company will
recognize gain in an amount equal to payments on the TSI Note as such
payments, if any, are received. The Company incurred a one-time expense of
$223,000 in 1995 in connection with its early termination of an office lease
in Fountain Valley, California because space available at the premises no
longer met the Company's needs.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Revenues
Total revenues increased 29.7% from $18.4 million in 1994 to $23.8 million
in 1995.
License Fees. Total license fees increased 46.4% from $7.4 million, or 40.3%
of total revenues, in 1994 to $10.8 million, or 45.5% of total revenues, in
1995. EDGE license fees increased 77.9% from $4.7 million in 1994 to $8.4
million in 1995. The increase in EDGE license fees was primarily attributable
to an increase in the average size of customer licenses, increased market
awareness and acceptance of the EDGE products, and increased productivity
resulting from expansion of the Company's sales and marketing organization.
Telemar license fees decreased 8.7% from $2.7 million in 1994 to $2.5 million
in 1995.
Services and Maintenance. Services and maintenance revenues increased 18.5%
from $11.0 million, or 59.7% of total revenues, in 1994 to $13.0 million, or
54.5% of total revenues, in 1995. EDGE services and maintenance revenues
increased 31.4% from $7.9 million in 1994 to $10.3 million in 1995 due to the
continuation of several large projects involving significant service
components contracted for in 1994 together with the addition of new services
and maintenance contracts. Telemar services and
24
<PAGE>
maintenance revenues decreased 14.4% from $3.1 million in 1994 to $2.6 million
in 1995. The decrease in Telemar services and maintenance revenues was
primarily attributable to decreased licensing of Telemar software products.
Cost of Revenues
Cost of revenues increased 32.6% from $6.7 million in 1994 to $8.9 million
in 1995.
Cost of License Fees. Cost of license fees increased from $462,000, or 6.2%
of total license fees, in 1994 to $700,000, or 6.5% of total license fees, in
1995.
Cost of Services and Maintenance. The cost of services and maintenance
increased 31.2% from $6.3 million, or 57.2% of services and maintenance
revenues, in 1994 to $8.2 million, or 63.3% of services and maintenance
revenues, in 1995. The increase in cost of services and maintenance in 1995
was due to significant use of subcontractors to assist with several large
projects involving significant customer service components as well as the
hiring of additional services personnel to meet increased service demands
associated with large software licenses requiring extensive consulting and
systems integration services. In 1995, the Company incurred costs of
approximately $650,000 for third party subcontractor fees for services
provided in connection with a customer installation pursuant to the terms of a
fixed price services contract entered into in December 1993 without realizing
any corresponding revenue.
Operating Expenses
Sales and Marketing. Sales and marketing expenses increased 16.9% from $5.9
million, or 31.9% of total revenues, in 1994 to $6.8 million, or 28.7% of
total revenues, in 1995. This increase was primarily attributable to the
hiring of additional sales and marketing personnel.
Product Development. Product development expenses increased 11.4% from $6.1
million, or 33.3% of total revenues, in 1994 to $6.8 million, or 28.6% of
total revenues, in 1995. The increase in product development expenses was
primarily attributable to an increase in product development personnel hired
in connection with the Company's efforts to enable its products to support the
complex requirements of mid-size and large-scale call centers.
General and Administrative. The Company's general and administrative
expenses increased 42.0% from $2.7 million, or 14.7% of total revenues, in
1994 to $3.8 million, or 16.1% of total revenues, in 1995. The increase in
general and administrative expenses in 1995 was primarily attributable to an
increase in the number of finance and administrative support personnel,
increased usage of outside legal and auditing services to support the growth
of the Company, and an increase in the provision for doubtful accounts.
Other Income (Expense)
Interest Expense. Interest expense increased 23.4% from $619,000 in 1994 to
$764,000 in 1995. This increase in interest expense is attributable to
increased borrowings under the Line of Credit and borrowing under the Term
Note.
Other Items. The Company incurred losses associated with the disposal of
property and equipment of $298,000 in 1994 and $113,000 in 1995. The entire
amount of such loss in 1994 and $78,000 of such loss in 1995 was attributable
to the sale of an office building in Trumbull, Connecticut which had been
leased by the Company and with respect to which the Company had guaranteed the
repayment of a mortgage loan. See "Certain Transactions." The balance of the
expense incurred in 1995 was related to the disposal of equipment. The Company
incurred a one-time expense of $223,000 in 1995 in connection with its early
termination of an office lease in Fountain Valley, California because space
available at the premises no longer met the Company's needs.
25
<PAGE>
SELECTED QUARTERLY OPERATING RESULTS
The following table presents certain unaudited quarterly financial
information for the eight quarters ended December 31, 1996. In the opinion of
the Company's management, this information has been prepared on the same basis
as the Consolidated Financial Statements appearing elsewhere in this
Prospectus and includes all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the financial results set forth
herein. Results of operations for any previous quarters are not necessarily
indicative of results for any future period.
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------------------------
MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31 JUNE 30 SEPT. 30 DEC. 31
1995 1995 1995 1995 1996 1996 1996 1996
------- ------- -------- ------- ------- ------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues:
License fees:
EDGE product line...... $ 902 $2,134 $2,350 $2,982 $2,449 $2,937 $2,409 $4,385
Telemar product line... 572 749 419 717 480 321 42 --
------- ------ ------ ------ ------ ------ ------ ------
Total license fees.... 1,474 2,883 2,769 3,699 2,929 3,258 2,451 4,385
------- ------ ------ ------ ------ ------ ------ ------
Services and mainte-
nance:
EDGE product line...... 1,671 2,560 3,009 3,102 2,612 2,813 2,970 3,248
Telemar product line... 784 748 532 578 548 624 439 --
------- ------ ------ ------ ------ ------ ------ ------
Total services and
maintenance.......... 2,455 3,308 3,541 3,680 3,160 3,437 3,409 3,248
------- ------ ------ ------ ------ ------ ------ ------
Total revenues....... 3,929 6,191 6,310 7,379 6,089 6,695 5,860 7,633
------- ------ ------ ------ ------ ------ ------ ------
Cost of revenues:
License fees........... 148 173 292 87 166 186 289 68
Services and mainte-
nance................. 1,720 1,992 2,187 2,326 1,822 1,811 1,842 1,716
------- ------ ------ ------ ------ ------ ------ ------
Total cost of reve-
nues................. 1,868 2,165 2,479 2,413 1,988 1,997 2,131 1,784
------- ------ ------ ------ ------ ------ ------ ------
Gross profit............ 2,061 4,026 3,831 4,966 4,101 4,698 3,729 5,849
------- ------ ------ ------ ------ ------ ------ ------
Operating expenses:
Sales and marketing.... 1,540 1,661 1,455 2,188 1,872 1,964 1,793 2,426
Product development.... 1,642 1,526 1,851 1,783 1,553 1,741 1,471 1,617
General and adminis-
trative............... 807 1,017 1,030 970 1,024 961 1,008 885
------- ------ ------ ------ ------ ------ ------ ------
Total operating ex-
penses............... 3,989 4,204 4,336 4,941 4,449 4,666 4,272 4,928
------- ------ ------ ------ ------ ------ ------ ------
Operating income
(loss)................. (1,928) (178) (505) 25 (348) 32 (543) 921
Other income (expense).. (231) (497) (174) (198) (281) (301) (164) (333)
------- ------ ------ ------ ------ ------ ------ ------
Loss before provision
for income
taxes.................. (2,159) (675) (679) (173) (629) (269) (707) 588
Provision for income
taxes.................. 25 25 25 25 -- 30 -- --
------- ------ ------ ------ ------ ------ ------ ------
Net income (loss)....... $(2,184) $ (700) $ (704) $ (198) $ (629) $ (299) $ (707) $ 588
======= ====== ====== ====== ====== ====== ====== ======
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------------------------
MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31 JUNE 30 SEPT. 30 DEC. 31
1995 1995 1995 1995 1996 1996 1996 1996
------- ------- -------- ------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PERCENTAGE OF TOTAL REV-
ENUES:
Revenues:
License fees
EDGE product line...... 23.0% 34.5% 37.3% 40.4% 40.2% 43.9% 41.1% 57.4%
Telemar product line... 14.5 12.1 6.6 9.7 7.9 4.8 0.7 --
----- ----- ----- ----- ----- ----- ----- -----
Total license fees.... 37.5 46.6 43.9 50.1 48.1 48.7 41.8 57.4
----- ----- ----- ----- ----- ----- ----- -----
Services and mainte-
nance:
EDGE product line...... 42.5 41.4 47.7 42.1 42.9 42.0 50.7 42.6
Telemar product line... 20.0 12.0 8.4 7.8 9.0 9.3 7.5 --
----- ----- ----- ----- ----- ----- ----- -----
Total services and
maintenance.......... 62.5 53.4 56.1 49.9 51.9 51.3 58.2 42.6
----- ----- ----- ----- ----- ----- ----- -----
Total revenues....... 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- ----- ----- ----- -----
Cost of revenues:
License fees........... 3.8 2.8 4.6 1.2 2.7 2.8 4.9 0.9
Services and mainte-
nance................. 43.7 32.2 34.7 31.5 29.9 27.0 31.5 22.5
----- ----- ----- ----- ----- ----- ----- -----
Total cost of reve-
nues................. 47.5 35.0 39.3 32.7 32.6 29.8 36.4 23.4
----- ----- ----- ----- ----- ----- ----- -----
Gross profit............ 52.5 65.0 60.7 67.3 67.4 70.2 63.6 76.6
----- ----- ----- ----- ----- ----- ----- -----
Operating expenses:
Sales and marketing.... 39.2 26.8 23.1 29.7 30.7 29.3 30.6 31.8
Product development.... 41.8 24.6 29.3 24.2 25.6 26.0 25.1 21.2
General and adminis-
trative............... 20.6 16.5 16.3 13.1 16.8 14.4 17.2 11.5
----- ----- ----- ----- ----- ----- ----- -----
Total operating ex-
penses............... 101.6 67.9 68.7 67.0 73.1 69.7 72.9 64.5
----- ----- ----- ----- ----- ----- ----- -----
Operating income
(loss)................. (49.1) (2.9) (8.0) 0.3 (5.7) 0.5 (9.3) 12.1
Other income (expense).. (5.8) (8.0) (2.8) (2.7) (4.6) (4.5) (2.8) (4.4)
----- ----- ----- ----- ----- ----- ----- -----
Loss before provision
for income taxes....... (54.9) (10.9) (10.8) (2.4) (10.3) (4.0) (12.1) 7.7
Provision for income
taxes.................. 0.7 0.4 0.4 0.3 -- 0.5 -- --
----- ----- ----- ----- ----- ----- ----- -----
Net income (loss)....... (55.6)% (11.3)% (11.2)% (2.7)% (10.3)% (4.5)% (12.1)% 7.7%
===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
The following table sets forth, for each component of revenue, the cost of
such revenue expressed as a percentage of such revenue for the periods
indicated:
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------------------
MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31 JUNE 30 SEPT. 30 DEC. 31
1995 1995 1995 1995 1996 1996 1996 1996
------- ------- -------- ------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cost of license fees.... 10.0% 6.0% 10.5% 2.4% 5.7% 5.7% 11.8% 1.6%
Cost of services and
maintenance............ 70.1 60.2 61.8 63.2 57.7 52.7 54.0 52.8
</TABLE>
The Company's quarterly operating results have varied significantly in the
past and may vary significantly in the future, depending on factors such as
the ability of the Company to develop, introduce and market new and enhanced
versions of the Company's products on a timely basis, the size, timing and
contractual terms of significant orders, the level of price and product
competition, demand for the Company's products and changes in pricing policies
by the Company or its competitors. In addition, the Company's quarterly
operating results are dependent on factors such as budgeting cycles of its
potential customers, customer order deferrals in anticipation of enhancements
or new products, the cancellation or non-renewal of licenses or maintenance
agreements, product life cycles, changes in Company strategy, investments to
develop sales distribution channels, seasonal trends, changes in the level of
operating expenses and general domestic and international economic and
political conditions, among others.
27
<PAGE>
The Company's business has experienced and is expected to experience
significant seasonality, in part due to customer buying patterns. In recent
years, the Company has generally had stronger demand for its products during
the quarters ending in June and December and weaker demand in the quarters
ending in March and September. The Company has generally recorded 50% to 70%
of its total quarterly revenues in the third month of a quarter, with a
concentration of the revenues in the last half of the third month. The Company
has also experienced a seasonal trend in its revenues whereby its fiscal
fourth quarter revenues represented a disproportionate part of the Company's
annual revenues.
The Company's EDGE license fees increased for each of the four quarters of
1996 from the comparable periods in 1995 with the highest increase in the
first quarter and the lowest increase in the third quarter. In the first
quarter of 1996 license fees increased by 171.5% from the first quarter of
1995, resulting primarily from a license to a significant customer; however,
total revenue from such customer represented less than 10% of 1996 revenues.
The increase of 2.5% in the third quarter of 1996 compared to 1995 reflected
the timing of certain orders which were delayed to the fourth quarter of 1996
and a significant international license in the third quarter of 1995.
EDGE services and maintenance revenues generally increased for each of the
quarters of 1996 from the comparable periods in 1995, except for the third
quarter of 1996, which decreased slightly from the third quarter of 1995,
primarily as a result of a significant service engagement during the third
quarter of 1995.
Sales and marketing expenses increased in each quarter of 1996 over the
comparable periods in 1995, reflecting expansion of the Company's sales and
marketing organization. The lower sales and marketing expenses in the third
quarter of each of 1995 and 1996 reflect lower commissions associated with
lower license fees and services and maintenance revenues for such periods.
Product development expenses were lower in each quarter of 1996 than in the
comparable periods in 1995 except for the second quarter. The lower costs in
the third and fourth quarters of 1996 were primarily attributable to the sale
of Telemar on September 1, 1996. The expenses in the second quarter of 1996
included fees paid to independent contractors retained to assist the Company's
internal staff with specific development projects.
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its operations and met its capital expenditure
requirements primarily from proceeds of private sales of its Convertible
Preferred Stock and Common Stock and from funds obtained from a credit
facility with a commercial bank. Through December 31, 1996, the Company has
raised approximately $14.5 million from the sale of its Convertible Preferred
Stock, warrants and Common Stock. The Company's credit facility consists of a
$6.0 million Line of Credit and a $2.5 million Term Note. Borrowings under the
Line of Credit are limited to 75% of qualified accounts receivable, as defined
in the Loan and Security Agreement. The Line of Credit had an outstanding
balance of approximately $4.9 million at December 31, 1996. Advances under the
Line of Credit bear interest at a variable rate equal to the prime rate plus
1.0%. The Line of Credit terminates on June 1, 1997. The Company is currently
engaged in discussions with the Bank to extend the maturity date of the Line
of Credit to January 1, 1998 and management expects that such extension will
be obtained. Upon the closing of this offering, the Company is required to
repay the outstanding principal balance of and accrued interest on the Line of
Credit and the Term Note. The Term Note is payable in equal monthly
installments of $41,667, commencing November 1, 1997 through October 2002 and
bears interest at 11.0%, payable on a current basis, and accrues additional
interest based upon a formula which approximates 9.0%. As of December 31,
1996, the balance of accrued interest was $233,000. This additional interest
is payable at the earlier of November 1, 1998 or the full repayment of the
Term Note.
At December 31, 1996, the Company had approximately $3.1 million in cash and
approximately $10.5 million in accounts receivable. For the three years ended
December 31, 1994, 1995 and 1996, net
28
<PAGE>
cash used in operations totaled approximately $3.3 million, $1.9 million and
$3.3 million, respectively. In 1994 and 1996 the Company experienced
significant increases in accounts receivable resulting primarily from higher
levels of revenues in the fourth quarter of each of those years.
For the past three fiscal years, the Company's primary investing activities
consisted of purchases of computer and office equipment to support the
Company's expanding employee base. The Company used approximately $1.0 million
in each of fiscal 1994, 1995 and 1996, to purchase computer and office
equipment. During 1994 and 1995, the Company financed $851,000 and $113,000,
respectively, of computer and office equipment acquisitions through capital
leases and, in 1996, the Company entered into a sale/leaseback transaction
with respect to certain computer equipment which was reflected as a debt
obligation of $509,000. The Company currently has no significant capital
spending or purchase commitments other than existing commitments under certain
capital leases, but expects to continue to engage in capital spending in the
ordinary course of business.
The Company anticipates that proceeds from this offering together with
existing sources of working capital will be sufficient to meet the Company's
projected working capital and other cash requirements for the next eighteen
months. The Company's future operating and capital requirements will depend on
numerous factors, including the Company's internal research and development
programs, the level of resources the Company devotes to marketing and sales
capabilities, advances in technology and the successful development and
introduction of new products. In order to meet these requirements, the Company
may need to sell additional equity or debt securities or obtain additional
credit facilities. There can be no assurance that any necessary additional
financing will be available to the Company on commercially reasonable terms,
or at all. In addition, there are no present undertakings, commitments or
agreements with respect to any acquisitions of businesses, products or
technologies. The Company, from time to time, does however evaluate potential
acquisitions of other businesses, products and technologies that are
complementary to those of the Company, and may in the future require
additional equity or debt financings to consummate such acquisitions.
29
<PAGE>
BUSINESS
THE COMPANY
The Company develops, markets and supports customer interaction software
designed to increase the productivity and revenue-generating capabilities of
mid-size to large-scale telephone call centers. The EDGE TeleBusiness software
is a suite of applications and tools that enable businesses to automate
telebusiness activities (telemarketing, telesales, account management,
customer service and customer support) on an enterprise-wide basis. The
Company complements its EDGE products by offering its clients professional
consulting, technical support and maintenance services. EDGE has been licensed
to over 175 customers in a range of industries, including teleservices
outsourcing, telecommunications and financial services. Significant customers
include APAC Teleservices, Inc., AT&T Corp., Belgacom, S.A., Bose Corporation,
SITEL Corporation, Sprint PCS, United Parcel Service General Services Co.,
Wells Fargo Bank N.A. and ING Bank, N.V.
The Company's EDGE products are designed to provide superior functionality,
flexibility, integration, scalability and speed of deployment. Based upon an
open systems software architecture, EDGE supports multiple hardware platforms,
operating environments, database management systems, network topologies,
desktop standards, and legacy system and computer-telephony middleware.
Additionally, the Company has developed and is currently testing software
which will enable EDGE to support the Internet and corporate-based intranets.
The Company's products provide call center agents with real-time data and
guidance needed to manage increasingly complex processes for selling products
and servicing customers. For example, EDGE offers scripting to support order-
taking, cross-selling and up-selling, enables agents to track and resolve
customer service problems and facilitates the collection of valuable customer
information that can be disseminated on an enterprise-wide basis. The
Company's professional consulting, technical support and maintenance services
include application development, systems integration, systems and database
design and construction and software training. The Company believes that these
services significantly differentiate the Company from its competitors and
complement its EDGE products to provide a total solution for mid-size and
large-scale call centers.
Until September 1996, the Company developed, marketed and supported a
telemarketing and telesales automation software application called Telemar
which runs on the IBM AS/400 platform. Over the last five years, the Company
has increasingly focused on its EDGE products. Due to the substantial growth
in EDGE software license fees and client/server open system software market
opportunities, the Company elected to focus exclusively on its EDGE products
and sold Telemar and certain related assets and liabilities on September 1,
1996.
INDUSTRY BACKGROUND
Competitive pressures have intensified across many industries as a result of
increased global competition, deregulation, rapid technological change and
higher customer expectations. Businesses are expanding their use of telephony-
based customer interaction, from initial sales and marketing activities to
post-sales service and support, as a key component of their competitive
efforts to increase sales, reduce costs, enhance customer service, distinguish
their products and services and receive and process valuable customer
information. Effective customer interaction can increase revenue, build
customer loyalty and improve customer acquisition and retention while reducing
costs.
In recent years, telephony-based customer interaction has become a strategic
business weapon driven by decreased telecommunications costs associated with
deregulation, the proliferation of toll-free 800 numbers and the introduction
of new computing and telecommunications technologies, all of which have
enabled businesses to develop an efficient and interactive communications
medium with its existing and prospective customers. In a May 1996 research
report, the Aberdeen Group, Inc., an independent market research firm,
projected that the market for customer support software will grow at an
average annual compounded rate of 40%, from $260 million in 1995 to $1.0
billion in 1999.
30
<PAGE>
High-volume, telephony-based customer interaction activities are conducted
through call centers that are typically designed and equipped with special
telecommunications and computer hardware and software. Common examples of call
centers are the customer service or sales centers for outbound and inbound
telemarketing, telesales, account management, customer service and support.
Call centers can range in size from tens to thousands of sales or service
agents. The Company defines small, mid-size and large-scale call centers based
upon the number of agents dedicated to telephony-based activities in the call
center. Small call centers typically have up to 50 agents, while mid-size call
centers have from 50 to 250 agents and large-scale centers over 250 agents.
Initial applications of technology for call centers were primarily
telephony-based and included such devices as high capacity telephone switches,
predictive dialers, automatic call distributors and interactive voice response
units. These technologies offered point solutions addressing only certain
functions of call center management and the customer interaction process. As
call centers progressed, organizations implemented solutions based on software
used with legacy systems in an effort to improve the effectiveness and
efficiency of call centers and customer interaction processes. These solutions
were typically internally developed and mainframe-based and as such, were
generally inflexible, expensive to maintain and difficult to deploy throughout
a decentralized organization. Moreover, these systems did not fully integrate
and leverage improvements in telephony technology, resulting in technology
infrastructures that could not provide comprehensive customer interaction and
call center management throughout the organization and across business
processes.
Enterprises are seeking to exploit emerging technologies to improve the
effectiveness and efficiency of their telebusiness operations. Distributed
client/server computing environments have become increasingly commonplace,
built upon a foundation of relational database platforms, object-oriented
technology and wide deployment of network solutions. Customer interaction
software solutions today must leverage emerging technology and offer the
functionality necessary to support the broad spectrum of call center and
customer interaction functions and integrate these functions with other
business processes in the organization. Additionally, businesses are seeking
customer interaction solutions which can be deployed and updated rapidly
throughout the organization, are scalable to meet the needs of growing
businesses, and seamlessly integrate and leverage telephony technology. Call
center customer interaction solutions will also need to support and
incorporate emerging customer interaction channels and computing platforms,
such as the Internet and corporate-based intranets.
THE IMA SOLUTION
The EDGE suite of software applications and tools, coupled with the
Company's comprehensive service offerings, represent a total solution designed
to enable businesses to increase their productivity and revenue-generating
capabilities by improving the effectiveness of their interaction with
customers through telephone call centers.
The IMA solution incorporates five design tenets: functionality,
flexibility, integration, scalability and speed of deployment.
Functionality. Customer calls are often three to five minute events which,
when handled effectively, can have a dramatic impact on a business's ability
to acquire and retain customers. The Company's products are designed to enable
the user to more effectively manage the telephone conversation with the
customer before, during and after the call by automating numerous call center
activities, providing real-time access to customer information, and providing
features such as intelligent scripting, contact management, time management,
work flow management, voice/data management and other conversation management
aids. In addition, EDGE provides comprehensive call center reporting tools
which enable managers and supervisors to efficiently and effectively manage
call center agents and marketing campaigns.
31
<PAGE>
Flexibility. EDGE includes an integrated development environment that
enables a business to rapidly develop or change applications relating to
specific sales, marketing or service activities without disrupting live
operations. EDGE allows a call center manager to tailor scripts, screen
displays and workflow processes. The ability to change applications allows
clients to adapt call center operations quickly in response to changing
business needs such as new product sales or marketing campaigns, special
customer service programs or crisis management events.
Integration. EDGE is designed to integrate seamlessly with other
technologies to improve call center productivity. With its component-based
open architecture, EDGE can be integrated with a wide variety of computer and
telephony-based technologies and products, including telephony devices (voice
response units, predictive dialers, automatic call distributors and private
branch exchange technology), relational databases, legacy systems, other
third-party desktop applications and facsimile technology.
Scalability. The Company's products are scalable from small single-site
departmental networks to multi-site global implementations without
significantly increasing the risk of system degradation. EDGE has been
deployed in client configurations consisting of more than 1,000 users handling
over 1,000,000 calls per month.
Speed of Deployment. The EDGE integrated development environment allows
businesses to rapidly develop and deploy call center customer interaction
software solutions on an enterprise-wide basis. The ability to swiftly develop
and deploy applications enables the Company's clients to implement sales,
marketing and service programs quickly in response to changes in the business
environment.
STRATEGY
The Company's objective is to become the global leader in providing
flexible, technologically advanced, feature-rich customer interaction software
and services to mid-size and large-scale call centers. To achieve this
objective, the Company is pursuing the following strategies:
Target Specific Industries
The Company has established particular expertise in the teleservices
outsourcing, telecommunications and financial services industries, and has
developed client relationships in several other industries which it believes
in time will become specific areas of focus. The Company believes that it can
utilize its knowledge of the business processes and requirements of selected
industries to focus its marketing efforts, improve its services and increase
the speed and productivity of its research and development efforts targeted at
these industries.
Extend Call Center Technology Leadership
The Company provides technologically advanced customer interaction software
products that are designed to meet and exceed the complex and changing
requirements of mid-size and large-scale call centers. The Company believes
EDGE's integrated development environment and its ability to integrate
extensive computer-telephony capabilities and access legacy systems have been
and will continue to be important differentiators of its products. The Company
continues to develop integration capabilities for third-party technologies
utilized in call centers including relational databases, computer-telephony
technology and Internet and corporate-based intranet links. The Company is
also focusing its development efforts on building ready-to-use templates for
specific business functions.
Broaden International Distribution
The Company will seek to expand its existing international distribution
network, including its indirect distribution channels and direct sales force,
in order to take advantage of international growth
32
<PAGE>
opportunities. Since 1990, the Company has been offering its products in key
international markets and has gained valuable experience with respect to
engaging in business overseas. In support of its overseas business commitment,
EDGE has been translated into Japanese and permits users to work in a number
of other foreign languages. The Company has licensed EDGE to over 90
international customers in 20 countries and in 1996 international revenues
comprised approximately 26% of total revenues.
Expand Existing Customer Relationships
The Company's products are licensed to over 175 customers worldwide. The
Company's strategy is to increase revenues generated from this existing base
of customers by licensing its products to additional users, developing new and
enhanced products specifically tailored to customer requirements, and
providing additional consulting and support services. The Company believes
that its customer relationships provide key insights into market trends and
customer needs that help the Company more effectively shape its product and
service offerings and development efforts.
Leverage Strategic Business and Technology Relationships
The Company's strategy is to increase market acceptance of its software by
working with large systems integration firms and technology companies to
broaden market awareness and visibility of the Company's products and
services, and to maintain its product integration capabilities with related
and complementary technology. The Company has established relationships with
several leading consulting and systems integration firms, including Deloitte &
Touche LLP, Ernst & Young LLP, A.T. Kearney and IBM, and hardware and software
companies, including Hewlett-Packard Company, NCR Corporation, Oracle and
Microsoft. While the scope of these relationships vary, such relationships
provide the Company with lead generation and co-marketing support and the
ability to facilitate its technology integration efforts.
Leverage Internet Technology
The Company has developed and is currently testing products to enable its
clients to expand customer interaction activities to the Internet and
corporate-based intranets. The Company believes that the Internet is rapidly
evolving as a new communication medium that can be integrated with a call
center. The Company expects that EDGE will enable customers to purchase
products, complete service requests and conduct other customer interactions
over the Internet without assistance from a live agent, or complement an
interaction on the World Wide Web with a live conversation with a call center
agent for assistance with sales or service questions. In addition, the Company
is incorporating Internet/intranet technology into its products so that
clients may utilize corporate-based intranets and industry standard browsers
as an alternative computing platform for customer interaction software
applications.
PRODUCTS AND SERVICES
The EDGE suite of products is based on a distributed, multi-tier
client/server open architecture which allows for the distinct separation of
presentation, application and database layers. This architecture provides the
system performance and scalability that is critical for mid-size and large-
scale call centers and permits hardware, relational database and operating
system independence to preserve and leverage existing information technology
investments. EDGE currently supports Windows 3.X, Windows 95, Windows NT
workstation clients and a wide variety of Unix platforms. The Company expects
to provide server support for Windows NT and database support for Microsoft
SQL Server during the second half of 1997.
List prices for the Company's EDGE products range from $1,600 to $5,700 per
user and are based upon the client's desired configuration and number of
users.
33
<PAGE>
EDGE COMPONENT ARCHITECTURE
The EDGE Component Architecture is comprised of a Business Application
Framework based on an integrated development environment and is augmented by
an external technology layer designed to provide seamless integration with
third-party products. The following diagram illustrates the EDGE Component
Architecture:
[DIAGRAM DEPICTING THE EDGE COMPONENT ARCHITECTURE.
THE TEXT BELOW ACCOMPANIES THE DIAGRAM]
Business Application Framework
Call Center Customer Interaction Industry
Objects Software Objects Objects
Integrated Development Environment
Client/Server Desktop Workflow Legacy Business
Development Integration Management System Telephony Rules
Access
External Technology Layer
Desktop Relational Legacy Computer Internet
Links Database Gateway Telephony Technology
BUSINESS APPLICATION FRAMEWORK
EDGE business applications are constructed by linking together component
objects in a building block approach to enable the user to perform functions
required in a call center ranging from simple individual tasks to complex
business processes. EDGE component objects include Call Center Objects,
Customer Interaction Software Objects and Industry Objects. The following
diagram illustrates the EDGE Business Application Framework:
[DIAGRAM DEPICTING THE EDGE BUSINESS APPLICATION FRAMEWORK.
THE TEXT BELOW ACCOMPANIES THE DIAGRAM.]
Industry Object Layer
Teleservice Tele- Finance Technology Healthcare Utilities Consumer
Outsourcing Communications Products
Customer Interaction Software Object Layer
Account Lead Telesales Customer Support/ Campaign Opportunity
Management Management Incident Processing Management Management
Call Center Object Layer
Intelligent Queue Telephony Call List Call Center Customer Additional
Scripting Management Functions Processing Reporting Management Objects
34
<PAGE>
Call Center Objects. Call Center Objects perform discrete functions that are
used by a call center agent at many different points before, during and after
a customer conversation. Call center managers and supervisors also utilize
Call Center Objects to help manage call center operations and personnel. More
than 75 ready-to-use Call Center Objects are available with the EDGE product,
the most common of which are:
. Intelligent Scripting--Provides dynamic screen presentation and
navigational routing based on defined business rules, historical customer
data and other input derived from the customer conversation.
. Queue Management--Provides for administration, prioritization, security
and processing of user and system workflow activities such as calling
campaigns, call backs, appointments, to-do's, incidents, personal
schedules and tasks.
. Telephony Functions--Allows control of all telephone-related functions
and interfaces such as automatic call distributors, voice response units
and predictive dialers through the application.
. Call List Processing--Provides importing, manipulation, sorting,
selecting and loading of calls into prioritized lists, which can be
managed by user, group, time of day and quota levels.
. Call Center Reporting--Provides ongoing operational results for
management analysis of call center activity in a variety of categories,
including by agent, group, department, campaign, list and time period.
. Customer Management--Allows for user-defined searching, selection and
modification of customer and company information, including system and
user-defined data.
Customer Interaction Software Objects. Customer Interaction Software Objects
contain a higher level of functionality than Call Center Objects and assist in
the performance of more complex customer interaction processes. At present,
these objects are developed by the client or by the Company's client services
organization by combining Call Center Objects to create customer-specific
applications using the EDGE integrated development environment. The Company is
currently developing packaged versions of commonly used Customer Interaction
Software Objects, which it plans to release in the second half of 1997.
Customer Interaction Software Objects that may be developed as part of an EDGE
installation include:
. Account Management--Supports call center agents during free-form
conversations with customers. Critical customer information such as
contacts, corporate hierarchy and profiles is combined with corporate
information such as product, lead source and objection handling and is
displayed in a timely manner.
. Lead Management--Provides closed-loop lead tracking for users to manage
leads and prospects through a sales qualification process by providing
list import and segmentation facilities, lead profiling and scoring,
results tracking and management reporting.
. Telesales--Provides graphical, interactive telephone sales and order
capture utilizing intelligent prompts for objection handling, cross-
selling, up-selling, product and service information, campaign based
pricing and order and inventory file integration.
. Customer Support/Incident Processing--Allows a user to track and resolve
customer inquiries or cases in single call or multiple step resolution
environments, providing closed looped case management with fast path
entry, problem determination and resolution support, predefined workflows
by type and category, escalation with proactive alerts and on-line status
reports.
35
<PAGE>
. Campaign Management--Allows a user to create, manage and analyze sales
process protocols containing workflow assignments, simultaneous call
lists, date parameters, escalations, control groups, inbound call
recognition and lead source tracking.
. Opportunity Management--Allows a user to manage multiple sales
engagements at the same time by providing detailed opportunity
definition, forecasting data, team selling, corresponding relationships,
history and workflow management.
Industry Objects. Industry Objects are applications that combine Call Center
Objects and Customer Interaction Software Objects to perform complex,
typically enterprise-wide business processes according to the requirements of
the particular industry in which the business operates. The Company has
historically utilized its consulting services and support organization to
provide individual customers with Industry Objects, but expects to package
Industry Objects in the future as discrete product offerings for the Company's
targeted industries.
INTEGRATED DEVELOPMENT ENVIRONMENT
The EDGE integrated graphical development environment is used to tailor EDGE
applications to meet a client's specific needs. The primary components
supported within the integrated development environment include:
Client/Server Development. The Company's EDGE TeleBusiness Workstation (ETW)
provides a client/server graphical development tool for accessing and
integrating business application framework objects and external technologies
into end user applications.
Desktop Integration. The desktop integration component provides integration
capabilities between EDGE applications and third-party software applications
running on the desktop. The Company's Graphical EDGE Operations (GEO) product
allows EDGE to support Windows on the desktop. The Company has developed and
is currently testing a product to support Internet browsers.
Workflow Management. The workflow management component allows a user to
develop elaborate workflow routing within the call center and enables
creation, prioritization, processing and tracking of multiple customer
interaction activities coordinated on a "just in time" basis between the
client, its call center and its customer. The workflow management component
integrates agent and task scheduling with a variety of inbound and outbound
customer touch points.
Legacy System Access. The legacy system access component is a suite of
development tools which allows a user to access and update legacy system
information. Legacy system information or other data may be viewed or updated
from the same graphical presentation as local call center operations and
management data.
Telephony. The telephony component is a series of development tools which
permit a client to quickly establish a telephony interface to a particular
private branch exchange, predictive dialer or voice response unit, providing,
for example, the capability to capture automatic number identification/direct
number identification services and route the call and relevant data to a
particular agent, or to transfer voice/data from one agent to another.
Business Rules. The business rules component utilizes an intuitive graphical
user interface which allows rapid integration of client business processes and
practices into an application. This component enables a client to define the
critical processes and tasks for qualifying, selling and servicing the
client's customers. These rules become the basis of a client's customer
interaction process. Business rules embody specific procedures and policies
for handling each customer event in a manner consistent with the best business
practices established by each client.
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<PAGE>
EXTERNAL TECHNOLOGY LAYER
The EDGE external technology layer consists of components that are designed
to enable clients to link to a variety of external technologies on a real-time
basis. The following diagram illustrates the EDGE External Technology Layer
components:
[DIAGRAM DEPICTING THE EXTERNAL TECHNOLOGY LAYER.
THE TEXT BELOW ACCOMPANIES THE DIAGRAM]
External Technology Layer
<TABLE>
<CAPTION>
Computer
Desktop Relational Legacy Telephony Internet
Links Database Gateway Integration Technology
<S> <C> <C> <C> <C> <C>
Dynamic Data Oracle 3270 Access PRX: Predictive Dialer: MS Internet Explorer*
Exchange (DDE) Informix HLLAPI ---- ------------------ Netscape Navigator*
Sysbase LU 6.2 Lucent EIS Java*
Dynamic Library Microsoft SQL IBM MQ Series Definity G3 Intervoice JavaScript*
Links (DDL) Server* message 5ESS VRU: Active X*
DB/2 400* middleware* NEC ----
Object Linking IPC Nortal IBM Direct Talk
and Embedding TCP/IP Sockets Meridian I Lucent Conversant
(OLE) DMS 100 Intervoice*
Aspect* Periphonics*
Active X* Rockwell Middleware:
Galaxy -----------
Spectrum* ATT ASAI
Rolm 9751 HP CCM
Siemens HP ACT
Ericsson IBM Callpath
Aspect Application
Bridge*
Rockwell Gateway*
TSAPI*
TAPI*
</TABLE>
*Estimated to be available in 1997
Desktop Links. The EDGE client component links to other desktop applications
through support of dynamic data exchange (DDE), dynamic library links (DLL),
object linking and embedding (OLE) and Microsoft's Active X.
Relational Database. EDGE supports Oracle, Informix and Sybase relational
databases. Existing corporate data stored in these relational databases may be
accessed and updated along with the setup and definition of new databases for
management of call center data. As part of its Windows NT support strategy,
the Company is developing support capability for Microsoft SQL Server and
expects it to be commercially available in the second half of 1997.
Legacy Gateway. EDGE supports a variety of legacy system links and data
access options, including 3270 Access, HLLAPI, LU 6.2, IBM's MQ Series
messaging middleware, UNIX InterProcess Communication (IPC) and TCP/IP
Sockets.
Computer Telephony Integration. EDGE supports a variety of commonly used
telephony technology, including private branch exchanges, predictive dialers,
voice response units and telephony-middleware. Functionality provided through
these telephony links include automatic number identification, direct number
identification services, screen notification, voice/data transfer and
conference, outbound preview dial, automated agent logon/logoff, agent
available/unavailable, call hold, retrieve, answer and disconnect and host-
based routing.
Internet Technology. The Company has developed and is currently testing
products that support the most commonly used Internet and corporate-based
intranets through Microsoft's Internet Explorer browser, Netscape's Navigator
browser and Javascript and Sun's Java as well as integration to Microsoft's
Active X. These products are expected to be commercially available in the
second half of 1997.
37
<PAGE>
CLIENT SERVICES
The Company believes that its client services are a significant
differentiating factor in its target markets and are an important component of
EDGE deployments. The Company provides consulting and maintenance and
technical support services to its customers, including custom application
development, systems integration, systems design and construction, database
design, installation, skills training, custom documentation, client help desk
and software training. The Company has developed a comprehensive and standard
methodology to provide continuity through a project from the initial sale to
implementation of its applications. The Company's client services organization
helps to develop and maintain long-term customer relationships by applying
specialized knowledge of industry needs, business processes and technology to
help design and provide the customer with a highly functional and flexible
solution. The Company's client service department works with strategic
consulting and systems integration companies to identify and provide services
for large-scale service projects. The Company principally relies on
distributors and remarketers to provide consulting and client support services
to its international customers. As of January 31, 1997, the Company employed
86 employees in its client services organization. Services and maintenance
revenues as a percentage of total revenues were 59.7%, 54.5% and 50.4% in
1994, 1995 and 1996, respectively. The Company provides the following
services:
Consulting Services. The Company provides a comprehensive range of
professional services for its customers including project management, business
consulting, application development, implementation and integration of the
Company's products with the customer's existing systems. In addition, the
Company offers training programs to meet the specific needs of its customers.
The Company maintains a large consulting services staff with extensive
experience in the implementation and deployment of complex customer
interaction solutions. The demand for the Company's consulting services has
increased as the Company's product offerings have been accepted for large-
scale installations. Consulting services fees are determined on a time and
expense basis and training fees are generally charged on a per class or per
student basis.
Maintenance and Technical Support Services. The Company's maintenance and
technical support services staff provides clients with telephone and on-line
support of the Company's products. These support services include access to
technical support via the Company's telephone help-desk, customer support Web
site and e-mail. The Company offers several product support plans, including a
7 day/24 hour plan, which are generally offered for an annual fee based upon a
percentage of the license fee. The Company also provides its customers with
software upgrades, account management services, technical bulletins, status
reports and ongoing communication regarding new features and products under
development.
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<PAGE>
CUSTOMERS AND APPLICATIONS
As of December 31, 1996, the EDGE suite of products had been licensed to
over 175 customers with more than 25,000 total users. In 1996, no customer
accounted for more than 10% of the Company's total revenues. The following is
a representative list of the Company's customers. Each customer listed below
has provided revenues in excess of $100,000 from license fees, services or
maintenance.
TELESERVICES OUTSOURCING FINANCIAL SERVICES TECHNOLOGY
- ------------------------ ------------------ ----------
APAC Teleservices, Inc. American Express Company Cabletron Systems, Inc.
Direct Marketing American Maturity Life Hewlett-Packard Company
Services, Inc. Insurance Company Nippon Motorola Ltd.
ICT Group, Inc. Bank of New Zealand
ITI Marketing Services, Commonwealth Bank of UTILITIES
Inc. Australia ---------
Neodata Services, Inc. ING Bank, N.V.
Service Data Corporation JCB Co., Ltd. British Gas plc
SITEL Corporation The Bank of Tokyo Pacific Gas and
Service Network Mitsubishi Electric Company
Telephony B.V. The Mutual Life
Telespectrum Worldwide, Assurance Company of HEALTH CARE
Inc. Canada -----------
NationsBank
TELECOMMUNICATIONS Trans Financial, Inc. FHP, Inc.
- ------------------ TSB Bank plc Kaiser Foundation
AT&T Corp. United Overseas Bank Health Plan, Inc.
Belgacom, S.A. Ltd. Merck-Medco Managed
British Wells Fargo Bank N.A. Care, L.L.C.
Telecommunications plc Zurich Insurance Company The Prudential
Cincinnati Bell Insurance Company of
Telephone Company CONSUMER GOODS America
New Zealand Telecom --------------
P.T.T. Telecom B.V. Bose Corporation OTHER
Sprint PCS Philip Morris, Inc. -----
TeleNor Direkte AS SecurityLink from Securicor Distribution
Ameritech United Parcel Service
General Services Co.
EDGE applications have been selected by businesses in a variety of
industries for domestic and global implementation. The following are
representative examples of EDGE deployments by several of the Company's
clients:
SITEL Corporation
Situation: SITEL Corporation ("SITEL") is one of the largest independent
teleservices outsourcing companies in the United States. SITEL creates,
manages and conducts large-scale, telephone-based direct sales and customer
service programs on an outsourced basis for large corporations using both
outbound and inbound call processing. After completing the implementation of
specialized predictive dialing and private branch exchange technology, SITEL
required comprehensive customer interaction software technology that was
flexible, allowed for rapid application deployment of multiple campaigns,
could be integrated with existing predictive dialers and automatic call
distributors, and was scalable for a range of hundreds to thousands of call
center agents.
Solution: SITEL has licensed EDGE for over 900 users at seven different call
centers. SITEL is currently opening two new call centers and has licensed 400
additional users. EDGE's flexibility and functionality enabled SITEL to
rapidly add new customer applications, integrate with installed predictive and
automatic call distributor technology, and scale across multiple locations.
The Company's EDGE solution has been expanded from an initial license for
approximately 200 call center agents in 1994 to its current license for more
than 1,300 agents. SITEL has primarily used EDGE in its telecommunications
39
<PAGE>
division for outbound calling, and is presently executing customer winback,
retention and loyalty campaigns for major telecommunications providers to
aggressively seek additional market share.
Bose Corporation
Situation: Bose Corporation ("Bose") is a leading manufacturer of innovative
stereo systems, automotive audio equipment and home stereo speakers. Bose
identified a need for an automated customer interaction system to promote the
rapid growth in sales of Bose Wave Radios through direct telesales. Bose
telesales agents processed inbound prospect and customer calls from extensive
print, radio, direct mail and television advertising, and conducted outbound
calls to prospects who have been sent information about Bose products. Bose
desired a complete automated system to support every phase of its telephony-
based marketing, sales and customer support programs.
Solution: The Bose project commenced in early July 1995 with an absolute
requirement to have the call center operational by October 1, 1995. The
Company worked with Bose to develop a scripted inbound sales guide and to
provide real-time access to marketing campaign information to facilitate order
capture, literature fulfillment, customer service and re-call management. The
EDGE solution provided computer-telephony links for automatic number
identification to facilitate presentation of customer data and directed number
identification services to present the appropriate campaign to the agent based
upon the advertisement or promotion to which the customer was responding. The
EDGE product also provided Bose agents with access to extensive product
information as part of a total sales, marketing and service solution.
Sprint PCS
Situation: The emergence of wireless technology has presented an alternative
method of communication using mobile technology, including mobile telephones,
pagers, and remote computing and fax. Sprint Spectrum L.P., which markets its
services as Sprint PCS, was formed in 1996 as a joint venture among
subsidiaries of each of Sprint Corporation, Tele-Communications, Inc., Comcast
Corporation and Cox Communications, Inc., in an effort to capitalize on the
personal communications services market. Sprint PCS's sales strategy consisted
of multiple sales channels, including retail stores, a field sales force, and
direct inside sales through a call center. Sprint PCS also required a common
customer database for all sales and marketing activities to facilitate
consistent customer communications. The launch of these services was a large
and complex undertaking with many interdependencies between nationwide
marketing programs and internal management information systems. Sprint PCS
utilized a variety of outside consultants and vendors including Ernst & Young
and Electronic Data Systems Corp. to assist in the evaluation, selection and
implementation of these systems.
Solution: The EDGE product constituted one of the main architectural
components for the customer information repository built using an Oracle
database for inside and outside application components. The EDGE
implementation was developed and deployed in under three months by the
Company's client services staff who worked with Ernst & Young, the overall
systems integrator. The EDGE suite of products was integrated with an Aspect
automatic call distributor for computer telephony and third-party software for
sales force automation. Additionally, EDGE was integrated to an external
mainframe system to improve eligibility verification and enrollment processes
for Sprint PCS. The Company's on-time delivery allowed Sprint PCS to perform
its integration testing with the other call center business applications and
begin its marketing programs on schedule.
Pacific Gas and Electric Company
Situation: At the end of 1993 the Pacific Gas and Electric Company ("PG&E"),
one of the largest utilities in the United States, saw the need to develop a
plan for a world-class customer service operation to address competition
resulting from deregulation. PG&E's plan called for a company-wide
reorganization to consolidate customer service from 31 offices into four call
centers with over 800 agents and 18 district offices with more than 200
agents. The new call centers, along with PG&E's district offices, were
intended
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<PAGE>
to enable PG&E to improve the effectiveness and efficiency of its customer
service to its approximately eight million residential and business customers
while reducing costs. To support its customer service plan, PG&E required
leading edge, scalable call center and customer service software which could
be rapidly deployed to meet aggressive reorganization timetables.
Solution: PG&E chose EDGE to be integrated with PG&E's telephony and legacy
systems. Since mid-1994, EDGE has acted as a front-end interface to PG&E's
legacy customer information system, enabling customer service agents during a
customer call to easily access information stored on the mainframe while
maintaining call center data on local servers. Based upon automatic number
identification, local area information is presented to PG&E agents
automatically via a screen notification. As the agents process calls, EDGE
allows for scripting, queues and other information to be presented in an easy
conversational flow. Due to the critical nature of providing continuous
utility services during natural disasters, the Company created and implemented
backup and recovery strategies for PG&E designed to detect database failure
and to automatically and transparently write to a mirror Oracle database.
SALES AND MARKETING
The Company markets its software and services in the United States through a
direct sales organization. The Company's sales representatives are focused by
industry expertise and geographical location. To support its sales efforts,
the Company conducts marketing programs including advertising, telemarketing,
direct mail, seminars, public relations and trade shows. As of January 31,
1997, the Company's sales and marketing organization covering the United
States consisted of 41 employees.
The Company's direct sales force employs a consultative sales process,
working closely with prospective customers to understand and define their
needs and to determine how those needs are best addressed by the Company's
product offerings as well as complementary technology and services offered by
strategic systems integration and technology companies. In addition to
pursuing sales opportunities with new customers, the Company works closely
with its existing customer base to gain knowledge of their industries, and
focuses on selling new and enhanced products specifically tailored to such
existing customers' requirements, as well as licensing its products to
additional users within a customer. Because customer interaction software
applications are highly visible within an organization, the Company's sales
efforts are generally directed to the senior management of a customer.
The Company also works closely with strategic consulting and systems
integration companies such as Deloitte & Touche LLP, Ernst & Young LLP, IBM
and A.T. Kearney to increase market awareness and acceptance of the Company's
products. These relationships have led to the Company's introduction into
strategic accounts, increased account penetration and reduced sales cycle
length. A key part of the Company's strategy is to expand and enhance its
existing relationships with leading consulting and systems integration
companies to capture additional market share.
The Company markets its software internationally in Europe, the Pacific Rim,
Canada, Mexico and Latin America through remarketing and distribution
relationships which it supplements with a direct sales force in certain
regions. The Company's principal remarketers and distributors include
Datapoint (U.K.) Limited (Europe), TeleDynamics BV (Holland), NCR Corporation
(France, Canada, Turkey and Southeast Asia), Kawasaki Steel Systems R&D
Corporation (Japan), Locus Corporation (Korea), TKM Communications, Inc.
(Canada), Telebusiness New Zealand Limited (New Zealand and Australia), and
Communicacoes, Processamento e Mecanismos de Automacao Ltda. (Brazil). As of
January 31, 1997, the Company had a direct sales force consisting of six sales
and marketing professionals covering Europe from its London, England office,
and three sales professionals focused on Mexico and Latin America. The Company
is seeking to expand its existing international distribution network including
its indirect distribution channels and direct sales force in order to take
advantage of international growth opportunities.
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<PAGE>
PRODUCT DEVELOPMENT
The Company believes that to maintain its competitive advantage it must
enhance existing applications, introduce new products and features into the
market on a regular basis to keep pace with technological advances, meet
changing customer requirements and respond to competitors' products. To meet
these goals, the Company has invested in developing a comprehensive product
development process to define and evaluate rigorous requirements for product
functionality and quality. The Company's research and development engineers
work closely with its marketing and support personnel and its customers to
design enhancements and new products to assure that product evolution reflects
developments in the marketplace and trends in client requirements.
The Company intends to continue its product research and development efforts
in order to meet the complex and changing requirements of mid-size and large-
scale call centers. Specifically, the Company is planning releases of EDGE
during 1997 to support Microsoft NT 4.0 and SQL Server release 6.5, IBM's MQ
Series messaging middleware and Microsoft Active X, and to integrate case-
based reasoning technology. In the area of computer-telephony integration, the
Company is adding support for Novell TSAPI, Microsoft TAPI and Aspect
Application Bridge telephony middleware and enhanced blended agent and
software-based dialing functionality. In addition, the Company has developed
and is currently testing products with Internet and corporate-based intranet
capabilities, which will enable call centers to integrate with sites on the
World Wide Web and allow applications to be deployed over an intranet with a
browser user interface. These new releases will support multiple integrated
channels of customer interaction including voice, interactive voice response,
e-mail and the World Wide Web.
The Company is making long-term investments to enhance the componentization
and object orientation of EDGE's underlying architecture. The Company is
utilizing emerging industry standards such as Microsoft COM/DCOM, CORBA
compliant object technology, Java language and supporting Java technology. The
Company believes that these investments will provide a number of important
benefits including the ability to migrate easily to new components in the
future in a "plug and play" mode, to shield business objects and customer
applications from the underlying technology infrastructure, and to seamlessly
integrate with other business applications that adhere to the same standards.
As of January 31, 1997, the Company's product development staff consisted of
48 employees. In addition, the Company augments its internal research and
development organization with the services of an outside consulting firm. The
Company's total expenses for product development for the years ended
December 31, 1994, 1995 and 1996 were $6.1 million, $6.8 million and $6.4
million, respectively, and represented 33.3%, 28.6% and 24.3% of total
revenues in these periods, respectively. The Company expects that it will
continue to commit substantial resources to product development in the future.
COMPETITION
The market for telemarketing, telesales and customer service software is
intensely competitive, rapidly evolving and highly sensitive to new product
introductions or enhancements and marketing efforts by industry participants.
The Company competes with a large number of competitors ranging from internal
information systems departments to packaged software application vendors. The
Company believes that as the United States and international software markets
continue to grow, a number of new vendors will enter the market and existing
competitors and new market entrants will attempt to develop applications
targeting additional markets.
Management believes that it competes in most of its markets with the
internal information systems departments of potential customers who desire to
develop their own customer interaction software rather than acquire software
from a third-party vendor such as the Company. The Company believes that the
principal software companies with which it competes are Versatility Inc. for
telesales and telemarketing automation software, and The Vantive Corporation,
Clarify Inc. and Scopus Technology, Inc. for
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<PAGE>
teleservices automation software. The Company also competes on occasion with
systems integration firms. Among the Company's current and potential
competitors are also a number of large hardware and software companies that
may develop or acquire products that compete with the Company's products.
Competitors have established and may in the future establish cooperative
relationships or alliances which may increase their ability to provide
superior software solutions or services. In addition, consolidation within the
call center customer interaction software industry could create new or
stronger competitors. Increased competition resulting from new entrants, call
center interaction software industry consolidation, cooperative relationships
or alliances could result in price reductions, reduced operating income or
loss of market share, any of which could materially adversely affect the
Company's business, operating results or financial condition. Many of the
Company's current and potential competitors have significantly greater
financial, technical, marketing, service, support and other resources,
generate higher revenues and have greater name recognition than the Company.
There can be no assurance that the Company's current or potential competitors
will not develop products comparable or superior to those developed by it or
adapt more quickly than the Company to new technologies, evolving industry
trends or changing client requirements. There can be no assurance that the
Company will be able to compete effectively against current or future
competitors or that competitive pressures faced by the Company would not
materially and adversely affect its business, operating results or financial
condition.
The Company believes that the principal competitive factors in its industry
include product performance and functionality, flexibility, ease of use,
adherence to open standards, scalability, ability to integrate external data
sources, speed of deployment, client service, customer support and price.
Although the Company believes that it currently competes favorably with
respect to such factors, there can be no assurance that it will be able to
maintain its competitive position against current and potential competitors,
especially those with greater financial, technical, marketing, service,
support and other resources than the Company, or that competitive pressures
will not materially and adversely affect the Company's business, operating
results and financial condition.
INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS
The Company relies primarily on a combination of copyright and trademark
laws, trade secrets, nondisclosure agreements and technical measures to
protect its proprietary rights. The Company typically enters into
confidentiality or license agreements with its employees, distributors,
clients and potential clients, and limits access to and distribution of its
software, documentation and other proprietary information. There can be no
assurance that these steps will be adequate to deter misappropriation or
independent third-party development of its technology or to prevent an
unauthorized third party from obtaining or using information that the Company
regards as proprietary. In addition, the laws of some foreign countries do not
protect or enforce proprietary rights to the same extent as do the laws of the
United States. Policing unauthorized use of the Company's products is
difficult and, while the Company is unable to determine the extent to which
piracy of its software products exists, software piracy can be expected to be
a persistent problem. There can be no assurance that the Company's means of
protecting its proprietary rights will be adequate or that the Company's
competitors will not independently develop similar technology. Although the
Company believes that its products and technology do not infringe on any
existing proprietary rights of others, the use of patents to protect software
has increased, and there can be no assurance that third parties will not
assert infringement claims in the future or, if infringement claims are
asserted, that such claims will be resolved in the Company's favor. The
Company expects that software product developers will increasingly be subject
to infringement claims as the number of products and competitors in the
Company's industry segment grows and the functionality of products in
different industry segments overlaps. Any such claims, with or without merit,
could be time-consuming, result in costly litigation, cause product shipment
delays or require the Company to enter into royalty or licensing agreements.
Such royalty or licensing agreements, if required, may not be available on
terms favorable to the Company or at all, which could have a material adverse
effect on the Company's business, operating results and financial condition.
Any infringement claims resolved against the Company could have a
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<PAGE>
material adverse effect upon the Company's business, operating results and
financial condition. In addition, litigation may be necessary in the future to
protect the Company's trade secrets or other intellectual property rights, or
to determine the validity and scope of the proprietary rights of others. Such
litigation could result in substantial costs and diversion of resources and
could have a material adverse effect on the Company's business, operating
results and financial condition.
The Company has entered into agreements with a small number of its customers
requiring the Company to place its source code in escrow. These escrow
agreements typically provide that customers have a limited, non-exclusive
right to use such code in the event that there is a bankruptcy proceeding by
or against the Company, if the Company ceases to do business or if the Company
fails to meet its support obligations. The escrow agreements, and any that the
Company may enter into in the future, may increase the possibility of
misappropriation by third parties. In addition, the Company utilizes a third-
party contractor for selected product development projects which may also
increase the possibility of misappropriation by third parties.
REGULATORY ENVIRONMENT
Certain uses of outbound call processing systems are regulated by federal,
state and foreign law. The Federal Telephone Consumer Protection Act required
the Federal Communications Commission to create regulations protecting
residential telephone subscribers from unwanted telephone solicitations.
Certain states have enacted similar laws limiting access to telephone
subscribers who object to receiving solicitations. Although compliance with
these laws may limit the potential use of the Company's products, the
Company's products can be programmed to operate in compliance with these laws
through the use of appropriate calling lists and calling campaign time
parameters. There can be no assurance, however, that future legislation
further restricting telephone solicitation practices, if enacted, would not
materially adversely affect the Company.
EMPLOYEES
As of January 31, 1997, the Company employed 213 employees, consisting of 48
employees in research and development, 50 employees in sales and marketing, 63
employees in consulting services, 23 employees in client support services and
29 employees in finance and administration. Of these, 19 are located in Europe
and the remainder are located in the United States. None of these employees is
covered by any collective bargaining agreements. The Company believes that its
relationship with its employees is good.
FACILITIES
The Company leases its corporate headquarters in Shelton, Connecticut, which
consists of approximately 25,000 square feet of office space. The lease for
the Shelton, Connecticut office has a term ending on March 31, 2004. In
addition, the Company maintains an office in Irvine, California with a lease
for approximately 22,000 square feet of office space. The lease for the
Irvine, California office has a term ending on January 19, 2001. In support of
its direct sales and service and support operations, the Company leases
offices in three other locations in the United States, as well as an office in
London, England. These offices comprise between 1,200 and 6,000 square feet
each and have lease terms ending between December 31, 1997 and April 30, 2001.
LEGAL PROCEEDINGS
From time to time, the Company is involved in litigation in the normal
course of business relating to claims arising out of its operations. The
Company is not currently involved in any litigation which, in management's
opinion, would have a material adverse effect on its business, operating
results or financial condition.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company, their ages and their
respective positions with the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
Albert R. Subbloie, Jr........... 36 President, Chief Executive Officer and
Director
Gary R. Martino.................. 36 Chairman of the Board, Chief Financial
Officer,
Treasurer, Assistant Secretary and
Director
Andrei Poludnewycz............... 36 Executive Vice President--Technology,
Secretary and Director
James S. Aufdemberge............. 44 Senior Vice President--Sales and
Marketing
Paul G. Frederick................ 37 Senior Vice President--Client Services
James E. Anderson................ 51 Vice President--International
Operations
David G. Caldeira................ 40 Vice President--Products Division
Michael P. McGroarty............. 36 Vice President and General Counsel,
Assistant Secretary
Paul J. Schmidt.................. 37 Vice President--Applied Technologies
and Director
David J. Callard (1)(2).......... 58 Director
Thomas F. Hill (1)............... 51 Director
Donald P. Miller (2)............. 65 Director
</TABLE>
- --------
(1) Member of Compensation Committee
(2) Member of Audit Committee
Each officer serves at the discretion of the Board of Directors. Each
director holds office until his successor is duly elected and qualified or
until his resignation or removal. There are no family relationships among any
of the directors or executive officers of the Company.
Following this Offering, the Board of Directors will be divided into three
classes, each of whose members will serve for a staggered three-year term. The
Board will consist of three Class I Directors (Messrs. Schmidt, Miller and
Hill), two Class II Directors (Messrs. Poludnewycz and Subbloie) and two Class
III Directors (Messrs. Callard and Martino). At each annual meeting of
shareholders, a class of directors will be elected for a three-year term to
succeed the directors or director of the same class whose terms are then
expiring. The terms of the Class I Directors, Class II Directors and Class III
Directors expire upon the election and qualification of successor directors at
the annual meeting of shareholders held during the calendar years 1998, 1999
and 2000, respectively.
Mr. Subbloie has been the President, Chief Executive Officer and a Director
of the Company since its incorporation in 1990. Prior to incorporation of the
Company, Mr. Subbloie was a founding partner of the Partnership with Messrs.
Martino and Poludnewycz, which engaged in the business of consulting and
development of computer software. From 1982 to 1984, Mr. Subbloie was employed
with the consulting division of Arthur Andersen & Co., a professional
accounting firm ("Arthur Andersen"), and specialized in distribution and
manufacturing consulting.
Mr. Martino has been a Director and officer of the Company since its
incorporation in 1990. In his capacity as a director, he has served as the
Chairman of the Board of Directors since the Company's incorporation in 1990.
In his capacity as an officer, he has served as Treasurer, Chief Financial
Officer and Assistant Secretary. Prior to incorporation of the Company, Mr.
Martino was also a founder of the
45
<PAGE>
Partnership with Messrs. Subbloie and Poludnewycz. From 1982 to 1984, Mr.
Martino was employed with the consulting division of Arthur Andersen and
specialized in financial application consulting.
Mr. Poludnewycz has been an officer and a Director of the Company since its
incorporation in 1990. Mr. Poludnewycz has served as Secretary of the Company
since its incorporation in 1990. From 1992 to 1994, he served as Executive
Vice President--Products Division and subsequently served as Executive Vice
President--Technology. Prior to incorporation of the Company, Mr. Poludnewycz
was a founding partner of the Partnership with Messrs. Subbloie and Martino.
From 1982 to 1984, Mr. Poludnewycz was employed with the consulting division
of Arthur Andersen and specialized in developing computer applications for the
mid-range hardware platforms of IBM.
Mr. Aufdemberge served as Vice President--Sales of the Company from 1994
through 1995 and has served as Senior Vice President--Sales and Marketing
since 1996. Prior to joining the Company in 1994, Mr. Aufdemberge was employed
for ten years with Dun & Bradstreet Software, Inc. ("Dun & Bradstreet"), a
financial, human resources and manufacturing applications software company.
Mr. Aufdemberge's primary responsibilities with Dun & Bradstreet were sales
and support services.
Mr. Frederick has served as Senior Vice President--Client Services of the
Company since 1995. Prior to joining the Company, he was employed from 1991 to
1995, most recently as associate partner, with a division of Andersen
Consulting LLP ("Andersen Consulting") which specialized in large scale
systems integration. Mr. Frederick's primary responsibilities with Andersen
Consulting included project and practice management.
Mr. Anderson served as Vice President--Business Development of the Company
from 1994 to 1995 and has since served as Vice President--International
Operations. From 1970 to 1994, Mr. Anderson was employed by IBM as a software
product planning manager, a branch sales manager and the Worldwide Market
Development Manager for IBM's CallPath product.
Mr. Caldeira has been employed with the Company in several capacities since
its incorporation in 1990. He served as Vice President--Sales from 1990 to
1992 and as Vice President--Business Development from 1992 to 1994. He has
served in his present position of Vice President--Products Division since
1994. Mr. Caldeira joined the Partnership in 1989 as a Regional Sales Manager
and was formerly employed as a Senior Manager with the consulting division of
Arthur Andersen where he specialized in systems for mid-size companies.
Mr. McGroarty joined the Company in 1996 as Vice President and General
Counsel, and also serves as an Assistant Secretary. From 1990 to 1996, Mr.
McGroarty was an attorney with the law firm of Fulbright & Jaworski L.L.P.
Mr. Schmidt has served as an officer and Director of the Company since its
incorporation in 1990. From 1990 to 1994, he served as Vice President--Client
Services and has since served as Vice President--Applied Technologies. From
1985 to 1990, Mr. Schmidt was employed as a Vice President at the Partnership
and specialized in client services. From 1982 to 1985, Mr. Schmidt worked for
Andersen Consulting and specialized in financial, distribution and
manufacturing consulting.
Mr. Callard has served as a Director of the Company since March 1992. He has
served as President of Wand Partners Inc. ("WPI") since 1991. WPI and its
affiliates are principally engaged in the business of direct private equity
investments. Mr. Callard serves on the Company's Board of Directors pursuant
to a 1991 letter agreement, as amended, between WPI and the Company, which
permits WPI to designate two members of the Company's Board of Directors.
Prior to joining WPI, Mr. Callard was a Managing Director in mergers and
acquisitions with the investment banking firm of Alex. Brown & Sons
Incorporated. Mr. Callard has also served as a director since 1974 of Waverly,
Inc., a medical publisher, and as a director since 1992 of Chartwell Re Corp.,
a property and casualty reinsurer.
46
<PAGE>
Mr. Hill has served as a Director of the Company since March 1991. He has
served as a director of WPI since 1990 and his present principal occupation is
as President of Thomas F. Hill, Inc., a management consulting company. Since
1994, he has also served as a director of Nestor, Inc., a company which
develops neural network pattern recognition technology. Mr. Hill serves on the
Company's Board of Directors pursuant to a 1991 letter agreement, as amended,
between WPI and the Company which permits WPI to designate two members of the
Company's Board of Directors.
Mr. Miller has served as a Director of the Company since March 1991. From
1970 to 1986 Mr. Miller was President and Chief Executive Officer of Posi-Seal
International, Inc., a manufacturer of industrial valves. He is presently
retired. Mr. Miller has served as a director of the following companies since
the dates indicated: Raytech Corp., a manufacturing holding company, since
1986; Saab Financial Receivable Corp., an automotive finance company and
wholly-owned subsidiary of Saab-Scania Corp., since 1991; and Smart Games
Interactive, Inc., a manufacturer of interactive consumer electronic systems,
since 1993.
BOARD COMMITTEES
The Board of Directors has a Compensation Committee and an Audit Committee.
The Compensation Committee, in conjunction with the entire Board of Directors,
makes recommendations concerning salaries and incentive compensation for
employees of and consultants to the Company. It is comprised of Messrs.
Callard and Hill. The Audit Committee, in conjunction with the entire Board of
Directors, reviews the results and scope of the audit and other services
provided by the Company's independent public accountant. It is comprised of
Messrs. Callard and Miller.
DIRECTOR COMPENSATION
The Company reimburses each member of the Board of Directors for expenses
incurred in connection with attending Board and committee meetings. Mr. Miller
receives $2,500 for attendance at each meeting of the Board, unless his
attendance is via telephone. Mr. Hill receives a fixed fee of $10,000 per
year. Directors who are employees of the Company are not entitled to receive
compensation in their capacities as directors. For the fiscal year ended
December 31, 1996, non-employee directors received the following compensation:
(i) Thomas F. Hill--$20,000 ($10,000 for fiscal year 1995 and $10,000 for
fiscal year 1996) and (ii) Donald P. Miller--$7,500.
Pursuant to the Company's 1996 Non-Employee Directors Stock Option Plan,
each non-employee director receives a one-time grant of a stock option to
purchase 16,875 shares of Common Stock of the Company, subject to certain
adjustments, at the fair market value thereof on the date of grant. Each such
stock option is fully exercisable on the date that is six months following the
date of grant and expires ten years after the date of grant.
Pursuant to the 1996 Non-Employee Directors Stock Option Plan, Messrs.
Callard, Hill and Miller each received options to purchase 16,875 shares of
Common Stock at an exercise price of $7.11 on March 14, 1996.
47
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation. The following table sets forth certain information
relating to compensation earned by the Company's Chief Executive Officer and
each of the four other most highly compensated executive officers of the
Company whose total salary and bonus exceeded $100,000 (collectively, the
"Named Executive Officers") for services rendered in all capacities to the
Company for the fiscal year ended December 31, 1996:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION(1)
-------------------- ----------------
SHARES OF COMMON
STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY ($) BONUS ($) OPTIONS (#)(2) COMPENSATION ($)
--------------------------- ---------- --------- ---------------- ----------------
<S> <C> <C> <C> <C>
Albert R. Subbloie, Jr. ................... 225,000 18,750 123,750 18,449(3)
President and Chief Executive Officer
Gary R. Martino............................ 225,000 18,750 123,750 16,252(3)
Chairman of the Board, Chief Financial
Officer, Treasurer and Assistant Secretary
Andrei Poludnewycz......................... 174,600 -- 22,500 8,795(3)
Executive Vice President--Technology and
Secretary
Paul G. Frederick.......................... 179,375 19,047 -- 899(4)
Senior Vice President--Client Services
James S. Aufdemberge....................... 152,500 74,645 -- 995(5)
Senior Vice President--Sales and Marketing
</TABLE>
- --------
(1) The Company did not make any restricted stock awards or long term
incentive plan payouts in the fiscal year ended December 31, 1996.
(2) The Company did not grant any stock appreciation rights ("SARs") in the
fiscal year ended December 31, 1996. The number of shares presented
reflects a 2.25-for-1 split of the Common Stock to be effected prior to
the closing of this offering.
(3) Amount includes term life insurance premiums paid in the amounts of
$3,524, $2,464 and $2,562 for Messrs. Subbloie, Martino and Poludnewycz,
respectively, and the benefit derived from the interest-free loans made by
the Company to such officers in the amounts of $14,925, $13,788 and
$6,233, respectively. See "Certain Transactions."
(4) Amount includes Company contributions or payments of (i) $667 to Mr.
Frederick's 401(k) plan and (ii) $232 of term life insurance premiums.
(5) Amount includes Company contributions or payments of (i) $763 to Mr.
Aufdemberge's 401(k) plan and (ii) $232 of term life insurance premiums.
48
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth grants of stock options to the Named
Executive Officers during the fiscal year ended December 31, 1996. No SARs
were granted during the fiscal year ended December 31, 1996.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
------------------------------------------------------
VALUE AT ASSUMED
SHARES OF % OF TOTAL ANNUAL RATES OF STOCK
COMMON STOCK OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(2)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ------------------------
NAME GRANTED(3) FISCAL YEAR(4) PER SHARE(3) DATE 5% 10%
---- ------------- -------------- ------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Albert R. Subbloie, Jr.. 56,250 11.2% $7.11 3/14/06(5) $ 251,600 $ 637,500
67,500 13.4 8.00 7/11/06(6) 339,600 860,600
Gary R. Martino......... 56,250 11.2 7.11 3/14/06(5) 251,600 637,500
67,500 13.4 8.00 7/11/06(6) 339,600 860,600
Andrei Poludnewycz...... 22,500 4.5 8.00 7/11/06(6) 113,200 286,900
</TABLE>
- --------
(1) All options were granted at fair market value on the date of the grant as
determined by the Board of Directors of the Company.
(2) Amounts reported in these columns represent amounts that may be realized
upon exercise of the options immediately prior to the expiration of their
term assuming the specified compound rates of appreciation (5% and 10%) on
the market value of the Common Stock on the date of option grant over the
term of the options. These numbers are calculated based on rules
promulgated by the Securities and Exchange Commission and do not reflect
the Company's estimate of future stock price growth. Actual gains, if any,
on stock option exercises and Common Stock holdings are dependent on the
timing of such exercise and the future performance of the Common Stock.
There can be no assurance that the rates of appreciation assumed in this
table can be achieved or that the amounts reflected will be received by
the individuals.
(3) The number of shares presented reflects a 2.25-for-1 split of the Common
Stock to be effected prior to the closing of this offering.
(4) Based on options to purchase an aggregate of 502,875 shares of Common
Stock granted to all employees of the Company in fiscal 1996.
(5) All 56,250 options became exercisable on March 14, 1996.
(6) The dates of exercisability for the options are as follows: (i) 25% on
July 11, 1997; (ii) 25% on July 11, 1998; (iii) 25% on July 11, 1999; and
(iv) 25% on July 11, 2000.
FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information concerning the number and
value of unexercised options held by each of the Named Executive Officers as
of December 31, 1996. No stock options were exercised by any of the Named
Executive Officers during fiscal year 1996.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF VALUE OF UNEXERCISED
COMMON STOCK UNDERLYING IN-THE-MONEY OPTIONS
UNEXERCISED OPTIONS AT FISCAL YEAR-
AT FISCAL YEAR-END (#)(1) END ($)(1)(2)
------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Albert R. Subbloie, Jr...... 131,287 67,500 233,450 --
Gary R. Martino............. 131,287 67,500 233,450 --
Andrei Poludnewycz.......... 37,518 22,500 116,725 --
Paul G. Frederick........... 18,750 37,498 36,667 73,333
James S. Aufdemberge........ 42,187 42,187 131,250 131,250
</TABLE>
- --------
(1) The numbers of shares and values of options presented reflects a 2.25-for-
1 split of the Common Stock to be effected prior to the closing of this
offering.
(2) Calculated on the basis of the difference between the fair market value of
the underlying securities at fiscal year end, as determined by the
Company's Board of Directors, and the exercise price of the option.
49
<PAGE>
STOCK OPTION PLANS
1991 Amended and Restated Stock Option Plan. The Company's 1991 Amended and
Restated Stock Option Plan (the "1991 Plan") provides for the grant of options
to purchase a maximum of 900,000 shares of Common Stock. As of December 31,
1996, 6,007 shares had been issued pursuant to the exercise of options granted
under the 1991 Plan, options for 840,224 shares were outstanding. The
scheduled termination date for the 1991 Plan is October 29, 2001; however, the
termination of the 1991 Plan will not affect any options previously granted
thereunder. The 1991 Plan provides for grants to employees of either or both
incentive stock options and nonqualified stock options. On March 14, 1996 the
Board of Directors resolved that no further options may be granted or issued
under the 1991 Plan.
The 1991 Plan is currently administered by the Board of Directors, which is
authorized to delegate its administrative duties to a committee. Subject to
the provisions of the 1991 Plan, the Board of Directors has the authority to
select the employees to whom options are granted and determine the terms of
each option.
1996 Non-Employee Directors Stock Option Plan. The Company's 1996 Non-
Employee Directors Stock Option Plan (the "1996 Non-Employee Directors Plan")
provides for the grant of options to purchase a maximum of 135,000 shares of
Common Stock. As of December 31, 1996, no shares had been issued under the
1996 Non-Employee Directors Plan, options for 50,625 shares were outstanding
and 84,375 shares remained available for future issuance under the 1996 Non-
Employee Directors Plan. All options granted under the 1996 Non-Employee
Directors Plan must be granted by March 14, 2006, the scheduled termination
date of the 1996 Non-Employee Directors Plan; however, the termination of the
1996 Non-Employee Directors Plan will not affect any options previously
granted thereunder. The 1996 Non-Employee Directors Plan provides for grants
to non-employee directors of the Company ("Non-Employee Directors") of
nonqualified stock options.
The 1996 Non-Employee Directors Plan is administered by the Board of
Directors which is authorized to delegate its administrative duties to a
committee. Each Non-Employee Director receives at the first Board of Directors
meeting attended, a one-time grant of an option to purchase 16,875 shares of
Common Stock at an exercise price equal to the fair market value of the shares
on the grant date. Each option becomes fully exercisable on the date that is
six months following the grant date. All options expire ten years after the
grant date; however, the Board of Directors may limit the exercise period if
deemed necessary to comply with applicable law.
1996 Employee and Consultant Stock Option Plan. The Company's 1996 Employee
and Consultant Stock Option Plan (the "1996 Employee and Consultant Plan")
provides for the grant of options to purchase a maximum of 900,000 shares of
Common Stock. As of December 31, 1996, no shares had been issued under the
1996 Employee and Consultant Plan, options for 445,500 shares were outstanding
and 454,500 shares remained available for future issuance. All options granted
under the 1996 Employee and Consultant Plan must be granted by March 14, 2006,
the scheduled termination date of the 1996 Employee and Consultant Plan,
however, the termination of the 1996 Employee and Consultant Plan will not
affect any options previously granted thereunder. The 1996 Employee and
Consultant Plan provides for grants to employees of the Company and certain of
its affiliates of either or both incentive stock options and nonqualified
stock options and grants of nonqualified stock options only to non-employee
consultants to the Company and certain of its affiliates.
The 1996 Employee and Consultant Plan is administered by the Board of
Directors which is authorized to delegate its administrative duties to a
committee. Subject to the provisions of the 1996 Employee and Consultant Plan,
the Board of Directors has the authority to select the employees and
consultants to whom options are granted and determine the terms of each
option.
50
<PAGE>
Employee Stock Purchase Plan. The Company's Employee Stock Purchase Plan
(the "Purchase Plan") was adopted by the Board of Directors on March 1, 1997
and will be submitted for approval at the shareholders' meeting to be held on
March 25, 1997. The Purchase Plan is designed to allow eligible employees of
the Company and designated subsidiaries to purchase shares of Common Stock, on
January 1 of each year, through accumulated payroll deductions under the
Purchase Plan. A reserve of 450,000 shares of Common Stock has been
established for this purpose.
Payroll deductions may not exceed 10% of the annual salary or wages paid by
the Company to the employee, including contributions to his 401(k) but
excluding any bonus, fee, overtime, severance or credits. The purchase price
per share will be an amount equal to eighty-five percent (85%) of (i) the fair
market value of a share of the Common Stock on the offering date or (ii) the
fair market value of a share of Common Stock on the exercise date. Employees
may end their participation in the offering at any time during the offering
period, and participation ends automatically on termination of employment with
the Company.
LIMITATIONS ON LIABILITY AND INDEMNIFICATION MATTERS
The Company has adopted provisions in its Certificate of Incorporation that
eliminate to the fullest extent permissible under Connecticut law the
liability of its directors to the Company or its shareholders for monetary
damages. Such limitation of liability does not affect the availability of
equitable remedies such as injunctive relief or rescission. In addition, the
Company's Certificate of Incorporation and Bylaws provide that the Company
shall indemnify its directors and officers to the fullest extent permitted by
Connecticut law.
There is no currently pending litigation or proceeding involving a director,
officer, employee or other agent of the Company in which indemnification would
be required or permitted. The Company is not aware of any threatened
litigation or proceeding which may result in a claim for such indemnification.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company was comprised of Messrs. Callard
and Hill for the fiscal year ended December 31, 1996. Messrs. Subbloie,
Martino, Poludnewycz and Schmidt also participated in the deliberations of the
Board of Directors concerning executive officer compensation. Messrs. Callard
and Hill are affiliated with the Wand Group (as defined below) which have
engaged in certain financing and consulting transactions with the Company
during fiscal years 1994, 1995 and 1996. Messrs. Subbloie, Martino,
Poludnewycz and Schmidt also engaged in certain transactions with the Company
during fiscal years 1994, 1995 and 1996. See "Certain Transactions."
CERTAIN TRANSACTIONS
The Company entered into an agreement with Wand Partners L.P. ("Wand
Partners"), dated as of January 2, 1995 (the "Monitoring Agreement") pursuant
to which Wand Partners provides consulting services to the Company for a fee
of $40,000 per year payable in equal quarterly installments. The Monitoring
Agreement will terminate upon the completion of this offering. David J.
Callard is the President and a director of WPI and Wand (IMA) Inc. and Thomas
F. Hill is a director of WPI. WPI is a general partner of Wand/IMA
Investments, L.P. ("Wand-I") and Wand/IMA Investments II L.P. ("Wand-II").
Wand (IMA) Inc. is a general partner of Wand-II and Wand/IMA Investments III
L.P. ("Wand-III"). Messrs. Callard and Hill are directors of the Company.
During 1994, 1995 and 1996, the Company paid financial advisory and consulting
fees in the aggregate amount of $50,000, $50,000 and $40,000, respectively, to
WPI and its affiliates. In addition, the Company paid a fee of $100,000 to
Wand (IMA) Inc. in 1996 in connection with an equity financing transaction.
Wand-I, Wand-II, Wand-III, WPI, Wand (IMA) Inc. and Bruce W. Schnitzer are
sometimes referred to herein collectively as the "Wand Group."
During 1994, 1995 and 1996, the Company made principal payments on a
subordinated note held by Wand-I in the amount of $250,000 in 1995 and
$500,000 in 1996.
51
<PAGE>
On June 1, 1994, a letter agreement originally executed on December 21, 1990
(the "Letter Agreement"), among the Company, Wand-I, WPI, and certain
shareholders of the Company, including Albert R. Subbloie, Jr., Gary R.
Martino, Andrei Poludnewycz and Paul J. Schmidt, each of whom is a director,
executive officer and shareholder of the Company, was amended to change
certain provisions relating to take-along rights, to delete certain
individuals as parties to the Letter Agreement and to make certain other
changes set forth therein.
On June 1, 1994, Messrs. Martino, Subbloie, Schmidt and Poludnewycz sold an
aggregate of 265,000 shares of Common Stock to Mercury Asset Management plc,
acting as agent for certain of its discretionarily managed accounts, for an
aggregate purchase price of $1,060,002. The Company granted registration
rights to the purchasers in connection with the transaction.
On June 1, 1994, Messrs. Martino, Subbloie, Schmidt and Poludnewycz sold an
aggregate of 66,249 shares of the Common Stock to Mr. Callard, Bruce W.
Schnitzer and Malcolm P. Appelbaum for an aggregate purchase price of
$264,996. Mr. Schnitzer is the majority shareholder and a director and officer
of WPI and Wand (IMA) Inc., and may be deemed to beneficially own the shares
of Common Stock held by the Wand Group. The Company granted registration
rights to the purchasers in connection with the transaction. The Company also
entered into certain amendments to the registration rights provisions of
outstanding Common Stock purchase warrants, the Letter Agreement and
registration rights provisions of other agreements between the Company and
Wand-I, Mr. Hill and WPI.
On November 16, 1994, the Company issued 250,000 shares of Common Stock to
Wand-I at a price of $4.00 per share. In connection with such financing, the
Company entered into certain amendments to outstanding common stock purchase
warrants held by Wand-I, Mr. Hill and WPI.
On March 31, 1995, the Company issued to Wand-I and Wand-II, 3,750 and 750
shares of Series A Senior Convertible Preferred Stock, no par value ("Series A
Preferred Stock"), respectively, for an aggregate consideration of $4,500,000.
The Series A Preferred Stock has a stated value of $1,000 per share and is
presently convertible into 920,433 shares of Common Stock at a conversion
price of $4.89 per share.
On May 2, 1995, the Partnership, whose general partners are Messrs. Martino,
Subbloie and Poludnewycz, sold an office building which had been formerly
leased by the Company to an unrelated third party. In connection with such
sale, the Partnership utilized the proceeds from the sale to repay a portion
of the outstanding commercial mortgage loan secured by the facility. The
amount of the sale price was less than the outstanding balance of the mortgage
loan and the Partnership reissued a promissory note to the Bank in an amount
equal to the remaining balance of $475,000, bearing interest at a floating
rate equal to the Bank's prime rate plus one and one-half percent (1.5%) (the
"Restated Partnership Note"). The Restated Partnership Note was payable in
equal monthly installments of $15,833 commencing June 1, 1995 and ending
November 1, 1997. In connection with such sale and refinancing, the Company's
lease with respect to the facility was terminated and the Company entered into
a lease termination agreement with the Partnership pursuant to which the
Company agreed to make payments in an amount equal to the debt service on the
Restated Partnership Note. The amount of net rent, operating expenses and
other costs paid by the Company to, or on behalf of, the Partnership during
fiscal years 1994 and 1995 was $223,000 and $208,600, respectively. The
previously existing mortgage loan had been guaranteed by the Company, and the
Company confirmed its guaranty of the Restated Partnership Note in connection
with the sale of the office building.
On October 26, 1995, the Company entered into the Loan and Security
Agreement with the Bank pursuant to which the Bank provided the Line of Credit
in the maximum amount of $6.0 million and the Term Loan in the amount of $2.5
million. The Company used a portion of the proceeds from the bank financing to
prepay all of its obligations under the lease termination agreement and the
Partnership repaid in full the Restated Partnership Note. Messrs. Subbloie,
Martino and Poludnewycz guaranteed the payment of all of the indebtedness
under the Loan and Security Agreement and agreed to subordinate the payment of
any debt payable to such officers to the debt owed to the Bank.
52
<PAGE>
On November 1, 1996, the Company issued to Wand-II and Wand-III, 3,996 and
354 shares of its Series B Senior Convertible Preferred Stock, no par value
("Series B Preferred Stock"), respectively, for an aggregate consideration of
$4,350,000. The Series B Preferred Stock has a stated value of $1,000 per
share and is presently convertible into 611,728 shares of Common Stock at a
conversion price of $7.11 per share.
As of January 1, 1994, the Company had borrowed $50,000 from Mr. Subbloie.
During 1994, the Company borrowed from Messrs. Subbloie, Martino and
Poludnewycz $481,500, $387,500 and $273,000, respectively, and repaid
$437,000, $377,500 and $273,000 to such individuals, respectively, resulting
in outstanding balances of $94,500, $10,000 and $0 as of December 31, 1994 for
such individuals, respectively. During 1995, the Company borrowed $421,500,
$119,200 and $273,000 from Messrs. Subbloie, Martino and Poludnewycz, and
repaid $356,500, $114,000 and $170,000 to such individuals, respectively,
resulting in outstanding balances of $159,500, $15,200 and $103,000 as of
December 31, 1995 for such individuals, respectively. During 1996, the Company
repaid the outstanding balances of the loans and paid interest on the 1994,
1995 and 1996 net borrowings under the loans at an effective interest rate of
9.5%.
As of January 1, 1994, Messrs. Subbloie, Martino and Poludnewycz had
received interest-free unsecured personal loans from the Company aggregating
approximately $127,300, $105,600 and $21,700, respectively. During 1994, 1995
and 1996 the Company made additional interest-free unsecured personal loans to
each of Messrs. Subbloie, Martino and Poludnewycz such that amounts
outstanding at December 31 of each such year were $192,200, $209,900 and
$238,700 for Mr. Subbloie; $173,900, $187,900 and $222,600 for Mr. Martino;
and $63,000, $67,800 and $109,100 for Mr. Poludnewycz, which amounts were the
greatest principal amounts outstanding at any time during such years for such
officers. On December 31, 1996, Messrs. Subbloie, Martino and Poludnewycz
executed promissory notes equal to the outstanding balance of their aggregate
loans, which were $238,700, $222,600 and $109,100, respectively (collectively,
the "1996 Loans").
On February 28, 1997, the Company made unsecured personal loans of $57,000,
$58,500 and $34,000 to each of Messrs. Subbloie, Martino and Poludnewycz,
respectively (collectively, the "1997 Loans"). The 1996 Loans and 1997 Loans
bear interest at 8.25% and are payable on the earlier of June 1, 1999 or an
initial public offering of Common Stock of the Company. The aggregate
outstanding amount of the 1996 Loans and 1997 Loans for each of Messrs.
Subbloie, Martino and Poludnewycz is $295,700, $281,100 and $143,100,
respectively. It is anticipated that the principal amount and accrued interest
of such loans will be repaid in full by such officers upon the completion of
this offering.
53
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of January 31, 1997 and as adjusted
to reflect the sale of the shares offered hereby (i) by each person or entity
known by the Company to own beneficially more than 5% of the outstanding
shares of Common Stock, (ii) by each director of the Company, (iii) by each of
the Named Executive Officers, (iv) by all directors and executive officers of
the Company as a group, and (v) by other Selling Shareholders. Unless
otherwise indicated below, to the knowledge of the Company, each person or
entity listed below maintains a mailing address c/o Information Management
Associates, Inc., One Corporate Drive, Suite 414, Shelton, Connecticut 06484
and has sole voting and investment power over the shares of Common Stock shown
as beneficially owned, except to the extent authority is shared by spouses
under applicable law.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR OWNED
TO OFFERING(1) AFTER OFFERING(1)(2)
----------------------- NUMBER OF -----------------------
NAME AND ADDRESS OF SHARES
BENEFICIAL OWNER NUMBER PERCENT OFFERED NUMBER PERCENT
- ------------------- ------------ ---------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Wand Group (3).......... 3,516,913 56.0% 1,604,985 1,911,928 21.5%
630 Fifth Avenue, Suite
2435
New York, NY 10111
Albert R. Subbloie, Jr.
(4).................... 682,726 10.7 60,000 622,726 6.9
Gary R. Martino (5)..... 680,476 10.6 60,000 620,476 6.9
Andrei Poludnewycz (6).. 455,304 7.2 39,375 415,929 4.7
James S. Aufdemberge
(7).................... 50,230 * 6,000 44,230 *
Paul G. Frederick (8)... 18,750 * 3,000 15,750 *
James E. Anderson (9)... 3,750 * 565 3,185 *
David G. Caldeira (10).. 48,825 * 2,625 46,200 *
Michael P. McGroarty
(11)................... 7,500 * 1,125 6,375 *
Paul J. Schmidt (12).... 200,508 3.2 15,000 185,508 2.1
David J. Callard (13)... 48,750 * 4,140 44,610 *
c/o Wand Partners Inc.
630 Fifth Avenue, Suite
2435
New York, NY 10111
Thomas F. Hill (14)..... 68,661 1.1 6,000 62,661 *
Donald P. Miller (15)... 16,875 * 2,500 14,375 *
Directors and Executive
Officers as a Group
(12 persons) (16)...... 2,282,355 33.7 200,330 2,082,025 22.2
Mercury Asset Management
plc (17)............... 265,000 4.2 22,500 242,500 2.7
James H. Coffman, Jr.
(18)................... 209,902 3.3 17,000 192,902 2.1
Michael Herlehy (19).... 67,974 1.1 7,500 60,474 *
Joseph Niciforo (20).... 67,974 1.1 7,500 60,474 *
Joseph R. LeMay, Jr.
(21)................... 67,140 1.1 3,750 63,390 *
Other Selling
Shareholders (22)...... 82,911 1.3 11,435 71,476 *
(None of whom owns more
than 1% of
the outstanding Common
Stock)
</TABLE>
- --------
*Less than 1%
54
<PAGE>
- --------
(1) The number of shares beneficially owned by each shareholder is determined
under rules promulgated by the SEC, and the information is not
necessarily indicative of beneficial ownership for any other purpose.
Under SEC rules, beneficial ownership includes any shares as to which an
individual or entity has sole or shared voting power or investment power
and also any shares which an individual or entity has the right to
acquire within 60 days after January 31, 1997 through the exercise of any
stock option, warrant or other right. The inclusion herein of such
shares, however, does not constitute an admission that the named
shareholder is a direct or indirect beneficial owner of such shares.
Unless otherwise indicated, each person or entity named in the table has
sole voting power and investment power (or shares such power with his or
her spouse) with respect to all shares of capital stock listed as owned
by such person or entity.
(2) Assumes no exercise of the Underwriters' over-allotment option.
(3) Includes (i) 2,678,546 shares held by Wand/IMA Investments, L.P. ("Wand-
I"), 1,539,949 of which are offered hereby; (ii) 203,187 shares held by
Wand/IMA Investments II L.P. ("Wand-II"), 17,270 of which are offered
hereby; (iii) 561,946 shares held by Wand/IMA Investments III L.P.
("Wand-III"), 47,766 of which are offered hereby; (iv) 41,361 shares
issuable upon the cashless exercise of an outstanding warrant held by
Wand Partners Inc. ("WPI"); and (v) 31,873 shares held by Bruce W.
Schnitzer. Mr. Schnitzer is the majority shareholder and a director of
WPI and Wand (IMA) Inc. and owns limited partnership interests in Wand-I
and Wand-III. WPI is a general partner of Wand-I and Wand II, and Wand
(IMA) Inc. is a general partner of Wand-II and Wand-III. Mr. Schnitzer
may be deemed to beneficially own all shares held by such entities. Wand-
I, Wand-II and Wand-III have agreed to sell 151,699, 17,270 and 47,766
shares, respectively, pursuant to the Underwriter's over-allotment
option.
(4) Includes 131,287 shares issuable pursuant to stock options which are
exercisable within 60 days. Mr. Subbloie has agreed to sell 60,000 shares
pursuant to the Underwriters' over-allotment option.
(5) Includes 131,287 shares issuable pursuant to stock options which are
exercisable within 60 days. Mr. Martino has agreed to sell 60,000 shares
pursuant to the Underwriters' over-allotment option.
(6) Includes 37,518 shares issuable pursuant to stock options which are
exercisable within 60 days. Mr. Poludnewycz has agreed to sell 39,375
shares pursuant to the Underwriters' over-allotment option.
(7) Includes 50,230 shares issuable pursuant to stock options which are
exercisable within 60 days. Mr. Aufdemberge has agreed to sell 9,000
shares pursuant to the Underwriters' over-allotment option.
(8) Includes 18,750 shares issuable pursuant to stock options which are
exercisable within 60 days. Mr. Frederick has agreed to sell 5,625 shares
pursuant to the Underwriters' over-allotment option.
(9) Includes 3,750 shares issuable pursuant to stock options which is
exercisable within 60 days.
(10) Includes options to purchase 48,825 shares which are exercisable within
60 days. Mr. Caldeira has agreed to sell 4,875 shares pursuant to the
Underwriters' over-allotment option.
(11) Includes 7,500 shares issuable pursuant to stock options which are
exercisable within 60 days. Mr. McGroarty has agreed to sell 2,625 shares
pursuant to the Underwriters' over-allotment option.
(12) Includes 12,798 shares issuable pursuant to stock options which are
exercisable within 60 days. Mr. Schmidt has agreed to sell 18,750 shares
pursuant to the Underwriters' over-allotment option.
(13) Includes 16,875 shares issuable pursuant to stock options which are
exercisable within 60 days. Mr. Callard is a minority shareholder and a
director of WPI and Wand (IMA) Inc. WPI is a general partner of Wand-I
and Wand-II, and Wand (IMA) Inc. is a general partner of Wand-II and
Wand-III. Mr. Callard owns limited partnership interests in Wand-I and
Wand-III. Mr. Callard disclaims beneficial ownership of any shares of
Common Stock except for those held by him directly. Mr. Callard has
agreed to sell 4,140 shares pursuant to the Underwriters' over-allotment
option.
(14) Includes 51,786 shares issuable upon the cashless exercise of an
outstanding warrant and an option to purchase 16,875 shares which is
exercisable within 60 days. Mr. Hill is a director of WPI which is a
general partner of Wand-I and Wand-II. Mr. Hill disclaims beneficial
ownership of any shares except for those held by him directly. Mr. Hill
has agreed to sell 6,000 shares pursuant to the Underwriters' over-
allotment option.
(15) Includes 16,875 shares issuable pursuant to stock options which are
exercisable within 60 days.
(16) Includes options to purchase an aggregate of 492,570 shares held by
directors and executive officers which are exercisable within 60 days.
(17) Mercury Asset Management plc has agreed to sell 22,500 shares pursuant to
the Underwriters' over-allotment option.
(18) Includes 149,557 shares issuable pursuant to stock options which are
exercisable within 60 days. Mr. Coffman has agreed to sell 145,379 shares
pursuant to the Underwriters' over-allotment option.
(19) Mr. Herlehy has agreed to sell 15,000 shares pursuant to the
Underwriters' over-allotment option.
(20) Mr. Niciforo has agreed to sell 15,000 shares pursuant to the
Underwriters' over-allotment option.
(21) Includes 13,500 shares issuable pursuant to stock options which are
exercisable within 60 days. Mr. LeMay has agreed to sell 7,500 shares
pursuant to the Underwriters' over-allotment option.
(22) Includes 5,782 shares issuable pursuant to stock options which are
exercisable within 60 days. These shareholders have agreed to sell an
aggregate of 38,589 shares pursuant to the Underwriters' over-allotment
option.
55
<PAGE>
DESCRIPTION OF CAPITAL STOCK
After giving effect to the amendment and restatement of the Company's
Certificate of Incorporation, to be effected upon the closing of this
offering, the authorized capital stock of the Company will consist of
20,000,000 shares of Common Stock, no par value per share, and 500,000 shares
of undesignated Preferred Stock, no par value per share. As of December 31,
1996 (after giving effect to the conversion of all outstanding shares of
Convertible Preferred Stock into Common Stock and the exercise of all common
stock purchase warrants held by WPI and its affiliates and the exercise of
options for 34,690 shares of Common Stock), there were outstanding (i)
6,275,538 shares of Common Stock held by shareholders of record, (ii) stock
options for the purchase of a total of 1,301,659 shares of Common Stock, and
(iii) stock purchase warrants exercisable for a total of 6,750 shares of
Common Stock.
The following summary of certain provisions of the Company's Common Stock,
Preferred Stock, Certificate of Incorporation and Bylaws, and of certain
provisions of the Connecticut Business Corporation Act (the "CBCA"), is not
intended to be complete and is qualified by reference to the provisions of
applicable law and to the Certificate of Incorporation and Bylaws included as
exhibits to the Registration Statement of which this Prospectus is a part. See
"Additional Information."
COMMON STOCK
Holders of Common Stock are entitled to one vote for each share held on all
matters properly submitted to a vote of shareholders and do not have
cumulative voting rights. Accordingly, holders of a majority of the shares of
Common Stock entitled to vote in any election of directors may elect all of
the directors standing for election. Holders of Common Stock are entitled to
receive ratably such distributions, if any, as may be declared by the Board of
Directors out of funds legally available therefor, subject to any preferential
distribution rights of outstanding Preferred Stock. Upon the liquidation,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to receive ratably the net assets of the Company available after the
payment of all debts and other liabilities and subject to any prior claims.
Holders of Common Stock have no preemptive, subscription, redemption or
conversion rights. The outstanding shares of Common Stock are, and the shares
offered by the Company in this offering will be, when issued and paid for,
fully paid and nonassessable. The rights, preferences and privileges of
holders of Common Stock are subject to, and may be adversely affected by, the
rights of the holders of shares of any series of Preferred Stock which the
Company may designate and issue in the future. Certain holders of Common Stock
have the right, in certain circumstances, to require the Company to effect the
registration of their shares of Common Stock pursuant to the Securities Act.
See "Shares Eligible for Future Sale."
PREFERRED STOCK
Under the terms of the Certificate of Incorporation, the Board of Directors
is authorized, subject to any limitations prescribed by law, without
shareholder approval, to issue shares of Preferred Stock in one or more
series. Each such series of Preferred Stock issued may rank senior to the
Common Stock with respect to the payment of any distributions or amounts upon
liquidation, dissolution or winding up of the Company. In addition, it shall
have such preferences, limitations and relative rights, including voting
rights, distribution rights, conversion rights, redemption privileges and
liquidation preferences, as shall be determined by the Board of Directors,
without any further vote or action by the shareholders.
The issuance of Preferred Stock, while providing desirable flexibility in
connection with possible acquisitions and other corporate purposes, could have
the effect of making it more difficult for a third party to acquire, or of
discouraging a third party from acquiring, a majority of the outstanding
voting stock of the Company. The Company has no present plans to issue any
shares of Preferred Stock.
56
<PAGE>
ANTITAKEOVER EFFECTS OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION, BYLAWS
AND CONNECTICUT LAW
Certificate of Incorporation and Bylaws. The Certificate of Incorporation
provides for the division of the Board of Directors into three classes as
nearly equal in size as possible with staggered three-year terms. See
"Management." In addition, the Certificate of Incorporation provides that
subject to the rights of holders of any class or series of Preferred Stock
then outstanding, directors may be removed only for cause at a meeting of
shareholders called expressly for that purpose at which a quorum is present by
the affirmative vote of the holders of two-thirds of the shares of the Company
entitled to vote in the election of directors generally. The classification of
the Board of Directors and the limitations on the removal of directors could
have the effect of making it more difficult for a third party to acquire, or
of discouraging a third party from acquiring, control of the Company.
The Bylaws provide that any action required or permitted to be taken by the
shareholders of the Company at an annual meeting or special meeting of
shareholders may only be taken if it is properly brought before such meeting.
The Bylaws further provide that special meetings of the shareholders may only
be called by the Chairman of the Board of Directors and shall be called by the
Secretary of the Company at the written request or by resolution adopted by a
majority of the Board of Directors or upon the written demand of the holders
of 35% of the voting stock entitled to vote at such special meeting. Under the
Bylaws, in order for any matter to be considered "properly brought" before a
meeting, a shareholder must comply with certain requirements regarding advance
notice to the Company. The foregoing provisions could have the effect of
delaying until the next shareholders' meeting shareholder actions which are
favored by the holders of a majority of the outstanding voting securities of
the Company.
The Certificate of Incorporation also contains certain provisions permitted
under the CBCA relating to the personal liability of directors. The provisions
limit a director's liability for monetary damages for a breach of fiduciary
duty to the amount of compensation received by the director for serving the
Company during the year of the violation, except in certain circumstances
involving (i) a knowing and culpable violation of law, (ii) receipt of an
improper personal economic gain by the director or an associate, (iii) a lack
of good faith and a conscious disregard for the duty of the director to the
Company under circumstances in which the director is aware that his conduct or
omission created an unjustifiable risk of serious injury to the Company, (iv)
a sustained and unexcused pattern of inattention that amount to an abdication
of the director's duty to the Company and (v) a director voting in favor of
certain types of distributions by the Company in violation of law or the
Certificate of Incorporation. Further, the Certificate of Incorporation
contains provisions to indemnify the Company's directors and officers to the
fullest extent permitted by the CBCA. The Company believes that these
provisions will assist the Company in attracting and retaining qualified
individuals to serve as directors.
Connecticut Antitakeover Statute. The Company is subject to the provisions
of Section 33-844 of the CBCA (the "Antitakeover Law"). The Antitakeover Law
prohibits a Connecticut corporation from engaging in a "business combination"
with an "interested shareholder" for a period of five years after the date of
the transaction in which the person became an interested shareholder, unless
the business combination is approved in a prescribed manner. A "business
combination" includes generally, mergers, asset sales, certain types of stock
issuances, and other transactions resulting in a disproportionate financial
benefit to the interested shareholder. Subject to certain exceptions, an
"interested shareholder" is a person who owns, or within five years did own,
10% or more of the corporation's voting stock.
The Certificate of Incorporation provides that an amendment of the
Certificate of Incorporation will require the approval of the Board of
Directors and an affirmative vote of a majority of the shares entitled to vote
on the amendment, if shareholder approval is required by the CBCA. The CBCA
provides generally that bylaws may be amended by a majority vote of the board
of directors or the shareholders. The Certificate of Incorporation provides,
however, that any Bylaws adopted by the shareholders of the Company or
required by the CBCA to be adopted by the shareholders may only be made,
altered or repealed by the vote of a majority of the shareholders.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company.
57
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, based upon the number of shares
outstanding at January 31, 1997, there will be 8,900,538 shares of Common
Stock outstanding (exclusive of 880,547 shares covered by vested options
outstanding at January 31, 1997). Of these shares, the 4,500,000 shares sold
in this offering will be freely tradeable without restriction or further
registration under the Securities Act, except that any shares purchased by
"affiliates" of the Company, as that term is defined in Rule 144 under the
Securities Act ("Affiliates"), may not be resold except pursuant to an
effective registration statement of the Company, or an applicable exemption
from registration, including an exemption under Rule 144.
SALES OF RESTRICTED SHARES
The remaining 4,400,538 shares of Common Stock are deemed "restricted
securities" under Rule 144. Of the restricted securities, 54,732 shares of
Common Stock will be eligible for sale beginning 90 days following the
Effective Date subject to certain resale restrictions pursuant to Rule 144
under the Securities Act. In addition, beginning 90 days after the Effective
Date, approximately 327,791 shares of Common Stock will be available for sale
without restriction in reliance on Rule 144(k) under the Securities Act upon
the expiration of 90-day Lock-up Agreements. Beginning 180 days after the
Effective Date, approximately 3,982,015 shares of Common Stock will be
available for sale upon the expiration of 180-day Lock-up Agreements, of which
approximately 3,566,598 shares will be subject to certain resale restrictions
pursuant to Rule 144 and approximately 451,417 shares will be available for
sale without restriction pursuant to Rule 144(k).
In general, under Rule 144 (as amended effective as of April 29, 1997),
beginning 90 days after the Effective Date, a person, including an Affiliate,
who has beneficially owned restricted securities for at least one year is
entitled to sell, within any three-month period, a number of such shares that
does not exceed the greater of (i) 1% of the then outstanding shares of Common
Stock (approximately 89,005 shares immediately after this offering) or (ii)
the average weekly trading volume in the Common Stock during the four calendar
weeks preceding the date on which notice of such sale is filed, provided that
certain requirements concerning availability of public information, manner of
sale and notice of sale are satisfied. In addition, under Rule 144(k), a
person who is not an Affiliate and has not been an Affiliate for at least
three months prior to the sale and who has beneficially owned restricted
securities for at least two years is entitled to sell such shares immediately
without compliance with the foregoing requirements of Rule 144. In meeting the
one- and two-year holding periods described above, a holder of restricted
securities can include the holding periods of a prior owner who was not an
Affiliate. The one- and two-year holding periods do not begin to run until the
full purchase price or other consideration is paid by the person acquiring the
restricted securities from the issuer or an Affiliate.
LOCK-UP AGREEMENTS
The executive officers, directors and certain employees of the Company, and
certain shareholders, who in the aggregate will hold approximately 4,008,015
shares of Common Stock have agreed that for a period of 180 days following the
Effective Date, and certain other shareholders who will hold approximately
327,791 shares of Common Stock have agreed that for a period of 90 days
following the Effective Date, they will not offer, pledge, sell, contract to
sell, grant any option to purchase, purchase any option to sell, or otherwise
transfer or dispose of, directly or indirectly, any shares of Common Stock,
any options, rights or warrants to purchase any shares of Common Stock
(including any stock appreciation, right, or similar right with an exercise or
conversion privilege at a price related to or derived from the market price of
the Common Stock) or any securities convertible into or exchangeable for
shares of Common Stock owned directly by them or with respect to which they
have the power of disposition, or engage in any hedging transactions with
respect to the Common Stock that may have an impact on the market price of the
Common Stock without the prior written consent of the Representatives.
58
<PAGE>
OPTIONS
As of the Effective Date, based on the number of options outstanding at
January 31, 1997, approximately 880,547 shares of Common Stock will be
issuable pursuant to vested options under the Company's 1991 Plan, 1996
Employee and Consultant Plan and 1996 Non-Employee Directors Plan, of which
approximately 831,400 shares will be subject to 180-day Lock-up Agreements.
Shortly after the Effective Date, the Company intends to file one or more
registration statements on Form S-8 to register under the Securities Act
shares issuable under such plans, upon which such shares will generally be
eligible for sale in the public market without restriction, subject to Rule
144 limitations applicable to Affiliates and Lock-up Agreements, to the extent
applicable.
REGISTRATION RIGHTS
Certain persons and entities (the "Rightsholders"), including certain
members of the Wand Group, Mercury Asset Management plc and certain individual
holders are entitled to certain rights under the Securities Act with respect
to the registration of a total of 2,581,734 shares of Common Stock (the
"Registrable Shares") pursuant to the terms of various stock purchase
agreements and warrant agreements (collectively, the "Registration Rights
Agreements"). The Registration Rights Agreements generally provide that, in
the event the Company proposes to register any of its securities under the
Securities Act, the Rightsholders shall be entitled to include Registrable
Shares in such registration, subject to the right of the managing underwriter
of any underwritten offering to limit for marketing reasons the number of
Registrable Shares included in such registration.
Certain members of the Wand Group have the right at any time and from time
to time to require the Company to prepare and file registration statements
under the Securities Act with respect to a total of 1,925,841 shares of Common
Stock held by them; provided, however, that the Company need effect no more
than three demand registrations.
EFFECT OF SALES OF SHARES
Prior to this offering, there has been no public market for the Common Stock
of the Company, and no prediction can be made as to the effect, if any, that
market sales of shares of Common Stock or the availability of shares for sale
will have on the market price of the Common Stock prevailing from time to
time. Nevertheless, sales of significant numbers of shares of the Common Stock
in the public market, or the perception that such sales could occur, could
adversely affect the market price of the Common Stock and could impair the
Company's future ability to raise capital through an offering of its equity
securities.
59
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company and the Selling Shareholders have agreed to sell to the Underwriters
named below, and the Underwriters, for whom Alex. Brown & Sons Incorporated,
Robertson, Stephens & Company LLC and SoundView Financial Group, Inc. are
acting as representatives (the "Representatives"), have severally agreed to
purchase from the Company and the Selling Shareholders the following
respective number of shares of Common Stock at the initial public offering
price less the underwriting discounts and commissions set forth on the front
cover of this Prospectus:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ----------- ---------
<S> <C>
Alex. Brown & Sons Incorporated.......................................
Robertson, Stephens & Company LLC.....................................
SoundView Financial Group, Inc. ......................................
---------
Total............................................................... 4,500,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent, and that the Underwriters are
committed to purchase all of the shares of Common Stock offered hereby (other
than those covered by the over-allotment option described below), if any such
shares are purchased.
The Company and the Selling Shareholders have been advised by the
Representatives that the Underwriters propose to offer the shares of Common
Stock in part directly to the public at the initial public offering price set
forth on the cover page of this Prospectus and in part to certain securities
dealers at such price less a concession not in excess of $ per share. The
Underwriters may allow, and such dealers may reallow, a concession not in
excess of $ per share to certain brokers and dealers. After the shares of
Common Stock are released for sale to the public, the offering price and other
selling terms may from time to time be varied by the Representatives.
Certain Selling Shareholders have granted the Underwriters an option,
exercisable for 30 days after the date of the Prospectus, to purchase up to an
aggregate of 675,000 additional shares of Common Stock at the initial public
offering price less the underwriting discounts and commissions set forth on
the cover page of this Prospectus, solely to cover over-allotments, if any. To
the extent such option is exercised, the Underwriters will become obligated,
subject to certain conditions, to purchase approximately the same percentage
of such additional shares that the number of shares to be purchased by each
Underwriter shown in the foregoing table bears to the 4,500,000 shares of
Common Stock offered hereby.
The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act.
60
<PAGE>
The Company has agreed that for a period of 180 days after the Effective
Date it will not issue, sell or otherwise dispose of, directly or indirectly,
any shares of Common Stock or other securities convertible into or
exchangeable or exercisable for shares of Common Stock or derivatives of
Common Stock without the prior written consent of the Representatives, except
that the Company may issue shares upon the exercise of options outstanding on
the Effective Date issued pursuant to its 1991 Plan, 1996 Non-Employee
Directors Plan and 1996 Employee and Consultant Option Plan and grant options
and offer to sell shares of Common Stock to its employees and directors
pursuant to such plans, provided that the Company will not grant any options
which will become exercisable within 180 days after the Effective Date.
The executive officers, directors and certain employees of the Company, and
certain shareholders, who in the aggregate will hold approximately 4,008,015
shares of Common Stock have agreed that for a period of 180 days following the
Effective Date, and certain other shareholders who will hold approximately
327,791 shares of Common Stock have agreed that for a period of 90 days
following the Effective Date, they will not offer, pledge, sell, contract to
sell, grant any option to purchase, purchase any option to sell, or otherwise
transfer or dispose of, directly or indirectly, any shares of Common Stock,
any options, rights or warrants to purchase any shares of Common Stock
(including any stock appreciation, right, or similar right with an exercise or
conversion privilege at a price related to or derived from the market price of
the Common Stock) or any securities convertible into or exchangeable for
shares of Common Stock owned directly by them or with respect to which they
have the power of disposition, or engage in any hedging transactions with
respect to the Common Stock that may have an impact on the market price of the
Common Stock without the prior written consent of the Representatives.
During and after the offering, the Underwriters may purchase and sell Common
Stock in the open market. These transactions may include over-allotment and
stabilizing transactions and purchases to cover syndicate short positions
created in connection with the offering. The Underwriters also may impose
penalty bids, whereby selling concessions allowed to syndicate members or
other broker-dealers in respect of the Common Stock sold in the offering for
their account may be reclaimed by the syndicate if such securities are
repurchased by the syndicate in stabilizing or short-covering transactions.
These activities may stabilize, maintain or otherwise affect the market price
of Common Stock, which may be higher than the price that might otherwise
prevail in the open market. These transactions may be effected on the Nasdaq
National Market or otherwise and these activities, if commenced, may be
discontinued at any time.
The Representatives have advised the Company that the Underwriters do not
intend to confirm sales to any accounts over which they exercise discretionary
authority.
Prior to this offering, there has been no public market for the Common Stock
of the Company. Consequently, the initial public offering price will be
determined by negotiation among the Company, representatives of the Selling
Shareholders and the Representatives. Among the factors expected to be
considered in such negotiations are the prevailing market conditions, the
results of operations of the Company in recent periods, the market
capitalizations and stages of development of other companies that the Company,
the Selling Shareholders and the Representatives believe to be comparable to
the Company, estimates of the business potential of the Company, the present
state of the Company's development and other factors deemed relevant.
LEGAL MATTERS
The validity of the shares of Common Stock offered by the Company hereby
will be passed upon for the Company by LeBoeuf, Lamb, Greene & MacRae, L.L.P.,
Hartford, Connecticut. Certain legal matters will be passed upon for the
Underwriters by Ropes & Gray, Boston, Massachusetts.
EXPERTS
The audited consolidated financial statements and schedule included in this
Prospectus and elsewhere in the Registration Statement have been audited by
Arthur Andersen LLP, independent public accountants as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
61
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (which term shall include all
amendments, exhibits, schedules and supplements thereto) on Form S-1 under the
Securities Act with respect to the shares of Common Stock offered hereby. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement.
Statements made in this Prospectus as to the contents of any contract,
agreement or other document referred to are not necessarily complete. With
respect to each such contract, agreement or other document filed as an exhibit
to the Registration Statement, reference is made to the exhibit for a more
complete description of the matter involved, and each such statement shall be
deemed qualified in its entirety by such reference. The Registration Statement
and the exhibits thereto may be inspected and copied at prescribed rates at
the public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549 and at the
regional offices of the Commission located at Seven World Trade Center, 13th
Floor, New York, New York 10048 and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. The Commission maintains a World Wide Web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the
Commission. The address of the Commission's Web site is http://www.sec.gov.
62
<PAGE>
INFORMATION MANAGEMENT ASSOCIATES, INC. AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................................. F-2
Consolidated Balance Sheets as of December 31, 1995 and 1996.............. F-3
Consolidated Statements of Operations for the Years Ended December 31,
1994, 1995 and 1996...................................................... F-4
Consolidated Statements of Cash Flows for the Years Ended December 31,
1994, 1995 and 1996...................................................... F-5
Consolidated Statements of Shareholders' Equity (Deficit) for the Period
from January 1, 1994 through December 31, 1996........................... F-6
Notes to Consolidated Financial Statements................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of Information Management
Associates, Inc.:
We have audited the accompanying consolidated balance sheets of Information
Management Associates, Inc. (a Connecticut corporation) and subsidiary as of
December 31, 1996 and 1995, and the related consolidated statements of
operations, shareholders' equity (deficit) and cash flows for each of the
three years in the period ended December 31, 1996. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Information Management Associates, Inc. and subsidiary as of December 31, 1996
and 1995, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1996 in conformity with
generally accepted accounting principles.
Arthur Andersen llp
Hartford, Connecticut March 6, 1997
F-2
<PAGE>
INFORMATION MANAGEMENT ASSOCIATES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, 1996
PRO FORMA
DECEMBER 31, DECEMBER 31, SHAREHOLDERS'
1995 1996 EQUITY (NOTE 2)
------------ ------------ -----------------
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......... $ 1,543 $ 3,073
Accounts receivable, net of
allowance for doubtful accounts
of
$425 in 1995 and $482 in 1996.... 7,801 10,473
Other current assets.............. 392 232
-------- --------
Total current assets............ 9,736 13,778
Equipment, net..................... 2,263 2,222
Notes receivable from officers..... 194 572
Other assets, net.................. 326 709
-------- --------
$ 12,519 $ 17,281
======== ========
LIABILITIES AND SHAREHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Bank line of credit............... $ 3,000 $ 4,860
Current maturities of term note
payable to bank.................. -- 83
Current maturities of obligations
under capital leases............. 371 251
Current maturities of
subordinated note payable to
shareholder...................... 500 250
Accounts payable.................. 2,788 2,308
Accrued sales tax payable......... 220 823
Accrued compensation.............. 1,057 1,166
Accrued liabilities............... 769 1,122
Deferred revenues................. 2,264 1,705
-------- --------
Total current liabilities....... 10,969 12,568
-------- --------
Term note payable to bank, less
current maturities included above. 2,500 2,417
-------- --------
Subordinated note payable to
shareholder, less current
maturities included above......... 246 --
-------- --------
Obligations under capital lease,
less current maturities included
above............................. 296 386
-------- --------
Other long term liabilities........ 572 520
-------- --------
Commitments and Contingencies
(Notes 7, 8 and 12)
Series A senior redeemable
convertible preferred stock,
$1,000 stated value; 4,500 shares
authorized, issued and outstanding
(liquidation value of $4,775 and
$5,169 in 1995 and 1996).......... 4,751 5,145
Series B senior redeemable
convertible preferred stock,
$1,000 stated value; 4,350 shares
authorized, issued and outstanding
in 1996 (liquidation value of
$4,408 in 1996)................... -- 4,286
-------- --------
Total preferred stock........... 4,751 9,431
-------- --------
Redeemable common stock warrants... 2,480 2,865
-------- --------
Shareholders' equity (deficit):
Preferred stock, undesignated, no
par value, 500,000 shares
authorized, no shares issued and
outstanding pro forma............. $ --
Common stock, no par value;
4,255,197 and 4,293,379 shares
outstanding at December 31, 1995
and 1996, 6,275,538 shares pro
forma............................. 5,554 5,795 18,107
Cumulative translation adjustment.. (41) (9) (9)
Accumulated deficit................ (14,808) (16,692) (16,692)
-------- -------- --------
Total shareholders' equity
(deficit)...................... (9,295) (10,906) 1,406
-------- -------- --------
$ 12,519 $ 17,281 $ 17,297
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
INFORMATION MANAGEMENT ASSOCIATES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1994 1995 1996
------- ------- ---------
(IN THOUSANDS, EXCEPT
SHARE AMOUNTS)
<S> <C> <C> <C>
Revenues:
License fees.................................... $ 7,393 $10,825 $ 13,022
Services and maintenance........................ 10,959 12,984 13,255
------- ------- ---------
Total revenues................................ 18,352 23,809 26,277
------- ------- ---------
Cost of revenues:
Cost of license fees............................ 462 700 709
Cost of services and maintenance................ 6,268 8,225 7,191
------- ------- ---------
Total cost of revenues........................ 6,730 8,925 7,900
------- ------- ---------
Gross profit...................................... 11,622 14,884 18,377
------- ------- ---------
Operating expenses:
Sales and marketing............................. 5,857 6,844 8,055
Product development............................. 6,106 6,802 6,382
General and administrative...................... 2,693 3,824 3,878
------- ------- ---------
Total operating expenses...................... 14,656 17,470 18,315
------- ------- ---------
Operating income (loss)........................... (3,034) (2,586) 62
------- ------- ---------
Other income (expense):
Interest expense................................ (619) (764) (1,171)
Loss on disposal of property and equipment...... (298) (113) --
Gain on sale of product line.................... -- -- 92
Termination of operating lease.................. -- (223) --
------- ------- ---------
Total other income (expense).................. (917) (1,100) (1,079)
------- ------- ---------
Loss before provision for income taxes............ (3,951) (3,686) (1,017)
Provision for income taxes........................ 132 100 30
------- ------- ---------
Net loss.......................................... $(4,083) $(3,786) $ (1,047)
======= ======= =========
Pro forma net loss per share (Note 2)............. $ (0.17)
=========
Pro forma shares used in net loss per share
calculation (Note 2)............................. 6,007,213
=========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
INFORMATION MANAGEMENT ASSOCIATES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1994 1995 1996
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net loss........................................... $(4,083) $(3,786) $(1,047)
Adjustments to Reconcile Net Loss to Net Cash Used
In Operations:
Depreciation and amortization...................... 816 948 1,155
Loss on disposal of property and equipment......... 298 113 --
Gain on sale of product line....................... -- -- (92)
Amortization of restricted stock awards............ 10 10 10
Changes in Operating Assets and Liabilities
Accounts receivable................................ (2,315) 399 (3,001)
Other current assets............................... (129) (236) 143
Notes receivable from officers..................... (71) 76 (378)
Other assets....................................... (63) (182) (502)
Accounts payable................................... 1,400 (288) (480)
Accrued sales tax.................................. 61 145 603
Accrued compensation............................... (68) 537 109
Accrued expenses................................... (275) 123 370
Other long term liabilities........................ 213 260 (52)
Deferred revenues.................................. 914 (10) (128)
------- ------- -------
Net Cash Used In Operations...................... (3,292) (1,891) (3,290)
------- ------- -------
Cash Flows from Investing Activities:
Acquisition of equipment........................... (1,047) (951) (1,001)
Proceeds from sale of building..................... -- 677 --
------- ------- -------
Net Cash Used in Investing Activities............ (1,047) (274) (1,001)
------- ------- -------
Cash Flows from Financing Activities:
Net proceeds from sale of common stock............. 1,164 -- 231
Net proceeds from sale of preferred stock.......... -- 4,475 4,228
Proceeds from bank term loan....................... -- 2,500 --
Proceeds from (repayment of) advances from share-
holders........................................... 1,008 (1,008) --
Net proceeds from (repayment of) bank line of cred-
it................................................ 1,555 (1,000) 1,860
Repayment of obligations under capital leases...... (375) (1,376) (539)
Proceeds from sale leaseback....................... -- -- 509
Repayment of subordinated note payable to share-
holder............................................ -- (250) (500)
------- ------- -------
Net Cash Provided by Financing Activities........ 3,352 3,341 5,789
------- ------- -------
Effect of Exchange Rate Changes..................... 38 (79) 32
------- ------- -------
Net Increase (Decrease) in Cash and Cash Equiva-
lents.............................................. (949) 1,097 1,530
Cash and Cash Equivalents, beginning of year........ 1,395 446 1,543
------- ------- -------
Cash and Cash Equivalents, end of year.............. $ 446 $ 1,543 $ 3,073
======= ======= =======
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest........... $ 469 $ 714 $ 877
Cash paid during the period for income taxes....... 30 -- 16
Supplemental Disclosure of Noncash Activities:
Accretion of Series A preferred stock in lieu of
dividends......................................... $ -- $ 275 $ 394
Accretion of Series B preferred stock in lieu of
dividends......................................... -- -- 58
Increase in fair market value of redeemable common
stock warrants.................................... 458 965 385
Equipment acquired pursuant to capital lease obli-
gation............................................ 851 113 --
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F-5
<PAGE>
INFORMATION MANAGEMENT ASSOCIATES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
COMMON STOCK CUMULATIVE
---------------- TRANSLATION ACCUMULATED
SHARES AMOUNT ADJUSTMENT DEFICIT TOTAL
--------- ------ ----------- ----------- --------
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1994.... 3,958,947 $4,370 $-- $ (5,241) $ (871)
Sale of common stock, net
of issuance costs of $21.. 296,250 1,164 -- -- 1,164
Amortization of restricted
stock awards.............. -- 10 -- -- 10
Change in fair market value
of redeemable common stock
warrants.................. -- -- -- (458) (458)
Equity adjustment from for-
eign currency translation. -- -- 38 -- 38
Net loss................... -- -- -- (4,083) (4,083)
--------- ------ ---- -------- --------
Balance, December 31, 1994.. 4,255,197 5,544 38 (9,782) (4,200)
Amortization of restricted
stock awards.............. -- 10 -- -- 10
Change in fair market value
of redeemable common stock
warrants.................. -- -- -- (965) (965)
Accretion of Series A pre-
ferred stock dividends.... -- -- -- (275) (275)
Equity adjustment from for-
eign currency translation. -- -- (79) -- (79)
Net loss................... -- -- -- (3,786) (3,786)
--------- ------ ---- -------- --------
Balance, December 31, 1995.. 4,255,197 5,554 (41) (14,808) (9,295)
Sale of common stock....... 32,400 231 -- -- 231
Exercise of common stock
options................... 5,782 -- -- -- --
Amortization of restricted
stock awards.............. -- 10 -- -- 10
Change in fair market value
of redeemable common stock
warrants.................. -- -- -- (385) (385)
Accretion of Series A pre-
ferred stock dividends.... -- -- -- (394) (394)
Accretion of Series B pre-
ferred stock dividends.... -- -- -- (58) (58)
Equity adjustment from for-
eign currency translation. -- -- 32 -- 32
Net loss................... -- -- -- (1,047) (1,047)
--------- ------ ---- -------- --------
Balance, December 31, 1996.. 4,293,379 $5,795 $ (9) $(16,692) $(10,906)
========= ====== ==== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
INFORMATION MANAGEMENT ASSOCIATES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 1995 AND 1996
(1) NATURE OF OPERATIONS
Information Management Associates, Inc. and subsidiary (the Company) are
primarily engaged in the development, marketing and support of software that
automates customer interaction including telemarketing, telesales, contact
management, sales, marketing and customer service functions of business
organizations in a variety of industries. The Company markets its software
products in North and South America as well as Western Europe, Asia, Australia
and New Zealand.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation. The accompanying consolidated financial
statements include the accounts of the Company and its wholly-owned foreign
subsidiary, Information Management Associates Limited, which is located in the
United Kingdom. All material intercompany balances and transactions have been
eliminated in consolidation.
Foreign currency transactions. The functional currency of the Company's
subsidiary is the local currency. Accordingly, the Company applies the current
rate method to translate the subsidiary's financial statements into U.S.
dollars. Translation adjustments are included as a separate component of
shareholders' equity (deficit) in the accompanying consolidated financial
statements.
Cash and cash equivalents. The Company considers all highly liquid
investments with original maturities of three months or less to be the
equivalent of cash. As of December 31, 1995 and 1996, the Company's cash and
cash equivalents are deposited with principally one financial institution.
Equipment. Equipment is recorded at cost and is depreciated or amortized,
using the straight-line method, over their estimated useful life of three to
ten years.
At December 31, 1995 and 1996, property and equipment, net, consisted of the
following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1995 1996
------ ------
<S> <C> <C>
Equipment..................................................... $1,504 $2,606
Furniture and fixtures........................................ 1,219 1,499
Leasehold improvements........................................ 425 451
Equipment under capital lease................................. 1,338 931
------ ------
4,486 5,487
Less--Accumulated depreciation and amortization............... 2,223 3,265
------ ------
$2,263 $2,222
====== ======
</TABLE>
Expenditures for repairs and maintenance are charged against income as
incurred while renewals and betterments are capitalized.
Software development costs. The Company expenses research and development
costs as incurred. The Company has evaluated the establishment of
technological feasibility of its products in accordance with SFAS No. 86,
Accounting for the Costs of Computer Software To Be Sold, Leased or Otherwise
F-7
<PAGE>
INFORMATION MANAGEMENT ASSOCIATES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Marketed. The Company defines technological feasibility as the completion of a
working model. The Company sells products in a market that is subject to rapid
technological change, new product development and changing customer needs. The
Company has concluded that technological feasibility is not established until
the development stage of the product is nearly complete. The time period
during which costs could be capitalized from the point of reaching
technological feasibility until the time of general product release is very
short and, consequently, the amounts that could be capitalized are not
material to the Company's financial position or results of operations.
Therefore, the Company has charged all such costs to research and development
in the period incurred.
Revenue recognition. The Company generates revenues from licensing the
rights to use its software products directly to end users and indirectly
through sublicense fees from resellers. The Company also generates revenues
from sales of software maintenance contracts, and from consulting and training
services performed for customers who license its products.
Revenues from software license agreements are recognized upon the delivery
of the software to the customer if there are no significant post-delivery
obligations and collection is probable. Service revenues consist of
professional consulting, implementation and training services performed on a
time-and-materials basis under separate service arrangements related to the
implementation of the Company's software products. Revenues from consulting
and training services are recognized as services are performed. The Company
enters into transactions which include both license and service elements. As
such service elements do not include more than minor alteration of the
software, the license fees are recognized upon delivery and the service
revenues are recognized when performed.
Software maintenance fees are recognized ratably over the term of the
maintenance period. If software maintenance fees are provided for in the
license fee or at a discount in a license agreement, a portion of the license
fee equal to the fair market value of these amounts is allocated to software
maintenance revenue based on the value established by independent sales of
such maintenance services to customers.
Cost of license revenues consists primarily of the cost of media on which
the product is delivered and third party software products which are resold by
the Company. Cost of service and maintenance revenues consists primarily of
salaries, benefits, subcontracted consulting costs and allocated overhead
costs related to consulting personnel and the customer support group.
Deferred revenues primarily relate to post-contract customer support which
has been paid by customers prior to the performance of the services.
Income taxes. The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes". This statement requires the Company to recognize deferred tax
liabilities and assets for the expected future tax consequences of events that
have been recognized in the Company's financial statements or tax returns.
Under this method, deferred tax liabilities and assets are determined based on
the difference between the financial statement carrying amounts and the tax
basis of the assets and liabilities and the net operating loss carryforwards
available for tax reporting purposes, using applicable tax rates for the years
in which the differences are expected to reverse.
Pro forma net loss per common share. Pro forma net loss per common share
assumes, in connection with the closing of the initial public offering,
numbers of shares issuable upon the conversion of the Series A senior
redeemable convertible preferred stock, the cashless exercise of the
F-8
<PAGE>
INFORMATION MANAGEMENT ASSOCIATES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
redeemable common stock warrants at an offering price of $12.00 per share and
the exercise of 34,690 options as if such conversion or exercise occurred on
January 1, 1996, and the number of shares issuable upon the conversion of the
Series B senior redeemable convertible preferred stock as if such conversion
occurred upon issuance of such stock on November 1, 1996 (see Notes 7, 8 and
17). In addition, pursuant to the requirements of the Securities and Exchange
Commission, common stock equivalents issued at prices below the anticipated
public offering price during the twelve months immediately preceding the
initial public offering filing date have been included in the calculation of
weighted average number of common shares outstanding (using the treasury stock
method and the anticipated public offering price).
Historical net loss per share is not presented in the accompanying financial
statements as such amounts are not meaningful.
Long-lived assets. In March 1995, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of"
(SFAS 121). SFAS 121 requires a company to review long-lived assets for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The adoption of this
standard did not have a material impact on the Company's results of operations
or financial position.
Concentration of credit risk. Financial instruments which potentially
subject the Company to concentration of credit risk consists principally of
cash and trade receivables. As of December 31, 1995 and 1996 one customer
accounted for 14% and 10%, respectively, of accounts receivable.
Use of estimates in the preparation of financial statements. The preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Reclassifications. Certain reclassifications have been made to the 1994 and
1995 consolidated financial statements in order for them to be presented in
conformity with the 1996 consolidated financial statements.
Pro forma presentation. As discussed in Note 17, the Company's Series A
convertible preferred stock and Series B convertible preferred stock will be
converted into shares of common stock and the redeemable common stock warrants
will be exercised upon the closing of the Company's initial public offering
contemplated herein. In addition, 34,690 options are expected to be exercised
in connection with the initial public offering. The unaudited pro forma
shareholders' equity as of December 31, 1996 reflects the conversion of the
Series A and Series B preferred stock into 1,532,161 shares of common stock,
the issuance of 415,308 shares of common stock pursuant to the cashless
exercise of outstanding redeemable common stock warrants and the exercise of
34,690 options.
(3) RESTRUCTURING OF OPERATIONS
Effective September 1, 1996, the Company sold its assets related to the
Telemar product line to a third party buyer, Telemar Software International,
LLC (TSI). TSI also assumed certain liabilities of the Company related to the
Telemar product line. As a result of the sale, the Company was relieved of
liabilities in
F-9
<PAGE>
INFORMATION MANAGEMENT ASSOCIATES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(3) RESTRUCTURING OF OPERATIONS--(CONTINUED)
excess of assets sold and, accordingly, recognized a net gain of approximately
$92,000. Concurrent with the sale, certain employees who were dedicated to the
Telemar product line were terminated by the Company and rehired by TSI.
In connection with the sale, TSI also gave the Company a promissory note in
the principal amount of $650,000, which is payable in five equal annual
installments of $130,000 and bears interest at 8.0%. The Company has fully
reserved for the $650,000 note receivable because collectibility, based on the
start up nature of TSI operations, was not ascertainable at the time of sale.
The note is secured by substantially all of the assets of TSI.
(4) BANK INDEBTEDNESS
In February 1997, the Company entered into an amended Loan and Security
Agreement (the Credit Agreement) with a bank. The Credit Agreement consists of
a $6,000,000 line of credit and a $2,500,000 Term Note Payable (the Term
Note).
Line of credit. Borrowings under the line of credit bear interest at prime
(8.25% at December 31, 1996) plus 1.0% and are limited to 75% of qualified
accounts receivable, as defined. At December 31, 1996, borrowings outstanding
under the line of credit were $4,860,000 and additional borrowings of
approximately $1,140,000 were available. The maturity date of the line of
credit is June 1, 1997. The Company is currently engaged in discussions with
its bank to extend the maturity date of the line of credit to January 1, 1998
and management expects that such extension will be obtained. The Company
believes that its existing working capital, operating activities and business
strategies will provide sufficient cash to fund its operations through 1997.
Upon the closing of an initial public offering, the Company is required to
repay the outstanding principal balance of, and accrued interest on, the line
of credit and Term Note.
Term Note Payable. The Term Note is payable in equal monthly principal
installments of $41,667, commencing November 1, 1997 through October 2002. In
the event of an initial public offering, the balance of the Term Note is due
and payable.
In addition to an 11.0% per annum interest which is payable on a current
basis, the Company is required to accrue additional interest based upon a
formula which approximates 9.0% (the Additional Interest). The Additional
Interest is payable at the earlier of November 1, 1998 or upon full repayment
of the Term Note. The Company is accruing for the Additional Interest and at
December 31, 1995 and 1996 approximately $33,000 and 233,000, respectively, is
included in accrued liabilities in the accompanying consolidated balance
sheets.
Aggregate maturities of the Term Note for each of the succeeding five years
subsequent to December 31, 1996 and thereafter, are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, AMOUNT
------------------------ ------
<S> <C>
1997............................................................. $ 83
1998............................................................. 500
1999............................................................. 500
2000............................................................. 500
2001............................................................. 500
thereafter....................................................... 417
------
$2,500
======
</TABLE>
F-10
<PAGE>
INFORMATION MANAGEMENT ASSOCIATES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(4) BANK INDEBTEDNESS--(CONTINUED)
The Credit Agreement contains financial and other covenants requiring the
Company to maintain, among other requirements, a minimum level of working
capital and tangible net worth, as defined. As of and during the year ended
December 31, 1996, the Company was in violation of certain covenants for which
it has received a waiver from its bank. In addition, in connection with an
amendment to the Credit Agreement the lender adjusted the financial covenants
for 1997. Borrowings under the Credit Agreement are secured by substantially
all assets of the Company and are personally guaranteed by certain members of
management.
(5) OBLIGATIONS UNDER CAPITAL LEASES
The Company leases certain equipment under capital leases which expire at
varying dates through 2000.
The following is a schedule of future minimum lease payments for capital
leases as of December 31, 1996 and thereafter, (in thousands):
<TABLE>
<S> <C>
1997................................................................ $311
1998................................................................ 274
1999................................................................ 85
2000................................................................ 48
----
718
Less--Amount representing interest.................................. 81
----
Present value of future minimum lease payments...................... 637
Less--Current maturities............................................ 251
----
$386
====
</TABLE>
In February 1996 the Company sold certain equipment and simultaneously
leased back the equipment under a Master Lease Agreement (the Lease
Agreement). The Lease Agreement was accounted for as a financing lease and
accordingly the proceeds from the sale were reflected as a debt obligation
which is being amortized over the term of the lease. In connection with the
Lease Agreement, the Company issued warrants to purchase 6,750 shares of
common stock at a price of $4.89 per share. In accordance with the terms and
conditions of the capital lease, the Company has a repurchase option whereby
the equipment can be repurchased at fair market value, as defined. As the
equipment was sold at its net book value there was no gain or loss as a result
of the Lease Agreement.
During 1993 and 1994 the Company leased a facility in Trumbull, Connecticut,
from Information Management Associates (the Partnership), a related party
whose partners are the same as certain of the Company's shareholders. This
facility served as the Company's headquarters until April 1994 (see Note 12).
As a result of the mortgage on the facility being guaranteed by both the
partners of the Partnership and the Company, the related lease had been
accounted for as a capital lease. As of December 31, 1994, there was
outstanding mortgage indebtedness on the facility of approximately $976,000.
During 1995, the Partnership sold the facility in Trumbull, Connecticut. The
sale resulted in a loss of $376,000, of which $298,000 and $78,000 was
provided for in the accompanying consolidated statements of operations for the
years ended December 31, 1994 and 1995, respectively. The net proceeds from
the sale, which were received in 1995, were used to reduce the mortgage
indebtedness and the remaining indebtedness of $475,000 was repaid by the
Company during 1995.
F-11
<PAGE>
INFORMATION MANAGEMENT ASSOCIATES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(6) SUBORDINATED NOTE PAYABLE TO SHAREHOLDER
The Subordinated Note Payable to Shareholder (the Shareholder Note) was
payable in four annual, equal installments of $250,000, commencing in December
1994 and bears interest at 12.0% per annum. The installments of $250,000 due
in December 1994 and 1995 were paid in 1995 and 1996, respectively. As of
December 31, 1996, the balance of the Shareholder's Note was $250,000. The
outstanding principal balance of the Shareholder Note is stated net of
approximately $4,000 of related unamortized debt discount costs at December
31, 1995. These costs were being amortized over the life of the debt.
(7) REDEEMABLE CONVERTIBLE PREFERRED STOCK
The Company's Amended and Restated Certificate of Incorporation has
authorized 500,000 shares of preferred stock, of which 4,500 shares have been
designated as Series A senior redeemable convertible preferred stock (Series A
preferred) and of which 4,350 shares have been designated as Series B senior
redeemable convertible preferred stock (Series B preferred). In March 1995,
the Company issued the Series A preferred, with a stated value of $1,000, to
certain common shareholders for proceeds of approximately $4,475,000, net of
issuance costs of approximately $25,000. In November 1996, the Company issued
the Series B preferred, with a stated value of $1,000, to certain common
shareholders for proceeds of approximately $4,228,000, net of issuance costs
of approximately $122,000.
Dividends. The Series A preferred and Series B preferred accrue dividends at
a rate of 8% per annum. Through June 30, 1999, the Company can elect to pay
such dividends in additional shares of preferred stock in lieu of cash. As of
December 31, 1995 and 1996, the carrying value of the Series A preferred
included $275,000 and $669,000, respectively, of accrued but unpaid dividends.
As of December 31, 1996, the carrying value of the Series B preferred included
$58,000 of accrued but unpaid dividends. Provided there are shares of
preferred stock outstanding, the Company shall not declare any dividends on
the Company's common stock.
Conversion. Holders of the Series A preferred and Series B preferred are
entitled to convert such shares into common stock at a rate of $4.89 and $7.11
per share, respectively, with such conversion rate subject to adjustment, as
defined.
If the holders of the Series A preferred elect to convert such stock and
there has not been either (i) an initial public offering with aggregate
proceeds in excess of $20,000,000, and a per share price less than $8.22
through September 30, 1997 and increasing thereafter, or (ii) a Mandatory
Redemption (see below) in which the appraised value of the common stock, as
defined, is less than $31.11 per share as of March 31, 2003 and $39.11 per
share as of March 31, 2004, then the conversion price shall be based on a
$1,000 stated value and the Company shall have no obligation to pay the holder
any accrued but unpaid dividends.
If the holders of the Series B preferred elect to convert such stock and
there has not been either (i) an initial public offering with aggregate
proceeds in excess of $20,000,000, and a per share price less than $12.89
through March 31, 1998 and increasing thereafter, or (ii) a Mandatory
Redemption (see below) in which the appraised value of the common stock, as
defined, is less than $67.56 per share as of March 31, 2004 and $91.11 per
share as of March 31, 2005, then the conversion price shall be based on a
$1,000 stated value and the Company shall have no obligation to pay the holder
any accrued but unpaid dividends.
Upon the occurrence of an initial public offering with aggregate proceeds in
excess of $20,000,000, and a per share price greater than $8.22 per share
through September 30, 1997 for Series A preferred and
F-12
<PAGE>
INFORMATION MANAGEMENT ASSOCIATES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(7) REDEEMABLE CONVERTIBLE PREFERRED STOCK--(CONTINUED)
a per share price greater than $12.89 per share through March 31, 1998 for
Series B preferred, and increasing thereafter, the Company can require that
the holder convert the Series A preferred and Series B preferred into common
stock at the then conversion price based on a $1,000 stated value, and the
Company shall have no obligation to pay any previously accrued but unpaid
dividends (see Notes 2 and 17).
Redemption. If the Series A preferred is not converted into common stock,
the Company shall redeem 2,250 shares on each of March 31, 2003 and 2004
(Mandatory Redemption), at the $1,000 stated value per share plus all accrued
but unpaid dividends. If the Series B preferred is not converted into common
stock, the Company shall redeem 2,175 shares on each of March 31, 2004 and
2005 (Mandatory Redemption) at the $1,000 stated value per share plus all
accrued but unpaid dividends.
If within 150 days prior to a Mandatory Redemption there has not been an
initial public offering with aggregate proceeds exceeding $20,000,000, then
the holders of the Series A preferred and Series B preferred can require that
the Company obtain a financial valuation, as defined, of the value of the
common stock into which such Series A preferred and Series B preferred would
be convertible.
Liquidation. In the case of a voluntary or involuntary liquidation or
dissolution of the Company, the holders of the Series A preferred and Series B
preferred shall receive a liquidation value of $1,000 per share plus any
accrued but unpaid dividends.
(8) REDEEMABLE COMMON STOCK WARRANTS
During 1990 and 1991, the Company issued redeemable warrants to purchase
433,372 shares of common stock, with exercise prices ranging from $.40 per
share to $1.33 per share, which are exercisable through December 21, 2002. As
of December 31, 1996, all of the issued warrants were outstanding.
All of the outstanding warrant holders have the right to put the warrants to
the Company after January 31, 1998, in the event that there has not been a
public offering of the Company's common stock. The put option requires that
the Company repurchase the warrants at the fair market value of the Company's
common stock, net of the associated warrant exercise price, at the time the
put option is exercised.
The Company accounted for the initial value of the warrants based on their
fair market values at the time the warrants were originally issued. Subsequent
increases in the fair market value of the warrants, as determined by sales of
the Company's common stock, results in adjustments to the carrying value of
the warrants through direct charges to accumulated deficit. As of December 31,
1995 and 1996, the redeemable common stock warrants were reflected in the
accompanying consolidated financial statements based on the estimated fair
market values of $6.22 and $7.11 per share, respectively.
(9) SHAREHOLDERS' EQUITY
Common stock. The Company's Amended and Restated Certificate of
Incorporation authorizes 20,000,000 shares of common stock (see Note 17).
The Company sold 296,250 shares of common stock in November 1994 at a per
share price of $4.00 for aggregate proceeds of approximately $1,164,000, net
of issuance costs of approximately $21,000.
The Company sold 32,400 shares of common stock in December 1996 at a per
share price of $7.11 for aggregate proceeds of approximately $231,000.
F-13
<PAGE>
INFORMATION MANAGEMENT ASSOCIATES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(9) SHAREHOLDERS' EQUITY--(CONTINUED)
Restricted stock awards. During 1990, the Company granted 160,875 shares of
common stock to certain key employees in consideration of future services to
be performed. The awards require each employee to complete 7 years of service
in order to retain ownership of the stock. The related compensation is being
recognized ratably over the 7-year vesting period. During each of 1994, 1995
and 1996, $10,000 of compensation expense was recognized in connection with
these restricted stock awards.
Stock option plans. The Company has stock option plans which provide for the
issuance of both incentive and nonqualified stock options. In March 1996, the
Company adopted both the 1996 Employee and Consultant Stock Option Plan, which
provides for the issuance of up to 900,000 shares of common share for both
incentive and nonqualified stock options, and the 1996 Non-Employee Directors'
Stock Option Plan, which provides for the issuance of up to 135,000 shares of
common stock (collectively, The 1996 Plans). Under the provisions of The 1996
Plans, the exercise price of each option shall not be less than 100% of the
fair market value of a share of common stock at the time of grant, as defined,
and the options may vest immediately or over time. The 1996 Plans shall be
adjusted for future changes in the capitalization of the Company or as
designated by the Board of Directors.
Previous to The 1996 Plans, the Company had established a stock option plan
which provided for the issuance of up to 900,000 shares of common stock for
both incentive and nonqualified stock options. Under the provisions of this
plan, the exercise price of each option was not to be less than 100% of the
fair market value of a share of common stock, as defined, and the options
could vest immediately or over time.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards, SFAS No. 123, Accounting for Stock-Based
Compensation (SFAS 123). SFAS 123 requires the measurement of the fair value
of stock options or warrants to be included in the statement of income or
disclosed in the notes to financial statements. The Company has determined
that it will continue to account for stock-based compensation for employees
under Accounting Principles Board Opinion No. 25 and elect the disclosure-only
alternative under SFAS 123. The Company has computed the pro forma disclosures
required under SFAS 123 for options granted in 1995 and 1996 using the Black-
Scholes option pricing model prescribed by SFAS 123. The weighted average
assumptions used are as follows:
<TABLE>
<CAPTION>
1995 1996
------- -----------
<S> <C> <C>
Risk free interest rate............................... 5.77% 6.15%-6.94%
Expected dividend yield............................... None None
Expected lives........................................ 8 years 8 years
Expected volatility................................... 72% 72%
</TABLE>
Had compensation cost for the Company's stock option plans been determined
based on the fair value at the grant dates of awards under these plans
consistent with the method of SFAS 123, the Company's loss applicable to
common shareholders and pro forma loss per common share would have been
increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1995 1996
------ ------
<S> <C> <C>
Loss applicable to common shareholders:
As reported............................................. (3,786) (1,047)
Pro forma............................................... (3,806) (2,563)
Pro forma loss per common stock:
As reported............................................. -- (.17)
Pro forma............................................... -- (.43)
</TABLE>
F-14
<PAGE>
INFORMATION MANAGEMENT ASSOCIATES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(9) SHAREHOLDERS' EQUITY--(CONTINUED)
Because SFAS 123 method of accounting has not been applied to options
granted prior to January 1, 1995, the resulting pro forma compensation cost
may not be representative of that to be expected in future years.
A summary of the status of the Company's two stock option plans at December
31, 1994, 1995 and 1996 and changes during the years then ended is presented
in the table and narrative below (shares in thousands):
<TABLE>
<CAPTION>
1994 1995 1996
---------------- ----------------- -------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------- -------- ------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning 359,464 $ .74 771,754 $2.48 894,606 $2.97
of year................
Granted................. 412,290 4.00 144,751 5.57 502,875 7.51
Exercised............... -- -- -- -- (5,782) .04
Expired................. -- -- (21,899) 3.08 (55,350) 4.61
------- ------- ---------
Outstanding, end of 771,754 2.48 894,606 2.97 1,336,349 4.62
year...................
======= ======= =========
Exercisable, end of 558,306 $1.90 632,572 $2.18 854,282 3.42
year...................
======= ======= =========
Weighted average fair
value of options grant- $4.40 $5.80
ed.....................
</TABLE>
Of the 1,336,349 options outstanding at December 31, 1996, 254,833 have a
$.04 exercise price, a weighted average contractual life of 4 years and are
all exercisable. There are also 71,849 options which have exercise prices
between $2.25 and $2.94, a weighted average exercise price of $2.60, a
weighted average contractual life of 5.5 years and are all exercisable. In
addition, there are 513,542 options which have exercise prices between $4.00
and $6.22, a weighted average exercise price of $4.39, a weighted average
contractual life of 7.3 years and 348,725 are exercisable at a weighted
average exercise price of $4.18. Lastly, there are 496,125 options which have
exercise prices between $6.22 and $8.00, a weighted average exercise price of
$7.51, a weighted average contractual life of 9.5 years and 178,875 are
exercisable at a weighted average exercise price of $7.08.
(10) INCOME TAXES
The provision for income taxes for the years ended December 31, 1994, 1995
and 1996 is as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Current:
Foreign............................................ $ 120 $ 75 $ --
Federal............................................ -- -- --
State.............................................. 12 25 30
------- ------- -------
$132 $ 100 $ 30
======= ======= =======
</TABLE>
F-15
<PAGE>
INFORMATION MANAGEMENT ASSOCIATES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(10) INCOME TAXES--(CONTINUED)
Deferred income taxes reflect the net tax effects of temporary differences
between the basis of assets and liabilities for financial reporting and income
tax purposes. Gross deferred tax assets of $4,168,000 and $3,944,000, gross
deferred tax liabilities of $9,000 and $0, and a valuation allowance of
$4,159,000 and $3,944,000 are included in the deferred tax balance as of
December 31, 1995 and 1996, respectively. A valuation allowance has been
recorded for the deferred tax assets as a result of uncertainties regarding
the realization of the asset, including the lack of profitability to date and
the variability of operating results.
The approximate tax effects of temporary differences which give rise to
deferred tax assets and liabilities is as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1995 1996
------ ------
<S> <C> <C>
Current:
Allowance for doubtful accounts.............................. $ 153 $ 178
Accrued vacation and payroll................................. 14 57
Loss on sale of property held for sale....................... 40 --
Other........................................................ 174 216
Valuation allowance.......................................... (381) (451)
------ ------
$ 0 $ 0
====== ======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1995 1996
------- -------
<S> <C> <C>
Non-current:
Acquired software.......................................... $ 188 $ --
Depreciation............................................... (9) 51
Deferred compensation...................................... 20 23
Rental obligations......................................... 167 154
Other...................................................... 39 --
Net operating losses....................................... 3,373 3,265
Valuation allowance........................................ (3,778) (3,493)
------- -------
$ 0 $ 0
======= =======
</TABLE>
The Company's effective tax rate differs from the statutory federal income
tax rate as shown in the following schedule:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Income tax benefit at statutory rate........ (34)% (34)% (34)%
Other....................................... (3) (3) (3)
Net operating loss not benefited............ 37 37 37
------- ------- -------
Effective tax rate.......................... 0% 0% 0%
======= ======= =======
</TABLE>
At December 31, 1996, the Company had approximately $8,900,000 of U.S.
Federal net operating loss carryforwards and approximately $2,000,000 of state
net operating loss carryforwards which can be used, subject to certain
limitations, to offset future taxable income, if any. These U.S. Federal net
operating loss carryforwards expire through 2011 and the State net operating
loss carryforwards expire through 2002. The Company's ability to utilize these
carryforwards may be limited by a change in ownership, as defined by Federal
income tax laws and regulations, which may occur upon completion of the
proposed initial public offering.
F-16
<PAGE>
INFORMATION MANAGEMENT ASSOCIATES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(11) RELATED PARTY TRANSACTIONS
Notes Receivable from officers at December 31, 1995 and 1996 consist of net
advances to shareholders of $194,000, and $572,000, respectively. These notes
will be due and payable at the earlier of (i) an initial public offering or
(ii) June 30, 1999.
The Company has entered into agreements with its principal shareholder and
its general partner which provides for the Company to receive financial
advisory services. The agreement called for an annual advisory fee to be paid
to this shareholder. In addition, an annual advisory fee is to be paid to an
affiliate of the shareholder until the earlier to occur of January 2, 1998,
the date of an initial public offering of common stock with gross proceeds to
the Company of at least $10.0 million or the sale by the Company of
substantially all of its stock or assets. Included in the accompanying
consolidated statements of operations is $40,000 of financial advisory fees in
1996 and $50,000 in each of 1994 and 1995. In addition, the Company paid
$100,000 to an affiliate of this shareholder in November 1996 in connection
with the issuance of Series B Preferred Stock (See Note 7).
(12) COMMITMENTS AND CONTINGENCIES
Leases. During 1994 the Company entered into an agreement to lease office
space in Shelton, Connecticut, which became the corporate headquarters of the
Company. This lease commenced April 1, 1994, and has a term of 10 years. Under
the terms of this lease, the Company paid only operating expenses until the
sale of its former corporate headquarters (see Note 5). Total aggregate lease
payments of approximately $2,176,000 are being amortized on a straight line
basis over the term of the operating lease, beginning in April 1994.
Accordingly, approximately $218,000 and $38,000 of deferred rent expense was
recorded during 1995 and 1996, respectively, related to this lease and is
included in accrued liabilities and other long term liabilities in the
accompanying consolidated balance sheets.
During 1995, the Company entered into an agreement to lease office space in
Irvine, California, which is used as a sales, service and product development
facility. The lease commenced January 5, 1995, and has a term of 6 years.
Under the terms of the lease, the Company is committed to pay aggregate lease
payments of approximately $2,961,000. In connection with entering into this
lease, the Company terminated their lease for its previous California
facility. As a result of the termination of such lease, the Company incurred a
$223,000 lease termination cost which is reflected as other expense in the
accompanying 1995 consolidated statement of operations. The termination
charge, which is being paid in monthly installments of approximately $5,000
through October 31, 1998, is included in accrued expenses and other long-term
liabilities in the accompanying 1995 consolidated balance sheet.
The Company leases other property and equipment under a number of operating
leases extending for varying periods of time.
Operating lease rental expense approximated $661,000, $1,054,000 and
$858,000 for the years ended December 31, 1994, 1995 and 1996, respectively.
Minimum future rental commitments under all operating leases for each of the
succeeding five years subsequent to December 31, 1996, and thereafter, are as
follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, AMOUNT
------------ ------
<S> <C>
1997............................................................... $1,237
1998............................................................... 1,131
1999............................................................... 1,070
2000............................................................... 934
2001............................................................... 977
Thereafter......................................................... 915
</TABLE>
F-17
<PAGE>
INFORMATION MANAGEMENT ASSOCIATES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(12) COMMITMENTS AND CONTINGENCIES--(CONTINUED)
Litigation. The Company is a party to litigation arising in the normal
course of business. In the opinion of management, any claims are not expected
to have a material adverse effect on the Company's operations or financial
position.
(13) EMPLOYEE BENEFIT PLAN
The Company has a voluntary 401(k) plan. All full-time employees who have
completed six months of service are eligible to participate in the plan. The
plan provides for matching contributions and an annual profit sharing
contribution made at the discretion of the Company's Board of Directors. No
matching or profit sharing contributions were made to the plan during 1994.
During 1995 and 1996, $12,000 and $33,000 of matching contributions were made
to the Plan by the Company.
(14) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of certain of the Company's financial instruments
including cash and cash equivalents, accounts receivable, accounts payable and
accrued liabilities approximate fair value due to their short maturities.
Based on borrowing rates currently available to the Company for loans with
similar terms, the carrying value of its notes payable, bank indebtedness and
capital lease obligations also approximate fair value.
(15) GEOGRAPHIC INFORMATION AND INDUSTRY SEGMENTS
The Company operates in two major geographic areas and a single industry
segment. The United States charges the European segment a 50% royalty on
license fees recognized, which approximates the royalty fee charged to
unaffiliated resellers. In addition, certain direct costs incurred by the
United States segment, primarily related to research and development and
customer support costs, are charged to the European segment. The elimination
in the identifiable assets is for intercompany receivables.
The following tables summarize the Company's activities by geographic area
for 1994, 1995 and 1996 (in thousands).
<TABLE>
<CAPTION>
UNITED
STATES EUROPE ELIMINATION CONSOLIDATED
------- ------ ----------- ------------
<S> <C> <C> <C> <C>
Year Ended December 31, 1996
Revenues......................... $22,762 $4,680 $(1,165) $26,277
======= ====== ======= =======
Income (loss) from operations.... $ 802 $ (740) $ -- $ 62
======= ====== ======= =======
Identifiable assets.............. $17,483 $2,648 $(2,850) $17,281
======= ====== ======= =======
Year Ended December 31, 1995
Revenues......................... $20,093 $4,332 $ (616) $23,809
======= ====== ======= =======
Income (loss) from operations.... $(2,520) $ (66) $ -- $(2,586)
======= ====== ======= =======
Identifiable assets.............. $11,929 $2,710 $(2,120) $12,519
======= ====== ======= =======
Year Ended December 31, 1994
Revenues......................... $14,654 $4,515 $ (817) $18,352
======= ====== ======= =======
Income (loss) from operations.... $(3,007) $ (27) $ -- $(3,034)
======= ====== ======= =======
Identifiable assets.............. $10,460 $3,039 $(1,349) $12,150
======= ====== ======= =======
</TABLE>
F-18
<PAGE>
INFORMATION MANAGEMENT ASSOCIATES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(15) GEOGRAPHIC INFORMATION AND INDUSTRY SEGMENTS--(CONTINUED)
The following table summarizes the Company's revenues by major worldwide
regions (in thousands):
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
United States.............................. $ 13,192 $ 14,792 $ 19,483
Canada..................................... 39 1,018 546
Mexico and Latin America................... 195 256 277
Europe..................................... 4,515 6,390 4,798
Pacific Rim................................ 411 1,353 1,173
---------- ---------- ----------
$ 18,352 $ 23,809 $ 26,277
========== ========== ==========
</TABLE>
(16) SIGNIFICANT CUSTOMERS
For the years ended December 31, 1994, 1995 and 1996, approximately 14%, 24%
and 8%, respectively, of the Company's revenues resulted from sales to a
single customer.
(17) SUBSEQUENT EVENTS
On March 6, 1997, the Company filed a Registration Statement with the
Securities and Exchange Commission related to an initial public offering (the
Offering) relating to 2,625,000 shares of the Company's unissued common stock
and 1,875,000 shares of common stock being offered by certain selling
shareholders. If the Offering is consummated under the terms presently
anticipated, the Company's Series A preferred and Series B preferred will be
converted into 1,532,161 shares of common stock, 415,308 shares of common
stock will be issued in connection with the cashless exercise of the
redeemable common stock warrants and 34,690 options will be exercised (See
Note 2).
The Company anticipates amending its Certificate of Incorporation in
connection with the Offering to increase the number of authorized shares of
common stock from 5,000,000 to 20,000,000, to give effect to a 2.25-for-1
split of the Company's common stock, to remove the Company's existing series
of preferred stock. The accompanying financial statements have been restated
to reflect this anticipated share split and change in authorized shares.
On March 1, 1997, the Board of Directors approved the adoption of an
employee stock purchase plan designed to allow eligible employees of the
Company to purchase shares of common stock. The Board of Directors has
reserved 450,000 shares of Common Stock to be available under this plan.
F-19
<PAGE>
INFORMATION MANAGEMENT ASSOCIATES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
The unaudited pro forma consolidated statement of operations that follows is
presented to give effect to the sale of the Telemar product line on September
1, 1996 to a third party buyer, Telemar Software International (TSI), as if
such event occurred on January 1, 1996. The unaudited pro forma information,
which reflects the elimination of identifiable revenues and expenses of the
Telemar product line, does not purport to be indicative of the actual results
that would have been achieved had the sale taken place on January 1, 1996 or
the results which may be achieved in the future.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996
--------------------------------
ACTUAL ADJUSTMENTS PRO FORMA
------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues:
License fees:
EDGE product line........................... $12,180 $ -- $12,180
Telemar product line........................ 842 (842)(1) --
------- -------
Total license fees........................ 13,022 12,180
------- -------
Services and maintenance:
EDGE product line........................... 11,643 11,643
Telemar product line........................ 1,612 (1,612)(2) --
------- -------
Total services and maintenance............ 13,255 11,643
------- -------
Total revenues.......................... 26,277 23,823
------- -------
Cost of revenues:
License fees................................ 709 (93)(3) 616
Services and maintenance.................... 7,191 (520)(4) 6,671
------- -------
Total cost of revenues.................... 7,900 7,287
------- -------
Gross profit.................................. 18,377 16,536
------- -------
Operating expenses:
Sales and marketing......................... 8,055 (823)(5) 7,232
Product development......................... 6,382 (1,070)(6) 5,312
General and administrative.................. 3,878 (244)(7) 3,634
------- -------
Total operating expenses.................. 18,315 16,178
------- -------
Operating income.............................. 62 358
Other income (expense)........................ (1,079) (92)(8) (1,171)
------- -------
Loss before provision for income taxes........ (1,017) (813)
Provision for income taxes.................... 30 30
------- -------
Net loss...................................... $(1,047) $ (843)
======= =======
</TABLE>
- --------
(1) Represents the elimination of Telemar license fees.
(2) Represents the elimination of Telemar services and maintenance revenues.
(3) Represents the elimination of payroll, taxes and benefits of $66,000
related to employees dedicated to Telemar, as well as the elimination of
$27,000 of direct license costs.
G-1
<PAGE>
(4) Represents the elimination of payroll, taxes and benefits of $455,000
related to employees dedicated to Telemar, as well as $20,000 of outside
consulting costs and $45,000 of other direct costs related to Telemar.
(5) Represents the elimination of payroll, taxes and benefits of $466,000
related to employees dedicated to Telemar, as well as $295,000 of related
travel costs, $49,000 of advertising and promotional costs and $13,000 of
other direct costs related to Telemar.
(6) Represents the elimination of payroll, taxes and benefits of $1,002,000
related to employees dedicated to Telemar, as well as $68,000 of direct
costs used in the research and development efforts related to Telemar.
(7) Represents the elimination of $28,000 of legal costs, $69,000 of equipment
depreciation expense, $60,000 of provision for doubtful accounts and
$87,000 of other direct costs related to Telemar.
(8) Represents the elimination of the gain on sale of Telemar.
G-2
<PAGE>
INSIDE BACK COVER
[DIAGRAM OF INFORMATION MANAGEMENT ASSOCIATES, INC. PRODUCTS AND SERVICES.]
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR-
MATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS NOT CONTAINED HEREIN MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING
SHAREHOLDERS, ANY OF THE UNDERWRITERS OR BY ANY OTHER PERSON. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY,
ANY SECURITIES OTHER THAN THE SHARES OF COMMON STOCK OFFERED HEREBY, NOR DOES
IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY, TO ANY PERSON IN ANY JURISDICTION WHICH IT IS UN-
LAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE DE-
LIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUM-
STANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS COR-
RECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
-----------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 6
Use of Proceeds........................................................... 15
Dividend Policy........................................................... 15
Capitalization............................................................ 16
Dilution.................................................................. 17
Selected Consolidated Financial Data...................................... 18
Pro Forma Consolidated Statement of Operations............................ 19
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 20
Business.................................................................. 30
Management................................................................ 45
Certain Transactions...................................................... 51
Principal and Selling Shareholders........................................ 54
Description of Capital Stock.............................................. 56
Shares Eligible for Future Sale........................................... 58
Underwriting.............................................................. 60
Legal Matters............................................................. 61
Experts................................................................... 61
Additional Information.................................................... 62
Index to Consolidated Financial Statements................................ F-1
</TABLE>
-----------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY RE-
QUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
4,500,000 Shares
[LOGO OF IMA APPEARS HERE]
Common Stock
-----------
PROSPECTUS
-----------
Alex. Brown & Sons
INCORPORATED
Robertson, Stephens & Company
SoundView Financial Group, Inc.
, 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses, all of which will be
borne by the Registrant, in connection with the sale and distribution of the
securities being registered, other than the underwriting discounts and
commissions. All amounts shown are estimates except for the Securities and
Exchange Commission registration fee and the NASD filing fee.
<TABLE>
<S> <C>
SEC registration fee....................................... $ 20,387.00
NASD filing fee............................................ 7,228.00
Nasdaq National Market listing fee......................... 39,752.00
Transfer agent fees........................................ 3,500.00
Accounting fees and expenses............................... 350,000.00
Legal fees and expenses.................................... 300,000.00
Printing and mailing expenses.............................. 100,000.00
Miscellaneous.............................................. 179,133.00
-------------
Total.................................................... $1,000,000.00
=============
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 33-771 of the Connecticut Business Corporation Act (the "CBCA")
permits a corporation generally to indemnify any individual made a party to a
proceeding because he is or was a director or officer of the corporation
against any liabilities incurred by such person in such proceedings if: (i) he
conducted himself in good faith; and (ii) he reasonably believed (A) in the
case of conduct in his official capacity with the corporation, that his
conduct was in its best interests and (B) in all other cases, that his conduct
was at least not opposed to its best interests; and (iii) in the case of any
criminal proceeding, he had no reasonable cause to believe his conduct was
unlawful; provided, however, a corporation may not indemnify a director or
officer under such section if: (i) in connection with a proceeding by or in
the right of the corporation in which the director was adjudged liable to the
corporation; or (ii) in connection with any other proceeding charging improper
personal benefit to him, whether or not involving action in his official
capacity, in which he was adjudged liable on the basis that personal benefit
was improperly received by him. In addition, Sections 33-772 and 33-776 of the
CBCA provide that, unless limited by its certificate of incorporation, a
corporation shall indemnify each officer and director who is wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which he was a party because he is or was a director or officer of the
corporation against reasonable expenses incurred by him in connection with the
proceeding.
Article VIII of the Certificate of Incorporation and Section 7.2 of the
Bylaws provide that the Company shall indemnify all directors and officers to
the fullest extent permitted by the CBCA.
Section 7.2 of the Bylaws also provides that the Board of Directors may
cause the Company to indemnify an employee or agent to the same extent as an
officer or director.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Set forth in chronological order is information regarding the number of
shares of Common Stock, Preferred Stock, and Common Stock purchase warrants
issued and the number of options granted by the Registrant since January 1994.
Further included is the consideration, if any, received by the Registrant for
such shares and options, and information relating to the section of the
Securities Act of 1933, as amended (the "Securities Act"), and rule of the
Securities and Exchange Commission under which exemption from
II-1
<PAGE>
registration was claimed. All awards of options did not involve any sale under
the Securities Act. None of these securities were registered under the
Securities Act. No sale of securities involved the use of an underwriter and
no commissions were paid in connection with the sales of any securities. The
information set forth in this Item 15 reflects the Company's 2.25-for-1 split
in Common Stock to be effected prior to the closing of this offering.
(a)Issuances of Common Stock:
(1) In November 1994, the Company issued to Wand/IMA Investments, L.P. and
certain individuals a total of 296,248 shares of Common Stock at $4.00
per share for a total consideration received of $1,184,994.
(2) In August 1996, the Company issued to an individual 5,783 shares of
Common Stock upon the exercise of a stock option with an exercise price
of $0.04 per share. The Company received total consideration of $257.
(3) In December 1996, the Company issued to certain individuals 32,400
shares of Common Stock at $7.11 per share for a total consideration
received of $230,400.
(b)Issuances of Preferred Stock:
(1) In March 1995, the Company issued to Wand/IMA Investments, L.P. and
Wand/IMA Investments II L.P. a total of 4,500 shares of Series A Senior
Convertible Preferred Stock with a stated value of $1,000 per share for
a total consideration received of $4,500,000.
(2) In November 1996, the Company issued to Wand/IMA Investments II L.P.
and Wand/IMA Investments III L.P. a total of 4,350 shares of Series B
Senior Convertible Preferred Stock with a stated value of $1,000 per
share for a total consideration received of $4,350,000.
(c)Issuance of Warrants to Purchase Common Stock:
(1) In February and March of 1996, the Company issued warrants to an
individual to purchase 6,750 shares of Common Stock with an exercise
price of $4.89 per share in connection with a financing transaction.
The Company received no separate consideration for the warrants.
(d)Certain Grants and Exercises of Stock Options:
(1) Since January 1, 1994 the Company has issued options under its (i)
Amended and Restated 1991 Stock Option Plan to purchase an aggregate of
513,542 shares of Common Stock at a weighted average exercise price of
$4.39, (ii) the 1996 Employee and Consultant Stock Option Plan to
purchase an aggregate of 653,076 shares of Common Stock at a weighted
average exercise price of $7.41, and (iii) the 1996 Non-Employee
Directors Stock Option Plan to purchase an aggregate of 50,625 shares
of Common Stock at an exercise price of $7.11.
The shares of capital stock and other securities issued in the above
transactions were offered and sold in reliance upon the exemptions from
registration under Section 4(2) of the Securities Act, Regulation D or Rule
701 promulgated under the Securities Act, relative to sales by an issuer not
involving any public offering.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement.*
3.1 Certificate of Incorporation of the Registrant, as amended.***
3.2 Amended and Restated Certificate of Incorporation of the Registrant
(to be filed upon closing of this offering).***
3.3 Amended and Restated By-Laws of the Registrant.***
3.4 Amended and Restated By-Laws of the Registrant (to be effective upon
the closing of this offering).***
4.1 Specimen Certificate for shares of Common Stock, no par value, of the
Registrant.***
5.1 Opinion of LeBoeuf, Lamb, Greene & MacRae, L.L.P. with respect to the
validity of the securities being offered.***
10.1 Amended and Restated 1991 Stock Option Plan.***
10.2 Original Form of Non-Qualified Stock Option Agreement (Amended and
Restated 1991 Stock Option Plan).***
10.3 Amended Form of Non-Qualified Stock Option Agreement (Amended and
Restated 1991 Stock Option Plan).***
10.4 1996 Employee and Consultant Stock Option Plan.***
10.5 Form of Non-Qualified Stock Option Agreement (1996 Employee and
Consultant Stock Option Plan).***
10.6 1996 Non-Employee Directors Stock Option Plan.***
10.7 Form of Non-Qualified Stock Option Agreement (1996 Non-Employee
Directors Stock Option
Plan ).***
10.8 Employee Stock Purchase Plan.***
10.9 Note and Warrant Purchase Agreement between the Company and Wand/IMA
Investments, L.P., dated December 21, 1990.**
10.10 Amendment to Note and Warrant Purchase Agreement between the Company
and Wand/IMA Investments, L.P., dated March 1, 1993.**
10.11 Amendment No. 2 to Note and Warrant Agreement between the Company and
Wand/IMA Investments, L.P., dated June 1, 1994.**
10.12 Common Stock Purchase Warrant No. W-3 issued to Thomas F. Hill, dated
December 21, 1990.**
10.13 Amendment No. 1 to Common Stock Purchase Warrant No. W-3, dated June
1, 1994.**
10.14 Amendment No. 2 to Common Stock Purchase Warrant No. W-3, dated
November 16, 1994.**
10.15 Amendment No. 3 to Common Stock Purchase Warrant No. W-3, dated
September 20, 1996.**
10.16 Stock Purchase Agreement between the Company and Wand/IMA Investments,
L.P., dated September 4, 1991.**
10.17 Amendment No. 1 to Stock Purchase Agreement dated September 4, 1991
between the Company and Wand/IMA Investments, L.P., dated June 1,
1994.**
10.18 Stock Purchase Agreement between the Company and Wand/IMA Investments,
L.P., dated October 29, 1991.**
10.19 Amendment No. 1 to Stock Purchase Agreement dated October 29, 1991
between the Company and Wand/IMA Investments, L.P., dated June 1,
1994.**
10.20 Exchange and Note Modification Agreement between the Company and
Wand/IMA Investments, L.P., dated October 29, 1991.**
10.21 12% Senior Subordinated Note due 1997 for $1,000,000 issued to
Wand/IMA Investments, L.P., dated October 29, 1991.**
10.22 Common Stock Purchase Warrant No. W-4 issued to Wand/IMA Investments,
L.P., dated October 29, 1991.**
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.23 Amendment No. 1 to Common Stock Purchase Warrant No. W-4, dated June
1, 1994.**
10.24 Amendment No. 2 to Common Stock Purchase Warrant No. W-4, dated
November 16, 1994.**
10.25 Amendment No. 3 to Common Stock Purchase Warrant No. W-4, dated
September 20, 1996.**
10.26 Common Stock Purchase Warrant No. W-5 issued to Wand Partners Inc.,
dated October 29, 1991.**
10.27 Amendment No. 1 to Common Stock Purchase Warrant No. W-5, dated June
1, 1994.**
10.28 Amendment No. 2 to Common Stock Purchase Warrant No. W-5, dated
November 16, 1994.**
10.29 Amendment No. 3 to Common Stock Purchase Warrant No. W-5, dated
September 20, 1996.**
10.30 Stock Purchase Agreement between the Company and certain Purchasers,
dated March 26, 1993.**
10.31 Stock Purchase Agreement between certain Selling Shareholders and
Mercury Asset Management plc, dated June 1, 1994.**
10.32 Stock Purchase Agreement between certain Selling Shareholders and D.
Callard, B. Schnitzer and M. Appelbaum as Purchasers, dated June 1,
1994.**
10.33 Stock Purchase Agreement between the Company, V. Nesi and G. Collins,
dated November 14, 1994.**
10.34 Stock Purchase Agreement between the Company and Wand/IMA Investments,
L.P., dated as of November 16, 1994.**
10.35 Stock Purchase Agreement among the Company Wand/IMA Investments, L.P.
and Wand/IMA Investments II L.P., dated as of March 31, 1995.**
10.36 Stock Purchase Agreement among the Company, Wand/IMA Investments II
L.P. and Wand/IMA Investments L.P. III, dated October 31, 1996.**
10.37 Stock Purchase Agreement among the Company, V. Nesi and G. Collins,
dated December 18, 1996.**
10.38 Loan and Security Agreement between the Company and People's Bank,
dated October 26, 1995.**
10.39 Promissory Note (Term) for $2.5 million issued to People's Bank, dated
October 26, 1995.**
10.40 Promissory Note (Revolver) for $6.0 million issued to People's Bank,
dated October 26, 1995.**
10.41 Subordination Agreement among the Company, People's Bank and Wand/IMA
Investments, L.P., dated October 26, 1995.**
10.42 Subordination Agreement among the Company, Albert R. Subbloie, Jr.,
Information Management Associates Limited and People's Bank, dated
October 26, 1995.**
10.43 Subordination Agreement among the Company, Gary R. Martino,
Information Management Associates Limited and People's Bank, dated
October 26, 1995.**
10.44 Subordination Agreement among the Company, Andrei Poludnewycz,
Information Management Associates Limited and People's Bank, dated
October 26, 1995.**
10.45 First Amendment to Loan and Security Agreement between the Company and
People's Bank, dated December 31, 1996.**
10.46 Asset Purchase Agreement between the Company and Telemar Software
International LLC, dated as of July 31, 1996.**
10.47 Sublease between the Company and Telemar Software International, LLC,
dated as of September 1, 1996.**
10.48 8% Promissory Note due 2002 from Telemar Software International, LLC
to the Company, dated as of September 1, 1996.**
10.49 Security Agreement between the Company and Telemar Software
International, LLC, dated September 16, 1996.**
10.50 Promissory Note from Albert R. Subbloie, Jr. to the Company, dated
December 31, 1996.**
10.51 Promissory Note from Gary R. Martino to the Company, dated December
31, 1996.**
10.52 Promissory Note from Andrei Poludnewycz to the Company, dated December
31, 1996.**
10.53 Promissory Note from Albert R. Subbloie, Jr. to the Company, dated
February 28, 1997.**
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.54 Promissory Note from Gary R. Martino to the Company, dated February
28, 1997.**
10.55 Promissory Note from Andrei Poludnewycz to the Company, dated February
28, 1997.**
10.56 Monitoring Agreement between the Company and Wand Partners LP, dated
as of January 2, 1995.**
10.57 Lease Agreement between the Company and Robert D. Scinto, dated as of
October 6, 1993.**
10.58 First Amendment to Lease Agreement between the Company and Robert D.
Scinto, dated January 30, 1996.**
10.59 Full Service Office Lease between the Company and Lakeshore Towers
Limited Partnership Phase I and the Company, dated November 4, 1994.**
10.60 First Amendment to Lease between the Company and Lakeshore Towers
Limited Partnership, Phase I.***
10.61 Second Amendment to Lease between the Company and Lakeshore Towers
Limited Partners, Phase I, dated July 15, 1996.***
10.62 Letter Agreement among the Company, Wand/IMA Investments, L.P. and
certain Shareholders, dated December 21, 1990.**
10.63 Amendment to Letter Agreement among the Company, Wand/IMA Investments,
L.P. and certain Shareholders, dated October 29, 1991.**
10.64 Second Amendment to Letter Agreement among the Company, Wand/IMA
Investments, L.P. and certain Shareholders, dated June 1, 1994.**
10.65 Letter Agreement among the Company, Mercury Asset Management plc and
certain Shareholders, dated as of June 1, 1994.**
10.66 Restricted Stock Award Agreement between the Company and Paul J.
Schmidt, dated December 21, 1990.***
10.67 Restricted Stock Award Agreement between the Company and Joseph R.
LeMay, as amended.***
10.68 Consulting Service Agreement between the Company and Clifton Myers
Enterprise, Inc., dated January 1, 1996.**
10.69 Equipment Lease Agreement between the Company and Tal Financial
Corporation, dated February 1, 1996.**
11.1 Computation of income per common share.*
21.1 Subsidiaries of the Registrant.*
23.1 Consent of LeBoeuf, Lamb, Greene & MacRae, L.L.P. (included in Exhibit
5.1).***
23.2 Consent of Arthur Andersen LLP.**
24.1 Power of Attorney.*
27.1 Financial Data Schedule.*
</TABLE>
- --------
*Previously filed.
**Filed herewith.
***To be filed by amendment.
(B) FINANCIAL STATEMENT SCHEDULES
Schedule No. II--Valuation and Qualifying Accounts
All other schedules have been omitted because they are not required or
because the required information is given in the Consolidated Financial
Statements or Notes thereto.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions contained in the Certificate of
Incorporation, as amended, and By-Laws, as amended, of the Registrant and the
laws of the State of Connecticut or otherwise, the Registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant
II-5
<PAGE>
will, unless in the opinion of its counsel the matters have been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 1 to its Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Hartford, State of Connecticut, on this 24th day of March, 1997.
Information Management Associates,
Inc.
By /s/ Albert R. Subbloie, Jr.
-----------------------------
Albert R. Subbloie, Jr.
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Albert R. Subbloie, Jr. President, Chief March 24, 1997
- ------------------------------------- Executive Officer
ALBERT R. SUBBLOIE, JR. and Director
(Principal
Executive Officer)
/s/ Gary R. Martino Chairman of the March 24, 1997
- ------------------------------------- Board of Directors,
GARY R. MARTINO Chief Financial
Officer, Treasurer
and Director
(Principal
Financial and
Accounting Officer)
Director March 24, 1997
*
- -------------------------------------
PAUL J. SCHMIDT
* Director March 24, 1997
- -------------------------------------
ANDREI POLUDNEWYCZ
Director March , 1997
- -------------------------------------
THOMAS F. HILL
* Director March 24, 1997
- -------------------------------------
DONALD P. MILLER
* Director March 24, 1997
- -------------------------------------
DAVID J. CALLARD
*By: /s/ Gary R. Martino
---------------------------
Attorney-in-fact, pursuant to
power of attorney previously filed
as part of this Registration
Statement
</TABLE>
II-7
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
To the Board of Directors and Shareholders of
Information Management Associates, Inc.:
We have audited in accordance with generally accepted auditing standards,
the consolidated balance sheets of Information Management Associates, Inc. and
subsidiary as of December 31, 1996 and 1995, and the related consolidated
statements of operations, changes in shareholders' equity (deficit) and cash
flows for the three years then ended included in this registration statement,
and have issued our report thereon dated March 6, 1997. Our audits were made
for the purpose of forming an opinion on the basic financial statements taken
as a whole. The accompanying schedule on page S-2 is the responsibility of the
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. The schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
Arthur Andersen LLP
Hartford, Connecticut
March 6, 1997
S-1
<PAGE>
SCHEDULE II
INFORMATION MANAGEMENT ASSOCIATES, INC.
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT
BEGINNING CHARGED TO COST BALANCE AT
OF PERIOD AND EXPENSES DEDUCTIONS END OF PERIOD
---------- --------------- ---------- -------------
<S> <C> <C> <C> <C>
Allowance for Doubtful Ac-
counts
January 1, 1994-December
31, 1994................ 287,574 607,935 (425,529) 469,980
January 1, 1995-December
31, 1995................ 469,980 996,701 (1,041,353) 425,328
January 1, 1996-December
31, 1996................ 425,328 390,224 (333,578) 481,974
</TABLE>
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S> <C>
1.1 Form of Underwriting Agreement.*
3.1 Certificate of Incorporation of the Registrant, as amended.***
3.2 Amended and Restated Certificate of Incorporation of the
Registrant (to be filed upon closing of this offering).***
3.3 Amended and Restated By-Laws of the Registrant.***
3.4 Amended and Restated By-Laws of the Registrant (to be effective
upon the closing of this offering).***
4.1 Specimen Certificate for shares of Common Stock, no par value,
of the Registrant.***
5.1 Opinion of LeBoeuf, Lamb, Greene & MacRae, L.L.P. with respect
to the validity of the securities being offered.***
10.1 Amended and Restated 1991 Stock Option Plan.***
10.2 Original Form of Non-Qualified Stock Option Agreement (Amended
and Restated 1991 Stock Option Plan).***
10.3 Amended Form of Non-Qualified Stock Option Agreement (Amended
and Restated 1991 Stock Option Plan).***
10.4 1996 Employee and Consultant Stock Option Plan.***
10.5 Form of Non-Qualified Stock Option Agreement (1996 Employee and
Consultant Stock Option Plan).***
10.6 1996 Non-Employee Directors Stock Option Plan.***
10.7 Form of Non-Qualified Stock Option Agreement (1996 Non-Employee
Directors Stock Option Plan).***
10.8 Employee Stock Purchase Plan.***
10.9 Note and Warrant Purchase Agreement between the Company and
Wand/IMA Investments, L.P., dated December 21, 1990.**
10.10 Amendment to Note and Warrant Purchase Agreement between the
Company and Wand/IMA Investments, L.P., dated March 1, 1993.**
10.11 Amendment No. 2 to Note and Warrant Agreement between the
Company and Wand/IMA Investments, L.P., dated June 1, 1994.**
10.12 Common Stock Purchase Warrant No. W-3 issued to Thomas F. Hill,
dated December 21, 1990.**
10.13 Amendment No. 1 to Common Stock Purchase Warrant No. W-3, dated
June 1, 1994.**
10.14 Amendment No. 2 to Common Stock Purchase Warrant No. W-3, dated
November 16, 1994.**
10.15 Amendment No. 3 to Common Stock Purchase Warrant No. W-3, dated
September 20, 1996.**
10.16 Stock Purchase Agreement between the Company and Wand/IMA
Investments, L.P., dated September 4, 1991.**
10.17 Amendment No. 1 to Stock Purchase Agreement dated September 4,
1991 between the Company and Wand/IMA Investments, L.P., dated
June 1, 1994.**
10.18 Stock Purchase Agreement between the Company and Wand/IMA
Investments, L.P., dated October 29, 1991.**
10.19 Amendment No. 1 to Stock Purchase Agreement dated October 29,
1991 between the Company and Wand/IMA Investments, L.P., dated
June 1, 1994.**
10.20 Exchange and Note Modification Agreement between the Company and
Wand/IMA Investments, L.P., dated October 29, 1991.**
10.21 12% Senior Subordinated Note due 1997 for $1,000,000 issued to
Wand/IMA Investments, L.P., dated October 29, 1991.**
10.22 Common Stock Purchase Warrant No. W-4 issued to Wand/IMA
Investments, L.P., dated October 29, 1991.**
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S> <C>
10.23 Amendment No. 1 to Common Stock Purchase Warrant No. W-4, dated
June 1, 1994.**
10.24 Amendment No. 2 to Common Stock Purchase Warrant No. W-4, dated
November 16, 1994.**
10.25 Amendment No. 3 to Common Stock Purchase Warrant No. W-4, dated
September 20, 1996.**
10.26 Common Stock Purchase Warrant No. W-5 issued to Wand Partners
Inc., dated October 29, 1991.**
10.27 Amendment No. 1 to Common Stock Purchase Warrant No. W-5, dated
June 1, 1994.**
10.28 Amendment No. 2 to Common Stock Purchase Warrant No. W-5, dated
November 16, 1994.**
10.29 Amendment No. 3 to Common Stock Purchase Warrant No. W-5, dated
September 20, 1996.**
10.30 Stock Purchase Agreement between the Company and certain
Purchasers, dated March 26, 1993.**
10.31 Stock Purchase Agreement between certain Selling Shareholders
and Mercury Asset Management plc, dated June 1, 1994.**
10.32 Stock Purchase Agreement between certain Selling Shareholders
and D. Callard, B. Schnitzer and M. Appelbaum as Purchasers,
dated June 1, 1994.**
10.33 Stock Purchase Agreement between the Company, V. Nesi and G.
Collins, dated November 14, 1994.**
10.34 Stock Purchase Agreement between the Company and Wand/IMA
Investments, L.P., dated as of November 16, 1994.**
10.35 Stock Purchase Agreement among the Company Wand/IMA Investments,
L.P. and Wand/IMA Investments II L.P., dated as of March 31,
1995.**
10.36 Stock Purchase Agreement among the Company, Wand/IMA Investments
II L.P. and Wand/IMA Investments L.P. III, dated October 31,
1996.**
10.37 Stock Purchase Agreement among the Company, V. Nesi and G.
Collins, dated December 18, 1996.**
10.38 Loan and Security Agreement between the Company and People's
Bank, dated October 26, 1995.**
10.39 Promissory Note (Term) for $2.5 million issued to People's Bank,
dated October 26, 1995.**
10.40 Promissory Note (Revolver) for $6.0 million issued to People's
Bank, dated October 26, 1995.**
10.41 Subordination Agreement among the Company, People's Bank and
Wand/IMA Investments, L.P., dated October 26, 1995.**
10.42 Subordination Agreement among the Company, Albert R. Subbloie,
Jr., Information Management Associates Limited and People's
Bank, dated October 26, 1995.**
10.43 Subordination Agreement among the Company, Gary R. Martino,
Information Management Associates Limited and People's Bank,
dated October 26, 1995.**
10.44 Subordination Agreement among the Company, Andrei Poludnewycz,
Information Management Associates Limited and People's Bank,
dated October 26, 1995.**
10.45 First Amendment to Loan and Security Agreement between the
Company and People's Bank, dated December 31, 1996.**
10.46 Asset Purchase Agreement between the Company and Telemar
Software International LLC, dated as of July 31, 1996.**
10.47 Sublease between the Company and Telemar Software International,
LLC, dated as of September 1, 1996.**
10.48 8% Promissory Note due 2002 from Telemar Software International,
LLC to the Company, dated as of September 1, 1996.**
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S> <C>
10.49 Security Agreement between the Company and Telemar Software
International, LLC, dated September 16, 1996.**
10.50 Promissory Note from Albert R. Subbloie, Jr. to the Company,
dated December 31, 1996.**
10.51 Promissory Note from Gary R. Martino to the Company, dated
December 31, 1996.**
10.52 Promissory Note from Andrei Poludnewycz to the Company, dated
December 31, 1996.**
10.53 Promissory Note from Albert R. Subbloie, Jr. to the Company,
dated February 28, 1997.**
10.54 Promissory Note from Gary R. Martino to the Company, dated
February 28, 1997.**
10.55 Promissory Note from Andrei Poludnewycz to the Company, dated
February 28, 1997.**
10.56 Monitoring Agreement between the Company and Wand Partners LP,
dated as of January 2, 1995.**
10.57 Lease Agreement between the Company and Robert D. Scinto, dated
as of October 6, 1993.**
10.58 First Amendment to Lease Agreement between the Company and
Robert D. Scinto, dated January 30, 1996.**
10.59 Full Service Office Lease between the Company and Lakeshore
Towers Limited Partnership Phase I and the Company, dated
November 4, 1994.**
10.60 First Amendment to Lease between the Company and Lakeshore
Towers Limited Partnership, Phase I.***
10.61 Second Amendment to Lease between the Company and Lakeshore
Towers Limited Partners, Phase I, dated July 15, 1996.***
10.62 Letter Agreement among the Company, Wand/IMA Investments, L.P.
and certain Shareholders, dated December 21, 1990.**
10.63 Amendment to Letter Agreement among the Company, Wand/IMA
Investments, L.P. and certain Shareholders, dated October 29,
1991.**
10.64 Second Amendment to Letter Agreement among the Company, Wand/IMA
Investments, L.P. and certain Shareholders, dated June 1,
1994.**
10.65 Letter Agreement among the Company, Mercury Asset Management plc
and certain Shareholders, dated as of June 1, 1994.**
10.66 Restricted Stock Award Agreement between the Company and Paul J.
Schmidt, dated December 21, 1990.***
10.67 Restricted Stock Award Agreement between the Company and Joseph
R. LeMay, as amended.***
10.68 Consulting Service Agreement between the Company and Clifton
Myers Enterprise, Inc., dated January 1, 1996.**
10.69 Equipment Lease Agreement between the Company and Tal Financial
Corporation, dated February 1, 1996.**
11.1 Computation of income per common share.*
21.1 Subsidiaries of the Registrant.*
23.1 Consent of LeBoeuf, Lamb, Greene & MacRae, L.L.P. (included in
Exhibit 5.1).***
23.2 Consent of Arthur Andersen LLP.**
24.1 Power of Attorney.*
27.1 Financial Data Schedule.*
</TABLE>
- --------
*Previously filed.
**Filed herewith.
***To be filed by amendment.
<PAGE>
EXHIBIT 10.9
- -------------------------------------------------------------------------------
INFORMATION MANAGEMENT ASSOCIATES, INC.
15% SENIOR SUBORDINATED NOTES DUE 1997
WARRANTS TO PURCHASE SHARES OF COMMON STOCK
No Par Value Per Share
----------------------------------------
NOTE AND WARRANT PURCHASE AGREEMENT
----------------------------------------
December 21, 1990
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
Section PAGE
- ------- ----
l. Authorization of Notes and Warrants............................... 1
2. Sale and Purchase of Notes and Warrants........................... 2
3. Closing; Payment of Purchase Price................................ 2
4. Conditions to Closing............................................. 3
4.1. Representations and Warranties........................... 3
4.2. Performance; No Default.................................. 3
4.3. Compliance Certificates; Officers'
Certificates........................................... 3
4.4. Opinion of Counsel....................................... 4
4.5. Certificate of Incorporation............................. 4
4.6. Legal Investment......................................... 4
4.7. No Actions Pending....................................... 4
4.8. Compliance with Securities Laws.......................... 4
4.9. Proceedings and Documents................................ 4
4.10. Letter Agreement......................................... 5
4.11. Bonus Plan............................................... 5
4.12. Shareholders' Agreement.................................. 5
4.13. Investigations, etc...................................... 5
4.14. No Offerings............................................. 5
4.15. No Material Adverse Change............................... 5
4.16. Consents and Permits..................................... 6
4.17. Sales to Other Purchasers................................ 6
4.18. Non-disclosure and Proprietary
Information Agreements................................. 6
4.19. Transfer of Intellectual Property........................ 6
5. Representations and Warranties.................................... 7
5.1. Organization, Standing, etc.............................. 7
5.2. Subsidiaries............................................. 7
5.3. Qualification............................................ 7
5.4. Business; Financial Statements........................... 8
5.5. Formation of the Company and Related
Transactions; Changes.................................. 9
5.6. Capital Stock and Related Matters........................ 10
5.7. Tax Returns and Payments................................. 11
5.8. Indebtedness of the Company.............................. 11
5.9. Title to Properties; Liens............................... 12
5.10. Litigation, etc.......................................... 12
5.11. Compliance with Other Instruments, etc................... 12
i
<PAGE>
Section PAGE
- ------- ----
5.12. Governmental Consents, etc............................... 13
5.13. Certain Fees............................................. 14
5.14. Margin Regulations....................................... 14
5.15. Investment Company Act................................... 14
5.16. Compliance with ERISA.................................... 14
5.17. Disclosure............................................... 15
5.18. Use of Proceeds.......................................... 15
5.19. Intellectual Property.................................... 15
5.20. Environmental Matters.................................... 17
5.21. Registration Rights...................................... 18
5.22. Governmental Regulation.................................. 18
5.23. Agreements............................................... 18
5.24. Availability of Documents................................ 18
5.25. Business Relations....................................... 19
5.26. Interest in Competitors, Suppliers,
Customers, etc...................................... 19
5.27. Private Offering......................................... 19
5.28. Insurance................................................ 20
5.29. Solvency................................................. 20
6. Purchase for Investment........................................... 21
7. Prepayment of Notes............................................... 21
7.1. Acquisition or Prepayment of Notes....................... 21
7.2. Required Prepayments..................................... 21
7.3. Optional Prepayments..................................... 21
7.4. Notice of Optional Prepayments;
Officers' Certificate.................................. 22
7.5. Allocation of Partial Prepayments........................ 22
7.6. Maturity; Surrender, etc................................. 22
8. Affirmative Covenants............................................. 22
8.1. Financial Statements..................................... 23
8.2. Certificates; Other Information.......................... 24
8.3. Payment of Taxes and Other Obligations................... 25
8.4. Conduct of Business and Maintenance
of Existence........................................ 26
8.5. Maintenance of Property; Insurance....................... 26
8.6. Inspection of Property; Books and
Records; Discussions................................... 27
8.7. Notices.................................................. 27
8.8. Maintenance of Intellectual Property Rights.............. 28
ii
<PAGE>
<TABLE>
<CAPTION>
Section PAGE
- ------- ----
<S> <C> <C>
9. Negative Covenants..................................... 30
9.1. Restricted Payments.................................. 30
9.2. Merger, Consolidation, Sale of Assets................ 30
9.3. Dividends and Other Payment Restrictions
Affecting Subsidiaries............................. 32
9.4. Amendments, Modifications, etc....................... 32
9.5. Investment Company Act............................... 32
9.6. Compliance with ERISA................................ 33
9.7. Sale or Lease of Assets.............................. 33
9.8. Transactions with Affiliates......................... 33
9.9. Minimum Consolidated Tangible Net Worth.............. 34
9.10. Limitation on Indebtedness........................... 34
9.11. Limitation on Ranking of Future Indebtedness......... 34
9.12. Sale and Lease-Back.................................. 34
9.13. Sale or Discount of Receivables...................... 35
9.14. Investments, Loans and Advances...................... 35
9.15. Liens................................................ 36
9.16. Change in Control.................................... 36
9.17. Bonus Plan........................................... 37
10. Subordination................................................ 37
10.1. Payment Over of Proceeds Upon Bankruptcy............. 37
10.2. Suspension of Payment and Remedies When Senior
Indebtedness in Default............................ 38
10.3. Payment Permitted If No Default...................... 41
10.4. Subrogation to Rights of Holders
of Senior Indebtedness............................. 41
10.5. Provisions Solely to Define Relative Rights.......... 41
10.6. No Waiver of Subordination Provisions................ 42
10.7. Reliance on Judicial Order or
Certificate of Liquidating Agent..................... 43
10.8. Notice to Holders of Notes........................... 43
10.9. No Suspension of Remedies............................ 43
10.10. This Section Not to Prevent Events of Default........ 43
11. Registration, Transfer and Substitution of Notes.............. 44
</TABLE>
iii
<PAGE>
Section PAGE
- ------- ----
11.1. Note Register; Ownership of Notes......................... 44
11.2. Transfer and Exchange of Notes............................ 44
11.3. Replacement of Notes...................................... 44
11.4. Restrictions on Transfer.................................. 45
12. Payments on Notes................................................. 46
12.1. Place of Payment.......................................... 46
12.2. Home Office Payment....................................... 46
13. Events of Default; Acceleration................................... 47
14. Unconditional Right of Holders to Receive Principal and
Interest; Remedies on Default, etc.............................. 50
15. Definitions....................................................... 51
15.1. Certain Defined Terms..................................... 51
15.2. Accounting Terms.......................................... 64
15.3. Other Provisions Regarding Definitions.................... 64
16. Detachability of Warrants......................................... 64
17. Expenses, Indemnification, etc.................................... 64
17.1. Expenses.................................................. 64
17.2. Indemnification........................................... 66
18. Survival of Representations and Warranties........................ 66
19. Amendments and Waivers............................................ 67
20. Notices, etc...................................................... 67
21. Miscellaneous..................................................... 68
Schedule of Purchasers
Exhibit A -- Form of 15% Senior Subordinated Note due 1997
Exhibit B-1 -- Amended and Restated Certificate of
Incorporation of the Company
iv
<PAGE>
Exhibit B-2 -- Amended By-Laws of the Company
Exhibit C-1 -- Form of Base Warrant
Exhibit C-2 -- Form of Special Warrant
Exhibit D -- Form of Opinion of Counsel for the Company
Exhibit E -- Indebtedness of the Company and its
Subsidiaries
Exhibit F -- Form of Letter Agreement
Exhibit G -- Real Property; Leases
Exhibit H -- Litigation
Exhibit I -- Material Agreements
Exhibit J -- Intellectual Property
Exhibit K -- Bonus Plan
Exhibit L -- Form of Shareholders' Agreement
Exhibit M -- Jurisdictions in Which the Company is
Qualified to Do Business or Has Pending
Applications to Do Business
Exhibit N -- Customers
Exhibit O -- Insurance
Exhibit P -- List of Shareholders
v
<PAGE>
Information Management Associates, Inc.
6527 Main Street
Trumbull, CT 06611
December 21, 1990
To Each of the Purchasers
Listed in the
Schedule of Purchasers
Attached hereto:
Dear Sirs:
Information Management Associates, Inc., a Connecticut corporation (the
"Company"), agrees with you as follows:
1. Authorization of Notes and Warrants. The Company will authorize (i)
-----------------------------------
the issue and sale to you of $1,600,000 aggregate principal amount of its 15%
Senior Subordinated Notes due 1997 (the "Notes", such term to include any such
notes issued in substitution therefor pursuant to section 11), to be
substantially in the form of the Note set out in Exhibit A, with such changes
therefrom, if any, as may be approved by you and the Company, (ii) the issue and
sale to you of warrants (the "Base Warrants") to purchase 16,667 shares of the
Company's common stock, no par value (the "Common Stock"), to be substantially
in the form of the Base Warrant set out in Exhibit C-1, with such changes
therefrom, if any, as may be approved by you and the Company, and (iii) the
issue and sale to you of warrants (the "Special Warrants") to purchase such
number of shares of Common Stock as shall be equal to the Special Amount (as
defined in the Special Warrant), to be substantially in the form of the Special
Warrant set out in Exhibit C-2, with such changes therefrom, if any, as may be
approved by you and the Company. The Base Warrants and the Special Warrants are
hereinafter referred to collectively from time to time as the "Warrants", and
such term shall include any such warrants issued in substitution therefor
pursuant to section 12 of the Warrants. The Common Stock has the terms set out
in the Company's amended and restated certificate of incorporation attached as
Exhibit B-1 (the "Certificate of Incorporation").
<PAGE>
2. Sale and Purchase of Notes and Warrants. The Company will issue and
---------------------------------------
sell to you and, subject to the terms and conditions of this Agreement, you will
purchase from the Company, at the Closing provided for in section 3, (a) Notes
in the principal amount and (b) Warrants to purchase the number of Shares of
Common Stock, in each case as specified below your name in the Schedule of
Purchasers. The purchase price of the Notes and the Warrants to be purchased by
you shall be an amount equal to 100% of the principal amount of such Notes, such
purchase price to be allocated between such Notes and Warrants in the manner set
out below your name on the Schedule of Purchasers. Contemporaneously with
entering into this Agreement, the Company is entering into separate Note and
Warrant Purchase Agreements (the "Other Purchase Agreements"), identical with
this Agreement, with each of the other purchasers named in the Schedule of
Purchasers (the "Other Purchasers"), providing for the sale to each of the Other
Purchasers at such Closing of (i) Notes in the principal amount and (ii)
Warrants to purchase the number of shares of Common Stock, in each case as
specified below the name of such Other Purchaser in the Schedule of Purchasers.
The sales of Notes and Warrants to you and to each of the Other Purchasers are
to be separate sales, and this Agreement and the Other Purchase Agreements are
to be separate agreements.
3. Closing; Payment of Purchase Price. The sale of the Notes and the
----------------------------------
Warrants to be purchased by you shall take place at the offices of Skadden,
Arps, Slate, Meagher & Flom, New York, New York, at 10:00 a.m., New York City
time, at a closing (the "Closing") on December 21, 1990 or on such other
Business Day thereafter on or prior to December 21, 1990 as may be agreed upon
by the Company and you. At the Closing, the Company will deliver to you (i) the
Notes to be purchased by you in the form of a single Note (or such greater
number of Notes as you may request) dated the Closing Date and registered in
your name (or in the name of your nominee), (ii) the Base Warrants to be
purchased by you in the form of a single Base Warrant (or such greater number of
Base Warrants as you may request) dated the Closing Date and registered in your
name (or in the name of your nominee), and (iii) the Special Warrants to be
purchased by you in the form of a single Special Warrant (or such greater number
of Special Warrants as you may request) dated the date of the Closing and
registered in your name (or in the name of your
2
<PAGE>
nominee), against delivery by you to the Company of immediately available funds
in the amount of the purchase price therefor. If at the Closing the Company
shall fail to tender to you any of the Notes or the Warrants to be purchased by
you, as provided above in this section 3, or any of the conditions specified in
section 4 shall not have been fulfilled to your reasonable satisfaction, you
shall, at your election, be relieved of all further obligations under this
Agreement, without thereby waiving any other rights you may have by reason of
such failure or such nonfulfillment.
4. Conditions to Closing. Your obligation to purchase and
---------------------
pay for the Notes and the Warrants to be sold to you at the Closing is subject
to the fulfillment to your reasonable satisfaction, prior to or concurrently
with the Closing, of the following conditions:
4.1. Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in this Agreement, the Exhibits hereto, the
Letter Agreement, the Notes, the Warrants and the officers' certificates
delivered in connection with the Closing shall be correct when made and at the
time of the Closing.
4.2. Performance; No Default. The Company shall have performed and
-----------------------
complied with all agreements and conditions contained in this Agreement required
to be performed or complied with by it prior to or at the Closing. At the time
of the Closing (and after giving effect to any application of proceeds of the
sale of the Notes and the Warrants) no Event of Default or Default shall have
occurred and be continuing, and no event of default, or event that with notice
or lapse of time or both would become an event of default, shall have occurred
and be continuing under any agreement or instrument for Indebtedness in excess
of $50,000 (other than the Bank Credit Agreement, which is contemplated to be
repaid and terminated in accordance with section 5.18).
4.3. Compliance Certificates; Officers' Certificates. The Company shall
-----------------------------------------------
have delivered to you an Officers' Certificate, dated the date of the Closing,
certifying that the conditions specified in sections 4.1 and 4.2 have been
fulfilled and covering such other matters as you shall have requested.
3
<PAGE>
4.4. Opinion of Counsel. You shall have received a favorable opinion,
------------------
addressed to you, dated the date of the Closing and satisfactory in substance
and form to you, from Cummings & Lockwood, counsel for the Company,
substantially in the form set forth in Exhibit D and covering such other matters
incident to the transactions contemplated by this Agreement as you or your
counsel may reasonably request.
4.5. Certificate of Incorporation. The Certificate of Incorporation
----------------------------
shall have been duly filed under the laws of the State of Connecticut and shall
not have been amended or modified. The By-Laws shall not have been amended or
modified.
4.6. Legal Investment. On the date of the Closing, your purchase of the
----------------
Notes and Warrants to be purchased by you shall be permitted by the laws and
regulations of each jurisdiction to which you are subject (including, without
limitation, Regulation G, T, U or X of the Board of Governors of the Federal
Reserve System), and shall not subject you to any penalty or, in your judgment,
other onerous condition under or pursuant to any applicable law or governmental
regulation.
4.7. No Actions Pending. There shall be no suit, action, investigation,
------------------
inquiry or other proceeding by any Governmental Authority or any other Person or
any other legal or administrative proceeding pending or threatened which
questions the validity or legality of the transactions contemplated by this
Agreement, or seeks damages in connection therewith.
4.8. Compliance with Securities Laws. The offering and sale by the
-------------------------------
Company, at or prior to the Closing, of the Notes and the Warrants pursuant to
this Agreement and the Other Purchase Agreements shall have been made in
compliance with all applicable requirements of federal and state securities laws
and you shall have received evidence thereof in form and substance satisfactory
to you.
4.9. Proceedings and Documents. All corporate and other proceedings in
-------------------------
connection with the transactions contemplated by this Agreement and all
documents and instruments incident to such transactions shall be satisfactory to
you and your special counsel, and you and your special counsel shall have
received all such counterpart
4
<PAGE>
originals or certified or other copies of such documents as you or they may
reasonably request.
4.10. Letter Agreement. You shall have received a fully- executed
----------------
counterpart of the Letter Agreement in the form set out in Exhibit F (the
"Letter Agreement"), such agreement shall be in full force and effect and no
term or condition thereof shall have been amended, modified or waived.
4.11. Bonus Plan. At or prior to the Closing, the Company shall have
----------
adopted the bonus plan in the form set out in Exhibit K (the "Bonus Plan"), such
Bonus Plan shall be in full force and effect and no term or condition thereof
shall have been amended, modified or waived.
4.12. Shareholders' Agreement. You shall have received a copy of the
-----------------------
fully-executed Shareholders' Agreement in the form set out in Exhibit L (the
"Shareholders' Agreement"), such agreement shall be in full force and effect and
no term or condition thereof shall have been amended, modified or waived.
4.13. Investigations, etc. Neither any investigation of the Company by
-------------------
you or your special counsel, nor the Exhibits hereto nor any other document
delivered to you as contemplated by this Agreement, shall have revealed any
facts or circumstances which, in your sole and exclusive judgment, reflect in a
material adverse way on the financial condition, assets, liabilities (absolute,
accrued, contingent or otherwise), reserves, business, operations or prospects
of the Company.
4.14. No Offerings. The Company shall not have offered, placed or sold,
------------
or caused to be offered, placed or sold, any securities or other obligations
other than as part of the contemplated financing and previous sales of
securities consistent with the capital structure of the Company as reflected
herein.
4.15. No Material Adverse Change. In your sole and exclusive judgment,
--------------------------
(a) 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 its date of
incorporation, and (b) on the Closing Date the financial condition, assets,
liabilities (absolute, accrued, contingent or otherwise),
5
<PAGE>
reserves, business operations and prospects of the Company shall be
substantially similar to those of the Partnership reflected in the audited
financial statements of the Partnership as of December 31, 1989, other than (x)
changes which have not been, either in any case or in the aggregate, materially
adverse to the Company, (y) any matters of a general economic or political
nature which do not affect the Company uniquely and (z) other than as a result
of the retention by the Partnership, as described in section 5.5(a), of the
Headquarters Building and real estate and fixtures connected therewith.
4.16. Consents and Permits. The Company shall have received all
--------------------
consents, permits and other authorizations, and made all such filings and
declarations, as may be required pursuant to any law, statute, regulation or
rule (federal, state, local and foreign) in connection with the transactions
contemplated by this Agreement, or 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 you of all such consents, permits, authorizations,
filings and declarations.
4.17. Sales to Other Purchasers. Contemporaneously with the Closing the
-------------------------
Company shall sell to the Other Purchasers the Notes and Warrants to be
purchased by them at the Closing as specified in section 2.
4.18. Non-disclosure and Proprietary Information Agreements. Prior to
-----------------------------------------------------
the Closing, the Company shall have entered into non- disclosure and proprietary
information agreements, in form and substance satisfactory to you, with Messrs.
Gary R. Martino, Albert R. Subbloie, Andrei Poludnewycz and Paul Schmidt (the
"Non-disclosure and Proprietary Information Agreements"), and such agreements
shall be in full force and effect.
4.19. Transfer of Intellectual Property. Prior to the Closing, the
---------------------------------
Company shall become the sole and exclusive legal, beneficial and record owner
of all Intellectual Property Rights relating to any product which is currently
or presently proposed to be licensed or sold by the Company (including, without
limitation, all Intellectual Property Rights that were originally retained by
the Partnership in connection with the transaction described in section 5.5(a)).
6
<PAGE>
5. Representations and Warranties. The Company represents and warrants
------------------------------
that:
5.1. Organization, Standing, etc. The Company is a corporation duly
---------------------------
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to own and operate its properties and to carry on its business as now
conducted and as currently proposed to be conducted. The Company has all
requisite corporate power and authority to enter into and perform all of its
obligations under this Agreement, the Other Purchase Agreements, the Letter
Agreement, the Notes and the Warrants, to issue and sell the Notes and the
Warrants to be issued at the Closing and to carry out the transactions
contemplated hereby or thereby. This Agreement, the Other Purchase Agreements,
the Notes, the Warrants, and the Letter Agreement have been duly authorized by
all necessary corporate action on the part of the Company and, when executed and
delivered by the Company, will constitute legal, valid and binding obligations
of the Company. The Organizational Agreement, the Shareholders' Agreement and
the Transfer Agreement have been duly authorized, executed and delivered by each
party thereto and constitute the legal, valid and binding obligations of each
party thereto.
5.2. Subsidiaries. On the date hereof, the Company has no Subsidiaries.
------------
5.3. Qualification. Attached as Exhibit M is a true and complete list
-------------
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 for Illinois, Georgia, Virginia and California
the jurisdictions identified in Exhibit M are the only jurisdictions in which
the nature of the Company's activities or the character of the properties it
owns or leases makes such qualification 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.
7
<PAGE>
5.4. Business; Financial Statements. The Company has delivered to you
------------------------------
complete and correct copies of (i) the balance sheet of the Partnership at
December 31, 1987, 1988 and 1989, and the related statements of income and
changes in partners' capital and of cash flow for the years then ended, in each
case audited by Price Waterhouse, independent certified public accountants, (ii)
unaudited balance sheets of the Company at the end of the first three calendar
quarters in 1990, and an unaudited balance sheet at October 31, 1990, and
unaudited statements of income and retained earnings for each such quarter and
for October 1990, (iii) an unaudited summary historical financial profit/loss
statement of the Partnership for the five years ended December 31, 1989, (iv)
profit/loss projections of the Company for each of the calendar months in 1990,
(v) summary profit/loss projections of the Company for each of the five years in
the period ending December 31, 1994, (vi) summary balance sheet projections of
the Company for each of the five years in the period ending December 31, 1994,
(vii) summary statement of cash flow projections of the Company for each of the
five years in the period ending December 31, 1994 and (viii) summary forecast of
revenues and expenses for the fourth quarter of 1990. All audited financial
statements included in the foregoing materials delivered to you have been
prepared in accordance with GAAP consistently applied throughout the periods
involved (except as otherwise specified therein or in the notes included
therewith) and present fairly the financial position of the Partnership as of
the respective dates specified and the results of its operations and changes in
partners' capital for the respective periods specified. In the opinion of
management of the Company, the unaudited financial statements referred to in the
foregoing clauses (ii) and (iii) reflect all adjustments necessary for a fair
presentation of results for the periods to which those financial statements
relate (subject, in the case of interim statements, to normal year-end audit
adjustments). The projections furnished to you are based on good faith estimates
and assumptions by the management of the Company, it being recognized by you,
however, that projections as to future events are not to be viewed as fact and
that actual results during the period or periods covered by any such projections
may differ from the projected results and that the differences may be material.
8
<PAGE>
5.5. Formation of the Company and Related Transactions; Changes. (a)
----------------------------------------------------------
The Company was duly incorporated and organized on January 18, 1990. Thereafter,
the Company filed an election with the Internal Revenue Service to become an S
corporation for federal income tax purposes, and such election became effective
on January 18, 1990. The Company and the Partnership entered into an agreement,
dated as of January 1, 1990, in which (1) the Partnership transferred to the
Company all assets owned by the Partnership and used in the Partnership's
business (excluding certain real estate and related assets, computer software
and related assets, Intellectual Property Rights and certain deposit accounts)
and (2) the Company assumed certain liabilities of the Partnership. Prior to the
Closing Date the Partnership will have transferred to the Company, pursuant to
the Transfer Agreement, all of its real property and other properties and assets
(both tangible and intangible), except for the Headquarters Building and the
real estate and fixtures connected therewith.
(b) Since the date of incorporation of the Company there has been no
change in the financial condition, assets, liabilities (absolute, accrued,
contingent or otherwise), reserves, business, operations or prospects of the
Company, other than (x) changes which have not been, either in any case or in
the aggregate, materially adverse to the Company and (y) any matters of a
general economic or political nature which do not affect the Company uniquely.
(c) The Company's financial condition, assets, liabilities (absolute,
accrued, contingent or otherwise), reserves, business, operations and prospects
are substantially similar to those of the Partnership reflected in the audited
financial statements of the Partnership as of December 31, 1989, other than (x)
changes which have not been, either in any case or in the aggregate, materially
adverse to the Company, (y) any matters of a general economic or political
nature which do not affect the Company uniquely and (z) as a result of the
retention by the Partnership, as described in paragraph (a) of this section 5.5,
of the Headquarters Building and the real estate and fixtures connected
therewith.
(d) 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)
9
<PAGE>
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 Exhibits hereto.
(e) The Company has not as of the date of this Agreement directly or
indirectly declared, ordered, paid, made or set apart any sum or property for
any Restricted Payments.
5.6. Capital Stock and Related Matters. At the time of the Closing and
---------------------------------
after giving effect to the transactions contemplated by this Agreement, the
authorized capital stock of the Company will consist of 500,000 shares of common
stock, of which 100,000 shares will be outstanding and 50,000 shares will be
reserved for issuance upon exercise of the Warrants. Attached as Exhibit P is a
true and correct list identifying each stockholder of the Company and the number
of shares of Common Stock owned by each such stockholder. All of the outstanding
shares of Common Stock will be validly issued and outstanding, fully paid and
non-assessable. Except for the Warrants, the Company has no outstanding
securities convertible into or exchangeable for any shares of its Capital Stock,
or any outstanding rights (either preemptive or other) to subscribe for or to
purchase, or any outstanding options for the purchase of, or any agreements
providing for the issuance (contingent or otherwise) of, or any outstanding
calls, commitments or claims of any character relating to, any Capital Stock or
any stock or securities convertible into or exchangeable for any Capital Stock
of the Company. Except as provided in the Warrants, the Company is not subject
to any obligation (contingent or otherwise) to repurchase or otherwise acquire
or retire any shares of its Capital Stock or any convertible securities, rights
or options of the type described in the preceding sentence. The Company is not a
party to, and does not have knowledge of, any agreement (except as set forth in
this Agreement, the Letter Agreement, the Warrants and the Shareholders'
Agreement) restricting the voting or transfer of any shares of the Company's
Capital Stock. The Company is not required to file, nor has it filed, pursuant
to Section 12 of the Exchange Act, a registration statement relating to any
class of equity securities, provided, however, that under
-------- -------
10
<PAGE>
the Shareholders' Agreement, certain shareholders of the Company have been
granted "piggy-back" registration rights.
5.7. Tax Returns and Payments. The Company has made a valid election
------------------------
within the meaning of Section 1362 of the Code to be treated as an S corporation
for its taxable year beginning January 18, 1990 and for all succeeding taxable
years. Such S corporation status has continuously been in effect since the date
of such election and neither the execution and delivery of this Agreement, the
Notes, the Warrants, the Letter Agreement or any other agreement contemplated
hereby nor the consummation of any of the transactions contemplated hereby or
thereby shall adversely affect its S corporation status. The Company has
delivered to you true and correct copies of all documents filed by it in
connection with its S corporation election and all forms, schedules and exhibits
(including, without limitation, all Schedule K-1s) filed by the Partnership or
the Company with the Internal Revenue Service for tax years 1987 through 1990.
The Company has filed all tax returns required by law to be filed by it and has
paid all taxes shown to be due and payable on such returns and all assessments
and other governmental charges levied upon the Company, and any of its
respective properties, assets, income or franchises which are due and payable,
other than those presently payable without penalty or interest and those the
amount or the validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which adequate reserves in
accordance with GAAP have been provided on the books of the Company. The
charges, accruals and reserves on the books of the Company in respect of federal
and state income taxes for all fiscal periods are adequate in the opinion of the
Company, and the Company knows of no unpaid assessment for additional federal or
state income taxes for any period or any basis for any such assessment, except
for assessments the amount or the validity of which is currently being contested
in good faith by appropriate proceedings and with respect to which adequate
reserves in accordance with GAAP have been provided on the books of the Company.
5.8. Indebtedness of the Company. Exhibit E correctly describes all
---------------------------
secured and unsecured Indebtedness of the Company outstanding, or for which the
Company has commitments, on the date of this Agreement. The
11
<PAGE>
Company is not in default with respect to any Indebtedness or any instrument or
agreement relating thereto.
5.9. Title to Properties; Liens. Exhibit G correctly describes all real
--------------------------
property owned or leased by the Company, together with, in the case of the
leased properties, a description of the lease payment obligations and lease
termination provisions relating thereto. The Company has good and marketable
title to the real property that is reflected in Exhibit G as an owned property
and good and sufficient title to all of the other material properties and assets
used in or necessary to conduct the Company's business and those properties and
assets acquired by the Company pursuant to the Transfer Agreement. None of the
foregoing properties or assets is subject to any Liens, except such as are of
the character permitted by the Bank Credit Agreement or by Section 9.15 hereof.
The Company enjoys peaceful and undisturbed possession under all leases
necessary in any material respect for the operation of its properties and
assets, and all such leases are valid and subsisting and are in full force and
effect.
5.10. Litigation, etc. Except as listed in Exhibit H, there is no
---------------
action, proceeding or investigation pending or (to the knowledge of the Company)
threatened (or any basis therefor known to the Company) which questions the
validity of the Company's S corporation election, the Organizational Agreement,
the Transfer Agreement, this Agreement, the Other Purchase Agreements, the
Notes, the Warrants, the Letter Agreement or any action taken or to be taken
pursuant to any of the foregoing and there is no action, proceeding or
investigation pending or (to the knowledge of the Company) threatened which
could reasonably be expected to result, either in any case or in the aggregate,
in any adverse change in the financial condition, assets, liabilities (absolute,
accrued, contingent or otherwise), reserves, business, operations or prospects
of the Company, or in any liability on the part of the Company which would be
material to the Company.
5.11. Compliance with Other Instruments, etc. The Company is not in
--------------------------------------
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 regu-
12
<PAGE>
lation 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; the execution, delivery and performance of this Agreement, the
Other Purchase Agreements, the Notes, the Warrants and the Letter Agreement will
not (i) result in any violation of or be in conflict with or constitute a
default under (a) any term of the Certificate of Incorporation or By-Laws of the
Company, (b) the terms of any material agreement or instrument to which the
Company is a party or by which it is bound (except for (i) the Bank Credit
Agreement, which is contemplated to be repaid and terminated in accordance with
section 5.18 and (ii) a change of control provision contained in the Koll
Business Center lease dated September 15, 1989 referred to in Exhibit I), or (c)
any term of any 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 or (ii) result in the creation of (or impose any
obligation on the Company to create) any Lien upon any of the properties or
assets of the Company pursuant to any of the foregoing. The Company has provided
copies to you of each of the consents, permits, authorizations, filings and
declarations obtained in connection with the transactions contemplated by this
Agreement.
5.12. Governmental Consents, etc. No consent, approval or authorization
--------------------------
of, or declaration or filing with, any Governmental Authority on the part of the
Company or any of its Affiliates is required for the valid execution and
delivery of this Agreement, the Other Purchase Agreements and the Letter
Agreement, the valid offer, issue, sale and delivery of the Notes and the
Warrants pursuant to this Agreement and the Other Purchase Agreements or the
valid issue and delivery of shares of Common Stock upon the exercise of the
Warrants, except for the requirements of state securities or blue sky laws.
13
<PAGE>
5.13. Certain Fees. No broker's, finder's or financial advisory fees or
------------
commissions will be payable by the Company with respect to the transactions
contemplated by this Agreement, the Other Purchase Agreements and the Letter
Agreement, and the Company hereby indemnifies you against and agrees that it
will hold you harmless from any claim, demand or liability for broker's,
finder's or financial advisory fees alleged to have been incurred by the Company
in connection with any of the transactions contemplated by this Agreement, the
Other Purchase Agreements and the Letter Agreement (other than any fees payable
or Warrants issuable to Mr. Thomas Hill in connection with any such
transactions), and from any expenses, including reasonable legal fees, arising
in connection with any such claim, demand or liability.
5.14. Margin Regulations. The Company will not, directly or indirectly,
------------------
use any of the proceeds of the sale of the Notes and the Warrants for the
purpose, whether immediate, incidental or ultimate, of buying a Margin Stock or
of maintaining, reducing or retiring any indebtedness originally incurred to
purchase a stock that is currently a Margin Stock, or for any other purpose
which might constitute this transaction a "purpose credit", in each case within
the meaning of Regulation G of the Board of Governors of the Federal Reserve
System (12 C.F.R. 207, as amended), Regulation T of such Board (12 C.F.R. 220,
as amended), Regulation U of such Board (12 C.F.R. 221, as amended) or
Regulation X of such Board (12 C.F.R. 224, as amended), or otherwise take or
permit to be taken any action which would involve a violation of such Regulation
G, Regulation T, Regulation U or Regulation X or any other regulation of such
Board.
5.15. Investment Company Act. The Company is not an "investment
----------------------
company", or a company "controlled" by an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
5.16. Compliance with ERISA. (a) The Company has not engaged in any
---------------------
transaction in connection with which the Company has become subject or will
become subject to either a civil penalty assessed pursuant to section 502(i) of
ERISA or a tax imposed by section 4975 of the Code;
14
<PAGE>
(b) Other than the Profit-Sharing Plan, the Company has not
established and does not presently intend to establish any Plan;
(c) On the date hereof, the Company does not maintain or
contribute to, and at no time has the Company maintained or contributed to, any
Plan subject to Section 302 or Title IV of ERISA or Section 412 of the Code; and
(d) The execution and delivery of this Agreement and the Letter
Agreement and the issue and sale of the Notes and the Warrants hereunder will
not involve any transaction which is subject to the prohibitions of Section 406
of ERISA or in connection with which a tax could be imposed pursuant to section
4975 of the Code.
5.17. Disclosure. Neither this Agreement, the Exhibits hereto, the
----------
Letter Agreement, the Notes, the Warrants nor the 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.
5.18. Use of Proceeds. (a) On the Closing Date, the Company will use
---------------
the proceeds from the sale of the Notes and the Warrants to repay in full all
principal of and accrued interest on the borrowings that are then outstanding
under the Bank Credit Agreement and all other fees (including attorneys' fees)
that are due and payable under such Agreement. The Company will use any
remaining portion of such proceeds for general corporate purposes.
(b) Immediately upon the repayment of all amounts due under the
Bank Credit Agreement, the Company shall deliver to you evidence, in form and
substance satisfactory to you, of such repayment.
5.19. Intellectual Property. The Company owns or has valid rights to
---------------------
use all Intellectual Property Rights used in or necessary to conduct the
Company's business as heretofore conducted or planned to be conducted in the
foreseeable future, including, without limitation, all Intellectual Property
Rights in or relating to the so called "Telemar" software and all integrated
software modules in connection therewith, e.g., Voice
----
15
<PAGE>
Modules ("Simple Dial", "Intelligent Dial", "Call Router" and "Call Manager"),
Base Modules ("Account Management" and "Scripting"), Data Modules ("Order
Entry", "Mail Management", "Lead Management", "Sales Management", "Application
Generation" and "Telemar PC"), and Common Features ("Telewriter", "Teleprompt"
and "Teletext"). Exhibit J sets forth a complete and accurate list of all
registered trademarks and copyrights which the Company owns or is licensed to
use and all material License Agreements. The Company owns no Patents. The
Company is the sole and exclusive legal, beneficial and record owner of all
Copyrights and Trademarks specified on Exhibit J as well as all other material
Intellectual Property Rights used in or necessary to conduct the Company's
business, free and clear of all liens, claims, charges and encumbrances and free
and clear of all licenses to third parties other than licenses to customers in
the ordinary course of business. To the Knowledge of the Company, all License
Agreements are valid and binding obligations of the parties thereto. The
Copyright listed on Exhibit J relating to the TELEMAR computer software, and the
Copyright in the documentation related thereto, is a valid and subsisting United
States Copyright and is registered in the United States Copyright Office. The
registered Trademark listed on Exhibit J is a valid and subsisting U.S.
Trademark and is registered in the United States Trademark Office. To the
Company's Knowledge, all the Company's material intellectual property rights
(including those relating to the computer programs, data bases and related
documentation) are valid and enforceable, are subsisting, none are subject to
any interference, opposition, office action, cancellation or other similar
proceeding and all fees have been timely paid. There are no claims pending or,
to the best of the Company's knowledge, threatened, before any court or
governmental agency relating to the validity, enforceability, or the Company's
rights to own or use any Intellectual Property Rights (including, without
limitation, those relating to any of the computer programs, data bases or
related documentation) or alleging that the conduct of the Company's business
infringes upon or constitutes an unauthorized use of the Intellectual Property
Rights of any third party and, to the best of the Company's knowledge, there is
no valid basis for any such claims. To the best of the Company's knowledge,
there are no material infringements or unauthorized uses of any Intellectual
Property Rights owned by or licensed to the Company (including, without
limitation, those in the programs, data
16
<PAGE>
bases and related documentation) and no material breaches of any License
Agreements. The Company has taken reasonable security measures to protect the
secrecy and confidentiality of the source code, proprietary screen displays and
documentation relating to the TELEMAR computer programs and databases and in all
other material proprietary Know-How and Technical Information owned by or
licensed to the Company. Except as set forth on Exhibit J, the Company
customarily employs proper statutory notice of registration in connection with
registered Trademarks owned by or licensed to the Company and places appropriate
copyright notices on all material computer programs, data bases, related
documentation, and other material Copyrights owned by the Company. The Company
has not entered into any consent, forbearance to sue, or settlement agreement
with any person relating to any Intellectual Property Rights (including but not
limited to those in the computer programs, data bases and documentation related
thereto) or to those of any third party, except as set forth on Exhibit J. The
consummation of the transactions contemplated by this Agreement will not result
in the loss or impairment of any material Intellectual Property Rights
(including but not limited to those in any computer programs, data bases and
documentation related thereto) or the Company's ownership or right to use the
same or result in a breach of any License Agreement.
5.20. Environmental Matters. The Company is in compliance with the
---------------------
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.
17
<PAGE>
5.21. Registration Rights. The Company is not a party to any agreement
-------------------
granting registration rights to any Person with respect to any of its equity or
debt securities, other than the registration rights granted by the terms of the
Warrants and certain piggyback registration rights contained in the
Shareholders' Agreement.
5.22. Governmental Regulation. The Company is not subject to any
-----------------------
federal or state law or regulation materially limiting its ability to issue and
perform its obligations under the terms of this Agreement, the Other Purchase
Agreements, the Notes, the Warrants and the Letter Agreement.
5.23. Agreements. Exhibit I contains a list of each agreement or
----------
instrument (including any and all amendments thereto) to which the Company is a
party or bound and which is or, immediately following the consummation of the
transactions contemplated by this Agreement, will be, material to the financial
condition, assets, liabilities (absolute, accrued, contingent or otherwise),
reserves, business or operations of the Company, other than agreements or
instruments that are identified on Exhibit E. Each agreement or instrument
listed in Exhibit E or I (including any and all amendments thereto) is in full
force and effect and, to the best knowledge of the Company, constitutes a legal,
valid and binding obligation of the respective parties thereto, and, to the best
knowledge of the Company, no Person is in default or breach of (with or without
the giving of notice or the passage of time) any such agreement or instrument,
except for the Bank Credit Agreement, which is contemplated to be repaid on the
Closing Date and except to the extent that the Company is in default for failure
to obtain consent to the assignment by the Partnership to the Company of the
Koll Business Center lease dated September 15, 1989, the Omni
Offices/Atlanta-North, Inc. lease dated November 3, 1989, the Concourse
Associates Limited Partnership lease dated February 10, 1989 and the Nynex
Credit Company lease dated November 8, 1989.
5.24. Availability of Documents. Exhibit B-l hereto is a true, correct
-------------------------
and complete copy of the Company's Certificate of Incorporation, together with
all amendments thereto. Exhibit B-2 hereto is a true, correct and complete copy
of the Company's By-Laws, together with all amendments thereto. The Company has
heretofore made available for inspection by you all written agree-
18
<PAGE>
ments, arrangements, commitments and documents referred to herein or in the
Exhibits hereto, in each case, together with all amendments and supplements
thereto. The Company has heretofore made available for inspection by you its
corporate minute books. Such corporate minute books contain the minutes of all
the meetings of stockholders, board of directors and any committees which have
been held since the Company's date of incorporation and all written consents to
action executed in lieu thereof. The Company has delivered to you a true,
correct and complete copy of the Partnership Agreement, together with all
amendments thereto.
5.25. Business Relations. The Company is not required to provide any
------------------
bonding or other financial security arrangements in connection with any
transactions with any of its customers or suppliers in the ordinary course of
its business. To the knowledge of the Company, no customer or supplier will
cease to do business with the Company after the consummation of the transactions
contemplated by this Agreement.
5.26. Interest in Competitors, Suppliers, Customers, etc. (a)
--------------------------------------------------
Exhibit N hereto includes the names of the Company's top 25 customers in each of
1988, 1989 and 1990 ranked in order of contribution to revenues, subject to
year-end adjustments.
(b) The Company, its officers or directors, and Affiliates of any of
the Company or such officers or directors, have no ownership interest in any
competitor, supplier, customer or franchisee of the Company.
5.27. Private Offering. (a) The sale of the Notes and Warrants
----------------
hereunder is exempt from the registration and prospectus delivery requirements
of the Securities Act. The Company has not offered or sold the Notes or Warrants
to anyone other than you and the Other Purchasers. No securities of the same
class as the Notes and the Warrants have been issued and sold by the Company.
Neither the Company nor any Person acting on behalf of it has taken or will take
any action which would require the offering or sale of such securities to be
registered pursuant to the provisions of Section 5 of the Securities Act or the
provisions of any securities or Blue Sky law of any applicable jurisdiction; and
19
<PAGE>
(b) No form of general solicitation or general advertising (including,
without limitation, advertisements, articles, notices or other communications
published in any newspaper, magazine or other medium or broadcast over
television or radio, or any seminar or meeting whose attendees have been invited
by any general solicitation or general advertising) was used by the Company or,
to the best knowledge of the Company, any other Person acting on its behalf, in
respect of the Notes and Warrants or in connection with the offer and sale of
the Notes and Warrants. Neither the Company, nor, to the best of its knowledge,
any Person acting on behalf of it has, either directly or indirectly, sold or
offered for sale to any Person any of the Notes or Warrants or any other similar
security of the Company except as contemplated by this Agreement. Each Note and
Warrant shall have a legend setting forth the restrictions on transferability
and sale for at least so long as such restrictions apply.
5.28. Insurance. Exhibit O correctly describes all liability insurance
---------
coverage maintained by the Company, including employers liability and
professional malpractice insurance, and all other insurance maintained by the
Company including, without limitation, business interruption insurance and
insurance against loss or damage to property by fire, theft, explosion or
sprinklers. Exhibit O also includes a description of any deductibles applicable
to such insurance. All such insurance is in full force and effect, and the
Company is not aware that any such insurance will likely be terminated. The
Company believes that such insurance coverage is adequate for a company engaged
in its line of business or a similar line of business.
5.29. Solvency. As of the date of this Agreement and after giving
--------
effect to the transactions contemplated hereby, the Company (i) has assets the
fair market value of which is greater than the total amount of its liabilities
(absolute, accrued, contingent or otherwise), (ii) has assets the fair saleable
value of which is greater than the amount that will be required to pay the
probable liabilities on its debts as they become absolute and matured, (iii) is
able to realize upon its assets and pay its debts and other liabilities,
including contingent obligations and other commitments, as they mature in the
normal course of business, (iv) does not intend to, and does not believe that it
will, incur debts and liabil-
20
<PAGE>
ities beyond its ability to pay as such debts and liabilities mature and (v) is
not engaged in business or a transaction for which its property would constitute
unreasonably small capital after giving due consideration to the prevailing
practice in the industry in which it is engaged.
6. Purchase for Investment. You represent that you are Purchasing the
-----------------------
Notes and Warrants for your own account for investment and not with a view to
the distribution thereof or with any present intention of distributing or
selling any of the Notes or Warrants purchased by you, provided that the
--------
disposition of your property shall at all times be within your control. You
further represent that you are an "accredited investor" within the meaning of
Rule 501 under the Securities Act.
7. Prepayment of Notes.
-------------------
7.1. Acquisition or Prepayment of Notes. The Company will not, and will
----------------------------------
not permit any of its Subsidiaries to, purchase, redeem or otherwise acquire or
prepay any Note except upon the payment or prepayment thereof in accordance with
the terms of this Agreement and such Note.
7.2. Required Prepayments. On each of December 21, 1994, December 21,
--------------------
1995 and December 21, 1996 the Company will prepay $400,000 (or such lesser
principal amount as shall then be outstanding) of the Notes. No partial
prepayment of the Notes pursuant to section 7.3 shall relieve the Company from
its obligation to make the required prepayments provided for in this section 7.2
or any redemptions required pursuant to section 9.16. On December 21, 1997 (the
"Maturity Date"), the Company will repay all principal, together with all
accrued and unpaid interest through the Maturity Date and any other amounts due
and owing under this Agreement.
7.3. Optional Prepayments. The Company may, at its option, but subject
--------------------
to section 10, upon notice as provided in Section 7.4, prepay at any time all,
or from time to time any part (in integral multiples of $100,000) of, the Notes
at the principal amount so prepaid.
21
<PAGE>
7.4. Notice of Optional Prepayments; Officers' Certificate. The Company
-----------------------------------------------------
will give each holder of any Notes written notice of each optional prepayment
under section 7.3 not less than 10 days and not more than 30 days prior to the
date fixed for such prepayment, in each case specifying such date, the aggregate
principal amount of the Notes to be prepaid on such date, the principal amount
of each Note held by such holder to be prepaid on such date, and the section of
this Agreement under which such prepayment is to be made. Such notice shall be
accompanied by an Officers' Certificate certifying that the conditions of such
section have been fulfilled and specifying the particulars of such fulfillment.
7.5. Allocation of Partial Prepayments. In the case of each partial
---------------------------------
prepayment paid or to be prepaid, the principal amount of the Notes to be
prepaid shall be allocated (in integral multiples of $100,000) among all of the
Notes at the time outstanding in proportion, as nearly as practicable, to the
respective unpaid principal amounts thereof not theretofore called for
prepayment, with adjustments, to the extent practicable, to compensate for any
prior prepayment not made exactly in such proportion.
7.6. Maturity; Surrender, etc. In the case of each prepayment, the
------------------------
principal amount of each Note to be prepaid shall mature and become due and
payable on the date fixed for such prepayment, together with interest on such
principal amount accrued to such date. From and after such date, unless the
Company shall fail to pay such principal amount when so due and payable,
together with the interest as aforesaid, interest on such principal amount shall
cease to accrue. Any Note paid or prepaid in full shall be surrendered to the
Company and cancelled and shall not be reissued, and no Note shall be issued in
lieu of any prepaid principal amount of any Note.
8. Affirmative Covenants. The Company covenants that from and after the
---------------------
date of this Agreement through the Closing and thereafter (a) so long as any
Notes are outstanding or (b) if no Notes are outstanding and any Warrants or
Registration Securities are outstanding, so long as there has not been an
Initial Public Offering.
22
<PAGE>
8.1. Financial Statements. The Company will deliver (in duplicate) (i)
--------------------
to any holder of at least 25% in aggregate principal amount of the Notes, (ii)
to any holder of at least 25% in aggregate amount of the Warrants or shares of
Common Stock issued upon the exercise of such Warrants and (iii) upon the
written request by any other holder of any Notes, Warrants or shares of Common
Stock issued upon the exercise of such Warrants, to such holder:
(a) as soon as available, but in any event within 90 days after
the end of each fiscal year of the Company, a copy of fully audited long form
financial and operating statements prepared without qualification by Price
Waterhouse or other independent certified public accountants of nationally
recognized standing;
(b) as soon as available, but in any event not later than 15 days
after the end of each month, unaudited monthly financial statements prepared by
the Company, including at a minimum a condensed consolidated balance sheet as at
the end of such month and the related condensed statements of consolidated
income and changes in financial position for such month, accompanied by a
certificate of the chief financial officer of the Company;
(c) unless duplicative of information already delivered pursuant
to paragraph (a) or (b) of this section 8.1, any document, report or certificate
delivered to any lenders of Senior Indebtedness, regardless of whether such
document, report or certificate was required to be delivered pursuant to the
Bank Credit Agreement, shall be delivered as soon as it is available, but in any
event not later than 30 days after its delivery to such lenders; and
(d) within 20 days after the close of each month, an aging report
of all Accounts, together with a statement showing the Net Amount of Accounts as
of such date and the Borrowing Base as of such date.
All such financial statements shall be complete and correct in all material
respects (subject, in the case of interim statements, to normal year-end audit
adjustments) and shall be prepared in reasonable detail and in accordance with
GAAP applied consistently throughout the periods reflected therein (except as
concurred in by such
23
<PAGE>
accountants or officer, as the case may be, and disclosed therein).
8.2. Certificates; Other Information. The Company will deliver (in
-------------------------------
duplicate) (i) to any holder of at least 25% in aggregate principal amount of
the Notes, (ii) to any holder of at least 25% in aggregate amount of the
Warrants or shares of Common Stock issued upon exercise of such Warrants and
(iii) upon the written request of any other holder of any Notes, Warrants or
shares of Common Stock issued upon the exercise of such Warrants, to such
holder:
(a) concurrently with the delivery of the financial statements
referred to in section 8.1(a) and (b), a certificate of the chief financial
officer of the Company (i) stating that, to the best of such officer's
knowledge, the Company during such period has observed or performed all of its
covenants and other agreements contained in this Agreement, the Notes and any
agreement or instrument for Indebtedness aggregating in excess of $50,000, to be
observed or performed by it, and that such officer has obtained no knowledge of
any Default or Event of Default, or any other event of default, or event which
with notice or lapse of time or both would become an event of default under any
other agreement or instrument for Indebtedness aggregating in excess of $50,000,
except as specified in such certificate, and (ii) showing in detail as of the
end of the related fiscal period the calculations supporting such statement in
respect of sections 9.9 and 9.10;
(b) promptly upon receipt thereof, copies of all final reports
submitted to the Company or any of its Subsidiaries by independent certified
public accountants in connection with each annual, interim or special audit of
the books of the Company or of any of its Subsidiaries made by such accountants,
including without limitation, any final comment letter submitted by such
accountants to management in connection with their annual audit;
(c) promptly upon becoming available, copies of all financial
statements, reports, notices and proxy statements sent or made available
generally by the Company to all of its Security holders in their capacity as
such or by any Subsidiary of the Company to its security holders, other than the
Company, and of all regular
24
<PAGE>
and periodic reports and all final registration statements and final
prospectuses, if any, filed by the Company or any of its Subsidiaries with any
securities exchange or with the Securities and Exchange Commission or any
Governmental Authority succeeding to any of its functions; and
(d) promptly, such additional financial and other information as
you may from time to time reasonably request.
8.3. Payment of Taxes and Other Obligations. (a) the Company will pay
--------------------------------------
or cause to be paid, and will cause each of its Subsidiaries to pay or cause to
be paid, all taxes, assessments and other governmental charges imposed upon them
or any of their properties or assets or in respect of any of their franchises,
businesses, income or profits before any penalty or interest accrues thereon;
(b) the Company will, and will cause each of its Subsidiaries to,
pay, discharge or otherwise satisfy at or before maturity or before they become
delinquent, as the case may be, all its obligations and liabilities of whatever
nature;
(c) any such charge or obligation referred to in this Section 8.3
does not have to be paid when the amount or validity thereof is currently being
contested in good faith by appropriate proceedings and reserves in conformity
with GAAP with respect thereto have been provided on the books of the Company or
of its Subsidiaries, as the case may be; and
(d) the Company will promptly deliver (i) to any holder of at
least 25% in aggregate principal amount of the Notes, (ii) holders of at least
25% in aggregate amount of the Warrants or shares of Common Stock issued upon
the exercise of such Warrants and (iii) upon the written request of any other
holder of any Notes, Warrants or shares of Common Stock issued upon the exercise
of such Warrants, to such holder, a true and correct copy of each form, schedule
and exhibit (including, without limitation, each Form 1120S and all Schedule
K-1s), relating to the Company or any Subsidiary thereof and filed with the
Internal Revenue Service.
25
<PAGE>
8.4. Conduct of Business and Maintenance of Existence. (a) The Company
------------------------------------------------
will, and will cause each of its Subsidiaries to, continue to operate their
businesses in the ordinary and usual course and will engage, and permit its
Subsidiaries to engage in, only in a line of business of the same general type
as now conducted by it; and
(b) The Company will, and will cause each of its Subsidiaries to,
preserve, renew and keep in full force and effect its corporate existence and
take all reasonable action to maintain all rights, privileges, licenses, permits
and franchises necessary or desirable in the normal conduct of its business
except as otherwise permitted by section 9.2. The Company will, and will cause
each of its Subsidiaries to, comply with all material applicable Requirements of
Law except to the extent that the failure to comply therewith would not, in the
aggregate, have a material adverse effect on the financial condition, assets,
liabilities (absolute, accrued, contingent or otherwise), reserves, business,
operations or prospects of the Company or any of its Subsidiaries.
8.5. Maintenance of Property; Insurance. The Company will, and will
----------------------------------
cause each of its Subsidiaries to (a) keep all property useful and necessary in
their businesses in good working order and condition, (b) maintain with
financially sound and reputable insurance companies liability insurance and
insurance coverage on all their properties in each case of a type and in at
least such amounts and with such deductibles as are substantially similar on a
proportionate basis to the insurance coverage in respect of these risks
maintained by the Company on the Closing Date (as described, in Exhibit O) and
(c) furnish to any holder, upon written request, full information as to the
insurance carried. The Company will use its reasonable best efforts to obtain
"key man" life insurance with at least a seven-year term on Messrs. Gary R.
Martino, Andrei Poludnewycz and Albert R. Subbloie within 90 days after the
Closing Date in the amount of at least $1,000,000 each, and will use its
reasonable best efforts to maintain and keep in full force and effect all such
insurance until December 21, 1997. If any such insurance is terminated by the
insurance carrier prior to the end of such seven-year period, the Company will
use its reasonable best efforts to replace such insurance within 90 days after
such termination with new insurance policies on such persons in the amounts of
at least
26
<PAGE>
$1,000,000 each for the remaining time in such seven-year period, and the
Company will use its reasonable best efforts to maintain and keep in full force
and effect all such insurance.
8.6. Inspection of Property; Books and Records; Discussions. The
------------------------------------------------------
Company will, and will cause each of its Subsidiaries to (a) keep proper books
of record and account in which entries in conformity with GAAP and all
Requirements of Law shall be made of all dealings and transactions in relation
to its business and activities and (b) subject to the agreement of such holders
to keep such information confidential, permit representatives of the holders of
at least 25% in aggregate principal amount of the Notes and the holders of at
least 25% in aggregate amount of the Warrants or shares of Common Stock issued
upon the exercise of such Warrants to visit and inspect any of its properties
and examine and make abstracts from any of its books and records during regular
business hours upon reasonable notice and as often as may reasonably be desired,
and to discuss the business, operations, properties, prospects and financial and
other condition of the Company and of its Subsidiaries with officers and
employees of the Company and of its Subsidiaries and with their independent
certified public accountants.
8.7. Notices. Promptly upon becoming aware thereof, the Company will
-------
give notice to you, and to any other holder of any Notes, Warrants or shares of
Common Stock issued upon the exercise of Warrants, of:
(a) the occurrence of any Default or Event of Default;
(b) the occurrence of any event of default, or event that with
notice or lapse of time or both would become an event of default, under the Bank
Credit Agreement, or under any other agreement or instrument for Indebtedness
aggregating in excess of $50,000;
(c) any (i) default or event of default under any instrument or
other agreement of the Company or any of its Subsidiaries which default or event
of default would have a material adverse effect on the financial condition,
assets, liabilities (absolute, accrued, contingent or otherwise), reserves,
business, operations or prospects of the Company or any of its Subsidiaries or
27
<PAGE>
(ii) litigation, investigation or proceeding which may exist at any time between
the Company, or any of its Subsidiaries and any Governmental Authority, which in
any such case, if adversely determined, would have a material adverse effect on
the financial condition, assets, liabilities (absolute, accrued, contingent or
otherwise), reserves, business, operations or prospects of the Company or any of
its Subsidiaries; and
(d) any litigation or proceeding affecting the Company or any of
its Subsidiaries (i) in which the amount claimed is $50,000 or more and not
covered by insurance or (ii) in which injunctive or similar relief is sought
which if obtained would have a material adverse effect on the financial
condition, assets, liabilities (absolute, accrued, contingent or otherwise),
reserves, business, operations or prospects of the Company or any of its
Subsidiaries.
Each notice pursuant to this section 8.7 shall be accompanied by a statement of
the chief executive officer or chief financial officer of the Company setting
forth details of the occurrence referred to therein and stating what action the
Company proposes to take with respect thereto.
8.8. Maintenance of Intellectual Property Rights. (a) The Company will
-------------------------------------------
take all reasonable necessary action to preserve its Copyrights in the software
and data bases specified on Exhibit J, and to obtain and preserve Copyrights in
software and data bases acquired after the Closing Date, and will take
reasonable security measures to protect the secrecy and confidentiality of the
source code, proprietary screen displays and documentation relating to its
computer programs and data bases and in all other Know-How and Technical
Information owned by or licensed to the Company and the information contained in
applications for Patents owned by the Company (including, without limitation,
using best efforts to require existing employees with access to such Know-How
and Technical Information and requiring future employees with access to such
Information to sign non-disclosure and proprietary information agreements
substantially in the form of the Non-disclosure and Proprietary Information
Agreements in effect with respect to Messrs. Gary R. Martino, Albert R.
Subbloie, Andrei Poludnewycz and Paul Schmidt on the Closing Date). The Company
will customarily employ proper statutory notice of registration in
28
<PAGE>
connection with registered Trademarks owned by or licensed to the Company and
will place appropriate copyright notices on all computer programs, data bases,
related documentation, and other material Copyrights owned by the Company. The
Company will not enter into any consent, forbearance to sue, or settlement
agreement with any Person relating to the Intellectual Property Rights
(including but not limited to those in the computer programs, data bases and
documentation related thereto) of the Company or to those of any third party.
(b) The Company will not encumber or pledge its Intellectual
Property Rights to any third party other than licenses issued in the ordinary
course of business and will keep its Intellectual Property free and clear of all
liens, claims, charges and encumbrances. The Company will not do any act or omit
to do any act (and not permit any licensee or sublicensee of the Company to do
any act) whereby any material Intellectual Property Right of the Company will
become abandoned, invalidated, unenforceable or dedicated to the public unless
the Company reasonably determines such Intellectual Property Right to be of
negligible economic value to it. The Company will take all reasonable and
necessary steps to apply for registration of all material Intellectual Property
Rights and to pursue each application filed by the Company for registration and
to maintain each registration for any Intellectual Property Rights owned by the
Company in full force and effect. The Company will keep all material
Intellectual Property Rights valid and enforceable and free from any
interference, opposition, office action, cancellation or other similar
proceeding and will pay all fees in a timely manner. In the event that any
material Intellectual Property Right owned by or to the extent permitted by the
license agreement, in the case of any Intellectual Property Right licensed to
the Company, is infringed, misappropriated or diluted by a third party, the
Company shall promptly sue for infringement, misappropriation or dilution to
seek injunctive relief where appropriate and to seek to recover any and all
damages for such infringement, misappropriation or dilution, or take any and all
other actions as the Company shall reasonably deem appropriate under the
circumstances to stop such infringement, misappropriation or dilution and to
protect such Intellectual Property Rights.
29
<PAGE>
9. Negative Covenants. The Company covenants that so long as any of the
------------------
Notes are outstanding and, in the case of Sections 9.1(i), 9.2, 9.4, 9.5, 9.6
and 9.8, so long as the Company is required to comply with the provisions of
section 8:
9.1. Restricted Payments. The Company will not, and will not permit any
-------------------
Subsidiary to, directly or indirectly, (i) declare or pay any dividend on, make
any distribution on, or purchase, redeem, acquire or retire for value, or make
any payment on account of the purchase, redemption or other acquisition or
retirement for value of, any Capital Stock of the Company, (ii) make any
principal payment on, or redeem, repurchase or defease, or otherwise acquire or
retire for value, prior to any scheduled principal payment or maturity,
Indebtedness (other than the Notes) which is subordinate in right of payment to
the Notes or (iii) make any loan, or advance to, or other investment in, any
Person other than, in the case of the Company, its wholly owned Subsidiaries,
and, in the case of any wholly owned Subsidiary of the Company, another wholly
owned Subsidiary of the Company or the Company (such payments or any other
actions described in (i), (ii) and (iii), collectively, "Restricted Payments").
Notwithstanding the foregoing, the provisions of this section 9.1 shall not be
deemed to prohibit (a) a Restricted Payment by a Subsidiary of the Company
solely to the Company or to a wholly owned Subsidiary of the Company, (b) so
long as the Company is an S corporation for federal income tax purposes, an
annual cash dividend not in excess of an amount equal to the taxable income of
the Company for the preceding calendar year multiplied by the maximum marginal
federal income tax rate effective for individuals for the preceding calendar
year, or (c) any of the transactions that are expressly permitted pursuant to
the last sentence of section 9.8.
9.2. Merger, Consolidation, Sale of Assets. (a) The Company shall not
-------------------------------------
consolidate with or merge with or into any other Person or convey, transfer or
lease its properties and assets substantially as an entirety to any Person,
unless:
(i) either (1) the Company shall be the continuing
corporation or (2) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the Person which
acquires by convey-
30
<PAGE>
ance,transfer or lease the properties and assets of the Company
substantially as an entirety (i) shall be a corporation, partnership or
trust organized and validly existing under the laws of the United States or
any state thereof or the District of Columbia and (ii) shall expressly
assume, by an agreement supplement hereto, executed and delivered to you,
in form satisfactory to you, the due and punctual payment of the principal
of and interest on all the Notes and the performance of every covenant of
this Agreement on the part of the Company to be performed or observed;
(ii) immediately after giving effect to such transaction
(and treating any Indebtedness which becomes an obligation of the Company
or a Subsidiary in connection with or as a result of such transaction as
having been incurred at the time of such transaction), the Company (in the
case of clause (l) of subsection (i) above) or such Person (in the case of
clause (2) thereof) shall have a Consolidated Tangible Net Worth equal to
or greater than the Consolidated Tangible Net Worth of the Company
immediately prior to such transaction;
(iii) immediately after giving effect to such transaction
(and treating any Indebtedness which becomes an obligation of the Company
or a Subsidiary in connection with or as a result of such transaction as
having been incurred at the time of such transaction), no Event of Default,
and no event which, after notice or lapse of time, or both, would become an
Event of Default, shall have occurred and be continuing; and
(iv) the Company or such Person shall have delivered to you
an Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, transfer or lease and, if a supplemental
agreement is required in connection with such transaction, such
supplemental agreement, comply with this Section 9.2 and that all
conditions precedent herein provided for relating to such transaction have
been satisfied;
31
<PAGE>
(b) upon any consolidation or merger, or any conveyance, transfer
or lease of the properties and assets of the Company substantially as an
entirety in accordance with this section 9.2, the successor Person formed by
such consolidation or into which the Company is merged or the successor Person
to which such conveyance, transfer or lease is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
this Agreement with the same effect as if such Successor had been named as the
Company herein; and thereafter, except in the case of a lease, the Company shall
be discharged from all obligations and covenants under this Agreement and the
Notes.
9.3. Dividends and Other Payment Restrictions Affecting Subsidiaries.
---------------------------------------------------------------
The Company will not, and will not permit any Subsidiary to, create or otherwise
cause or suffer to exist or become effective any consensual encumbrance or
restriction of any kind, on the ability of any Subsidiary to (a) pay dividends
or make any other distribution on its Capital Stock, (b) pay any Indebtedness
owed to the Company or any other Subsidiary, (c) make loans or advances to the
Company or any other Subsidiary or (d) transfer any of its property or assets to
the Company or any other Subsidiary.
9.4. Amendments, Modifications, etc. The Company will not, and will not
------------------------------
permit any Subsidiary to, agree to any amendment, modification or termination of
any of the following (or any exhibits or schedules to any of the following): (i)
the Company's Certificate of Incorporation or the certificate or articles of
incorporation of any Subsidiary, (ii) the By-Laws of the Company or the by-laws
of any Subsidiary, (iii) the Letter Agreement, (iv) the Bonus Plan, (v) the
Shareholders' Agreement, (vi) the Profit Sharing Plan, (vii) the Affiliated
Lease, (viii) the Organizational Agreement, or (ix) the Transfer Agreement.
9.5. Investment Company Act. The Company will not, and will not permit
----------------------
any of its Subsidiaries to, become an "investment company," or a company
"controlled" by an "investment company," within the meaning of the Investment
Company Act of 1940, as amended.
32
<PAGE>
9.6. Compliance with ERISA. Other than the Profit-Sharing Plan as in
---------------------
effect on the Closing Date, the Company will not, and will not permit any of its
Subsidiaries to, establish any Plan.
9.7. Sale or Lease of Assets. The Company will not, and will not permit
-----------------------
any Subsidiary to, directly or indirectly, convey, transfer, sell, lease,
license, abandon or otherwise dispose of any of their assets (whether tangible
or intangible) except (a) in the ordinary course of business and consistent with
past practices of the Company and (b) dispositions of obsolete or worn-out or
used equipment, provided that, in the case of used equipment, such dispositions
--------
shall be permitted only if such equipment is no longer needed in connection with
the business of the Company or has been replaced by other equipment performing
the same function.
9.8. Transactions with Affiliates. The Company will not, and will not
----------------------------
permit any of its Subsidiaries to, directly or indirectly, engage in any
transaction (including, without limitation, any loan or advance, the purchase,
sale or exchange of assets or the rendering of any service), with any Affiliate
of the Company, except in the ordinary course of and pursuant to the reasonable
requirements of the Company's or such Subsidiary's business and upon fair and
reasonable terms that are no less favorable to the Company or such Subsidiary,
as the case may be, than those which might be obtained in an arm's length
transaction at the time from Persons which are not Affiliates. Notwithstanding
the foregoing, the Company will not, and will not permit any of its Subsidiaries
to, directly or indirectly, enter into any transaction or series of transactions
with an Affiliate of the Company having a value or involving consideration in
excess of $10,000. Any Indebtedness owed to or borrowed from any Affiliate or
stockholder of the Company shall be evidenced by a note or other instrument that
expressly states that such Indebtedness shall be subordinated to the
Indebtedness evidenced by the Notes. This section 9.8 shall not prohibit (a) any
transaction between the Company and one or more of its wholly owned Subsidiaries
or between two or more such Subsidiaries, (b) the payment of bonuses to officers
in accordance with the terms of the Bonus Plan, (c) the payment of other
compensation (including, without limitation, amounts paid pursuant to employee
benefit plans) for the personal services of officers, directors and employees of
the Company or any
33
<PAGE>
Subsidiary, so long as the Board of Directors of the Company in good faith shall
have approved the terms thereof and deemed the services theretofore or
thereafter to be performed for such compensation to be fair compensation
therefor, (d) lease payments pursuant to the Affiliated Lease, and (e) the
repayment of the demand notes of the Company Payable to Albert R. Subbloie in
the principal amount of $9,750 and to Gary R. Martino in the principal amount of
$72,500, in each case as in effect on the Closing Date.
9.9. Minimum Consolidated Tangible Net Worth. The Company will attain
---------------------------------------
Consolidated Tangible Net Worth of at least $550,000 by December 31, 1991, and
will not at any time thereafter permit Consolidated Tangible Net Worth to be
less than $550,000.
9.10. Limitation on Indebtedness. The Company will not, and will not
--------------------------
permit any Subsidiary to, create, incur, assume or guarantee or in any other
manner become directly or indirectly liable for the payment of, any Indebtedness
other than the Permitted Indebtedness, unless at the time of such event and
after giving effect thereto the aggregate amount of all outstanding Indebtedness
of the Company and its Subsidiaries does not exceed 80% of the Company's Net
Amount of Accounts (the "Borrowing Base") as set forth in the most recent
statement of Net Amount of Accounts delivered pursuant to section 8.1(d).
9.11. Limitation on Ranking of Future Indebtedness. The Company will
--------------------------------------------
not create, incur, assume or guarantee or in any other manner become directly or
indirectly liable for the payment of, any Indebtedness which would rank
subordinate in right of payment to any other Indebtedness of the Company unless
such Indebtedness is subordinate in right of payment to the Notes and (x) is
subordinated to Senior Indebtedness and (y) has a maturity and Average Life to
Stated Maturity longer than the Notes.
9.12. Sale and Lease-Back. The Company will not, and will not permit
-------------------
its Subsidiaries to, enter into any arrangement with any lender or investor or
to which such lender or investor is a party providing for the leasing by the
Company or any of its Subsidiaries of real or personal property which has been
or is to be sold or transferred by the Company or any of its Subsidiaries to
34
<PAGE>
such lender or investor or to any Person to whom funds have been or are to be
advanced by such lender or investor on the security of such Property or rental
obligations of the Company or any of its Subsidiaries; provided, however, that
-------- -------
the Affiliated Lease shall not be prohibited by the foregoing.
9.13. Sale or Discount of Receivables. The Company will not, and will
-------------------------------
not permit any of its Subsidiaries to, sell with recourse, or discount or
otherwise sell for less than the face value thereof, any of its notes or
accounts receivable.
9.14. Investments, Loans and Advances. The Company will not, and will
-------------------------------
not permit any of its Subsidiaries to, (a) make any advances or loans to, or
investments (by way of transfers of property, contributions to capital,
acquisitions of stock, securities or evidences of indebtedness or otherwise) in,
any other Person other than in the ordinary course of business or (b) purchase
or otherwise acquire any assets after the Closing Date other than assets
acquired in the ordinary course of business, except that the Company and its
Subsidiaries may acquire and hold (i) securities issued or directly and fully
guaranteed or insured by the United States Government or any agency or
instrumentality thereof having maturities of not more than six months from the
date of acquisition, (ii) time deposits and certificates of deposit of any
domestic commercial bank having capital and surplus in excess of $50,000,000
having maturities of not more than six months from the date of acquisition, so
long as the aggregate amount of all deposits in any such bank do not exceed
$100,000, (iii) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clauses (i) and (ii) entered
into with any bank meeting the qualifications specified in clause (ii) above,
and (iv) commercial paper rated A-1 or the equivalent thereof by Standard &
Poor's Corporation or P-l or the equivalent thereof by Moody's Investors
Service, Inc. and in each case maturing within six months after the date of
acquisition. Notwithstanding the foregoing, the Company may make any investment
in or loan to, or purchase or otherwise acquire any asset of a wholly owned
Subsidiary and a wholly owned Subsidiary may make any investment in or loan to,
or purchase or otherwise acquire any asset of the Company or another wholly
owned Subsidiary of the Company.
35
<PAGE>
9.15. Liens. The Company shall not, and shall cause its Subsidiaries
-----
not to, create or suffer to exist any Lien upon or with respect to any of its
properties or assets, whether now owned or hereafter acquired, other than (i)
Liens in existence on the Closing Date on property and assets owned by the
Company on such date; (ii) Liens on property and assets acquired by the Company
after the Closing Date, provided that such Liens are created pursuant to an
--------
instrument or agreement securing Senior Indebtedness; (iii) purchase money Liens
created in the ordinary course of business and granted to the vendor or Person
financing the acquisition of property, plant or equipment if (A) limited to the
specific assets acquired and, in the case of tangible assets, other property
which is an improvement to or is acquired for specific use in connection with
such acquired property or which is real property being improved by such acquired
property, (B) the indebtedness secured by the Lien is the unpaid balance of the
acquisition cost of the specific assets on which the Lien is granted and (C)
such transaction does not otherwise violate this Agreement; (iv) Liens arising
by reason of (A) taxes that are not yet delinquent or that are being contested
in good faith, (B) security for payment of workmen's compensation or insurance,
(C) good faith deposits in connection with tenders, contracts (other than
contracts for the payment of money) or leases entered into in the ordinary
course of business or (D) deposits to secure public or statutory obligations, or
in lieu of surety or appeal bonds; (v) Liens of mechanics, materialmen,
laborers, employees or suppliers arising by operation of law incurred in the
ordinary course of business for sums that are not yet delinquent or are being
contested in good faith by negotiations or by appropriate proceedings that
suspend the collection thereof; and (vi) Liens arising out of judgments or
orders that have been adequately bonded or with respect to which a stay of
execution has been obtained pending an appeal or proceeding for review.
9.16. Change in Control. Upon the occurrence of a Change in Control,
-----------------
each holder of Notes shall have the right to require that the Company redeem all
or any portion of such holder's Notes. Within 30 days following any Change in
Control, the Company shall send to each holder of the Notes a notice stating
that a Change in Control has occurred and that the holder has the right to
require the Company to redeem all or any portion of such holder's Notes at the
principal amount thereof plus all
36
<PAGE>
accrued interest thereon to the date the Notes are redeemed (the "redemption
price"). Within five Business Days of the date of receipt of a written notice
from any holder requesting that all or any portion of such holder's Notes be
redeemed, the Company shall pay to the holder, in the manner set forth in
section 12, the redemption price of such Notes.
9.17. Bonus Plan. Upon the expiration of the Bonus Plan, the Company
----------
will not adopt a new bonus plan unless such bonus plan contains terms which are
consistent with the terms set forth in the Bonus Plan.
10. Subordination. The Company covenants and agrees and the holders of
-------------
Notes, by their acceptance of the Notes likewise covenant and agree, that, to
the extent and in the manner hereinafter set forth in this section 10, the
principal of and interest on the Notes is hereby expressly made subordinate and
subject in right of payment as provided in this section 10 to the prior payment
in full, in cash, cash equivalents or in any other manner acceptable to the
holders of Senior Indebtedness, of all Senior Indebtedness; provided, however,
-------- -------
that the Notes, the Indebtedness represented hereby and the payment of the
principal of and interest on the Notes and of all other amounts payable under
this Agreement in all respects shall rank prior to all existing and future
unsecured Indebtedness of the Company that is not Senior Indebtedness.
10.1. Payment Over of Proceeds Upon Bankruptcy. In the event of (a) any
----------------------------------------
insolvency or bankruptcy case or proceeding, or any receivership, liquidation,
reorganization or other similar case or proceeding in connection therewith,
relative to the Company or to its assets, or (b) any liquidation, dissolution or
other winding up of the Company, whether voluntary or involuntary and whether or
not involving insolvency or bankruptcy, or (c) any assignment for the benefit of
creditors or any other marshalling of assets or liabilities of the Company, then
and in any such event the holders of Senior Indebtedness shall be entitled to
receive payment in full of all Senior Indebtedness, in cash, cash equivalents or
in any other manner acceptable to the holders of Senior Indebtedness, before the
holders of Notes are entitled to receive any payment or distribution on account
of principal of or interest on the Notes (excluding securities of the Company or
any other corporation provided for by a
37
<PAGE>
plan of reorganization or readjustment that are equity securities or are
subordinated in right of payment to all Senior Indebtedness that may at the time
be outstanding to at least the same extent as, or to a greater extent than, the
Notes are so subordinated as provided in this section 10; such securities are
hereinafter collectively referred to as "Permitted Junior Securities"), and to
that end the holders of Senior Indebtedness shall be entitled to receive, for
application to the payment thereof, any payment or distribution of assets of the
Company of any kind or character (excluding Permitted Junior Securities) that
may be payable or deliverable in respect of the Notes in any such case,
proceeding, dissolution, liquidation or other winding up or event referred to in
clauses (a) through (c) above.
In the event that, notwithstanding the foregoing provisions of this
section 10.1, the holder of any Note shall have received any payment or
distribution of assets of the Company of any kind or character in respect of
principal and interest on the Notes before all Senior Indebtedness is paid in
full or payment thereof provided for, then and in such event such payment or
distribution (excluding Permitted Junior Securities), shall be received and held
in trust for the holders of the Senior Indebtedness and shall be paid over or
delivered forthwith to the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee, agent or other Person making payment or distribution of
assets of the Company in trust for the holders of, and for application to the
payment of, all Senior Indebtedness remaining unpaid, to the extent necessary to
pay all Senior Indebtedness in full, in cash, cash equivalents or in any other
manner acceptable to the holders of Senior Indebtedness, after giving effect to
any concurrent payment or distribution to or for the holders of Senior
Indebtedness.
10.2. Suspension of Payment and Remedies When Senior Indebtedness in
--------------------------------------------------------------
Default. (a) Unless section 10.1 shall be applicable, in the event that the
- -------
holders of the Notes receive written notice from the Company or from any holder
of Senior Indebtedness that a Payment Event of Default has occurred and is
continuing, then no payment or distribution of any assets of the Company of any
kind or character (excluding Permitted Junior Securities), shall be made by the
Company on account of principal of or interest on the Notes or on account of the
purchase, redemption or acquisition of the Notes, unless and until
38
<PAGE>
such Payment Event of Default shall have been waived or such Senior Indebtedness
shall have been discharged in full or, within ten Business Days of the date that
the holders of the Notes receive the written notice referred to above in this
paragraph, such Event of Default shall have been cured, after which the Company
shall resume making any and all required Payments in respect of the Notes,
including any missed Payments;
(b) Unless section 10.1 shall be applicable, in the event that the
holders of the Notes receive written notice from the Company or from any holder
of Senior Indebtedness that a Non-Payment Event of Default has occurred and is
continuing, then no payment or distribution of any assets of the Company of any
kind or character (excluding Permitted Junior Securities), shall be made by the
Company on account of any principal of or interest on the Notes or on account of
the purchase, redemption or acquisition of the Notes for a period ("Payment
Blockage Period") commencing on the date of receipt of such notice until
(subject to any blockage of payments that may then be in effect under subsection
(a) of this section 10.2) the earlier of the time when (x) more than 179 days
shall have elapsed since receipt of such notice by the holders of the Notes, (y)
such Non-Payment Event of Default shall have been cured or waived or shall have
ceased to exist or such Senior Indebtedness shall have been discharged or (z)
such Payment Blockage Period shall have been terminated by notice to the Company
and the holders of the Notes from the holder of the Senior Indebtedness as to
which the Non-Payment Event of Default shall have occurred, after which, in the
case of clause (x), (y) or (z), the Company shall resume making any and all
required payments in respect of the Notes, including any missed payments.
Notwithstanding any other provision of this Agreement, upon the termination of
any Payment Blockage Period a second Payment Blockage Period may not commence
for at least 90 consecutive days after the date of such termination and no
Non-Payment Event of Default with respect to the Senior Indebtedness which
existed or was continuing on the date of commencement of any Payment Blockage
Period shall be, or be made, the basis for the commencement of a second Payment
Blockage Period unless such event of default shall have been cured or waived for
a period of not less than 90 consecutive days. In no event shall any Payment
Blockage Period extend beyond 179 consecutive days from the date of re-
39
<PAGE>
ceipt by the holders of the Notes of the notice referred to in this paragraph
(b); and
(c) Unless section 10.1 shall be applicable, upon the happening of
a Payment Event, Default or a Non-Payment Event of Default, then until the
earliest to occur of (i) the date on which such Payment Event of Default has
been cured, waived or shall have ceased to exist in accordance with section
10.2(a) or such Non-Payment Event of Default has been cured, waived or shall
have ceased to exist in accordance with section 10.2(b), (ii) the date on which
any holder of Senior Indebtedness shall have accelerated the maturity of such
Indebtedness, and (iii) the 180th day after the holders of the Notes shall have
received written notice of such Payment Event of Default or Non-Payment Event of
Default in accordance with section 10.2(a) or 10.2(b), as the case may be, no
holder of Notes shall, without the prior written consent of all holders of
Senior Indebtedness, take any action to accelerate the maturity of any of the
Notes or institute any proceedings to enforce all or any portion of the
provisions of this Agreement or the Notes, withstanding any provision to the
contrary contained in this Agreement or the Notes.
(d) in the event that, notwithstanding the foregoing, the Company
shall make any payment or distribution to any holder of Notes (including,
without limitation, pursuant to any acceleration of the maturity of the Notes or
the pursuit of any other rights or remedies hereunder or under applicable law at
any time when the making of such payments or distributions is prohibited by the
foregoing provisions of this section 10.2, then and in such event such payments
or distributions (excluding Permitted Junior Securities) shall be received and
held in trust for the holders of the Senior Indebtedness and shall be paid over
or delivered forthwith to an agent for the holders of Senior Indebtedness by
such holder of Notes. No holder of Notes shall at any time be charged with
knowledge of the existence of any facts which would require such holder to
deliver any payment to such agent for the holders of Senior Indebtedness unless
such holder shall have received written notice thereof from the Company or such
agent and, prior to the receipt of such written notice, such holder shall be
entitled in all respects to conclusively assume that no such facts exist. If any
holder of Notes is required to deliver any such payment to such agent, the
Company's obligation to make
40
<PAGE>
such payment to the holders of the Notes shall be reinstated.
10.3. Payment Permitted If No Default. Nothing contained in this
-------------------------------
Section or elsewhere in this Agreement or in the Notes shall prevent the
Company, at any time except during the pendency of any case, proceeding,
dissolution, liquidation or other winding up, assignment for the benefit of
creditors or marshalling of assets or liabilities of the Company referred to in
section 10.1 or under the conditions described in section 10.2, from making
regularly scheduled payments on the due date of principal of or interest on the
Notes, provided that this provision shall not authorize any prepayment or any
--------
other earlier reduction in principal or interest due under the Notes, other than
redemption payments pursuant to the requirements of section 9.16 (except for any
portion thereof the payment of which would cause a Payment Event of Default or a
Non-Payment Event of Default) and pursuant to any acceleration or other exercise
of remedies at any time when such acceleration or other exercise is not
prohibited by the provisions of section 10.2.
10.4. Subrogation to Rights of Holders of Senior Indebtedness. Subject
-------------------------------------------------------
to the payment in full of all Senior Indebtedness, the holders of Notes shall be
subrogated to the rights of the holders of such Senior Indebtedness to receive
payments and distributions of cash, property and securities applicable to the
Senior Indebtedness until the principal of and interest on the Notes and all
other amounts payable under this Agreement shall be paid in full. For purposes
of such subrogation, no payments or distributions to the holders of the Senior
Indebtedness of any cash, property or securities to which the holders of Notes
would be entitled except for the provisions of this section 10, and no payments
over pursuant to the provisions of this section 10 to the holders of Senior
Indebtedness by the holders of Notes, shall, as among the Company, its creditors
other than holders of Senior Indebtedness and the holders of Notes, be deemed to
be a payment or distribution by the Company to or on account of the Senior
Indebtedness.
10.5. Provisions Solely to Define Relative Rights. The provisions of
-------------------------------------------
this section 10 are and are intended solely for the purpose of defining the
relative rights of the holders of Notes, on the one hand, and the holders of
Senior Indebtedness, on the other hand. Noth-
41
<PAGE>
ing contained in this Article or elsewhere in this Agreement or in the Notes is
intended to or shall (a) impair, as among the Company and its creditors other
than holders of Senior Indebtedness and the holders of Notes, the obligation of
the Company, which is absolute and unconditional, to pay to the holders of Notes
the principal of and interest on the Notes and all other amounts payable under
this Agreement as and when the same shall become due and payable, all in
accordance with the terms hereof and of the Notes; or (b) affect the relative
rights against the Company of the holders of Notes and creditors of the Company
other than the holders of Senior Indebtedness; or (c) prevent the holders of
Notes from exercising all remedies otherwise permitted by applicable law upon
default under this Agreement, subject to the express limitations set forth in
section 13 and to the rights, if any, under this section 10 of the holders of
Senior Indebtedness, as and to the extent provided in section 10.1 or 10.2, to
prevent or require delivery of any payment or distribution prohibited by such
section.
10.6. No Waiver of Subordination Provisions. (a) No right of any
-------------------------------------
present or future holder of any Senior Indebtedness to enforce subordination as
herein provided shall at any time in any way be prejudiced or impaired by any
act or failure to act on the part of the Company or by any act or failure to
act, in good faith, by any such holders, or by any noncompliance by the Company
with the terms, provisions and covenants of this Agreement, regardless of any
knowledge thereof any such holder may have or be otherwise charged with; and
(b) Without in any way limiting the generality of subsection (a)
of this section 10.6, the holders of Senior Indebtedness may, at any time and
from time to time, without the consent of or notice to the holders of Notes,
without incurring responsibility to the holders of Notes and without impairing
or releasing the subordination provided in this section 10 or the obligations
hereunder of the holders of Notes to the holders of Senior Indebtedness, do any
one or more of the following: (1) change the manner, place or terms of payment
or extend the time of payment of, or renew, alter or amend, or enter into new
documentation evidencing new provisions of, Senior Indebtedness or any
instrument evidencing the same or any agreement under which Senior Indebtedness
is outstanding; (2) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise
42
<PAGE>
securing Senior Indebtedness; (3) release any Person liable in any manner for
the collection of Senior Indebtedness; and (4) exercise or refrain from
exercising any rights against the Company and any other Person.
10.7. Reliance on Judicial Order or Certificate of Liquidating Agent.
--------------------------------------------------------------
Upon any payment or distribution of assets of the Company referred to in this
section, the holders of Notes shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit
of creditors, agent or other Person making such payment or distribution, or a
certificate of any representative of Senior Indebtedness, delivered to the
holders of Notes, for the purpose of ascertaining the Persons entitled to
participate in such payment or distribution, the holders of the Senior
Indebtedness and other indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this section.
10.8. Notice to Holders of Notes. No holder of Notes shall be charged
--------------------------
with knowledge of the existence of any fact that would prohibit the making of
any payment to such holder under this Agreement or the Notes, unless and until
such holder of Notes shall have received written notice thereof as contemplated
hereby; and, prior to the receipt of any such written notice, such holder of
Notes shall be entitled in all respects to assume that no such fact exists.
10.9. No Suspension of Remedies. Nothing contained in this Agreement,
-------------------------
other than the provisions of section 10.2(c) and section 13, shall limit the
right of the holders of Notes to take any action to accelerate the maturity of
the Notes in accordance with the provisions of section 13 or to pursue any
rights or remedies hereunder or under applicable law.
10.10. This Section Not to Prevent Events of Default. The failure to
---------------------------------------------
make a payment on account of principal of or interest on the Notes by reason of
any provision of this section 10 will not be construed as preventing the
occurrence of an Event of Default.
43
<PAGE>
11. Registration, Transfer and Substitution of Notes.
------------------------------------------------
11.1. Note Register; Ownership of Notes. The Company will keep at its
---------------------------------
principal office a register in which the Company will provide for the
registration of Notes and the registration of transfers of Notes. The Company
may treat the Person in whose name any Note is registered on such register as
the owner thereof for the purpose of making payment of the principal of and
interest on such Note and for all other purposes, whether or not such Note shall
be overdue, and the Company shall not be affected by any notice to the contrary.
All references in this Agreement to a "holder" of any Note shall mean the Person
in whose name such Note is at the time registered on such register.
11.2. Transfer and Exchange of Notes. Upon surrender of any Note to the
------------------------------
Company at its principal office for registration of transfer or for exchange on
the register referred to section 11.1, the Company at its expense will, subject
to section 11.4, execute and deliver in exchange therefor a new Note or Notes,
as requested by the holder or transferee, which aggregate the unpaid principal
amount of such surrendered Note, registered as such holder or transferee may
request, dated so that there will be no loss of interest on such surrendered
Note and otherwise of like tenor.
11.3. Replacement of Notes. Upon receipt of evidence reasonably
--------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Note and, in the case of any such loss, theft or destruction of any Note, upon
delivery of such security or indemnity as the Company may determine or, in the
case of any such mutilation, upon the surrender of such Note for cancellation to
the Company at its principal office, the Company at its expense will execute and
deliver, in lieu thereof, a new Note in the unpaid principal amount of such
lost, stolen, destroyed or mutilated Note, dated so that there will be no loss
of interest on such lost, stolen, destroyed or mutilated Note and otherwise of
like tenor. Any Note in lieu of which any such new Note has been so executed and
delivered by the Company shall not be deemed to be an outstanding Note for any
purpose of this Agreement.
44
<PAGE>
11.4. Restrictions on Transfer. (a) Restrictive Legends. Except as
------------------------ -------------------
otherwise permitted by this section 11.4, each Note (including each Note issued
upon the transfer of any Note) shall be stamped or otherwise imprinted with a
legend in substantially the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933 AND ACCORDINGLY MAY NOT BE OFFERED OR SOLD UNLESS
SUCH OFFER OR SALE IS EITHER REGISTERED PURSUANT TO OR IS EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF SAID ACT. THIS SECURITY MAY BE TRANSFERRED
ONLY IN COMPLIANCE WITH THE CONDITIONS SPECIFIED IN THE NOTE AND WARRANT
PURCHASE AGREEMENT REFERRED TO IN THIS SECURITY."
(b) Notice of Proposed Transfer; Opinions of Counsel. Prior to any
------------------------------------------------
transfer of any Notes that bear the legend referred to in paragraph (a) of this
section 11.4 which are not registered under an effective registration statement
under the Securities Act, the holder thereof will give written notice to the
Company of such holder's intention to effect such transfer and to comply in all
other respects with this paragraph (b). Each such notice (a) shall describe the
manner and circumstances of the proposed transfer in sufficient detail to enable
counsel to render the opinions referred to below, and (b) shall designate
counsel for the holder giving such notice. The holder giving such notice will
promptly submit a copy thereof to the counsel designated in such notice, which
counsel shall be experienced in securities law matters. If in the opinion of
such counsel the proposed transfer may be effected without registration of such
Notes under the Securities Act or applicable state securities laws, such holder
shall thereupon be entitled to transfer such Notes in accordance with the terms
of the notice delivered by such holder to the Company. Each Note issued upon or
in connection with such transfer shall bear the restrictive legend required by
paragraph (a) of this section 11.4, unless in the opinion of such counsel and
counsel to the Company (each of which shall be experienced in securities law
matters) such restrictive legend is not required or advisable.
(c) Termination of Restrictions. The restrictions imposed by this
---------------------------
section 11.4 upon the transferability of Notes shall cease and terminate as to
any particu-
45
<PAGE>
lar Note (a) when such Note shall have been effectively registered under the
Securities Act, or (b) when, in the opinions of both counsel for the holder
thereof and counsel for the Company (each of whom shall be experienced in
securities laws matters), such restrictions are no longer required in order to
insure compliance with the Securities Act. Whenever such restrictions shall
cease and terminate as to any Note, the holder thereof shall be entitled to
receive from the Company, without expense (other than applicable transfer taxes,
if any), a new Note of like tenor not bearing the applicable legend required by
paragraph (a) of this section 11.4.
12. Payments on Notes.
-----------------
12.1. Place of Payment. Payments of principal and interest becoming due
----------------
and payable on the Notes shall be made at the principal office of the Company,
which as of the date of this Agreement is maintained at 6527 Main Street,
Trumbull, Connecticut 06611, unless the Company, by written notice to each
holder of any Notes, shall designate the principal office of a bank or trust
company in the State of Connecticut or in the Borough of Manhattan, the City and
State of New York, as such place of payment, in which case the principal office
of such other bank or trust company shall thereafter be such place of payment.
12.2. Home Office Payment. So long as you, your nominee, or any other
-------------------
holder of at least $250,000 aggregate principal amount of Notes shall be the
holder of any Note, and notwithstanding anything contained in section 12.1 or in
such Note to the contrary, the Company will pay all sums becoming due on such
Note for principal and interest by the method and at the address specified for
such purpose on the signature page of this Agreement, or by such other method or
at such other address as you shall have from time to time specified to the
Company in writing for such purpose, without the presentation or surrender of
such Note or the making of any notation thereon, except that any Note paid or
prepaid in full shall be surrendered to the Company at its principal office or
at the place of payment maintained by the Company pursuant to section 12.1 for
cancellation. Prior to any sale or other disposition of any Note held by you,
your nominee, or any other holder of at least $250,000 aggregate principal
amount of Notes such holder will, at its election, either endorse thereon the
amount of prin-
46
<PAGE>
cipal paid thereon and the last date to which interest has been paid thereon or
surrender such note to the Company in exchange for a new Note or Notes, as the
case may be, pursuant to section 11.2.
13. Events of Default; Acceleration. If any of the following conditions
-------------------------------
or events ("Events of Default") shall occur and be continuing:
(a) if the Company shall default in the payment of any principal of
or premium, if any, on any Note when the same becomes due and payable, whether
at maturity or at a date fixed for prepayment or by declaration or otherwise; or
(b) if the Company shall default in the payment of any interest on
any Note or any other amount payable under this Agreement for more than 5
Business Days after the same becomes due and payable; or
(c) if the Company shall default in the performance of or
compliance with any term contained in section 8.3, 8.4, 8.6(b), 8.7, 9.1(i),
9.1(ii), 9.2, 9.3, 9.4(i), 9.4(ii), 9.4(iii), 9.6, 9.7, 9.8, 9.10, 9.12, 9.14 or
9.16; or
(d) if the Company shall default in the performance of or
compliance with any term contained in section 9.l(iii), 9.11, 9.13 or 9.15 and
such default shall not have been remedied within 10 Business Days after such
failure shall first have become known to any officer of the Company; or
(e) if the Company shall default in the performance of or
compliance with any term contained in section 8.1, 8.2 or 9.5 and such default
shall not have been remedied within 15 Business Days after such failure shall
first have become known to any officer of the Company; or
(f) if the Company shall default in the performance of or
compliance with any term contained in this Agreement other than those referred
to above in this section 13 and such default shall not have been remedied within
30 days after such failure shall first have become known to any officer of the
Company; or
47
<PAGE>
(g) if any representation or warranty made in writing by or on behalf
of the Company in this Agreement, the Exhibits hereto, the Letter Agreement, the
Notes, the Warrants or the officers' certificates delivered in connection with
the Closing shall prove to be false or incorrect in any material respect on the
date as of which made; or
(h) if the Company or any of its Subsidiaries shall default (as
principal or guarantor or other surety) in the payment of any principal of or
premium or interest on any Indebtedness that is outstanding under any
Indebtedness which is outstanding in a principal amount of at least $50,000, or
if any event shall occur or condition shall exist in respect of any such
Indebtedness or under any evidence of any such Indebtedness or of any mortgage,
indenture or other agreement relating thereto which would permit or shall have
caused the acceleration of the payment of such Indebtedness, and such default,
event or condition shall continue for more than the period of grace, if any,
specified therein and shall not have been waived pursuant thereto, or any such
Indebtedness shall be declared to be due and payable, or required to be prepaid
(other than by a regularly scheduled required repayment), prior to the stated
maturity thereof; or
(i) if the Company or any of its Subsidiaries shall (i) be generally
not paying its or their debts as they become due, (ii) file, or consent by
answer or otherwise to the filing against it of, a petition for relief or
reorganization or arrangement or any other petition in bankruptcy, for
liquidation or to take advantage of any bankruptcy or insolvency law of any
jurisdiction, (iii) make an assignment for the benefit of its creditors, (iv)
consent to the appointment of a custodian, receiver, trustee or other officer
with similar powers with respect to it or with respect to any substantial part
of its property, (v) be adjudicated insolvent or be liquidated or (vi) take
corporate action for the purpose of any of the foregoing; or
(j) if a court or Governmental Authority of competent jurisdiction
shall enter an order appointing, without the consent of the Company or of any
Subsidiary, a custodian, receiver, trustee or other officer with similar powers
with respect to it or with respect to any substantial part of its property, or
if an order for
48
<PAGE>
relief shall be entered in any case or proceeding for liquidation or
reorganization or otherwise to take advantage of any bankruptcy or insolvency
law of any jurisdiction, or ordering the dissolution, winding up or liquidation
of the Company or any Subsidiary, or if any petition for any such relief shall
be filed against the Company or a Subsidiary and such petition shall not be
dismissed within 60 days; or
(k) if a final judgment shall be rendered against the Company or any of
its Subsidiaries which, with other outstanding final judgments against the
Company and its Subsidiaries, to the extent not covered by insurance, exceeds in
the aggregate $50,000 and if, within 60 days after entry thereof, such judgment
shall not have been discharged or execution thereof stayed pending appeal, or
if, within 60 days after the expiration of any such stay, such judgment shall
not have been discharged;
then, (x) subject to section 10.2(c), in any such event (other than an Event of
Default described in subdivision (i) or (j) of this section 13), any holder or
holders (other than the Company or any of its Subsidiaries or Affiliates) of not
less than 51% in aggregate principal amount of the Notes at the time outstanding
(excluding any Notes directly or indirectly owned by the Company or any of its
Subsidiaries or Affiliates) may (unless all defaults shall theretofore have been
remedied) at its or their option, by written notice or notices to the Company
and to the holders of Senior Indebtedness, if any is outstanding (the
"Acceleration Notice"), declare all the Notes to be due and payable, whereupon
the same shall forthwith mature and become due and payable, together with
interest accrued thereon and any other amounts due and payable under this
Agreement, (a) if no Senior Indebtedness is outstanding, immediately, or (b) if
any Senior Indebtedness is in effect, upon the first to occur of (1) an
acceleration of maturity of any such Senior Indebtedness (written notice of
which the Company shall give to the holders of the Notes as promptly as
practicable upon the occurrence thereof) or (2) the fifth Business Day following
the date of delivery of the Acceleration Notice, unless (in the absence of an
acceleration under Senior Indebtedness on or prior to such fifth Business Day)
the Company shall have discharged the Indebtedness, if any, that is the subject
of such Event of Default or otherwise cured the default relating to such
49
<PAGE>
Event of Default and shall have given written notice of such discharge or cure
to the holders of the Notes (which notice in the case of an Event of Default
specified in section 13(h) shall be countersigned by the holders of the
Indebtedness that is the subject of such Event of Default or by a trustee,
fiduciary or agent for such holders), and (y) in the event of any Event of
Default specified in section 13(i) or (j), the Notes, all interest accrued
thereon and any other amounts due and payable under this Agreement shall ipso
----
facto become and be forthwith due and payable without declaration or other act
- -----
on the part of the holders of the Notes and without presentment, demand, protest
or notice, all of which are hereby waived.
At any time after such declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained, such
declaration of acceleration shall be automatically rescinded if all Events of
Default, other than the non-payment of principal of Notes which have become due
solely by such declaration of acceleration, have been cured by the Company or
waived by any holder or holders (other than the Company or any of its
Subsidiaries or Affiliates) of at least 51% in principal amount of the Notes or,
in the event of a declaration of acceleration because of an Event of Default
specified in section 13(h), if the Indebtedness that is the subject of such
Event of Default has been discharged or the holders thereof have waived the
default under such Indebtedness or rescinded their declaration of acceleration
pursuant thereto, and written notice thereof shall have been given to the
holders of the Notes by the Company.
14. Unconditional Right of Holders to Receive Principal and Interest;
-----------------------------------------------------------------
Remedies on Default, etc. Subject to Section 10 but otherwise notwithstanding
- ------------------------
any other provision in this Agreement, the holder of any Note shall have the
right, on the terms stated herein and in the Notes, to receive payment of the
principal of and interest on such Note on the respective stated payment dates
expressed in such Note (or, in the case of redemption, on the applicable
redemption date) and to institute suit for the enforcement of any such payment,
and such rights shall not be impaired without the consent of such holder. In
case of a default in the payment of any principal of or interest on any Note,
the Company will pay to the holder thereof such further amount as shall be
suffi-
50
<PAGE>
cient to cover the cost and expenses of collection, including, without
limitation, attorneys' fees, expenses and disbursements. No course of dealing
and no delay on the part of any holder of any Note in exercising any right,
power or remedy shall operate as a waiver thereof or otherwise prejudice such
holder's rights, powers or remedies. No right, power or remedy conferred by this
Agreement or by any Note upon any holder thereof shall be exclusive of any other
right, power or remedy referred to herein or therein or now or hereafter
available at law, in equity, by statute or otherwise.
15. Definitions.
-----------
15.1. Certain Defined Terms. As used in this Agreement the
---------------------
following terms have the following respective meanings:
Account: Any bona fide and existing obligation of a customer of the
-------
Company (an "Account Debtor") arising out of the sale or lease of goods or
rendition of services by the Company which have been fully and satisfactorily
performed in the ordinary course of its business, free and clear of all liens
and encumbrances owned by and owing to the Company (other than pursuant to any
agreement securing Senior Indebtedness) without defense, offset, dispute or
counterclaim or the threat thereof.
Account Debtor: As defined in the definition of "Account" in this
--------------
section 15.1.
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 of the Company (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 Mr.
Gary R. Martino, Mr. Andrei Poludnewycz, Mr. Albert R. Subbloie and the
Partnership and any Person which is, directly or indirectly, controlled by any
of the foregoing. "Affiliate" shall not include Wand/IMA Investments, L.P. or
any of its partners.
51
<PAGE>
Affiliated Lease: The Lease, dated as of January 1, 1990, between the
----------------
Partnership and the Company, as in effect on the Closing Date.
Average Life to Stated Maturity: With respect to any Indebtedness, the
-------------------------------
quotient obtained by dividing (i) the sum of the products of (a) the number of
years from the date of the transaction or event giving rise to the need to
calculate the Average Life to Stated Maturity of such Indebtedness to the date
or dates of each successive scheduled principal payment of such Indebtedness
multiplied by (b) the amount of each such principal payment by (ii) the sum of
all such principal payments; provided that no scheduled principal payments more
--------
than 25 years after the date of the transaction or event giving rise to the need
to calculate the Average Life to Stated Maturity of such Indebtedness shall be
included in the calculation.
Bank Credit Agreement: The Revolving Line of Credit Loan and Security
---------------------
Agreement, dated May 8, 1989, between the Bank of Boston, Connecticut and the
Partnership, as amended by the Bank of Boston, Connecticut, the Partnership, the
Company, Albert Subbloie, Gary Martino and Andrei Poludnewycz pursuant to Letter
Agreements dated as of July 18, 1990 and December 6, 1990.
Base Warrants: As defined in section 1.1 of this Agreement.
-------------
Bonus Plan: As defined in section 4.11 of this Agreement, as such Bonus
----------
Plan shall be in effect on the Closing Date.
Borrowing Base: As defined in section 9.10 of this Agreement.
--------------
Business Day: Each Monday, Tuesday, Wednesday, Thursday and Friday
------------
which is not a day on which banking institutions in The City of New York or the
State of Connecticut are authorized or obligated by law or executive order to
close.
By-Laws: The amended By-Laws of the Company, as in effect on the
-------
Closing Date and attached as Exhibit B-2.
52
<PAGE>
Capital Lease Obligation: Any obligation to pay rent or other amounts
------------------------
under a lease of (or other agreement conveying the right to use) real or
personal property that is required to be classified and accounted for as a
capital lease obligation under GAAP and, for the purposes of this Agreement, the
amount of such obligation at any date shall be the capitalized amount thereof at
such date, determined in accordance with GAAP.
Capital Stock: All shares, option, interests, participations or other
-------------
equivalents (regardless of how designated) of or in a corporation or equivalent
entity, whether voting or non-voting, and including, without limitation, common
stock, preferred stock and warrants or options for any of the foregoing.
Certificate of Incorporation: As defined in section 1.1 of this
----------------------------
Agreement.
Change in Control: Any transaction the result of which is that Mr. Gary
-----------------
R. Martino, Mr. Andrei Poludnewycz and Mr. Albert R. Subbloie, as a group,
shall, directly or indirectly, own less than 51% of the common equity of the
Company on a fully-diluted basis. "Change in Control" shall not include (a) any
Minimum Public Offering, (b) so long as Messrs. Martino, Poludnewycz and
Subbloie, as a group, continue to Control at least 51% of the common equity of
the Company on a fully-diluted basis, the creation of any will or trust for the
sole benefit of the spouses and lineal descendants of such persons, or (c) the
transfer of common equity through testamentary disposition or the laws of
intestate succession as a result of the death of the first to die of Messrs.
Martino, Poludnewycz or Subbloie.
Closing: As defined in section 3 of this Agreement.
-------
Closing Date: The date of the Closing.
------------
Code: The Internal Revenue Code of 1986, as amended from time to time.
----
Commonly Controlled Entity: An entity, whether or not incorporated,
--------------------------
which is under common control with the Company within the meaning of Section
414(b) or (c) of the Code.
53
<PAGE>
Common Stock: As defined in section 1.1 of this Agreement.
------------
Company: As defined in the introduction to this Agreement.
-------
Consolidated Tangible Net Worth: With respect to any Person means, as
-------------------------------
of any date, (1) the net book value (after deducting related depreciation,
obsolescence, amortization, valuation and other proper reserves) at which the
Adjusted Tangible Assets of the Company and all Subsidiaries would be shown on a
consolidated balance sheet at such date, but excluding any amount on account of
write-ups of assets after May l, 1989, minus (2) the amount at which the
liabilities (other than capital stock and surplus) would be shown on such
balance sheet and including as liabilities all reserves for contingencies and
other potential liabilities, except the amount identified as "accrued software
maintenance" on management prepared statements or identified as "deferred
reserves" on audited statements. Four purposes of this definition, "Adjusted
Tangible Assets" means all assets except (l) defined assets, including
capitalized software, other than prepaid insurance and prepaid taxes; (2)
Intellectual Property Rights, franchises, good will and other similar
intangibles; and (3) accounts, notes and other receivables due from Affiliates.
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 "Controlling" 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.
Current Market Price: As defined in the Warrants.
--------------------
54
<PAGE>
Default: A condition or event which, after notice or lapse of time or
-------
both, would constitute an Event of Default.
ERISA: The Employee Retirement Income Security Act of 1974, as amended
-----
from time to time.
Event of Default: Any of the events specified in section 13 of this
----------------
Agreement.
Exchange Act: At any time, the Securities Exchange Act of 1934 as then
------------
in effect or any similar federal statute then in effect, and any reference to a
particular section of such Act shall be deemed to include a reference to the
comparable section, if any, in any such similar federal statute.
GAAP: Generally accepted accounting principles in the United States as
----
in effect from time to time.
Governmental Authority: Any nation or government, any state or other
----------------------
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
Guaranteed Debt of any Person: All Indebtedness of any other Person
---------------
referred to in the definition of Indebtedness contained in this section
guaranteed directly or indirectly in any manner by such Person, or in effect
guaranteed directly or indirectly by such Person through an agreement (i) to pay
or purchase such Indebtedness or to advance or supply funds for the payment or
purchase of such Indebtedness, (ii) to purchase, sell or lease (as lessee or
lessor) property, or to purchase or sell services, primarily for the purpose of
enabling the debtor to make payment of such Indebtedness or to assure the holder
of such Indebtedness against loss, (iii) to supply funds to, or in any other
manner invest in, the debtor (including any agreement to pay for property or
services irrespective of whether such property is received or such services are
rendered) or (iv) otherwise to assure a creditor against loss; provided that the
--------
term "Guarantee" shall not include endorsements for collection or deposit in
either case in the ordinary course of business.
55
<PAGE>
Headquarters Building: The building located at 6527 Main Street,
---------------------
Trumbull, Connecticut in which the Company maintains its headquarters.
Holder: As defined in section 11.1 of this Agreement.
------
Indebtedness: With respect to any Person, without duplication: (i) all
------------
Indebtedness Of such Person for borrowed money or for the deferred purchase
price of property or services excluding trade payables and other accrued current
liabilities incurred in the ordinary course of business, but including, without
limitation, all obligations, contingent or otherwise, of such Person in
connection with any letters of credit, letter of credit facilities, acceptance
facilities or other similar facilities and in connection with any agreement to
purchase, redeem, exchange, convert or otherwise acquire for value any Capital
Stock of such Person, or any warrants, rights or options to acquire such capital
stock, now or hereafter outstanding other than in connection with the Warrants,
(ii) all obligations of such Person evidenced by bonds, notes, debentures or
other similar instruments, (iii) all Indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even if the rights and remedies of the seller or lender
under such agreement in the event of default are limited to repossession or sale
of such property) other than any such agreements entered into in the ordinary
course of business, (iv) all Capital Lease Obligations of such Person, (v) all
Indebtedness of the type to in clause (i), (ii), (iii) or (iv) above secured by
(or for which the holder of such Indebtedness has an existing right, contingent
or otherwise, to be secured by) any Lien, upon or in property (including,
without limitation, accounts and contract rights) owned by such Person, even
though such Person has not assumed or become liable for the payment of such
Indebtedness, (vi) all Guaranteed Debt of such Person, (vii) Interest Rate
Protection Obligations of such Person, and (viii) any amendment, supplement,
modification, deferral, renewal, extension or refunding of any liability of the
types referred to in clauses (i) through (vii) above.
56
<PAGE>
Indemnified Party: As defined in section 17.2 of this Agreement.
-----------------
Initial Public Offering: As defined in the Warrants.
-----------------------
Intellectual Property Rights: All Trademarks, Patents, Copyrights, and
----------------------------
Know-How and Technical Information.
Intercompany Debt Obligations: Any Indebtedness of the Company or any
-----------------------------
Subsidiary of the Company which, in the case of the Company, is owing to any
Subsidiary and which, in the case of any Subsidiary, is owing to the Company or
any other Subsidiary of the Company.
Interest Rate Protection Obligations of any Person: The obligations of
------------------------------------
such Person pursuant to any arrangement with any other Person whereby, directly
or indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such other
Person calculated by applying a fixed or floating rate of interest on the same
notional amount.
Key Employee Insurance: As defined in section 4.19 of this Agreement.
----------------------
Know-How and Technical Information: Data, plans, trade secrets,
----------------------------------
technologies, processes, specifications, know-how, operating experience and
information (business, economic and technical) relating to the foregoing.
Letter Agreement: As defined in section 4.10 of this Agreement.
----------------
License Agreements: Agreements relating to the grant of rights to use
------------------
any Intellectual Property Rights to which the Company is a party, whether as the
licensor or licensee thereunder.
Lien: Any mortgage, pledge, hypothecation, assignment, security
----
interest, lien, charge, security agreement or other encumbrance of any kind or
nature whatsoever (including, without limitation, any condition-
57
<PAGE>
al sale or other title retention agreement, any financing lease having
substantially the same economic effects as any of the foregoing, and the filing
of, or agreement to give, any financing statement under the Uniform Commercial
Code or comparable law of any jurisdiction). For the purposes of this Agreement,
the Company or one of its Subsidiaries shall be deemed to be the owner of any
property which it has placed in trust for the benefit of the holders of
Indebtedness of the Company or its Subsidiaries which Indebtedness is deemed to
be extinguished under GAAP but for which the Company or its Subsidiaries remain
legally liable, and such trust shall be deemed to be a Lien.
Margin Stock: Shares of "margin stock" within the meaning of Regulation
------------
G of the Board of Governors of the Federal Reserve System (12 C.F.R. 207, as
amended).
Maturity Date: As defined in section 7.2 of this Agreement.
-------------
Minimum Public Offering: Any offering to the public, pursuant to a
-----------------------
registration statement filed with the Securities and Exchange Commission, of any
class or series of common stock of the Company or securities convertible into or
exchangeable for any such common stock, whether on a primary or secondary basis,
provided that (i) such public offering is underwritten on a firm commitment
- --------
basis by a nationally recognized investment banking firm and (ii) upon the
termination of any such offering Mr. Gary R. Martino, Mr. Andrei Poludnewycz and
Mr. Albert R. Subbloie, as a group, shall, directly or indirectly, own at least
35% of the common equity of the Company On a fully-diluted basis.
Net Amount of Accounts: The gross amount of Accounts calculated from
----------------------
time to time arising from the rendition of services by the Company which have
been fully and satisfactorily performed or from the license or absolute sale of
goods less the total of (i) intercompany accounts sales made by the Company to
an Affiliate of the Company or to a Person controlled by an Affiliate of the
Company; (ii) government accounts, foreign accounts and contra accounts, to the
extent any lender of Senior Indebtedness deems any such Account to be ineligible
when computing any borrowing base under any agreement or instrument governing
such Senior Indebtedness; (iii) returns, discounts, credits or allowances of any
nature at
58
<PAGE>
any time issued, owing, granted or outstanding; (iv) all Accounts due or unpaid
more than ninety (90) days after the original invoice date; (v) all Accounts
where the Account Debtor is also the Company's creditor or supplier, or the
Account Debtor has disputed liability, or the Account Debtor has made any
material claim with respect to any other Account due from such Account Debtor to
the Company, or the Account otherwise is subject to any right of setoff by the
Account Debtor; (vi) all Accounts where the Account Debtor has commenced a
voluntary case under the Bankruptcy Code of 1978, as amended, or made an
assignment for the benefit of creditors, or if a decree or order for relief has
been entered by a court having jurisdiction in respect of the Account Debtor in
an involuntary case under the Bankruptcy Code of 1978, as amended, or if any
other petition or other application for relief under the Bankruptcy Code of
1978, as amended, has been filed against the Account Debtor, or if the Account
Debtor has failed, suspended business, ceased to be solvent or consented to or
suffered a receiver, trustee, liquidator or custodian to be appointed for it or
for all or a significant portion of its assets or affairs; (vii) all Accounts to
any Account Debtor in Louisiana or outside the continental United States, to the
extent any lender of Senior Indebtedness deems any such Account to be ineligible
when computing any borrowing base under any agreement or instrument governing
such Senior Indebtedness; (viii) all accounts where ten percent (10%) or more of
the Accounts from the Account Debtor are not deemed eligible accounts hereunder;
(ix) all accounts where any covenant, representation or warranty contained in
this Agreement with respect to such Account has been breached; and (x) any other
Account or part thereof, to the extent any lender of Senior Indebtedness deems
any such Account to be ineligible when computing any borrowing base under any
agreement or instrument governing such Senior Indebtedness.
Non-disclosure and Proprietary Information Agreements: As defined in
-----------------------------------------------------
section 4.18 of this Agreement.
Non-Payment Event of Default: Any event (other than a Payment Event of
----------------------------
Default) the occurrence of which entitles one or more Persons to accelerate the
maturity of any Senior Indebtedness.
59
<PAGE>
Notes: As defined in section 1.1 of this Agreement.
-----
Officers' Certificate: As to any corporation, a certificate executed on
---------------------
behalf of such corporation by its Chairman of the Board (if an officer) or its
President or one of its Vice Presidents and, in each case, its Chief Financial
Officer or its Treasurer.
Opinion of Counsel: A written opinion of counsel, who may be counsel
------------------
for the Company, and who shall be acceptable to you.
Organizational Agreement: The Agreement, dated as of January l, 1990,
------------------------
among the Partnership, the Company, Gary R. Martino, Andrei Poludnewycz and
Albert R. Subbloie providing for the distribution of certain assets of the
Partnership to its partners and the contribution of such assets to the Company
in exchange for shares of the Company's Common Stock, the assumption by the
Company of certain liabilities of the Partnership and certain other matters set
forth therein, as such Agreement is in effect on the Closing Date.
Other Purchase Agreement: As defined in section 2 of this Agreement.
------------------------
Other Purchasers: As defined in section 2 of this Agreement.
----------------
Partnership: Information Management Associates, a Connecticut general
-----------
partnership having its principal place of business in Trumbull, Connecticut.
Partnership Agreement: The Partnership Agreement, dated January 31,
---------------------
1985, by and among Gary R. Martino, Albert R. Subbloie and Andrei Poludnewycz.
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.
Payment Blockage Period: As defined in section 10.2 of this Agreement.
-----------------------
60
<PAGE>
Payment Event of Default: Any default in the payment of principal of or
------------------------
interest on any Senior Indebtedness when due, whether at final maturity or upon
scheduled installment, mandatory prepayment, acceleration or otherwise, beyond
any applicable grace period.
Permitted Indebtedness: (a) Indebtedness of the Company under this
----------------------
Agreement and the Notes; (b) Indebtedness of the Company in a principal amount
not to exceed $150,000 (the "Basket Amount"); provided, however, that during any
-------- -------
period when the Company maintains Consolidated Tangible Net Worth of at least
$1,650,000, the Basket Amount shall be $300,000; (c) Indebtedness of the Company
and its Subsidiaries with respect to the endorsement of negotiable instruments
for collection in the ordinary course of business; (d) the obligations of the
Company under the Affiliated Lease to make rental payments equal to the
principal and interest payments due under the Secured Promissory Note, dated
July 22, 1987 (the "Loan Note") from the Partnership to Shawmut Home Bank (as
predecessor to Connecticut National Bank (the "Bank")), as amended by the
Agreement, dated September 25, 1990, among the Company, the Partnership and the
Bank, and under any extension, renewal, modification or refinancing of the loan
evidenced by the Loan Note, provided that the prinicipal amount outstanding at
the time of any such extension, renewal, modification or refinancing is not
increased; and (e) Intercompany Debt Obligations of the Company and each of its
wholly owned Subsidiaries, provided, however, that the obligation of each
-------- -------
obligor of such Indebtedness shall be subordinated in right of payment from and
after such time as the Notes shall become due and payable (whether at stated
maturity, by acceleration or otherwise) to the payment and performance of such
Obligor's obligations under this Agreement and the Notes and the Board of
Directors of such obligor shall have adopted resolutions giving effect to the
requirement of this proviso and such resolutions shall be in full force and
effect.
Permitted Junior Securities: As defined in section 10.1 of this
---------------------------
Agreement.
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.
61
<PAGE>
Plan: Any employee benefit plan as to which the Company or any of its
----
Subsidiaries or a Commonly Controlled Entity of any thereof may have any
liability under ERISA.
Preferred Stock: As applied to any corporation, shares of such
---------------
corporation which shall be entitled to preference or priority over any other
shares of such corporation in respect of either the payment of dividends or the
distribution of assets upon liquidation.
Profit-Sharing Plan: The Company's Self-Directed Profit Sharing Plan,
-------------------
with the Delaware Charter Guaranty & Trust Company, as in effect on the Closing
Date.
Registrable Securities: As defined in the Warrants.
----------------------
Requirement of Law: As to any Person, the certificate of incorporation
------------------
and by-laws or other organizational or governing documents of such Person, and
any law, treaty, rule or regulation, or determination of an arbitrator or a
court or other Governmental Authority, in each case applicable to or binding
upon such Person or any of its property or to which such Person or any of its
property is subject.
Restricted Payments: As defined in section 9.1 of this Agreement.
-------------------
Schedule of Purchasers: The Schedule of Purchasers attached to this
----------------------
Agreement.
Securities Act: At any time, the Securities Act of 1933 as then in
--------------
effect or any similar federal statute then in effect, and any reference to a
particular section of such Act shall be deemed to include a reference to the
comparable section, if any, in any such similar federal statute.
Securities and Exchange Commission: The U.S. Securities and Exchange
----------------------------------
Commission, or any other federal agency at the time administering the Securities
Act or the Exchange Act, whichever is the relevant statute for the particular
purpose.
62
<PAGE>
Senior Indebtedness: The principal of and premium, if any, and interest
-------------------
on any secured Indebtedness of the company for borrowed money owed to any
financial institution, whether outstanding on the date of this Agreement or
hereafter created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Notes or shall be junior or subordinate
to any other Indebtedness or obligation of the Company. Notwithstanding the
foregoing, Senior Indebtedness shall not include (a) Indebtedness of the Company
to a Subsidiary for money borrowed or advanced from such Subsidiary; (b) any
amounts owed with respect to the Affiliated Lease or with respect to any other
amounts owed to Affiliates (including, without limitation, any notes issued by
the Company to repurchase Common Stock from any shareholders of the Company
pursuant to the Shareholders' Agreement); and (c) that portion of any
Indebtedness which exceeds the Indebtedness then permitted to be outstanding
pursuant to section 9.10.
Shareholders' Agreement: As defined in section 4.12 of this Agreement.
-----------------------
Special Warrants: 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 registrations and all amendments,
renewals and extensions thereof.
63
<PAGE>
Transfer Agreement: Agreement, dated December 17, 1990, among the
------------------
Partnership, its partners and the Company transferring to the Company certain
intellectual property, as in effect on the Closing Date.
Warrants: As defined in section 1.1 of this Agreement.
--------
Any of the above-defined terms may, unless the context otherwise
requires, be used in the singular or plural depending on the reference.
15.2. Accounting Terms. As used in this Agreement, and in any Note,
----------------
Warrant, certificate, report or other document made or delivered pursuant to
this Agreement, accounting terms not defined in section 15.1 and accounting
terms partly defined in said section 15.1 to the extent not defined, shall have
the respective meanings give to them under GAAP.
15.3. Other Provisions Regarding Definitions. (a) Unless otherwise
--------------------------------------
defined therein, all terms defined in this Agreement shall have the defined
meanings when used in the Notes, the Warrants or in any certificate, report or
other document made or delivered pursuant to this Agreement; and
(b) The words "hereof", "herein", and "hereunder", and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement.
16. Detachability of Warrants. The Warrants shall be immediately
-------------------------
detachable from the Notes, and may be split up, combined, exchanged or
transferred separately, without regard to whether the holder thereof owns any
Note or Notes or whether any Note or Notes held by such Person are
simultaneously being split-up, combined, exchanged or transferred.
17. Expenses, Indemnification, etc.
-------------------------------
17.1. Expenses. Whether or not the transactions contemplated by this
--------
Agreement shall be consummated, the Company will pay on demand all expenses in
connection with such transactions and in connection with any amendments or
waivers (whether or not the same become effective) under or in respect of this
Agreement, the
64
<PAGE>
Letter Agreement or the Notes or the Warrants, including, without Limitation:
(a) the cost and expenses of printing or reproducing this Agreement, the Letter
Agreement and the Notes and the Warrants, of furnishing all opinions of counsel
for the Company (including any opinions reasonably requested by your special
counsel as to any legal matter arising hereunder) and all certificates on behalf
of the Company, and of the Company's performance of and compliance with all
agreements and conditions contained herein to be performed or complied with by
it; (b) the cost of delivering to your principal office, insured to your
satisfaction, the Notes and the Warrants sold to you hereunder and any Notes or
Warrants delivered to you upon any substitution of Notes or Warrants pursuant to
section 11 and of your delivering any Notes or Warrants, insured to your
satisfaction, upon any such substitution; (c) the fees, expenses and
disbursements of your special counsel in connection with such transactions (in
an amount not to exceed $55,000), any such amendments or waivers and in
connection with or arising out of any litigation, investigation or proceeding
instituted by any Governmental Agency or any other Person with respect to this
Agreement, the Letter Agreement or any other agreements contemplated hereby or
thereby or the transactions contemplated hereby or thereby and requiring your
participation or involvement; and (d) the out-of-pocket expenses incurred by you
in connection with such transactions, any such amendments or waivers and in
connection with any such litigation, investigation or proceeding. The Company
also will pay, and will save you and each holder of any Notes or Warrants
harmless from (a) all claims in respect of the fees, if any, of brokers and
finders acting on behalf of the Company, and (b) any and all liabilities with
respect to any taxes (including interest and penalties) which may be payable in
respect of the execution and delivery of this Agreement, the Letter Agreement,
the issue of the Notes and Warrants and any amendment or waiver under or in
respect of this Agreement, the Letter Agreement or the Notes or Warrants (other
than normal federal income taxes imposed on a holder of a Note, Warrant or any
share of Common Stock issued upon exercise of Warrants in respect of interest or
dividends received) or in respect of any determination by the Internal Revenue
Service to set aside or fail to recognize the Company's S corporation election.
65
<PAGE>
17.2. Indemnification. The Company agrees to indemnify and hold
---------------
harmless you and your Affiliates and respective directors, officers, general
partners, limited partners, employees, agents and controlling Persons thereof
(each such Person being an "Indemnified Party") from and against any and all
losses, claims, damages and liabilities, joint or several, to which such
Indemnified Party may become subject under any applicable law or otherwise
relating to or arising out of the transactions contemplated by this Agreement or
the Letter Agreement, or the execution, delivery, enforcement and performance of
this Agreement or the Letter Agreement and any other documents in any way
relating to the transactions contemplated by this Agreement or the Letter
Agreement and the performance by you or your Affiliates of the services
contemplated hereby and thereby, and will reimburse any Indemnified Party for
all expenses (including reasonable counsel fees and expenses) as they are
incurred in connection with the investigation of, preparation for or defense of
any pending or threatened claim or any action or proceeding arising therefrom,
whether or not such Indemnified Party is a party thereto. The Company will not
be liable under the foregoing indemnification provision to the extent that any
loss, claim, damage, liability or expense is found to have resulted primarily
from the bad faith, willful misconduct or gross negligence of you as determined
by a final judgment of a court of competent jurisdiction. The agreements in this
section 17.2 shall survive the execution and delivery of this Agreement and the
Letter Agreement, the purchase of the Notes and Warrants by you under this
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.
18. Survival of Representations and Warranties. All representations and
------------------------------------------
warranties contained in each of this Agreement, the Exhibits hereto, the Notes,
the Warrants, the Letter Agreement and the officers' certificates delivered in
connection with the Closing shall survive the execution and delivery of this
Agreement and the Letter Agreement, any investigation at any time made by you or
on your behalf, the purchase of the Notes and Warrants by you under this
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. All statements contained in the foregoing
documents shall
66
<PAGE>
be deemed representations and warranties of the Company under this Agreement.
19. Amendments and Waivers. Any term of this Agreement or of any Note
----------------------
may be amended or modified and the observance of any term of this Agreement or
of any Note may be waived (either generally or in a particular instance and
either retroactively or prospectively) only with the written consent of the
Company and
(a) in the case of any such action prior to the Closing, you; and
(b) in the case of any other such action, (i) if any Notes are
outstanding, the holders of at least 51% in principal amount of the Notes at the
time outstanding (provided that, (x) without the prior written consent of the
--------
holders of all the Notes at the time outstanding, no such amendment,
modification or waiver shall extend the stated maturity or reduce the principal
amount of, or reduce the rate or extend the time of payment of interest on or
reduce the amount or extend the time of payment of any principal payable on any
prepayment of any Note and no such amendment, modification or waiver shall
effect any change to this section 19 and (y) in the case of any amendment or
modification of this Agreement or any Note (other than any waiver of the
observance of any term thereof), no such amendment or modification will be
effective without the written consent of holders of at least 51% of the
outstanding principal amount or commitments pursuant to the agreements then
governing the Company's Senior Indebtedness and (ii) if no Notes are
outstanding, the holders of at least 51% of the aggregate value of the
Registrable Securities. For this purpose, the Registrable Securities shall be
valued at the Current Market Price of such Registrable Securities, assuming the
exercise in full of all of the Warrants.
20. Notices, etc. Except as otherwise provided in this Agreement,
------------
notices and other communications under this Agreement shall be in writing and
shall be delivered by hand, mailed by first-class mail (postage prepaid),
transmitted by telex or telecopier or sent by air courier guaranteeing overnight
delivery: (a) if to you, at the address set forth on the Schedule of Purchasers
or at such other address as you shall have furnished to the Company in writing,
except as otherwise provided in section 12.2 with respect to payments on Notes
held by
67
<PAGE>
you or your nominee, or (b) if to any other holder of any Notes or Warrants, at
such address as such other holder shall have furnished to the Company in
writing, or, until any such other holder so furnishes to the Company an address,
then to and at the address of the last holder of such Notes or Warrants who has
furnished an address to the Company, or (c) if to the Company at the address of
the Company set forth at the beginning of this Agreement, to the attention of
its President, or at such other address, or to the attention of such other
officer, as the Company shall have furnished to you and each such other holder
in writing.
21. Miscellaneous. This Agreement shall be binding upon and inure to
-------------
the benefit of and be enforceable by the respective successors and assigns of
the parties hereto, whether so expressed or not, and, in particular, shall inure
to the benefit of and be enforceable by any holder or holders at the time of the
Notes or Warrants sold hereunder. Notwithstanding the foregoing, the Company
shall not assign its rights hereunder or any interest herein without your prior
written consent. You shall have the right, in your sole discretion, to sell,
transfer, assign, participate or otherwise dispose of all or any portion of your
rights in respect of the Notes and the Warrants to one or more parties. Except
as otherwise stated herein, this Agreement embodies the entire agreement and
understanding between you and the Company and supersedes all prior agreements
and understandings relating to the subject matter hereof. This Agreement, the
Notes and the Warrants shall be construed and enforced in accordance with and
governed by the law of the State of New York. The headings in this Agreement are
for purposes of reference only and shall not limit or otherwise affect the
meaning hereof. This Agreement may be executed in any number of counterparts,
each of which shall be an original, but all of which together shall constitute
one instrument.
68
<PAGE>
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterparts of this letter and return one of the
same to the Company, whereupon this letter shall become a binding agreement
between you and the Company.
Very truly yours,
INFORMATION MANAGEMENT ASSOCIATES, INC.
By /s/ Albert R.Subbloie
____________________________
Albert R. Subbloie
President
The foregoing Agreement
is hereby agreed to as
of the date thereof.
Wand/IMA Investments, L.P.,
By Wand Partners Inc., as General Partner
By: /s/ David J. Callard
______________________
David J. Callard
President
69
<PAGE>
SCHEDULE OF PURCHASERS
----------------------
Wand/IMA Investments, L.P.
Principal amount of Notes to be purchased by Purchaser: $1,600,000
---------
Number of shares of Common Stock initially
issuable upon exercise of Base Warrants to be
purchased by Purchaser: 16,667
---------
Number of shares of Common Stock issuable upon exercise
of Special Warrants to be purchased by Purchaser: Equal to the
--------------
Special Amount
--------------
Aggregate purchase price for the Notes and
Warrants to be purchased by Purchaser: $1,600,000
---------
Portion of purchase price attributable to
each $1,000 principal amount of Notes: $ 986.88
---------
Portion of purchase price attributable to
Warrant to purchase one share of Common Stock: $ 13.12
---------
All payments on account of the Notes in
accordance with the provisions thereof and
of section 12.2 hereof shall be made by
credit of immediately available funds to:
Account of Wand Partners Inc.
(general partner of the Purchaser) Account No. 00120773
(ABA No. 021000238) at:
Morgan Guaranty Trust Company
616 Madison Avenue
New York, NY 10153
Attention: Lillian R. Wolf
Vice President, Phone: (212) 837-4308
with notice to such bank of the source and application
of such funds and with instructions to such
bank to telephone advice of credit to
David J. Callard, Phone: (212) 632-3790;
Fax: (212) 307-5599
70
<PAGE>
All notices in respect of payments on account of the Notes and any other notices
pursuant to the Purchase Agreement, Notes or Warrants shall be delivered or
mailed to Purchaser at:
30 Rockefeller Plaza
Suite 45-38
New York, NY 10112
Attention: David J. Callard,
Phone: (212) 632-3790
Fax: (212) 307-5599
with copies of notices (other than payment notices) to:
Nancy L. Henry, Esq.
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, NY 10022
Phone: (212) 735-2090
Fax: (212) 735-2000
Purchaser's Tax I.D. No.: Application Pending
71
<PAGE>
EXHIBIT 10.10
AMENDMENT TO NOTE AND WARRANT PURCHASE AGREEMENT
------------------------------------------------
THIS AMENDMENT dated as of March 1, 1993, to the Note and Warrant
Purchase Agreement, dated December 21, 1990 (the "Agreement") between
Information Management Associates, Inc., a Connecticut Corporation (the
"Company") and Wand/IMA Investments, L.P., a Delaware limited partnership
("Wand/IMA").
WHEREAS, the Agreement was previously amended pursuant to the terms of
the Exchange and Note Modification Agreement and Amendment to Note and Warrant
Purchase Agreement dated as of October 29 1991; and
WHEREAS, the Company and Wand/IMA desire to further amend the Agreement
as set forth herein.
NOW THEREFORE, in consideration of the premises and in order to permit
the Company to conduct its business as currently conducted, the Company and
Wand/IMA hereby agree as follows:
1. Section 9.8 of the Agreement is hereby amended by deleting the last
sentence thereof in its entirety and substituting the following therefor:
"This Section 9.8 shall not prohibit (a) any transaction between the
Company and one or more of its wholly-owned subsidiaries or between two
or more such subsidiaries, (b) the payment of bonuses to officers in
accordance with the terms of the Bonus Plan, (c) the payment of other
compensation (including, without limitation, amounts paid pursuant to
employee benefit plans) for the personal services of officers, directors
and employees of the Company or any Subsidiary, so long as the Board of
Directors of the Company in good faith shall have approved the terms
thereof and deemed the services theretofore or thereafter to be performed
for such compensation to be fair compensation therefor, (d) lease
payments pursuant to the Affiliated Lease, (e) the repayment of the
demand note of the Company payable to Albert R. Subbloie in the principal
amount of $46,000 and (f) the non-interest bearing short-term advances
between certain stockholders and the Company included as other assets in
the Financial Statements of the Company as of
<PAGE>
December 31, 1992, and 1991, a copy of which has previously been
delivered to Wand/IMA, as set forth in Note 8 thereto."
2. Section 9.9 of the Agreement is hereby amended by deleting it in
its entirety and substituting the following therefor:
"9.9 Minimum Consolidated Tangible Net Worth. The Company will
---------------------------------------
not at any time permit Consolidated Tangible Net Worth to be
less than $800,000."
3. Section 9.10 of the Agreement is hereby amended by deleting it
in its entirety and substituting the following therefor:
"9.10 Limitation on Indebtedness. The Company will not, and will
--------------------------
not permit any Subsidiary to, create, incur, assume or guarantee
or in any other manner become directly or indirectly liable for
the payment of, any Indebtedness other than the Permitted
Indebtedness, unless at the time of such event and after giving
effect thereto the aggregate amount of all outstanding
Indebtedness of the Company and its Subsidiaries, including all
Permitted Indebtedness other than the Notes, does not exceed 80%
of the Company's Net Amount of Accounts (the "Borrowing Base")
as set forth in the most recent statement of Net Amount of
Accounts delivered pursuant to Section 8.1(d)."
4. Section 15.1 of the Agreement is hereby amended by deleting the
definition of "Consolidated Tangible Net Worth" in its entirety and
substituting the following therefor:
"Consolidated Tangible Net Worth. With respect to any Person
-------------------------------
means, as of any date, (1) the net book value (after deducting
related depreciation, obsolescence, amortization, valuation and other
proper reserves) at which the Adjusted Tangible Assets of the Company
and all Subsidiaries would be shown on a consolidated balance sheet
at such date, but excluding any amount on account of write-ups of
assets after May 1, 1989, minus (2) the amount at which the
liabilities, (other than the Notes, deferred taxes, capital stock and
surplus) would be shown on such balance sheet and including as
liabilities all reserves for contingencies and other potential
liabilities. For purposes of this definition, "Adjusted Tangible
Assets" means all assets except (1) net capitalized software; (2)
Intellectual Property Rights,
-2-
<PAGE>
franchises, goodwill and other similar intangibles, and (3) accounts,
notes and other receivables due from Affiliates."
5. Section 15.1 of the Agreement is hereby amended by deleting the
definition of Permitted Indebtedness in its entirety and substituting the
following therefor:
"Permitted Indebtedness. (a) Indebtedness of the Company under this
----------------------
Agreement and the Notes; (b) Indebtedness of the Company in a
principal amount not to exceed $150,000 (the "Basket Amount");
provided, however, that during any period when the Company maintains
-------- -------
Consolidated Tangible Net Worth of at least $1,650,000 the Basket
Amount shall be $300,000, (c) Indebtedness of the Company and its
Subsidiaries with respect to the endorsement of negotiable
instruments in the ordinary course of business; (d) the obligations
of the Company under the Affiliated Lease and the guarantee by the
Company of the indebtedness of the Partnership to People's Bank under
a Promissory Note dated December 18, 1992, in the principal amount of
$1,150,000 (the "Loan Note"), as set forth in a Guaranty Agreement,
dated December 18, 1992, from the Company to the Bank (the "Bank
Guarantee"), and under any extension, renewal, modification or
refinancing of the loan evidenced by the Loan Note, provided that the
principal amount outstanding at the time of any such extension,
renewal modification or refinancing is not increased; (e) obligations
of the Company under Capital Leases for equipment in an aggregate
amount not to exceed $500,000; (f) Intercompany Debt Obligations
provided, however, that the obligation of each obligor of such
-------- -------
Indebtedness shall be subordinated in right of payment from and after
such time as the Notes shall be come due and payable (whether at
stated maturity, by acceleration or otherwise) to the payment and
performance of such obligor's obligation under this Agreement and the
Notes and the Board of Directors of such obligor shall have adopted
resolutions giving effect to the requirements of this proviso and
such resolutions shall be in full force and effect; and (g) Senior
Indebtedness owed by the Company to People's Bank in an aggregate
principal amount not exceeding $1,000,000 and all extensions,
renewals, refinancings or modifications thereof, provided that the
aggregate principal amount thereof does not exceed $2,000,000."
6. Section 15.1 of the Agreement is hereby amended by deleting the
definition of "Affiliated Lease" in its entirety and substituting the following
therefor:
-3-
<PAGE>
"Affiliated Lease. The lease, dated December 18, 1992, between the
----------------
Partnership and the Company."
7. Section 15.1 of the Agreement is hereby amended by deleting the
definition of "Change in Control" and substituting the following therefor:
"Change in Control: Any transaction, the result of which is that
-----------------
Mr. Gary R. Martino, Mr. Andrei Poludnewycz and Mr. Albert R.
Subbloie, Jr., as a group, shall directly or indirectly, own less
than 38% of the common equity of the Company on a fully-diluted
basis. Change in Control shall not include (a) any Minimum Public
Offering, (b) so long as Messrs. Martino, Poludnewycz and Subbloie,
as a group, continue to Control at least 38% of the common equity
of the Company on a fully-diluted basis, the creation of any will
or trust for the sole benefit of the spouses and lineal descendants
of such persons, or (c) the transfer of common equity through
testamentary disposition or the laws of intestate succession as a
result of the death of the first to die of Messrs. Martino,
Poludnewycz or Subbloie."
8. Except as previously amended and except as amended by the
provisions contained herein, the Agreement shall remain in full force and
effect.
9. This Amendment may be executed in any number of counterparts
each of which shall be an original, but all of which together shall constitute
one instrument.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as
of the date first above written.
INFORMATION MANAGEMENT
ASSOCIATES, INC.
By /s/ Albert R. Subbloie, Jr.
---------------------------------
Albert R. Subbloie, Jr.
President
WAND/IMA INVESTMENTS, L.P.
by WAND PARTNERS INC., AS
GENERAL PARTNER
By /s/ David J. Callard
---------------------------------
David J. Callard
President
-4-
<PAGE>
Exhibit 10.11
AMENDMENT NO. 2 TO NOTE AND WARRANT PURCHASE AGREEMENT
------------------------------------------------------
THIS IS AMENDMENT NO. 2 dated as of June 1, 1994, to the Note and
Warrant Purchase Agreement, dated December 21, 1990, as amended (the
"Agreement") between Information Management Associates, Inc., a Connecticut
corporation (the "Company") and Wand/IMA Investments, L.P., a Delaware limited
partnership ("Wand/IMA").
WHEREAS, the Agreement was previously amended pursuant to the terms of
the Exchange and Note Modification Agreement and Amendment to Note and Warrant
Purchase Agreement dated as of October 29, 1991 between the Company and
Wand/IMA; a Subordination Agreement dated June 18, 1992, among the Company,
Wand/IMA and People's Bank; and an Amendment to Note and Warrant Purchase
Agreement, dated as of March 1, 1993 between the Company and Wand/IMA; and
WHEREAS, the Company and Wand/IMA desire to further amend the
Agreement as set forth herein.
NOW THEREFORE, in consideration of the premises and the respective
agreements hereinafter set forth, the Company and Wand/IMA hereby agree as
follows:
1. Section 8.8 (b) of the Agreement is hereby amended by deleting the
first sentence in its entirety and substituting the following therefor:
The Company will not encumber or pledge its Intellectual Property
Rights to any third party except that the Company may (i) issue
licenses in the ordinary course of business and (ii) collaterally
assign, grant a security interest in and pledge the Company's
Intellectual Property Rights to People's Bank as security for the
Company's $4,000,000 secured revolving loan from People's Bank made
pursuant to the Bank Credit Agreement and may grant similar rights to
any other banking institution providing secured debt financing to the
Company.
2. Section 9.4 of the Agreement is hereby amended by deleting Section
9.4 in its entirety and substituting the following therefore:
<PAGE>
9.4. Amendments, Modifications, Etc. The Company will not, and will
------------------------------
not permit any Subsidiary to, agree to any amendment, modification or
termination of any of the following (or any exhibits or schedules to
any of the following): (i) The Company's Certificate of Incorporation
as amended by the Certificate of Amendment filed January 26, 1993, or
the Certificate or Articles of Incorporation of any Subsidiary; (ii)
The By-Laws of the Company or the by-laws of any Subsidiary; (iii) The
Letter Agreement, as amended pursuant to the Amendment dated as of
June 1, 1994; (iv) The Bonus Plan; (v) The Profit Sharing Plan; (vi)
The Affiliated Lease; (vii) The Organizational Agreement; or (viii)
The Transfer Agreement.
3. Section 9.8 of the Agreement is hereby amended by deleting the
fourth sentence of said section and substituting the following therefor:
This Section 9.8 shall not prohibit: (a) any transaction between the
Company and one or more of its wholly owned Subsidiaries or between
two or more Subsidiaries; (b) the payment of bonuses to officers in
accordance with the terms of the Bonus Plan; (c) the payment of other
compensation (including, without limitation, amounts paid pursuant to
employee benefit plans) for the personal services of officers,
directors and employees of the Company or any Subsidiary so long as
the Board of Directors of the Company in good faith shall have
approved the terms thereof and deem the services theretofore or
thereafter to be performed for such compensation to be fair
compensation therefore; (d) lease payments pursuant to the Affiliated
Lease; (e) loans from officers to the Company in an aggregate
principal amount not exceeding $100,000 and the repayment by the
Company of said officers loans and (f) the grant of certain
registration rights to certain purchasers identified in Schedule A of
a certain Stock Purchase Agreement dated as of May 31, 1994, among the
Company, Albert R. Subbloie, Jr., Gary R. Martino, Andrei Poludnewycz
and Paul Schmidt and said purchasers.
4. Section 9.15 of the Agreement is hereby amended by deleting the
word "and" immediately preceding subclause (vi) and by adding the following
immediately after subclause (vi):
; and (vii) Liens securing the $4,000,000 secured revolving loan from
People's Bank to the Company pursuant to the Bank Credit Agreement.
-2-
<PAGE>
5. Section 15.1 of the Agreement is hereby amended by deleting the
definition of "Bank Credit Agreement" and substituting the following therefor:
Bank Credit Agreement: The Loan and Security Agreement, dated as of
---------------------
June 1, 1994, between People's Bank and the Company with respect to
the $4,000,000 revolving loan from People's Bank to the Company.
6. Section 15.1 of the Agreement is hereby amended by deleting the
definition of "Minimum Public Offering" and substituting the following therefor:
Minimum Public Offering: Any offering to the public pursuant to a
-----------------------
registration statement filed with the Securities and Exchange
Commission, of any class or series of common stock of the Company or
securities convertible into or exchangeable for any such common stock,
whether on a primary or secondary basis, provided that (i) such public
offering is underwritten on a firm commitment basis by a nationally
recognized investment banking firm; and (ii) upon the termination of
any such offering, Mr. Gary R. Martino, Mr. Andrei Poludnewycz and
Albert R. Subbloie, Jr., as a group, shall directly or indirectly own
at least twenty-five percent (25%)of the common equity of the Company
on a fully-diluted basis.
7. Section 15.1 of the Agreement is hereby amended by deleting the
definition of "Change in Control" and substituting the following therefor:
Change in Control: Any transaction, the result of which is that Mr.
-----------------
Gary R. Martino, Mr. Andrei Poludnewycz and Mr. Albert R. Subbloie,
Jr., as a group, shall directly or indirectly, own less than 25% of
the common equity of the Company on a fully-diluted basis. Change in
Control shall not include (a) any Minimum Public Offering, (b) so long
as Messrs. Martino, Poludnewycz and Subbloie, as a group continue to
Control at least 25% of the common equity of the Company on a
fully-diluted basis, the creation of any will or trust for the sole
benefit of the spouses and lineal descendants of such persons, or (c)
the transfer of common equity through testamentary disposition or the
laws of intestate succession as a result of the death of the first to
die of Messrs. Martino, Poludnewycz or Subbloie.
8. Section 15.1 of the Agreement is hereby amended by deleting the
definition of Permitted Indebtedness in its entirety and substituting the
following therefor:
<PAGE>
Permitted Indebtedness. (a) Indebtedness of the Company under this
----------------------
Agreement and the Notes; (b) Indebtedness of the Company in a
principal amount not to exceed $150,000 (the "Basket Amount");
provided, however, that during any period when the Company maintains
Consolidated Tangible Net Worth of at least $1,650,000 the Basket
Amount shall be $300,000, (c) Indebtedness of the Company and its
Subsidiaries with respect to the endorsement of negotiable instruments
in the ordinary course of business; (d) the obligations of the Company
under the Affiliated Lease and the guarantee by the Company of the
indebtedness of the Partnership to People's Bank under a Promissory
Note dated December 18, 1992, in the principal amount of $1,150,000
(the "Loan Note"), as set forth in a Guaranty Agreement, dated
December 18, 1992, from the Company to the Bank (the "Bank
Guarantee"), and under any extension, renewal, modification or
refinancing of the loan evidenced by the Loan Note, provided that the
principal amount outstanding at the time of any such extension,
renewal, modification or refinancing is not increased; (e) obligations
of the Company under Capital Leases for equipment in an aggregate
amount not to exceed $1,000,000; (f) Intercompany Debt Obligations,
provided, however, that the obligation of each obligor of such
Indebtedness shall be subordinated in right of payment from and after
such time as the Notes shall become due and payable (whether at stated
maturity, by acceleration or otherwise) to the payment and performance
of such obligor's obligation under this Agreement and the Notes and
the Board of Directors of such obligor shall have adopted resolutions
giving effect to the requirements of this proviso and such resolutions
shall be in full force and effect; and (g) Indebtedness owed by the
Company to People's Bank in an aggregate principal amount not
exceeding $4,000,000 and all extensions, renewals, refinancings or
modifications thereof, provided that the aggregate principal amount
thereof does not exceed $4,000,000.
9. Except as previously amended and except as amended by the
provisions contained herein, the Agreement shall remain in full force and
effect.
10. This Amendment may be executed in any number of counterparts each
of which shall be an original, but all of which together shall constitute one
instrument.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of
the date first above written.
INFORMATION MANAGEMENT
ASSOCIATES, INC.
By /s/Albert R. Subbloie
_______________________
Albert R. Subbloie, Jr.
President
WAND/IMA INVESTMENTS, L.P.
by WAND PARTNERS INC., AS
GENERAL PARTNER
By /s/David J. Callard
_________________________
David J. Callard
President
<PAGE>
EXHIBIT 10.12
This Warrant and any shares acquired upon the exercise of this Warrant
have not been registered under the Securities Act of 1933, as amended,
and may not be transferred, sold or otherwise disposed of except while
such a registration is in effect or pursuant to an exemption from
registration under such Act.
INFORMATION MANAGEMENT ASSOCIATES, INC.
Common Stock Purchase Warrant
NEW YORK, NEW YORK
No. W-3 December 21, 1990
Information Management Associates, Inc., a Connecticut corporation
(the "Company"), for value received, hereby certifies that Thomas F. Hill, or
registered assigns, is entitled to purchase from the Company 2,381 duly
authorized, validly issued, fully paid and nonassessable shares of Common Stock,
no par value per share (the "Common Stock") of the Company at the purchase price
per share of $9, at any time or from time to time prior to 5:00 P.M., New York
City time, on December 21, 2000, all subject to the terms, conditions and
adjustments set forth below in this Warrant.
This Warrant is one of several Common Stock Purchase Warrants (the
"Warrants", such term to include any such warrants issued in substitution
therefor) originally issued in connection with the issue and sale by the Company
of 15% Senior Subordinated Notes due 1997, pursuant to the Note and Warrant
Purchase Agreement (the "Purchase Agreement"), dated December 21, 1990, between
the Company and Wand/IMA Investments, L.P., a Delaware limited partnership (the
"Purchaser"). Certain capitalized
<PAGE>
terms used in this Warrant are defined in section 14; references to an "Exhibit"
are, unless otherwise specified, to one of the Exhibits attached to this Warrant
and references to a "section" are, unless otherwise specified, to one of the
sections of this Warrant.
1. Exercise of Warrant. 1.1. Manner of Exercise. This Warrant may be
------------------- ------------------
exercised by the holder hereof, in whole or in part, during normal business
hours on any Business Day, by surrender of this Warrant to the Company at its
office maintained pursuant to subdivision (a) of section 12.2, accompanied by a
subscription in substantially the form attached to this Warrant (or a reasonable
facsimile thereof) duly executed by such holder and accompanied by payment, in
cash, by certified or official bank check payable to the order of the Company,
or in the manner provided in section 1.5 (or by any combination of such
methods), in the amount obtained by multiplying (a) the number of shares of
Common Stock (without giving effect to any adjustment thereof) designated in
such subscription by (b) $9, and such holder shall thereupon be entitled to
receive the number of duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock (or Other Securities) determined as
provided in sections 2 through 4.
1.2. When Exercise Effective. Each exercise of this Warrant shall be
-----------------------
deemed to have been effected immediately prior to the close of business on the
Business Day on which this Warrant shall have been surrendered to the Company as
provided in section 1.1, and at such time the Person or Persons in whose name or
names any certificate or certificates for shares of Common Stock (or Other
Securities) shall be issuable upon such exercise as provided in section 1.3
shall be deemed to have become the holder or holders of record thereof.
1.3. Delivery of Stock Certificates, etc. As soon as practicable after
-----------------------------------
each exercise of this Warrant, in whole or in part, and in any event within five
Business Days thereafter, the Company at its expense (including the payment by
it of any applicable issue taxes) will cause to be issued in the name of and
delivered to the holder hereof or, subject to section 9, as such holder (upon
payment by such holder of any applicable transfer taxes) may direct,
(a) a certificate or certificates for the
2
<PAGE>
number of duly authorized, validly issued, fully paid and nonassessable
shares of Common Stock (or Other Securities) to which such holder shall be
entitled upon such exercise plus, in lieu of any fractional share to which
such holder would otherwise be entitled, cash in an amount equal to the
same fraction of the Market Price per share on the Business Day next
preceding the date of such exercise, and
(b) in case such exercise is in part only, a new Warrant or Warrants
of like tenor, calling in the aggregate on the face or faces thereof for
the number of shares of Common Stock equal (without giving effect to any
adjustment thereof) to the number of such shares called for on the face of
this Warrant minus the number of such shares designated by the holder upon
such exercise as provided in section 1.1.
1.4. Company to Reaffirm Obligations. The Company will, at the time of
-------------------------------
each exercise of this Warrant, upon the request of the holder hereof,
acknowledge in writing its continuing obligation to afford to such holder all
rights (including, without limitation, any rights to registration of the shares
of Common Stock or Other Securities issued upon such exercise) to which such
holder shall continue to be entitled after such exercise in accordance with the
terms of this Warrant, provided that if the holder of this Warrant shall fail to
--------
make any such request, such failure shall not affect the continuing obligation
of the Company to afford such rights to such holder.
1.5. Payment by Application of Notes. Upon any exercise of this
-------------------------------
Warrant, the holder hereof may, at its option, instruct the Company, by written
notice accompanying the surrender of this Warrant at the time of such exercise,
to apply to the payment required by section 1.1 all or any part of the unpaid
principal amount of any one or more Notes at the time held by such holder, in
which case the Company will accept the principal amount specified in such notice
in satisfaction of a like amount of such payment. In case less than the entire
unpaid principal amount of any Note shall be so specified, the principal amount
so specified shall be credited, as of the date of such exercise, against the
required prepayments of principal then remaining unpaid on such
3
<PAGE>
Note in the inverse order of their maturity dates. Upon any partial application
of a Note, the Company at its expense shall forthwith issue and deliver to or
upon the order of the holder thereof a new Note or Notes in principal amount
equal to the unpaid principal amount of such surrendered Note which has not been
applied against such payment, such new Note or Notes to be dated and to bear
interest from the date to which interest has been paid on such surrendered Note.
Within two Business Days after receipt of any such notice, the Company will pay
to the holder of the Notes giving such notice, in the manner provided in the
Notes and in the Purchase Agreement, all unpaid interest on the principal amount
so specified in such notice, accrued to the date of the exercise of such
Warrant.
2. Adjustment of Common Stock Issuable Upon Exercise. 2.1. General;
------------------------------------------------- -------
Warrant Price. The number of shares of Common Stock which the holder of this
- -------------
Warrant shall be entitled to receive upon each exercise hereof shall be
determined by multiplying the number of shares of Common Stock which would
otherwise (but for the provisions of this section 2) be issuable upon such
exercise, as designated by the holder hereof pursuant to section 1.1, by a
fraction of which (a) the numerator is $9 and (b) the denominator is the Warrant
Price in effect on the date of such exercise. The "Warrant Price" shall
initially be $9 per share, shall be adjusted and readjusted from time to time as
provided in this section 2 and, as so adjusted or readjusted, shall remain in
effect until a further adjustment or readjustment thereof is required by this
section 2.
2.2. Adjustment of Warrant Price.
---------------------------
2.2.1. Issuance of Additional Shares of Common Stock. In case the
---------------------------------------------
Company at any time or from time to time after the date hereof shall issue or
sell Additional Shares of Common Stock (including Additional Shares of Common
Stock deemed to be issued pursuant to section 2.3 or 2.4) without consideration
or for a consideration per share less than the greater of the Current Market
Price and the Warrant Price in effect immediately prior to such issue or sale,
then, and in each such case, subject to section 2.8, such Warrant Price shall be
reduced, concurrently with such issue or sale, to a price (calculated to the
nearest .001 of a cent) determined by multiplying such Warrant Price by a
fraction
4
<PAGE>
(a) the numerator of which shall be (i) the number of shares of Common
Stock outstanding immediately prior to such issue or sale plus (ii) the
number of shares of Common Stock which the aggregate consideration received
by the Company for the total number of such Additional Shares of Common
Stock so issued or sold would purchase at the greater of such Current
Market Price and such Warrant Price, and
(b) the denominator of which shall be the number of shares of Common
Stock outstanding immediately after such issue or sale,
provided that, for the purposes of this section 2.2.1, (w) immediately after any
- --------
Additional Shares of Common Stock are deemed to have been issued pursuant to
section 2.3 or 2.4, such Additional Shares shall be deemed to be outstanding,
(x) treasury shares shall not be deemed to be outstanding, (y) if all or any
part of the 7,500 shares issued to Joseph Lemay or Paul Schmidt pursuant to
restricted stock awards on December 20, 1990 shall be forfeited, and cease to be
outstanding (whether because of cancellation or by virtue of becoming treasury
shares) then this section shall not apply to the issue of up to the number of
shares forfeited, as adjusted to account for any intervening stock dividend,
stock split, reclassification, recapitalization or other similar event and (z)
no adjustment of the Warrant Price pursuant to this section 2.2.2 shall be
required as a consequence of the issuance or sale of the Common Stock upon
exercise of the Options to acquire 5% of the Common Stock issued to employees
pursuant to section 2.3.
2.2.2. Extraordinary Dividends and Distributions. In case the Company
-----------------------------------------
at any time or from time to time after the date hereof shall declare, order, pay
or make a dividend or other distribution (including, without limitation, any
distribution of other or additional stock or other securities or property or
Options by way of dividend or spin-off, reclassification, recapitalization or
similar corporate rearrangement) on the Common Stock, other than (a) a dividend
payable in Additional Shares of Common Stock or (b) for so long as the Company
qualifies as an S corporation for federal income tax purposes, an annual cash
dividend not in excess of the amount equal to the taxable income of the Company
for the preceding calendar year multiplied by the maximum marginal federal
income tax rate on individuals for the preceding calendar
5
<PAGE>
year, then, and in each such case, subject to section 2.8, the Warrant Price in
effect immediately prior to the close of business on the record date fixed for
the determination of holders of any class of securities entitled to receive such
dividend or distribution shall be reduced, effective as of the close of business
on such record date, to a price (calculated to the nearest .001 of a cent)
determined by multiplying such Warrant Price by a fraction
(x) the numerator of which shall be the Current Market Price in effect
on such record date or, if the Common Stock trades on an ex-dividend basis,
on the date prior to the commencement of ex-dividend trading, less the
amount of such dividend or distribution (as determined in good faith by the
Board of Directors of the Company) applicable to one share of Common Stock,
and
(y) the denominator of which shall be such Current Market Price
provided that, in the event that the amount of such dividend applicable to one
- --------
share of Common Stock as so determined is equal to or greater than such Current
Market Price or in the event that such fraction is less than 1/2, in lieu of the
foregoing adjustment, adequate provision shall be made so that the holder of
this Warrant shall receive a pro rata share of such dividend based upon the
maximum number of shares of Common Stock at the time issuable to such holder
(determined without regard to whether the Warrant is exercisable at such time).
2.3. Treatment of Options and Convertible Securities. In case the
-----------------------------------------------
Company at any time or from time to time after the date hereof shall issue,
sell, grant or assume, or shall fix a record date for the determination of
holders of any class of securities entitled to receive, any Options (except for
Options issued or issuable to employees of the Company entitling such employees
to acquire up to a maximum of 5% of the Common Stock on a fully diluted basis
determined at the time of the issuance or grant of these employee options) or
Convertible Securities, then, and in each such case, the maximum number of
Additional Shares of Common Stock (as set forth in the instrument relating
thereto, without regard to any provisions contained therein for a subsequent
adjustment of such number) issuable upon the exercise of such Op-
6
<PAGE>
tions or, in the case of Convertible Securities and Options therefor, the
conversion or exchange of such Convertible Securities, shall be deemed to be
Additional Shares of Common Stock issued as of the time of such issue, sale,
grant or assumption or, in case such a record date shall have been fixed, as of
the close of business on such record date (or, if the Common Stock trades on an
ex-dividend basis, on the date prior to the commencement of ex-dividend
trading), provided that such Additional Shares of Common Stock shall not be
--------
deemed to have been issued unless the consideration per share (determined
pursuant to section 2.5) of such shares would be less than the greater of the
Current Market Price and the Warrant Price in effect on the date of and
immediately prior to such issue, sale, grant or assumption or immediately prior
to the close of business on such record date (or, if the Common Stock trades on
an ex-dividend basis, on the date prior to the commencement of ex-dividend
trading), as the case may be, and provided, further, that in any such case in
-------- -------
which Additional Shares of Common Stock are deemed to be issued
(a) no further adjustment of the Warrant Price shall be made upon the
subsequent issue or sale of Convertible Securities or shares of Common
Stock upon the exercise of such Options or the conversion or exchange of
such Convertible Securities, except in the case of any such Options or
Convertible Securities which contain provisions requiring an adjustment,
subsequent to the date of the issue or sale thereof, of the number of
Additional Shares of Common Stock issuable upon the exercise of such
Options or the conversion or exchange of such Convertible Securities by
reason of (x) a change of control of the Company, (y) the acquisition by
- -
any Person or group of Persons of any specified number or percentage of the
Voting Securities of the Company or (z) any similar event or occurrence,
-
each such case to be deemed hereunder to involve a separate issuance of
Additional Shares of Common Stock, Options or Convertible Securities, as
the case may be;
(b) if such Options or Convertible Securities by their terms provide,
with the passage of time or otherwise, for any increase in the
consideration payable to the Company, or decrease in the number of
Additional Shares of Common Stock issuable, upon the exercise, conversion
or exchange thereof (by change
7
<PAGE>
of rate or otherwise), the Warrant Price computed upon the original issue,
sale, grant or assumption thereof (or upon the occurrence of the record
date, or date prior to the commencement of ex-dividend trading, as the case
may be, with respect thereto), and any subsequent adjustments based
thereon, shall, upon any such increase or decrease becoming effective, be
recomputed to reflect such increase or decrease insofar as it affects such
Options, or the rights of conversion or exchange under such Convertible
Securities, which are outstanding at such time;
(c) upon the expiration (or purchase by the Company and cancellation
or retirement) of any such Options which shall not have been exercised or
the expiration of any rights of conversion or exchange under any such
Convertible Securities which (or purchase by the Company and cancellation
or retirement of any such Convertible Securities the rights of conversion
or exchange under which) shall not have been exercised, the Warrant Price
computed upon the original issue, sale, grant or assumption thereof (or
upon the occurrence of the record date, or date prior to the commencement
of ex-dividend trading, as the case may be, with respect thereto), and any
subsequent adjustments based thereon, shall, upon such expiration (or such
cancellation or retirement, as the case may be), be recomputed as if:
(i) in the case of Options for Common Stock or Convertible
Securities, the only Additional Shares of Common Stock issued or sold
were the Additional Shares of Common Stock, if any, actually issued or
sold upon the exercise of such Options or the conversion or exchange
of such Convertible Securities and the consideration received therefor
was the consideration actually received by the Company for the issue,
sale, grant or assumption of all such Options, whether or not
exercised, plus the consideration actually received by the Company
upon such exercise, or for the issue or sale of all such Convertible
Securities which were actually converted or exchanged, plus the
additional consideration, if any, actually received by the Company
upon such conversion or exchange, and
8
<PAGE>
(ii) in the case of Options for Convertible Securities, only the
Convertible Securities, if any, actually issued or sold upon the
exercise of such Options were issued at the time of the issue, sale,
grant or assumption of such Options, and the consideration received by
the Company for the Additional Shares of Common Stock deemed to have
then been issued was the consideration actually received by the
Company for the issue, sale, grant or assumption of all such Options,
whether or not exercised, plus the consideration deemed to have been
received by the Company (pursuant to section 2.5) upon the issue or
sale of such Convertible Securities with respect to which such Options
were actually exercised;
(d) no readjustment pursuant to subdivision (b) or (c) above shall
have the effect of increasing the Warrant Price by an amount in excess of
the amount of the adjustment thereof originally made in respect of the
issue, sale, grant or assumption of such Options or Convertible Securities;
and
(e) in the case of any such Options which expire by their terms not
more than 30 days after the date of issue, sale, grant or assumption
thereof, no adjustment of the Warrant Price shall be made until the
expiration or exercise of all such Options, whereupon such adjustment shall
be made in the manner provided in subdivision (c) above.
2.4. Treatment of Stock Dividends, Stock Splits, etc. In case the
-----------------------------------------------
Company at any time or from time to time after the date hereof shall declare or
pay any dividend on the Common Stock payable in Common Stock, or shall effect a
subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in Common Stock), then, and in each such case, Additional Shares of
Common Stock shall be deemed to have been issued (a) in the case of any such
dividend, immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive such
dividend, or (b) in the case of any such subdivision, at the close of business
on the day immediately prior to the day upon which such corporate action becomes
effective.
9
<PAGE>
2.5. Computation of Consideration. For the purposes of this section 2,
----------------------------
(a) the consideration for the issue or sale of any Additional Shares
of Common Stock shall, irrespective of the accounting treatment of such
consideration,
(i) insofar as it consists of cash, be computed at the net amount
of cash received by the Company,
(ii) insofar as it consists of property (including securities)
other than cash, be computed at the fair value thereof at the time of
such issue or sale, as determined in good faith by the Board of
Directors of the Company, and
(iii) in case Additional Shares of Common Stock are issued or
sold together with other stock or securities or other assets of the
Company for a consideration which covers both, be the portion of such
consideration so received, computed as provided in clauses (i) and
(ii) above, allocable to such Additional Shares of Common Stock, all
as determined in good faith by the Board of Directors of the Company;
(b) Additional Shares of Common Stock deemed to have been issued
pursuant to section 2.3, relating to Options and Convertible Securities,
shall be deemed to have been issued for a consideration per share
determined by dividing
(i) the total amount, if any, received and receivable by the
Company as consideration for the issue, sale, grant or assumption of
the Options or Convertible Securities in question, plus the minimum
aggregate amount of additional consideration (as set forth in the
instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration to
protect against dilution) payable to the Company upon the exercise in
full of such Options or the conversion or exchange of such Convertible
Securities or, in the case of Options for Convertible Securities, the
exercise of such Options for Convertible Securi-
10
<PAGE>
ties and the conversion or exchange of such Convertible Securities, in
each case computing such consideration as provided in the foregoing
subdivision (a),
by
(ii) the maximum number of shares of Common Stock (as set forth
in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number to
protect against dilution) issuable upon the exercise of such Options
or the conversion or exchange of such Convertible Securities; and
(c) Additional Shares of Common Stock deemed to have been issued
pursuant to section 2.4, relating to stock dividends, stock splits, etc.,
shall be deemed to have been issued for no consideration.
2.6. Adjustments for Combinations, etc. In case the outstanding shares
---------------------------------
of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Warrant Price in
effect immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or consolidation, be
proportionately increased.
2.7. Dilution in Case of Other Securities. In case any Other
------------------------------------
Securities shall be issued or sold or shall become subject to issue or sale upon
the conversion or exchange of any stock (or Other Securities) of the Company (or
any issuer of Other Securities or any other Person referred to in section 3) or
to subscription, purchase or other acquisition pursuant to any Options issued or
granted by the Company (or any such other issuer or Person) for a consideration
such as to dilute, on a basis consistent with the standards established in the
other provisions of this section 2, the purchase rights granted by this Warrant,
then, and in each such case, the computations, adjustments and readjustments
provided for in this section 2 with respect to the Warrant Price shall be made
as nearly as possible in the manner so provided and applied to determine the
amount of Other Securities from time to time receivable upon the exercise of the
11
<PAGE>
Warrants, so as to protect the holders of the Warrants against the effect of
such dilution.
2.8. Minimum Adjustment of Warrant Price. If the amount of any
-----------------------------------
adjustment of the Warrant Price required pursuant to this section 2 would be
less than one percent (1%) of the Warrant Price in effect at the time such
adjustment is otherwise so required to be made, such amount shall be carried
forward and adjustment with respect thereto made at the time of and together
with any subsequent adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate at least one percent (1%)
of such Warrant Price.
3. Consolidation, Merger, etc. 3.1. Adjustments for Consolidation,
-------------------------- ------------------------------
Merger, Sale of Assets, Reorganization, etc. In case the Company after the date
- -------------------------------------------
hereof (a) shall consolidate with or merge into any other Person and shall not
be the continuing or surviving corporation of such consolidation or merger, or
(b) shall permit any other Person to consolidate with or merge into the Company
and the Company shall be the continuing or surviving Person but, in connection
with such consolidation or merger, the Common Stock or Other Securities shall be
changed into or exchanged for stock or other securities of any other Person or
cash or any other property, or (c) shall transfer all or substantially all of
its properties or assets to any other Person, or (d) shall effect a capital
reorganization or reclassification of the Common Stock or Other Securities
(other than a capital reorganization or reclassification resulting in the issue
of Additional Shares of Common Stock for which adjustment in the Warrant Price
is provided in section 2.2.l or 2.2.2), then, and in the case of each such
transaction, proper provision shall be made so that, upon the basis and the
terms and in the manner provided in this Warrant, the holder of this Warrant,
upon the exercise hereof at any time after the consummation of such transaction,
shall be entitled to receive (at the aggregate Warrant Price in effect at the
time of such consummation for all Common Stock or Other Securities issuable upon
such exercise immediately prior to such consummation), in lieu of the Common
Stock or Other Securities issuable upon such exercise prior to such consummation
the highest amount of securities, cash or other property to which such holder
would actually have been entitled as a shareholder upon
12
<PAGE>
such consummation if such holder had exercised the Rights represented by this
Warrant immediately prior thereto.
3.2. Assumption of Obligations. Notwithstanding anything contained in
-------------------------
the Warrants or in the Purchase Agreement to the contrary, the Company will not
effect any of the transactions described in clauses (a) through (d) of section
3.1 unless, prior to the consummation thereof, each Person (other than the
Company) which may be required to deliver any stock, securities, cash or
property upon the exercise of this Warrant as provided herein shall assume, by
written instrument delivered to, and reasonably satisfactory to, the holder of
this Warrant, (a) the obligations of the Company under this Warrant (and if the
Company shall survive the consummation of such transaction, such assumption
shall be in addition to, and shall not release the Company from, any continuing
obligations of the Company under this Warrant) and (b) the obligation to deliver
to such holder such shares of stock, securities, cash or property as, in
accordance with the foregoing provisions of this section 3, such holder may be
entitled to receive, and such Person shall have similarly delivered to such
holder an opinion of counsel for such Person, which counsel shall be reasonably
satisfactory to such holder, stating that this Warrant shall thereafter continue
in full force and effect and the terms hereof (including, without limitation,
all of the provisions of this section 3) shall be applicable to the stock,
securities, cash or property which such Person may be required to deliver upon
any exercise of this Warrant or the exercise of any rights pursuant hereto.
Nothing in this section 3 shall be deemed to authorize the Company to enter into
any transaction not otherwise permitted by the Purchase Agreement.
4. Other Dilutive Events. In case any event shall occur as to which
---------------------
the provisions of section 2 or section 3 are not strictly applicable but the
failure to make any adjustment would not fairly protect the purchase rights
represented by this Warrant in accordance with the essential intent and
principles of such sections, then, in each such case, the Company shall appoint
a firm of independent certified public accountants of recognized national
standing (which may be the regular auditors of the Company), which shall give
their opinion upon the adjustment, if any, on a basis consistent with the
essential intent and principles established in sections 2 and 3, necessary to
preserve, without dilution, the purchase
13
<PAGE>
rights represented by this Warrant. Upon receipt of such opinion, the Company
will promptly mail a copy thereof to the holder of this Warrant and shall make
the adjustments described therein.
5. No Dilution or Impairment. The Company will not, by amendment of
-------------------------
its certificate of incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the holder of
this Warrant against dilution or other impairment. Without limiting the
generality of the foregoing, the Company (a) will not permit the par value of
any shares of stock receivable upon the exercise of this Warrant to exceed the
amount payable therefor upon such exercise, (b) will take all such action as may
be necessary or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable shares of stock on the exercise of the
Warrants from time to time outstanding, (c) will not take any action which
results in any adjustment of the Warrant Price if the total number of shares of
Common Stock (or Other Securities) issuable after the action upon the exercise
of all of the Warrants would exceed the total number of shares of Common Stock
(or Other Securities) then authorized by the Company's certificate of
incorporation and available for the purpose of issue upon such exercise, and (d)
will not issue any capital stock of any class which is preferred as to dividends
or as to the distribution of assets upon voluntary or involuntary dissolution,
liquidation or winding-up, unless the rights of the holders thereof shall be
limited to a fixed sum or percentage of par value or a sum determined by
reference to a formula based on a published index of interest rates, an interest
rate publicly announced by a financial institution or a similar indicator of
interest rates in respect of participation in dividends and to a fixed sum or
percentage of par value in any such distribution of assets.
6. Accountants' Report as to Adjustments. In each case of any
-------------------------------------
adjustment or readjustment in the shares of Common Stock (or Other Securities)
issuable upon the exercise of this Warrant, the Company at its expense will
14
<PAGE>
promptly compute such adjustment or readjustment in accordance with the terms of
this Warrant and prepare a report setting forth such adjustment or readjustment
and showing in reasonable detail the method of calculation thereof and the facts
upon which such adjustment or readjustment is based, including a statement of
(a) the consideration received or to be received by the Company for any
Additional Shares of Common Stock issued or sold or deemed to have been issued,
(b) the number of shares of Common Stock outstanding or deemed to be
outstanding, and (c) the Warrant Price in effect immediately prior to such issue
or sale and as adjusted and readjusted (if required by section 2) on account
thereof. The Company will forthwith mail a copy of each such report to each
holder of a Warrant and will, upon the written request at any time of any holder
of a Warrant, furnish to such holder a like report setting forth the Warrant
Price at the time in effect and showing in reasonable detail how it was
calculated. The Company will also keep copies of all such reports at its office
maintained pursuant to subdivision (a) of section 12.2 and will cause the same
to be available for inspection at such office during normal business hours by
any holder of a Warrant or any prospective purchaser of a Warrant designated by
the holder thereof. Upon the written request at any time of any holder of a
Warrant, the Company will cause independent certified public accountants of
recognized national standing (which may be the regular auditors of the Company)
selected by the Company to verify the Company's computations of adjustment or
readjustment of terms of the Warrant (other than any computation of the fair
value of property as determined in good faith by the Board of Directors) and
related reports.
7. Notices of Corporate Action. In the event of
---------------------------
(a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend (other than, for so long as the Company
qualifies as an S corporation for federal income tax purposes, an annual
cash dividend not in excess of the amount equal to the taxable income of
the Company for the preceding calendar year multiplied by the maximum
federal income tax rate on individuals for the preceding calendar year) or
other distribution, or any right
15
<PAGE>
to subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any other right,
or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any consolidation
or merger involving the Company and any other Person or any transfer of all
or substantially all the assets of the Company to any other Person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
the Company will mail to each holder of a Warrant a notice specifying (i) the
date or expected date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right, and (ii) the date or expected date on which any
such reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up is to take place and the time,
if any such time is to be fixed, as of which the holders of record of Common
Stock (or Other Securities) shall be entitled to exchange their shares of Common
Stock (or Other Securities) for the securities or other property deliverable
upon such reorganization, reclassification, recapitalization, consolidation,
merger, transfer, dissolution, liquidation or winding-up. Such notice shall be
mailed at least 45 days prior to the date therein specified.
8. Registration of Common Stock. If any shares of Common Stock
----------------------------
required to be reserved for purposes of exercise of this Warrant require
registration with or approval of any governmental authority under any federal or
state law (other than the Securities Act and applicable state securities laws)
before such shares may be issued upon exercise, the Company will, at its expense
and as expeditiously as possible, use its best efforts to cause such shares to
be duly registered or approved, as the case may be. At any such time as Common
Stock is listed on any national securities exchange, the Company will, at its
expense, obtain promptly and maintain the approval for listing on each such
exchange, upon official notice of issuance, the shares of Common Stock issuable
upon exercise of the then outstanding Warrants and maintain the listing of such
shares after their issuance; and
16
<PAGE>
the Company will also list on such national securities exchange, will register
under the Exchange Act and will maintain such listing of, any Other Securities
that at any time are issuable upon exercise of the Warrants, if and at the time
that any securities of the same class shall be listed on such national
securities exchange by the Company.
9. Restrictions on Transfer. 9.1. Restrictive Legends. Except as
------------------------ -------------------
otherwise permitted by this section 9, each Warrant (including each Warrant
issued upon the transfer of any Warrant) shall be stamped or otherwise imprinted
with a legend in substantially the following form:
"This Warrant and any shares acquired upon the exercise of this
Warrant have not been registered under the Securities Act of 1933 and
may not be transferred in the absence of such registration or an
exemption therefrom under such Act. This Warrant and such shares may
be transferred only in compliance with the conditions specified in
this Warrant."
Except as otherwise permitted by this section 9, each certificate for Common
Stock (or Other Securities) issued upon the exercise of any Warrant, and each
certificate issued upon the transfer of any such Common Stock (or Other
Securities), shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933 and may not be transferred in the
absence of such registration or an exemption therefrom under such Act.
Such shares may be transferred only in compliance with the conditions
specified in certain Common Stock Purchase Warrants issued by
Information Management Associates, Inc. pursuant to the Note and
Warrant Purchase Agreement, dated December 21, 1990, between
Information Management Associates, Inc. and Wand/IMA Investments, L.P.
A complete and correct copy of the form of such Warrant is available
for inspection at the principal office of Information Management
Associates, Inc. and will be furnished to the
17
<PAGE>
holder of such shares upon written request and without charge."
9.2. Notice of Proposed Transfer; Opinions of Counsel. Prior to any
------------------------------------------------
transfer of any Restricted Securities which are not registered under an
effective registration statement under the Securities Act, the holder thereof
will give written notice to the Company of such holder's intention to effect
such transfer and to comply in all other respects with this section 9.2. Each
such notice (a) shall describe the manner and circumstances of the proposed
transfer in sufficient detail to enable counsel to render the opinions referred
to below, and (b) shall designate counsel for the holder giving such notice. The
holder giving such notice will submit a copy thereof to the counsel designated
in such notice, which counsel shall be experienced in securities law matters. If
in the opinion of such counsel the proposed transfer may be effected without
registration of such shares of Restricted Securities under the Securities Act,
the transferring holder's holder shall thereupon be entitled to transfer such
shares in accordance with the terms of the notice delivered by such holder to
the Company. Each certificate representing such shares issued upon or in
connection with such transfer shall bear the restrictive legends required by
section 9.1, unless in the opinion of the transferring holder's counsel and
counsel to the Company (which counsel shall be experienced in securities laws
matters) such restrictive legends are not required or advisable.
The holder of the Restricted Securities seeking transfer thereof will pay the
reasonable fees and disbursements of counsel (other than house counsel) for any
holder of Restricted Securities in connection with all opinions rendered by such
counsel pursuant to this section 9.2 and pursuant to section 9.3.
9.3. Termination of Restrictions. The restrictions imposed by this
---------------------------
section 9 upon the transferability of Restricted Securities shall cease and
terminate as to any particular Restricted Securities (a) when such securities
shall have been effectively registered under the Securities Act, or (b) when, in
the opinions of both counsel for the holder thereof and counsel for the Company
(each of whom shall be experienced in securities laws matters), such
restrictions are no longer required in order to insure compliance with the
Securities Act.
18
<PAGE>
Whenever such restrictions shall cease and terminate as to any Restricted
Securities, the holder thereof shall be entitled to receive from the Company,
without expense (other than applicable transfer taxes, if any), new securities
of like tenor not bearing the applicable legends required by section 9.1.
10. Availability of Information. If the Company shall have filed a
---------------------------
registration statement pursuant to the requirements of section 12 of the
Exchange Act or a registration statement pursuant to the requirements of the
Securities Act, the Company will comply with the reporting requirements of
Sections l3 and 15(d) of the Exchange Act and will comply with all other public
information reporting requirements of the Commission from time to time in effect
and relating to assuring the availability of an exemption from the Securities
Act for the sale of any Restricted Securities pursuant to Rule 144 or any
comparable or similar rule promulgated by the Commission under the Securities
Act. The Company will also cooperate with each holder of any Restricted
Securities in supplying such information as may be necessary for such holder to
complete and file any information reporting forms presently or hereafter
required by the Commission as a condition to the availability of an exemption
from the Securities Act for the sale of any Restricted Securities. The Company
will furnish to each holder of any Warrants, promptly upon their becoming
available, copies of all financial statements, reports, notices and proxy
statements sent or made available generally by the Company to its stockholders,
and, upon the written request of any holder, copies of all regular and periodic
reports and all registration statements and prospectuses filed by the Company
with any securities exchange or with the Commission.
11. Reservation of Stock, etc. The Company will at all times reserve
-------------------------
and keep available, solely for issuance and delivery upon exercise of the
Warrants, the number of shares of Common Stock (or Other Securities) from time
to time issuable upon exercise of all Warrants at the time outstanding. All
shares of Common Stock (or Other Securities) issuable upon exercise of any
Warrants shall be duly authorized and, when issued upon such exercise, shall be
validly issued and, in the case of shares, fully paid and nonassessable with no
liability on the part of the holders thereof.
19
<PAGE>
12. Ownership, Transfer and Substitution of Warrants. l2.1. Ownership
------------------------------------------------ ---------
of Warrants. The Company may treat the person in whose name any Warrant is
- -----------
registered on the register kept at the office of the Company maintained pursuant
to subdivision (a) of section 12.2 as the owner and holder thereof for all
purposes, notwithstanding any notice to the contrary, except that, if and when
any Warrant is properly assigned in blank, the Company may (but shall not be
obligated to) treat the bearer thereof as the owner of such Warrant for all
purposes, notwithstanding any notice to the contrary. Subject to section 9, a
Warrant, if properly assigned, may be exercised by a new holder without a new
Warrant first having been issued.
12.2. Office; Transfer and Exchange of Warrants.
-----------------------------------------
(a) The Company will maintain an office where notices, presentations
and demands in respect of this Warrant may be made upon it. Such office
shall be maintained at 6527 Main Street, Trumbull, CT 066ll, until such
time as the Company shall notify the holders of the Warrants of any change
of location of such office.
(b) Upon the surrender of any Warrant, properly endorsed, for
registration of transfer or for exchange at the office of the Company
maintained pursuant to subdivision (a) of this section 12.2, the Company at
its expense will (subject to compliance with section 9, if applicable)
execute and deliver to or upon the order of the holder thereof a new
Warrant or Warrants of like tenor, in the name of such holder or as such
holder (upon payment by such holder of any applicable transfer taxes) may
direct, calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock called for on the face or faces of the
Warrant or Warrants so surrendered.
12.3. Replacement of Warrants. Upon receipt of evidence reasonably
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant
held by a Person other than the Purchaser or any institutional investor, upon
delivery of indemnity reasonably satisfactory to the Company in form and amount
20
<PAGE>
or, in the case of any such mutilation, upon surrender of such Warrant for
cancellation at the office of the Company maintained pursuant to subdivision (a)
of section 12.2, the Company at its expense will execute and deliver, in lieu
thereof, a new Warrant of like tenor.
13. Registration under Securities Act, etc.
---------------------------------------
13.1. Registration on Request.
-----------------------
(a) Request. At any time or from time to time on the earlier of (x)
-------
December 21, 1995 or (y) the occurrence of an Initial Public Offering, upon
the written request of one or more Initiating Holders, requesting that the
Company effect the registration under the Securities Act of all or part of
such Initiating Holders' Registrable Securities and specifying the intended
method of disposition thereof, the Company will promptly give written
notice of such requested registration to all holders of Registrable
Securities, and thereupon the Company will use its best efforts to effect
the registration under the Securities Act of
(i) the Registrable Securities which the Company has been so
requested to register by such Initiating Holders for disposition in
accordance with the intended method of disposition stated in such
request, and
(ii) all other Registrable Securities the holders of which shall
have made a written request to the Company for registration thereof
within 30 days after the giving of such written notice by the Company
(which request shall specify the intended method of disposition of
such Registrable Securities), and
(iii) subject to the priority provisions of section 13.1(f), all
shares of Common Stock which the Company may elect to register in
connection with the offering of Registrable Securities pursuant to
this Section 13.1; and
(iv) subject to the priority provisions of section 13.1(f),
shares of Common Stock held by other Persons having registration
rights
21
<PAGE>
all to the extent requisite to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities and the
additional shares of Common Stock, if any so to be registered, provided that the
provisions of this section 13.1(a) shall not require the Company to effect more
than two registrations of Registrable Securities.
(b) Registration Statement Form. Registrations under this section 13.1
---------------------------
shall be on such appropriate registration form of the Commission (i) as
-
shall be selected by the Company and, as shall be reasonably acceptable to
the holders of more than 50% (by number of shares) of the Registrable
Securities so to be registered and (ii) as shall permit the disposition of
--
such Registrable Securities in accordance with the intended method or
methods of disposition specified in their request for such registration.
The Company agrees to include in any such registration statement all
information which holders of Registrable Securities being registered shall
reasonably request.
(c) Expenses. The Company will pay all Registration Expenses in
--------
connection with the first registration requested pursuant to this section
13.1 and the holders will pay all Registration Expenses in connection with
the second registration pursuant to this section 13.1. Registration
Expenses (and underwriting discounts and commissions and transfer taxes, if
any) in connection with the second registration statement shall be
allocated pro rata among all Persons on whose behalf securities of the
Company are included in such registration, on the basis of the respective
amounts of the securities then being registered on their behalf.
(d) Effective Registration Statement. A registration requested
--------------------------------
pursuant to this section 13.1 shall not be deemed to have been effected (i)
-
unless a registration statement with respect thereto has become effective,
provided that a registration which does not become effective after the
--------
Company has filed a registration statement with respect thereto solely by
reason of the refusal to proceed of the Initiating Holders (other than a
refusal to proceed based upon the advice of counsel relating to a matter
with respect to the Company) shall be deemed to
22
<PAGE>
have been effected by the Company at the request of such Initiating Holders
unless the Initiating Holders shall have elected to pay all Registration
Expenses in connection with such registration, (ii) if, after it has become
--
effective, such registration is interfered with by any stop order,
injunction or other order or requirement of the Commission or other
governmental agency or court for any reason, or (iii) the conditions to
---
closing specified in the purchase agreement or underwriting agreement
entered into in connection with such registration are not satisfied, other
than by reason of some act or omission by such Initiating Holders.
(e) Selection of Underwriters. If a requested registration pursuant to
-------------------------
this section 13.1 involves an underwritten offering, the underwriter or
underwriters thereof shall be selected by the holders of at least a
majority (by number of shares) of the Registrable Securities as to which
registration has been requested and shall be acceptable to the Company,
which shall not unreasonably withhold its acceptance of such underwriters.
(f) Priority in Requested Registrations. If a requested registration
-----------------------------------
pursuant to this section 13.1 involves an underwritten offering, and the
managing underwriter shall advise the Company in writing (with a copy to
each holder of Registrable Securities requesting registration) that, in its
opinion, the number of securities requested to be included in such
registration (including securities of the Company which are not Registrable
Securities) exceeds the number which can be sold in such offering within a
price range acceptable to the holders of a majority of the Registrable
Securities requested to be included in such registration, the Company will
include in such registration, to the extent of the number which the Company
is so advised can be sold in such offering, (i) first Registrable
Securities requested to be included in such registration, pro rata among
the holders thereof requesting such securities requested to be included by
such holders and (ii) second, securities the Company proposes to sell and
other securities of the Company included in such registration by the
holders thereof.
23
<PAGE>
13.2. Incidental Registration.
-----------------------
(a) Right to Include Registrable Securities. If the Company at any
---------------------------------------
time proposes to register any of its securities under the Securities Act
(other than by a registration on Form S-4 or S-8, or any successor or
similar forms and other than pursuant to section 13.1), whether or not for
sale for its own account, it will each such time give prompt written notice
to all holders of Registrable Securities of its intention to do so and of
such holders' rights under this section 13.2. Upon the written request of
any such holder made within 30 days after the receipt of any such notice
(which request shall specify the Registrable Securities intended to be
disposed of by such holder and the intended method of disposition thereof),
the Company will use its best efforts to effect the registration under the
Securities Act of all Registrable Securities which the Company has been so
requested to register by the holders thereof, to the extent requisite to
permit the disposition (in accordance with the intended methods thereof as
aforesaid) of the Registrable Securities so to be registered, by inclusion
of such Registrable Securities in the registration statement which covers
the securities which the Company proposes to register, provided that if, at
--------
any time after giving written notice of its intention to register any
securities and prior to the effective date of the registration statement
filed in connection with such registration, the Company shall determine for
any reason either not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to each holder of Registrable Securities and, thereupon, (i)
-
in the case of a determination not to register, shall be relieved of its
obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses
in connection therewith), without prejudice, however, to the rights of any
holder or holders of Registrable Securities entitled to do so to request
that such registration be effected as a registration under section 13.1,
and (ii) in the case of a determination to delay registering, shall be
--
permitted to delay registering any Registrable Securities, for the same
period as the delay in registering such
24
<PAGE>
other securities. No registration effected under this section 13.2 shall
relieve the Company of its obligation to effect any registration upon
request under section 13.1. The Company will pay all Registration Expenses
in connection with each registration of Registrable Securities requested
pursuant to this section 13.2.
(b) Priority in Incidental Registrations. If (i) a registration
------------------------------------ -
pursuant to this section 13.2 involves an underwritten offering of the
securities so being registered, whether or not for sale for the account of
the Company, to be distributed (on a firm commitment basis) by or through
one or more underwriters of recognized standing under underwriting terms
appropriate for such a transaction, (ii) the Registrable Securities so
--
requested to be registered for sale for the account of holders of
Registrable Securities are not also to be included in such underwritten
offering (either because the Company has not been requested so to include
such Registrable Securities pursuant to section 13.4(b) or, if requested to
do so, is not obligated to do so under section 13.4(b)), and (iii) the
---
managing underwriter of such underwritten offering shall inform the Company
and holders of the Registrable Securities requesting such registration by
letter of its belief that the distribution of all or a specified number of
such Registrable Securities concurrently with the securities being
distributed by such underwriters would interfere with the successful
marketing of the securities being distributed by such underwriters (such
writing to state the basis of such belief and the approximate number of
such Registrable Securities which may be distributed without such effect),
then the Company may, upon written notice to all holders of such
Registrable Securities, reduce pro rata (if and to the extent stated by
such managing underwriter to be necessary to eliminate such effect) the
number of such Registrable Securities the registration of which shall have
been requested by each holder of Registrable Securities so that the
resultant aggregate number of such Registrable Securities so included in
such registration shall be equal to the number of shares stated in such
managing underwriter's letter.
25
<PAGE>
13.3. Registration Procedures. If and whenever the Company is required
-----------------------
to use its best efforts to effect the registration of any Registrable Securities
under the Securities Act as provided in sections 13.1 and 13.2 the Company
shall, as expeditiously as possible:
(i) prepare and (within 90 days after the end of the period
within which requests for registration may be given to the Company or
in any event as soon thereafter as possible) file with the Commission
the requisite registration statement to effect such registration
(including such audited financial statements as may be required by the
Securities Act or the rules and regulations promulgated thereunder)
and thereafter use its reasonable best efforts to cause such
registration statement to become and remain effective for the time
period required by this Agreement, provided, that before filing such
--------
registration statement or any amendments thereto the Company will
furnish to the counsel selected by the holders of Registrable
Securities which are to be included in such registration copies of all
such documents proposed to be filed, which documents will be subject
to the review of such counsel;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the
Securities Act with respect to the disposition of all securities
covered by such registration statement until the earlier of such time
as all of such securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set
forth in such registration statement or (i) in the case of a
-
registration pursuant to section 13.1, the expiration of 180 days
after such registration statement becomes effective, or (ii) in the
--
case of a registration pursuant to section 13.2, the expiration of 90
days after such registration statement becomes effective, it being
understood that following the expiration of the relevant time period,
the Company shall
26
<PAGE>
have no further obligation to maintain the effectiveness of such
registration statement;
(iii) furnish to each seller of Registrable Securities covered by
such registration statement such number of conformed copies of such
registration statement and of each such amendment and supplement
thereto (in each case including all exhibits), such number of copies
of the prospectus contained in such registration statement (including
each preliminary prospectus and any summary prospectus) and any other
prospectus filed under Rule 424 under the Securities Act, in
conformity with the requirements of the Securities Act, and such other
documents, as such seller may reasonably request in order to
facilitate the public sale or other disposition of the Registrable
Securities owned by such Seller;
(iv) use its reasonable best efforts to register or qualify all
Registrable Securities and other securities covered by such
registration statement under such other securities laws or blue sky
laws of such jurisdictions as any seller thereof and any underwriter
of the securities being sold by such seller shall reasonably request,
to keep such registrations or qualifications in effect for so long as
such registration statement remains in effect, and take any other
action which may be reasonably necessary or advisable to enable such
seller and underwriter to consummate the disposition in such
jurisdictions of the securities owned by such seller, except that the
Company shall not for any such purpose be required to qualify
generally to do business as a foreign corporation in any jurisdiction
wherein it would not but for the requirements of this subdivision (iv)
be obligated to be so qualified, or to consent to general service of
process in any such jurisdiction;
(v) use its best efforts to cause all Registrable Securities
covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the
27
<PAGE>
seller or sellers thereof to consummate the disposition of such
Registrable Securities;
(vi) furnish to each seller of Registrable Securities a
signed counterpart, addressed to such seller (and the
underwriters, if any) of
(x) an opinion of counsel for the Company, dated the
effective date of such registration statement (and, if such
registration includes an underwritten public offering, an opinion
dated the date of the closing under the underwriting agreement),
reasonably satisfactory in form and substance to such seller, and
(y) a "comfort" letter, dated the effective date of such
registration statement (and, if such registration includes an
underwritten public offering, a letter dated the date of the
closing under the underwriting agreement), signed by the
independent public accountants who have certified the Company's
financial statements included in such registration statement,
covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in
the case of the accountants' letter, with respect to events subsequent
to the date of such financial statements, as are customarily covered
in opinions of issuer's counsel and in accountants' letters delivered
to the underwriters in underwritten public offerings of securities
and, in the case of the accountants' letter, such other financial
matters, and, in the case of the legal opinion, such other legal
matters, as such seller (or the underwriters, if any) may reasonably
request;
(vii) notify each seller of Registrable Securities covered
by such registration statement at any time when a prospectus
relating to a registered offering thereof is required to be
delivered under the Securities Act, upon discovery that, or upon
the happening of any event as a result of which, the prospectus
included
28
<PAGE>
in such registration statement, as then in effect, includes an
untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the
circumstances under which they were made, and at the request of
any such seller promptly prepare and furnish to such seller and
each underwriter, if any, a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of
such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under
which they were made;
(viii) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make
available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at
least twelve months, but not more than eighteen months, beginning
with the first full calendar month after the effective date of
such registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act,
and will furnish to each such seller at least five business days
prior to the filing thereof a copy of any amendment or supplement
to such registration statement or prospectus and shall not file
any thereof to which any such seller shall have reasonably
objected on the grounds that such amendment or supplement does
not comply in all material respects with the requirements of the
Securities Act or of the rules or regulations thereunder;
29
<PAGE>
(ix) enter into such agreements and take such other actions
as sellers of such Registrable Securities holding 51% of the
shares so to be sold shall reasonably request in order to
expedite or facilitate the disposition of such Registrable
Securities;
(x) use its reasonable best efforts to list all Registrable
Securities covered by such registration statement on any
securities exchange on which any of the Registrable Securities
are then listed.
The Company may require each seller of Registrable Securities as to which any
registration is being effected to furnish the Company such information regarding
such seller and the distribution of such securities as the Company may from time
to time reasonably request in writing.
Each holder of Registrable Securities agrees by acquisition of
such Registrable Securities that, upon receipt of any notice from the Company of
the occurrence of any event of the kind described in subdivision (vii) of this
section 13.3, such holder will forthwith discontinue such holder's disposition
of Registrable Securities pursuant to the registration statement relating to
such Registrable Securities until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (vii) of this
section 13.3 and, if so directed by the Company, will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies, then in
such holder's possession of the prospectus relating to such Registrable
Securities current at the time of receipt of such notice. In the event the
Company shall give any such notice, the period mentioned in paragraph (ii) of
this section 13.3 shall be extended by the length of the period from and
including the date when each seller of any Registrable Securities covered by
such registration statement shall have received such notice to the date on which
each such seller has received the copies of the supplemented or amended
prospectus contemplated by paragraph (vii) of this section 13.3.
If any such registration or comparable statement refers to any
holder of Registrable Securities by name or otherwise as the holder of any
securities of the
30
<PAGE>
Company then such holder shall have the right to require (i) the insertion
-
therein of language, in form and substance satisfactory to such holder, to the
effect that the holding by such holder of such securities is not construed as a
recommendation by such holder of the investment quality of the Company's
securities covered thereby and that such holding does not imply that such holder
will assist in meeting any future financial requirements of the Company, or (ii)
--
in the event that such reference to such holder by name or otherwise is not
required by the Securities Act or any similar federal statute or the rules and
regulations promulgated thereunder then in force, the deletion of the reference
to such holder.
13.4. Underwritten Offerings.
----------------------
(a) Requested Underwritten Offerings. If requested by the underwriters
--------------------------------
for any underwritten offering by holders of Registrable Securities pursuant
to a registration requested under section 13.1, the Company will enter into
an underwriting agreement with such underwriters for such offering, such
agreement to be satisfactory in substance and form to the Company, each
such holder and the underwriters, and to contain such representations and
warranties by the Company and such other terms as are generally prevailing
in agreements of this type, including, without limitation, indemnities to
the effect and to the extent provided in section 13.7. The holders of the
Registrable Securities will cooperate with the Company in the negotiation
of the underwriting agreement and will give consideration to the reasonable
suggestions of the Company regarding the form thereof, provided that
--------
nothing herein contained shall diminish the foregoing obligations of the
Company. The holders of Registrable Securities to be distributed by such
underwriters shall be parties to such underwriting agreement and may, at
their option, require that any or all of the representations and warranties
by, and the other agreements on the part of, the Company to and for the
benefit of such underwriters shall also be made to and for the benefit of
such holders of Registrable Securities and that any or all of the
conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions
31
<PAGE>
precedent to the obligations of such holders of Registrable Securities. Any
such holder of Registrable Securities shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding
such holder, such holder's Registrable Securities and such holder's
intended method of distribution and any other representation required by
law.
(b) Incidental Underwritten Offerings. If the Company at any time
---------------------------------
proposes to register any of its securities under the Securities Act as
contemplated by section 13.2 and such securities are to be distributed by
or through one or more underwriters, the Company will, if requested by any
holder of Registrable Securities as provided in section 13.2 and subject to
the provisions of section 13.2(b), use its best efforts to arrange for such
underwriters to include all the Registrable Securities to be offered and
sold by such holder among the securities to be distributed by such
underwriters, provided that if the managing underwriter of such
--------
underwritten offering shall inform the holders of the Registrable
Securities requesting such registration and the holders of any other shares
of securities which shall have exercised, in respect of such underwritten
offering, registration rights comparable to the rights under section 13.2
by letter of its belief that inclusion in such underwritten distribution of
all or a specified number of such Registrable Securities or of such other
shares of securities so requested to be included would interfere with the
successful marketing of the securities (other than such Registrable
Securities and other shares of securities so requested to be included) by
the underwriters (such writing to state the basis of such belief and the
approximate number of such Registrable Securities and shares of other
securities so requested to be included which may be included in such
underwritten offering without such effect), then the Company may, upon
written notice to all holders of such Registrable Securities and of such
other shares of securities so requested to be included, exclude pro rata
from such underwritten offering (if and to the extent stated by such
managing underwriter to be necessary to eliminate such effect) the number
of such Registrable Securities
32
<PAGE>
and shares of such other securities so requested to be included the
registration of which shall have been requested by each holder of
Registrable Securities and by the holders of such other securities, so that
the resultant aggregate number of such Registrable Securities and of such
other shares of securities so requested to be included which are included
in such underwritten offering shall be equal to the approximate number of
shares stated in such managing underwriter's letter. The holders of
Registrable Securities to be distributed by such underwriters shall be
parties to the underwriting agreement between the Company and such
underwriters and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of,
the Company to and for the benefit of such underwriters shall also be made
to and for the benefit of such holders of Registrable Securities and that
any or all of the conditions precedent to the obligations of such
underwriters under such underwriting agreement be conditions precedent to
the obligations of such holders of Registrable Securities. Any such holder
of Registrable Securities shall not be required to make any representations
or warranties to or agreements with the Company or the underwriters other
than representations, warranties or agreements regarding such holder, such
holder's Registrable Securities and such holder's intended method of
distribution and any other representation required by law.
(c) Holdback Agreements.
-------------------
(i) Each holder of Registrable Securities agrees by acquisition
of such Registrable Securities, if so required by the managing
underwriter, not to effect any public sale or distribution of any
equity securities of the Company, during the seven days prior to and
the 90 days after any underwritten registration pursuant to section
13.1 or 13.2 has become effective, except as part of such underwritten
registration, whether or not such holder participates in such
registration.
33
<PAGE>
(ii) The Company agrees (x) if so required by the managing
-
underwriter not to effect any public sale or distribution of its
equity securities or securities convertible into or exchangeable or
exercisable for any of such securities during the seven days prior to
and the 90 days after any underwritten registration pursuant to
section 13.1 or 13.2 has become effective, except as part of such
underwritten registration and except pursuant to registrations on Form
S-4 and S-8, or any successor or similar forms thereto, and (y) to
-
cause each holder of its equity securities or any securities
convertible into or exchangeable or exercisable for any of such
securities, in each case purchased from the Company at any time after
the date of this Agreement (other than in a public offering) to agree
not to effect any such public sale or distribution of such securities
during such period.
13.5. Preparation; Reasonable Investigation. In connection with the
-------------------------------------
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company will give the holders of Registrable
Securities registered under such registration statement, their underwriters, if
any, and their respective counsel and accountants, the opportunity to
participate in the preparation of such registration statement, each prospectus
included therein or filed with the Commission, and each amendment thereof or
supplement thereto, and will give each of them such access to its books and
records and such opportunities to discuss the business of the Company with its
officers and the independent public accountants who have certified its financial
statements as shall be necessary, in the opinion of such holders' and such
underwriters' respective counsel, to conduct a reasonable investigation within
the meaning of the Securities Act.
13.6. Indemnification.
---------------
(a) Indemnification by the Company. In the event of any registration
------------------------------
of any securities of the Company under the Securities Act pursuant to this
Section 13, the Company will indemnify and hold harmless the holder of any
Registrable Securities covered by such registration statement, its direc-
34
<PAGE>
tors, officers, agents, employees, general partners, limited partners,
each other Person who participates as an underwriter in the offering or
sale of such securities and each other Person, if any, who controls such
holder or any such underwriter within the meaning of the Securities Act,
against any losses, claims, damages or liabilities, joint or several, to
which such holder or Requesting Holder or any such director, officer,
agent, employee, general partner, limited partner or underwriter or
controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions or proceedings, whether commenced or threatened, in respect
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration
statement under which such securities were registered under the Securities
Act, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and the
Company will reimburse such holder, and each such director, officer, agent,
employee, general partner, limited partner, underwriter and controlling
person for any reasonable legal or any other expenses reasonably incurred
by them in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided that the Company shall not be
--------
liable in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information
furnished to the Company through an instrument duly executed by such holder
specifically stating that it is for use in the preparation thereof and,
provided further that the Company shall not be liable to any Person who
-------- -------
participates as an underwriter, in the offering or sale of Registrable
Securities or to any other Person, if any, who controls such underwriter
within the meaning of the Securities Act, in any
35
<PAGE>
such case to the extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense arises out of such
Person's failure to send or give a copy of the final prospectus, as the
same may be then supplemented or amended, within the time required by the
Securities Act to the Person asserting an untrue statement or alleged
untrue statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such Person if such
statement or omission was corrected in such final prospectus. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such holder or such Requesting Holder
or any such director, officer, agent, employee, general partner, limited
partner, underwriter or controlling person and shall survive the transfer
of such securities by such holder.
(b) Indemnification by the Sellers. In the event of any registration
------------------------------
of Registrable Securities under the Securities Act pursuant to this Section
13, each seller of Registrable Securities will (severally and not jointly)
indemnify and hold harmless (in the same manner and to the same extent as
set forth in subdivision (a) of this section 13.7) the Company, each
director of the Company, each officer of the Company and each other person,
if any, who controls the Company within the meaning of the Securities Act,
with respect to any statement or alleged statement in or omission or
alleged omission from such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or
any amendment or supplement thereto, if such statement or alleged statement
or omission or alleged omission was made in reliance upon and in conformity
with written information furnished to the Company through an instrument
duly executed by such seller specifically stating that it is for use in the
preparation of such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement. Such indemnity
shall remain in full force and effect, regardless of any investigation made
by or on behalf of the Company or any such director, officer or controlling
person and shall survive the transfer of such securities by such seller.
36
<PAGE>
(c) Notices of Claims, etc. Promptly after receipt by an indemnified
----------------------
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this section 13.7, such
indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the
commencement of such action, provided that the failure of any indemnified
--------
party to give notice as provided herein shall not relieve the indemnifying
party of its obligations under the preceding subdivisions of this section
13.7, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such action is
brought against an indemnified party, unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, the indemnifying
party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified, to
the extent that the indemnifying party may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the consent of
the indemnified party, consent to entry of any judgment or enter into any
settlement of any such action which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified
party of a release from all liability in respect to such claim or
litigation. No indemnified party shall consent to entry of any judgment or
enter into any settlement of any such action the defense of which has been
assumed by an indemnifying party without the consent of such indemnifying
party.
37
<PAGE>
(d) Other Indemnification. Indemnification similar to that specified
---------------------
in the preceding subdivisions of this section 13.7 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification
of securities under any Federal or state law or regulation of any
governmental authority, other than the Securities Act.
(e) Indemnification Payments. The indemnification required by this
------------------------
section 13.7 shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred.
(f) Contribution. If for any reason the indemnification provided for
------------
in the preceding paragraphs of this Section 13 is unavailable to an
indemnified party or is insufficient to hold it harmless as contemplated by
the preceding clauses (a) and (b), then the indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim, damage,
liability or expense in such proportion as is appropriate to reflect not
only the relative benefits received by the indemnified party and the
indemnifying party, but also the relative fault of the indemnified party
and the indemnifying party in connection with the actions which resulted in
such loss, claim, damage, liability or expense, as well as any other
relevant equitable considerations. The relative fault of such indemnifying
party and indemnified party shall be determined by reference to, among
other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission
to state a material fact, has been made by, or relates to information
supplied by, such indemnifying party or indemnified party, and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such action. The amount paid or payable by a party as a
result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include any legal or other fees or expenses
reasonably incurred
38
<PAGE>
by such party in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 13(f) were determined by pro rata
allocation or by any other method of allocation which does not take into
account the equitable considerations referred to in the immediately
preceding paragraph. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation. No holder of Registrable Securities shall be
required to contribute in an amount greater than the dollar amount of
proceeds received by such holder with respect to the sale of such holder's
Registrable Securities.
13.7. Other Registration Rights
-------------------------
The Company shall not enter into any agreement or arrangement to provide any
Person with registration rights that are inconsistent with the registration and
other rights provided hereunder to holders of the Warrants.
14. Definitions. As used herein, unless the context otherwise
-----------
requires, the following terms have the following respective meanings:
Additional Shares of Common Stock: All shares (including treasury
---------------------------------
shares) of Common Stock issued or sold (or, pursuant to section 2.3 or 2.4,
deemed to be issued) by the Company after the date hereof, whether or not
subsequently reacquired or retired by the Company, other than
(a) shares issued upon the exercise of the Warrants,
(b) such additional number of shares as may become issuable upon the
exercise of any of the securities referred to in the foregoing clause (a)
by reason of adjustments required pursuant to antidilution provisions
applicable to such securities as in effect on the date hereof, but only if
and to the extent that such adjustments are required as the result of the
original issuance of the Warrants, and
39
<PAGE>
(c) such additional number of shares as may become issuable upon the
exercise of any of the securities referred to in the foregoing clause (a)
by reason of adjustments required pursuant to antidilution provisions
applicable to such securities as in effect on the date hereof, in order to
reflect any subdivision or combination of Common Stock, by reclassification
or otherwise, or any dividend on Common Stock payable in Common Stock.
Business Day: Any day other than a Saturday or a Sunday or a day on
------------
which commercial banking institutions in the City of New York or the state of
Connecticut are authorized by law to be closed. Any reference to "days" (unless
Business Days are specified) shall mean calendar days.
Commission: The Securities and Exchange Commission or any other
----------
federal agency at the time administering the Securities Act.
Common Stock: As defined in the introduction to this Warrant, such
------------
term to include any stock into which such Common Stock shall have been changed
or any stock resulting from any reclassification of such Common Stock, and all
other stock of any class or classes (however designated) of the Company the
holders of which have the right, without limitation as to amount, either to all
or to a share of the balance of current dividends and liquidating dividends
after the payment of dividends and distributions on any shares entitled to
preference.
Company: As defined in the introduction to this Warrant, such term to
-------
include any corporation which shall succeed to or assume the obligations of the
Company hereunder in compliance with section 3.
Convertible Securities: Any evidences of indebtedness, shares of stock
----------------------
(other than Common Stock) or other securities directly or indirectly convertible
into or exchangeable for Additional Shares of Common Stock.
Current Market Price: On any date specified herein, the average daily
--------------------
Market Price during the period of the most recent 20 days, ending on such date,
on which the national securities exchanges were open for trading, except that if
no Common Stock is then listed or admitted to trading on any national securities
exchange or quoted
40
<PAGE>
in the over-the-counter market, the Current Market Price shall be the Market
Price on such date.
Exchange Act: The Securities Exchange Act of 1934, or any similar
------------
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
Independent Financial Expert: means a nationally recognized investment
----------------------------
banking firm, ranking in the top twenty (as determined by the Securities
Industries Association, Inc. or a similar securities information data company)
as lead manager for primary common stock offerings in the year prior to the year
in which it is called upon to give independent financial advice to the Company
as described herein and that does not (and whose directors, officers, employees
and Affiliates do not) have a direct or indirect financial interest in the
Company or any of its Affiliates, that has not been, since the beginning of the
year prior to the year in which it is called upon to give independent financial
advice to the Company as described herein, and at the time it is called upon to
give independent financial advice to the Company is not (and none of whose
directors, officers, employees or Affiliates is) a promoter, director or officer
of the Company or any of its Affiliates and that does not provide any advice or
opinions to the Company or any of its Affiliates except as an Independent
Financial Expert. The Company will bear the expense of compensation of the
Independent Financial Expert for services or opinions it may provide in that
capacity.
Initial Public Offering: An Initial Public Offering shall mean the
-----------------------
first time a registration statement filed under the Securities Act with the
Securities Exchange Commission (other than a registration statement on Form S-8,
or any successor form thereto, with respect to the issuance of Common Stock (or
securities convertible into or exchangeable for Common Stock or rights to
acquire Common Stock) granted or to be granted to employees, officers or
directors of the Company pursuant to any employee stock option plan, unless as a
result thereof the Company would be required to file reports with respect to any
of its equity securities with the Securities Exchange Commission) respecting an
offering, whether primary or secondary, of Common Stock is declared effective by
the Securities Exchange Commission.
41
<PAGE>
Initiating Holders: Any holder or holders of Registrable Securities
------------------
holding at least 66 2/3% of the Registrable Securities (by number of shares or,
in the case of any debt securities which may be Other Securities, 66 2/3% of the
outstanding principal amount of such securities) and initiating a request
pursuant to section 13.1 for the registration of all or part of such holder's or
holders' Registrable Securities.
Market Price: On any date specified herein, the amount per share of
------------
the Common Stock, equal to (a) the last sale price of such Common Stock, regular
way, on such date or, if no such sale takes place on such date, the average of
the closing bid and asked prices thereof on such date, in each case as
officially reported on the principal national securities exchange on which such
Common Stock is then listed or admitted to trading, or (b) if such Common Stock
is not then listed or admitted to trading on any national securities exchange
but is designated as a national market system security by the NASD, the last
trading price of the Common Stock on such date, or (c) if there shall have been
no trading on such date or if the Common Stock is not so designated, the average
of the closing bid and asked prices of the Common Stock on such date as shown by
the NASD automated quotation system, or (d) if such Common Stock is not then
listed or admitted to trading on any national exchange or quoted in the
over-the-counter market, the higher of (x) the book value thereof as determined
by any firm of independent public accountants of recognized standing selected by
the Board of Directors of the Company as of the last day of any month ending
within 60 days preceding the date as of which the determination is to be made or
(y) the fair value thereof determined in good faith by the Board of Directors of
the Company as of a date which is within 18 days of the date as of which the
determination is to be made.
NASD: The National Association of Securities Dealers, Inc.
----
Notes: The 15% Senior Subordinated Notes, due December 1997, of this
-----
Company originally issued in the aggregate principal amount of $1.6 million
pursuant to the Purchase Agreement, such term to include any such notes issued
in substitution for such notes.
42
<PAGE>
Options: Rights, options or warrants to subscribe for, purchase or
-------
otherwise acquire either Additional Shares of Common Stock or Convertible
Securities.
Other Securities: Any stock (other than Common Stock) and other
----------------
securities of the Company or any other Person (corporate or otherwise) which the
holders of the Warrants at any time shall be entitled to receive, or shall have
received, upon the exercise of the Warrants, in lieu of or in addition to Common
Stock, or which at any time shall be issuable or shall have been issued in
exchange for or in replacement of Common Stock or Other Securities pursuant to
section 3 or otherwise.
Person: A corporation, an association, a partnership, an organization,
------
a business, an individual, a government or political subdivision thereof or a
governmental agency.
Purchase Agreement: As defined in the introduction to this Warrant.
------------------
Purchaser: As defined in the introduction to this Warrant.
---------
Registrable Securities: (a) any shares of Common Stock or Other
----------------------
Securities issued or issuable upon exercise of the Warrants originally issued in
connection with the issue and sale by the Company of the Notes pursuant to the
Purchase Agreement and (b) any securities issued or issuable with respect to any
securities referred to in the foregoing subdivision by way of stock dividend or
stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization or otherwise. As to any particular
Registrable Securities, once issued such securities shall cease to be
Registrable Securities when (a) a registration statement with respect to the
sale of such securities shall have become effective under the Securities Act and
such securities shall have been disposed of in accordance with such registration
statement, (b) they shall have been distributed to the public pursuant to Rule
144 (or any successor or similar provision) under the Securities Act, (c) they
shall have been otherwise transferred, new certificates for them not bearing a
legend restricting further transfer shall have been delivered by the Company and
subsequent disposition of them shall not require registration or qualification
of them
43
<PAGE>
(other than by the issuer, an underwriter or an affiliate [as such term is
defined in the Securities Act and the regulations promulgated thereunder] of the
issuer) under the Securities Act or any similar state law then in force, or (d)
-
they shall have ceased to be outstanding.
Registration Expenses: All expenses incident to the Company's
---------------------
performance of or compliance with section 13, including, without limitation, all
registration, filing and NASD fees, all fees and expenses of complying with
securities or blue sky laws, all word processing, duplicating and printing
expenses, messenger and delivery expenses, the fees and disbursements of counsel
for the Company and of its independent public accountants, including the
expenses of any special audits or "cold comfort" letters required by or incident
to such performance and compliance, the reasonable fees and disbursements of any
counsel and accountants retained by the holder or holders of more than 51% of
the Registrable Securities being registered, premiums and other costs of
policies of insurance (if any) against liabilities arising out of the public
offering of the Registrable Securities being registered or officers and
directors insurance and any fees and disbursements of underwriters customarily
paid by issuers or sellers of securities, but excluding underwriting discounts
and commissions and transfer taxes, if any.
Restricted Securities: All of the following: (a) any Warrants bearing
---------------------
the applicable legend or legends referred to in section 9.1, (b) any shares of
Common Stock (or Other Securities) which have been issued upon the exercise of
Warrants and which are evidenced by a certificate or certificates bearing the
applicable legend or legends referred to in such section and (c) unless the
context otherwise requires, any shares of Common Stock (or Other Securities)
which are at the time issuable upon the exercise of Warrants and which, when so
issued, will be evidenced by a certificate or certificates bearing the
applicable legend or legends referred to in such section.
Securities Act: The Securities Act of 1933, or any similar federal
--------------
statute, and the rules and regulations of the Commission thereunder all as the
same shall be in effect at the time.
Transfer: Any sale, assignment, pledge or other disposition of any
--------
security, or of any interest
44
<PAGE>
therein, which could constitute a "sale" as that term is defined in section 2(3)
of the Securities Act.
Value Report: A valuation report rendered by an Independent Financial
------------
Expert pursuant to Section 15 or Section 16 of this Agreement.
Warrant Price: As defined in section 2.1.
-------------
Warrants: As defined in the introduction to this Warrant.
--------
15. Determinations of Value By the Board of Directors. Wherever this
-------------------------------------------------
Agreement provides for the Board of Directors to make a good faith determination
of value, the procedures set forth in this section 15 shall be applicable. The
Company shall promptly (but in no event more than ten Business Days thereafter)
provide written notice (the "Valuation Notice") to each Warrant holder of each
determination of value or fair value made by the Board of Directors pursuant to
the terms of this Agreement. The Valuation Notice shall state the Board's
conclusions as to value, the purpose of the valuation (including designation of
the provision of this Agreement requiring the determination), and a summary of
the method used by the Board to reach its conclusions.
If requested in writing by any holder or holders of Registrable
Securities holding at least a majority of the Registrable Securities within 30
days of the date of the Valuation Notice, the Company will appoint, at the
Company's expense, an Independent Financial Expert to review and render a Value
Report concerning the Board of Directors Valuation. The conclusions of the
Independent Financial Expert shall be final and binding on the Company and the
Registrable Holders.
16. Company Obligation to Repurchase.
--------------------------------
(a) Repurchase Option. Any holder or holders of Registrable Securities
-----------------
holding at least a majority of the Registrable Securities may require the
Company to repurchase (the "Repurchase Option") all or any part of the
Registrable Securities if on or before December 21, 1996, there has not
been an Initial Public Offering.
(b) Repurchase Option Price. Upon an election
-----------------------
45
<PAGE>
by a holder or holders of Warrants pursuant to section 16(a), the Company
shall repurchase the Warrants designated by holders desiring to effect the
repurchase at a price equal to or greater than (i) the value of the Common
Stock into which the Warrant is exercisable less (ii) the Warrant Price
then in effect and relating to such number of shares of Common Stock (such
net price being the "Repurchase Price"). The value of such Common Stock
shall be determined by an Independent Financial Expert (to be selected as
provided below in section 16(d)) using one or more valuation methods that
the Independent Financial Expert in its professional judgment determines to
be most appropriate but without giving effect to the discount for any lack
of liquidity of the Common Stock or to the fact that the Company may have
no class of equity securities registered under the Securities Exchange Act
of 1934. The Independent Financial Expert shall deliver, promptly upon
completion, to the Company and to each of the holders exercising the
Repurchase Option a Value Report stating the method of valuation considered
or used and the value of said Common Stock as of the Valuation Date and
containing a statement as to the nature and scope of the examination or
investigation upon which the determination of value was made.
The Independent Financial Expert shall consult with management of the
Company in order to allow management to provide information and data
relevant to, and comment on the proposed value of, such Independent
Financial Expert's report to the Company. The Independent Financial Expert
may revise its Value Report based on such consultation provided that the
final value shall reflect both the initial valuation and the determination
to revise it. If the Independent Financial Expert becomes aware of any
material changes since the Valuation Date in the business or financial
conditions or prospects of the Company, such Independent Financial Expert
shall specify such material changes in the Value Report.
(c) Valuation Date. The "Valuation Date" with respect to any
--------------
Repurchase Option shall mean the date five Business Days prior to the date
of the holder's or holders' written notice to the Company of the election
to exercise the Repurchase Option stated in this section 16.
46
<PAGE>
(d) Procedures.
----------
(i) Any holder or holders electing a Repurchase Option pursuant
to Section 16(a) shall give written notice of such election (the
"Repurchase Notice") to the Company. The Repurchase Notice shall
include the name of the holders electing the Repurchase Option (the
"Electing Holders") and the number of shares (by holder) that the
Company shall be required at that time to repurchase.
(ii) Within five Business Days of its receipt of the Repurchase
Notice, the Company shall give written notice to each Electing Holder
of the Company's choice of an Independent Financial Expert to prepare
the Value Report. Within five Business Days after the date of this
notice, Electing Holders owning a majority of the shares identified in
the Repurchase Notice shall notify the Company in writing (the
"Holders' IFE Notice") of their approval or disapproval of the
Company's initial choice of Independent Financial Expert and, in the
event of disapproval, such holders shall propose an alternative firm
as Independent Financial Expert. Within two Business Days after its
receipt of the Holders' IFE Notice, the Company shall notify the
Electing Holders of its approval or disapproval of their selection. If
the Company does not accept the Independent Financial Expert chosen by
the Electing Holders, then the two Independent Financial Experts
previously selected pursuant to this section shall promptly be
requested by the Company and the Electing Holders to jointly select a
firm to act as Independent Financial Expert to prepare the Value
Report. Their joint selection, which shall be made within five
Business Days, shall be final and binding upon both the Company and
the Electing Holders.
(iii) The Company shall consult and cooperate with the selected
Independent Financial Expert to facilitate the final delivery of its
Value Report no later than sixty calendar days after the date of the
Repurchase Notice. The
47
<PAGE>
Value Report shall be final and binding upon both the Company and the
Electing Holders.
(iv) The Company shall pay the Repurchase Price in immediately
available funds to the holder or holders electing the Repurchase
Option within sixty calendar days of the delivery of the Value Report.
17. Remedies. The Company stipulates that the remedies at law of the
--------
holder of this Warrant in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate and that, to the fullest extent
permitted by law, such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.
18. No Rights or Liabilities as Stockholder. Nothing contained in this
---------------------------------------
Warrant shall be construed as conferring upon the holder hereof any rights as a
stockholder of the Company or as imposing any obligation on such holder to
purchase any securities or as imposing any liabilities on such holder as a
stockholder of the Company, whether such obligation or liabilities are asserted
by the Company or by creditors of the Company.
19. Notices. All notices and other communications under this Warrant
-------
shall be in writing and shall be mailed by registered or certified mail, return
receipt requested, addressed (a) if to any holder of any Warrant, at the
registered address of such holder as set forth in the register kept at the
principal office of the Company, or (b) if to the Company, to the attention of
its President at its office maintained pursuant to subdivision (a) of section
12.2, provided that the exercise of any Warrant shall be effective in the manner
--------
provided in section 1.
20. Miscellaneous. This Warrant and any term hereof may be changed,
-------------
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of the State of New York. The section headings
48
<PAGE>
in this Warrant are for purposes of convenience only and shall not constitute a
part hereof.
INFORMATION MANAGEMENT ASSOCIATES, INC.
By: /s/ Albert R. Subbloie
----------------------
Albert R. Subbloie
President
49
<PAGE>
FORM OF SUBSCRIPTION
--------------------
[To be executed only upon exercise of Warrant]
To Information Management Associates, Inc.
The undersigned registered holder of the within Warrant hereby
irrevocably exercises such Warrant for, and purchases thereunder, _____* shares
of Common Stock of Information Management Associates, Inc. and herewith makes
payment of $ therefor, and requests that the certificates for such shares
be issued in the name of, and delivered to , whose address is .
Dated:
----------------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
-----------------------------------
(Street Address)
-----------------------------------
(City) (State) (Zip Code)
- ---------------
* Insert here the number of shares called for on the face of this Warrant
(or, in the case of a partial exercise, the portion thereof as to which
this Warrant is being exercised), in either case without making any
adjustment for Additional Shares of Common Stock or any other stock or
other securities or property or cash which, pursuant to the adjustment
provisions of this Warrant, may be delivered upon exercise. In the case of
a partial exercise, a new Warrant or Warrants will be issued and
delivered, representing the unexercised portion of the Warrant, to the
holder surrendering the Warrant.
50
<PAGE>
FORM OF ASSIGNMENT
------------------
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of the within
Warrant hereby sells, assigns and transfers unto the right represented by
such Warrant to purchase shares of Common Stock of Information Management
Associates, Inc. to which such Warrant relates, and appoints Attorney to
make such transfer on the books of Information Management Associates, Inc.
maintained for such purpose, with full power of substitution in the premises.
Dated:
------------------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
-----------------------------------
(Street Address)
-----------------------------------
(City) (State) (Zip Code)
Signed in the presence of:
- ----------------------------
51
<PAGE>
EXHIBIT 10.13
INFORMATION MANAGEMENT ASSOCIATES, INC.
AMENDMENT NO. 1
TO
COMMON STOCK PURCHASE WARRANT
This Agreement is made as of June 1, 1994 by and between Information
Management Associates, Inc., a Connecticut corporation (the "Company") and
Thomas F. Hill ("Hill").
WHEREAS, Hill is currently the holder of a Warrant (No. W-3) initially
entitling Hill to purchase 2,381 shares of common stock at $9 per share (subject
to adjustment upon the occurrence of certain events) (the "Hill Warrant");
WHEREAS, Mercury Asset Management plc, acting as agent on behalf of
certain of its managed accounts (the "Managed Accounts"), is purchasing pursuant
to a Stock Purchase Agreement (the "Stock Purchase Agreement"), of even date
herewith, 117,778 shares of common stock from certain significant shareholders
of the Company; and
WHEREAS, in order to facilitate the transactions contemplated by the
Stock Purchase Agreement, the Company and Hill desire to amend the terms of the
Hill Warrant;
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
parties hereto agree as follows and the Hill Warrant (No. W-3) is hereby amended
as hereinafter set forth:
<PAGE>
SECTION 1
Representations and Warranties of the Company
The Company hereby represents and warrants to Hill as follows:
1.1 Authority and Validity. The execution, delivery and performance of
----------------------
this Amendment to the Hill Warrant and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of the Company. This Amendment to the Hill Warrant
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 Amendment to the Hill Warrant, 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 provisions of its Charter 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 judgment, order, writ, injunction or decree of any court,
administrative agency or governmental body applicable to Company.
SECTION 2
Amendments to Warrant
The terms and conditions of the Hill Warrant (No. W-3) are hereby
amended as follows:
2.1 Definitions. The definitions of "Initiating Holders." "Registrable
-----------
Securities" and "Warrants" set forth in Section 14 of the Hill Warrant are
hereby deleted in their entirety and the following revised definitions are
substituted therefor:
"Initiating Holders: Any holder or holders of Registrable Securities
------------------
holding at least
2
<PAGE>
40% of the Registrable Securities (by number of shares or, in the case of any
debt securities which may be Other Securities, 40% of the outstanding principal
amount of such securities) and initiating a request pursuant to section 13.1 for
the registration of all or part of such holder's or holders' Registrable
Securities."
"Registrable Securities: (a) any shares of Common Stock or Other
----------------------
Securities issued or issuable upon exercise of the Warrants; (b) the shares of
Common Stock issued to Purchaser pursuant to the Stock Purchase Agreement, dated
October 29, 1991, between the Company and Purchaser; (c) the shares of Common
Stock issued to Purchaser pursuant to the Stock Purchase Agreement, dated
September 4, 1991 between the Company and the Purchaser; and (d) any securities
issued or issuable with respect to any securities referred to in the foregoing
subdivisions by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise. As to any particular Registrable Securities, once
issued such securities shall cease to be Registrable Securities when (a) a
registration statement with respect to the sale of such securities shall have
become effective under the Securities Act and such securities shall have been
disposed of in accordance with such registration statement, (b) they shall have
been distributed to the public pursuant to Rule 144 (or any successor or similar
provision) under the Securities Act, (c) they shall have been otherwise
transferred, new certificates for them not bearing a legend restricting further
transfer shall have been delivered by the Company and subsequent disposition of
them immediately thereafter shall not require registration or qualification of
them (other than by the issuer, an underwriter or an affiliate) [as such terms
are defined in the Securities Act and the regulations promulgated thereunder] of
the issuer) under the Securities Act or any similar
3
<PAGE>
state law then in force, or (d) they shall have ceased to be outstanding."
"Warrants: (i) the Common Stock Purchase Warrants originally issued
--------
pursuant to the Purchase Agreement (including any warrants issued in
substitution therefor), (ii) this Common Stock Purchase Warrant, (iii) an
additional Common Stock Purchase Warrant, dated October 29, 1991, No. W-5,
issued by the Company to Wand Partners Inc., initially covering 2,068 shares
of Common Stock and (iv) an additional Common Stock Purchase Warrant, dated
October 29, 1991, No. W-4, issued by the Company to the Purchaser, initially
covering 14,812 shares of Common Stock."
2.2 Effect of Amendment. Except as amended hereby, all provisions of
-------------------
the Hill Warrant shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment as of the date and year first above written.
INFORMATION MANAGEMENT
ASSOCIATES, INC.
By: /s/ Gary R. Martino
----------------------
Name: Gary R. Martino
Title: Vice President
THOMAS F. HILL
By: /s/ Thomas F. Hill
----------------------
Name:
4
<PAGE>
Exhibit 10.14
INFORMATION MANAGEMENT ASSOCIATES, INC.
AMENDMENT NO. 2
TO
COMMON STOCK PURCHASE WARRANT
-----------------------------
This Agreement is made as of November 16, 1994 by and between
Information Management Associates, Inc., a Connecticut corporation (the
"Company") and Thomas F. Hill ("Hill").
WHEREAS, Hill is currently the holder of a Warrant (No. W-3) initially
entitling Hill to purchase 2,381 shares of common stock at $9.00 per share
(subject to adjustment upon the occurrence of certain events) (the "Hill
Warrant");
WHEREAS, the Hill Warrant was previously amended as of June 1, 1994;
WHEREAS, the Company and Hill desire to further amend the terms of the
Hill Warrant;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein and for other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto agree as follows and the Hill Warrant
(No. W-3) is hereby amended as hereinafter set forth.
SECTION 1. AMENDMENTS TO WARRANT
The terms and conditions of the Hill Warrant (No. W-3) are hereby
amended as follows:
1.1 Section 1.1 is hereby amended by inserting immediately following
the reference therein to "section 1.5" the phrase "or section 1.6".
1.2 The following is hereby added as section 1.6:
"1.6 Payment by Application of Shares Otherwise Issuable. Upon
---------------------------------------------------
any exercise of this Warrant, the holder hereof may, at its option,
instruct the Company, by written notice accompanying the surrender of this
Warrant at the time of such exercise, to apply to the payment required by
section 1.1 such number of the shares of Common Stock otherwise issuable to
such holder upon such exercise as shall be specified in such notice, in
which case an amount equal to the excess of the aggregate Current Market
Price of such specified number of shares on the date of exercise over the
portion of the payment required by section 1.1 attributable to such shares
shall be deemed to have been paid to the Company and the number of shares
issuable upon such exercise shall be reduced by such specified number."
<PAGE>
1.3 Section 13.1(c) is hereby deleted in its entirety and the
following is substituted therefor:
"(c) Expenses. The Company will pay all Registration Expenses
--------
in connection with each registration requested pursuant to this section
13.1. 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 are
included in such registration, on the basis of the respective amounts of
the securities then being registered on their behalf."
1.4 Section 16(a) is hereby deleted in its entirety and the following
is substituted therefor:
"(a) Repurchase Option. Any holder or holders of Warrants
-----------------
holding at least a majority of the total outstanding Warrants (measured by
the number of shares of Common Stock into which such Warrants are
exercisable) may require the Company to repurchase (the "Repurchase
Option") all or any part of the Warrants if on or before December 21, 1996,
there has not been an Initial Public Offering."
1.5 The second sentence of Section 16(d)(i) is hereby deleted in its
entirety and the following is substituted therefor:
"The Repurchase Notice shall include the name of the holders
electing the Repurchase Option (the "Electing Holders") and the number of
Warrants (by holder) that the Company shall be required at that time to
repurchase."
1.6 The second sentence of Section 16(d)(ii) is hereby deleted in its
entirety and the following is substituted therefor:
"Within five (5) Business Days after the date of this notice,
Electing Holders owning a majority of the Warrants (measured by the number
of shares of Common Stock into which such Warrants are exercisable)
identified in the Repurchase Notice shall notify the Company in writing
(the "Holders IFE Notice") of their approval or disapproval of the
Company's initial choice of Independent Financial Expert and, in the event
of disapproval, such holders shall propose an alternative firm as
Independent Financial Expert."
SECTION 2. EFFECT OF AMENDMENT
Except as amended hereby, all provisions of the Hill Warrant shall
remain in full force and effect.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment as of the date and year first above written.
INFORMATION MANAGEMENT ASSOCIATES,
INC.
By: /s/ Gary R. Martino
---------------------------------
Name: Gary R. Martino
Title: Chairman
/s/ Thomas F. Hill
---------------------------------
Thomas F. Hill
3
<PAGE>
Exhibit 10.15
INFORMATION MANAGEMENT ASSOCIATES, INC.
AMENDMENT NO. 3
TO
COMMON STOCK PURCHASE WARRANT
-----------------------------
This Agreement is made as of September 20, 1996 by and between Information
Management Associate, Inc., a Connecticut corporation (the "Company") and Thomas
F. Hill ("Hill").
WHEREAS, Hill is currently the holder of a Warrant (No. W-3) initially
entitling Hill to purchase 2,381 shares of Common Stock at $9.00 per share
(subject to adjustment upon the occurrence of certain events) (the "Hill
Warrant");
WHEREAS, on January 26, 1993 the Company effected a ten-for-one stock
split; thereafter the Hill Warrant entitled Hill to purchase 23,810 shares of
Common Stock at $.90 per share (subject to adjustment upon the occurrence of
certain events);
WHEREAS, the Hill Warrant was previously amended as of June 1, 1994 and as
of November 16, 1994;
WHEREAS, the Company and Hill desire to further amend the terms of the Hill
Warrant;
NOW, THEREFORE, in consideration of the mutual agreements contained herein
and for other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows and the Hill Warrant (No. W-3)
is hereby amended as hereinafter set forth.
SECTION 1. AMENDMENTS TO WARRANT
The terms and conditions of the Hill Warrant (No. W-3) are hereby amended
as follows:
1.1 The first paragraph of the Hill Warrant is hereby deleted in its
entirety and the following is substituted therefor:
<PAGE>
"Information Management Associates, Inc., a Connecticut corporation (the
"Company"), for value received, hereby certifies that Thomas F. Hill, or
registered assigns, is entitled to purchase from the Company 23,810
authorized, validly issued, fully paid and nonassessable shares of Common
Stock, no par value per share (the "Common Stock") of the Company at the
purchase price per share of $.90 at any time or from time to time commencing
at 9:00 A.M., New York City time, on the Warrant Exercise Date and prior to
5:00 P.M., New York City time, on December 21, 2002, all subject to the
terms, conditions and adjustments set forth below in this Warrant."
1.2 Section 1.1 is hereby deleted in its entirety and the following is
substituted therefor:
"1. Exercise of Warrant. 1.1 Manner of Exercise. This Warrant may be
------------------- ------------------
exercised by the holder hereof, in whole or in part, during normal business
hours on any Business Day, by surrender of this Warrant to the Company at its
office maintained pursuant to subdivision (a) of section 12.2, accompanied by
a subscription in substantially the form attached to this Warrant (or a
reasonable facsimile thereof) duly executed by such holder and accompanied by
payment, in cash, by certified or official bank check payable to the order of
the Company, or in the manner provided in section 1.5 (or by any combination
of such methods), in the amount obtained by multiplying (a) the number of
shares of Common Stock (without giving effect to any adjustment thereof)
designated in such subscription by (b) $.90, and such holder shall thereupon
be entitled to receive the number of duly authorized, validly issued, fully
paid and nonassessable shares of Common Stock (or Other Securities) determined
as provided in sections 2 through 4."
1.3 Section 2.1 is hereby deleted in its entirety and the following is
substituted therefor:
"2. Adjustment of Common Stock Issuable Upon Exercise 2.1 General: Warrant
------------------------------------------------- -------
Price. The number of shares of Common Stock which the holder of this Warrant
-----
shall be entitled to receive upon each
2
<PAGE>
exercise hereof shall be determined by multiplying the number of shares of
Common Stock which would otherwise (but for the provisions of this Section 2)
be issuable upon such exercise, as designated by the holder hereof pursuant to
section 1.1, by a fraction of which (a) the numerator is $.90 and (b) the
denominator is the Warrant Price in effect on the date of such exercise. The
"Warrant Price" shall initially be $.90 per share, shall be adjusted and
readjusted from time to time as provided in this section 2 and, as so adjusted
or readjusted, shall remain in effect until a further adjustment or
readjustment thereof is required by this section 2."
1.4 Section 16(a) is hereby deleted in its entirety and the following is
substituted therefor:
"(a) Repurchase option. Any holder or holders of Warrants holding at least
-----------------
a majority of the total outstanding Warrants (measured by the number of shares
of Common Stock into which such Warrants are exercisable) may require the
Company to repurchase (the "Repurchase Option") all or any part of the
Warrants if on or before January 31, 1998, there has not been an Initial
Public Offering."
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Hill as follows:
1.1 Authority and Validity. The execution, delivery and performance of this
----------------------
Amendment to the Hill Warrant and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of the Company. This Amendment to the Hill
Warrant 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
Amendment to the Hill Warrant, nor the consummation
3
<PAGE>
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 provisions of its Charter 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
judgment, order, writ, injunction or decree of any court, administrative
agency or governmental body applicable to Company.
SECTION 3. EFFECT OF AMENDMENT
Except as amended hereby, all provisions of the Hill Warrant shall remain
in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment
as of the date and year first above written.
INFORMATION MANAGEMENT ASSOCIATES,
INC.
By: /s/ Gary R. Martino
--------------------------
Name: Gary R. Martino
Title: Chairman
/s/ Thomas F. Hill
--------------------------
Thomas F. Hill
4
<PAGE>
Exhibit 10.16
STOCK PURCHASE AGREEMENT
DATED SEPTEMBER 4, 1991
BETWEEN
INFORMATION MANAGEMENT ASSOCIATES, INC.
AND
WAND/IMA INVESTMENTS, L.P.
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
STOCK PURCHASE AGREEMENT dated as of September 4, 1991 by and among
WAND/IMA INVESTMENTS, L.P. (the "Purchaser"), and INFORMATION MANAGEMENT
ASSOCIATES, INC. (the "Company").
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. TRANSFER OF SHARES AND RELATED MATTERS
- ---------- --------------------------------------
1.1 The Sale. Subject to the terms and conditions of this Agreement,
---------
the Company hereby agrees to issue and sell to the Purchaser, and the Purchaser
hereby agrees to purchase from the Company, on the date of the Closing (as
hereinafter defined), 13,228 newly issued shares (the "Shares") of the common
stock, no par value, of the Company ("Common Stock") free and clear of all
liens, claims, liabilities, restrictions or other encumbrances at a purchase
price of $45.36 per share (the "Purchase Price").
1.2 Delivery of Shares. On the Closing Date (as hereinafter
-------------------
defined), the Company will deliver to the Purchaser, against payment of the
Purchase Price, certificates representing the Shares.
ARTICLE 2. CLOSING
- ---------- -------
The closing for the consummation of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of LeBoeuf, Lamb,
Leiby & MacRae, 725 South Figueroa, 36th Floor, Los Angeles, California, on
April 29, 1991 or at such other time or place as the parties hereto shall
mutually agree (the "Closing Date").
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
- ---------- ---------------------------------------------
The Company hereby represents and warrants to the Purchaser as
follows:
3.1 Authority and Validity. The execution, delivery and performance
-----------------------
of this Agreement and the consummation of 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
-2-
<PAGE>
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 Charter 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 Company.
3.2 Organization and Standing; Certificate of Incorporation and
-----------------------------------------------------------
Bylaws. The Company is a 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 no
-------------
subsidiaries.
3.4 Qualification. Attached as Schedule 3.4 is a true and complete
--------------
list 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. The jurisdictions identified in Exhibit 3.4 are the
only jurisdictions in which the nature of the Company's activities or the
character of the properties it owns or leases makes such qualification
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
---------------
500,000 shares of common stock, of which 100,000 shares are issued and
outstanding. Except for such outstanding shares, the Common Stock to be issued
pursuant to this Agreement and shares of common stock issuable upon exercise of
outstanding common stock purchase warrants held by Purchaser and Thomas F. Hill,
the Company has no issued or outstanding shares of capital stock or securities
convertible or exchangeable into, or outstanding stock purchase warrants or
other options or rights to purchase shares of its capital stock or other equity
securities. All issued and outstanding shares have been duly authorized and
validly issued, are fully paid and non-assessable. When authorized and issued,
the Shares will not be subject to any pre-emptive rights or rights of first
refusal. The Shares, when issued in compliance with the
-3-
<PAGE>
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 Shares will be subject to restrictions on transfer imposed under
applicable state and federal securities laws.
3.6 Capital Stock and Related Matters. At the time of the Closing
----------------------------------
and after giving effect to the transactions contemplated by this Agreement, the
authorized capital stock of the Company will consist of 500,000 shares of common
stock, of which 113,228 shares will be outstanding and 50,000 shares will be
reserved for issuance upon exercise of the Warrants. Attached as EXHIBIT A is a
---------
true and correct list identifying each stockholder of the Company and the number
of shares of Common Stock owned by each such stockholder. All of the outstanding
shares of Common Stock will be validly issued and outstanding, fully paid and
non-assessable. Except for the Warrants, the Company has no outstanding
securities convertible into or exchangeable for any shares of its Capital Stock,
or any outstanding rights (either preemptive or other) to subscribe for or to
purchase, or any outstanding options for the purchase of, or any agreements
providing for the issuance (contingent or otherwise) of, or any outstanding
calls, commitments or claims of any character relating to, any Capital Stock or
any stock or securities convertible into or exchangeable for any Capital Stock
of the Company. Except as provided in the Warrants, the Company is not subject
to any obligation (contingent or otherwise) to repurchase or otherwise acquire
or retire any shares of its Capital Stock or any convertible securities, rights
or options of the type described in the preceding sentence. The Company is not a
party to, and does not have knowledge of, any agreement (except as set forth in
this Agreement, the Letter Agreement, the Warrants, the Shareholders' Agreement
[as defined in a certain Note and Warrant Purchase Agreement dated December 21,
1990 by and between Purchaser and the Company] and Restricted Stock Award
Agreements dated December 21, 1990 between the Company and Joseph LeMay and the
Company and Paul Schmidt and the Company) restricting the voting or transfer of
any shares of the Company's Capital Stock. The Company is not required to file,
nor has it filed, pursuant to Section 12 of the Exchange Act, a registration
statement relating to any class of equity securities, provided, however, that
--------- --------
under the Shareholders' Agreement, certain shareholders of the Company have been
granted "piggy-back" registration rights.
3.7 Indebtedness of the Company. EXHIBIT B correctly describes all
---------------------------- ---------
secured and unsecured Indebtedness of the Company outstanding, or for which the
Company has commitments, on the date of this Agreement. The Company is not in
default with respect to any Indebtedness or any instrument or agreement relating
thereto.
-4-
<PAGE>
3.8 Disclosure. Neither this Agreement, the Exhibits hereto, nor
-----------
the 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.
3.9 Intellectual Property. The Company owns or has valid rights to
----------------------
use all Intellectual Property Rights used in or necessary to conduct the
Company's business as heretofore conducted or planned to be conducted in the
foreseeable future, including, without limitation, all Intellectual Property
Rights in or relating to the so called "Telemar" software and all integrated
software modules in connection therewith, e.g., Voice Modules ("Simple Dial",
----
Intellectual Dial", "Call Router" and "Call Manager"), Base Modules ("Account
Management" and "Scripting"), Data Modules ("Order Entry", "Mail Management",
"Lead Management", "Sales Management", "Application Generation" and "Telemar
PC"), and Common Features ("Telewriter", "Teleprompt" and "Teletext"). EXHIBIT C
---------
sets forth a complete and accurate list of all registered trademarks and
copyrights which the Company owns or is licensed to use and all material License
Agreements. The Company owns no Patents. The Company is the sole and exclusive
legal, beneficial and record owner of all Copyrights and Trademarks specified on
EXHIBIT C as well as all other material Intellectual Property Rights used in or
- ---------
necessary to conduct the Company's business, free and clear of all liens,
claims, charges and encumbrances and free and clear of all licenses to third
parties other than licenses to customers in the ordinary course of business. To
the knowledge of the Company, all License Agreements are valid and binding
obligations of the parties thereto. The Copyright listed on EXHIBIT C relating
---------
to the TELEMAR computer software, and the Copyright in the documentation related
thereto, is a valid and subsisting United States Copyright and is registered in
the United States Copyright Office. To the Company's knowledge, all the
Company's material intellectual property rights (including those relating to the
computer programs, data bases and related documentation) are valid and
enforceable, are subsisting, none are subject to any interference, opposition,
office action, cancellation or other similar proceeding and all fees have been
timely paid. There are no claims pending or, to the best of the Company's
knowledge, threatened, before any court or governmental agency relating to the
validity, enforceability, or the Company's rights to own or use any Intellectual
Property Rights (including, without limitation, those relating to any of the
computer programs, data bases or related documentation) or alleging that the
conduct of the Company's business infringes upon or constitutes an unauthorized
use of the Intellectual Property Rights of any third party and, to the best of
the Company's knowledge, there is no valid basis for any such claims. To the
best of the Company's
-5-
<PAGE>
knowledge, there are no material infringements or unauthorized uses of any
Intellectual Property Rights owned by or licensed to the Company (including,
without limitation, those in the programs, data bases and related documentation)
and no material breaches of any License Agreements. The Company has taken
reasonable security measures to protect the secrecy and confidentiality of the
source code, proprietary screen displays and documentation relating to the
TELEMAR computer programs and databases and in all other material proprietary
Know-How and Technical Information owned by or licensed to the Company. Except
as set forth on EXHIBIT C, the Company customarily employs proper statutory
----------
notice of registration in connection with registered Trademarks owned by or
licensed to the Company and places appropriate copyright notices on all material
computer programs, data bases, related documentation, and other material
Copyrights owned by the Company. The Company has not entered into any consent,
forbearance to sue, or settlement agreement with any Person relating to any
Intellectual Property Rights (including but not limited to those in the computer
programs, data bases and documentation related thereto) or to those of any third
party, except as set forth on EXHIBIT C. The consummation of the transactions
----------
contemplated by this Agreement will not result in the loss or impairment of any
material Intellectual Property Rights (including but not limited to those in any
computer programs, data bases and documentation related thereto) or the
Company's ownership or right to use the same or result in a breach of any
License Agreement.
3.10 Environmental Matters. The Company is in compliance with the
----------------------
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.
3.11 Financial Statements. The unaudited balance sheet and related
---------------------
statement of operations of the Company as of December 31, 1990 and the unaudited
balance sheet and related statement of operations of the Company as of June 30,
1991 (collectively, the "Financial Statements") fairly present the Company's
assets,
-6-
<PAGE>
liabilities, financial position and results of operations 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 interim statements, to normal year-end 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 Exhibits hereto.
3.12 Changes. Except as set forth in Schedule 3.12 hereto, since June
--------
30, 1991, 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;
(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.
3.13 Litigation, Etc. There is no 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.
3.14 Compliance with Other Instruments, etc. The Company is not in
---------------------------------------
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
-7-
<PAGE>
financial condition, assets, liabilities (absolute, accrued, contingent or
otherwise), reserves, business, operations or prospects of the Company.
3.15 Use of Proceeds. The Company will use the proceeds from the sale
----------------
of the Common Stock to fund a term loan in an amount up to $600,000 to Coffman
Systems, Inc. and Consumer Relations Technology, Inc. The Company will use any
remaining portion of such proceeds for general corporate purposes.
3.16 No Violations of Securities Laws. Subject to the accuracy of the
---------------------------------
Purchaser's representations in Section 4 hereof, the offer and sale of the
Shares hereunder is and will be exempt from the registration and prospectus
delivery requirements of the Securities Act of 1933 (the "Act") and is 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 Shares to anyone other than
the Purchaser. Neither the Company nor any person acting on its behalf has taken
any action which would require the registration of the Shares under Section 5 of
the Act, including, without limitation, engaging in any form of general
solicitation.
3.17 Brokers or Finders Fees, Etc. 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 Shares contemplated hereby.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
- ---------- -----------------------------------------------
The Purchaser hereby represents and warrants to the Company as
follows:
4.1 Investment. The Purchaser is acquiring the 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 Shares have not
been registered under the Securities Act of 1933, as amended (the "Act") by
reason of a specific exemption from the registration provisions of the 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 Shares must be held
-------
indefinitely unless the Shares are subsequently registered under the Act or an
exemption from such registration is available. Each certificate representing (i)
the Shares, and (ii) any other securities issued in respect of the Shares upon
any stock split, stock dividend, recapitalization, merger,
-8-
<PAGE>
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. 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 ACT EXCEPT PURSUANT TO AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
4.3 Accredited Investor. The Purchaser is an "accredited investor"
--------------------
as that term is used in Rule 501 promulgated under the Act.
ARTICLE 5. CONDITIONS TO OBLIGATIONS OF THE PURCHASER
- ---------- ------------------------------------------
The obligations of the Purchaser to perform this Agreement are subject
to the satisfaction of the following conditions unless waived by the Purchaser:
5.1 Opinion of Counsel. You shall have received a favorable opinion,
-------------------
addressed to you, dated the date of Closing and satisfactory in substance and
form to you, from LeBoeuf, Lamb, Leiby & MacRae, special counsel for the
Company, substantially in the form set forth in EXHIBIT D and covering such
---------
matters incident to the transactions contemplated by this Agreement as you or
your counsel may reasonably request.
5.2 Representations. The representations made by the Company in
----------------
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,
--------------
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 Purchaser. The form and substance
---------------------------------------
of all legal matters contemplated hereby and of all papers delivered hereunder
shall be acceptable to counsel to the Purchaser.
-9-
<PAGE>
5.5 Government Consents, Authorizations, Etc. All consents,
-----------------------------------------
authorizations, orders or approvals of, and filings or registrations with, any
federal, state, local or foreign 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
-----------------------------
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 Purchaser, (a) 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 December 31, 1990, and (b) on the
Closing Date the financial condition, assets, liabilities (absolute, accrued,
contingent or otherwise), other than (x) changes which have not been, either in
any case or in the aggregate, materially adverse to the Company, and (y) any
matters of a general economic or political nature which do not affect the
Company uniquely.
5.8 Consents and Permits. The Company shall have received all
---------------------
consents, permits and other authorizations, and made all such filings and
declarations, as may be required pursuant to any law, statute, regulation or
rule (federal, state, local or foreign) in connection with the transactions
contemplated by this Agreement, or 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 you of all such consents, permits, authorizations,
filings and declarations.
ARTICLE 6. CONDITIONS TO OBLIGATIONS OF THE COMPANY
- ---------- ----------------------------------------
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 Purchaser in
----------------
Section 4 hereof shall be true and correct when made,
-10-
<PAGE>
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 Shares to the
---------
Purchaser shall be legally permitted by all laws and regulations to which the
Purchaser and the Company are subject.
6.3 Acceptance by Counsel to the Company. The form and substance of
-------------------------------------
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.
- ---------- ----------------------------------------------------------------
7.1 Survival. All representations and warranties made by any party
---------
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 Purchaser 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
- ---------- ------------------------------
8.1 Restriction; Procedure for Transfer. The 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 of 1933, as
amended and applicable state securities laws.
8.2 Notice of Proposed Transfer. Prior to any proposed transfer of
----------------------------
any of the Shares (other than a transfer pursuant to registration under the
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
-11-
<PAGE>
Company, to the effect that the proposed transfer of the Shares may be effected
without registration under the Act.
ARTICLE 9. REGISTRATION UNDER SECURITIES ACT, ETC.
- ---------- ---------------------------------------
9.1 Registration on Request.
------------------------
(a) Request. At any time or from time to time on the earlier
--------
of (x) December 21, 1995 or (y) the occurrence of an Initial Public
Offering, upon the written request of one or more Initiating Holders,
requesting that the Company effect the registration under the Securities
Act of all or part of such Initiating Holders' Registrable Securities and
specifying the intended method of disposition thereof, the Company will
promptly give written notice of such requested registration to all holders
of Registrable Securities, and thereupon the Company will use its best
efforts to effect the registration under the Securities Act of
(i) the Registrable Securities which the Company has been so
requested to register by such Initiating Holders for disposition in
accordance with the intended method of disposition stated in such
request, and
(ii) all other Registrable Securities the holders of which shall
have made a written request to the Company for registration thereof
within 30 days after the giving of such written notice by the Company
(which request shall specify the intended method of disposition of such
Registrable Securities), and
(iii) subject to the priority provisions of section 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. The registration rights
granted in this Agreement are intended to be coincident with the registration
rights granted to the holders of the Warrants. In no event, however, shall the
total number of registrations which
-12-
<PAGE>
the Company is required to effect on request hereunder and under the Warrants
exceed two.
(b) Registration Statement Form. Registrations under this
----------------------------
Section 9.1 shall be on such appropriate registration form of the
Commission (i) as shall be selected by the Company and, as shall be
-
reasonably acceptable to the holders of more than 50% (by number of shares)
of the Registrable Securities so to be registered and (ii) as shall permit
--
the disposition of such Registrable Securities in accordance with the
intended method or methods of disposition specified in their request for
such registration. The Company agrees to include in any such registration
statement all information which holders of Registrable Securities being
registered shall reasonably request.
(c) Expenses. The Company will pay all Registration Expenses in
---------
connection with the first registration requested pursuant to this section
9.1 and the holders will pay all Registration Expenses in connection with
the second registration pursuant to this section 9.1. Registration Expenses
(and underwriting discounts and commissions and transfer taxes, if any) in
connection with the second registration statement shall be allocated pro
rata among all Persons on whose behalf securities of the Company are
included in such registration, on the basis of the respective amounts of
the securities then being registered on their behalf.
(d) Effective Registration Statement. A registration requested
---------------------------------
pursuant to this section 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 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.
-13-
<PAGE>
(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 requested to be included by
such holders and (ii) second, securities the Company proposes to sell and
--
other securities of the Company included in such registration by the
holders thereof.
9.2 Incidental Registration.
-----------------------
(a) Right to Include Registrable Securities. If the Company at any
---------------------------------------
time proposes to register any of its securities under the Securities Act
(other than by a registration on Form S-4 or S-8, or any successor or
similar forms and other than pursuant to section 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
-14-
<PAGE>
registration statement which covers the securities which the Company
proposes to register, provided that if, at any time after giving written
--------
notice of its intention to register any securities and prior to the
effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason either not to
register or to delay registration of such securities, the Company may, at
its election, give written notice of such determination to each holder of
Registrable Securities and, thereupon, (i) in the case of a determination
-
not to register, shall be relieved of its obligation to register any
Registrable Securities in connection with such registration (but not from
its obligation to pay the Registration Expenses in connection therewith),
without prejudice, however, to the rights of any holder or holders of
Registrable Securities entitled to do so to request that such registration
be effected as a registration under section 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 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
-15-
<PAGE>
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 of such counsel;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such
registration statement until the earlier of such time as all of such
securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such registration
statement or (i) in the case of a registration pursuant to section 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
-16-
<PAGE>
to maintain the effectiveness of such registration statement;
(iii) furnish to each seller of Registrable Securities covered by such
registration statement such number of conformed copies of such
registration statement and of each such amendment and supplement
thereto (in each case including all exhibits), such number of copies
of the prospectus contained in such registration statement (including
each preliminary prospectus and any summary prospectus) and any other
prospectus filed under Rule 424 under the Securities Act, in
conformity with the requirements of the Securities Act, and such other
documents, as such seller may reasonably request in order to
facilitate the public sale or other disposition of the Registrable
Securities owned by such seller;
(iv) use its reasonable best efforts to register or qualify all
Registrable Securities and other securities covered by such
registration statement under such other securities laws or blue sky
laws of such jurisdictions as any seller thereof and any underwriter
of the securities being sold by such seller shall reasonably request,
to keep such registrations or qualifications in effect for so long as
such registration statement remains in effect, and take any other
action which may be reasonably necessary or advisable to enable such
seller and underwriter to consummate the disposition in such
jurisdictions of the securities owned by such seller, except that the
Company shall not for any such purpose be required to qualify
generally to do business as a foreign corporation in any jurisdiction
wherein it would not but for the requirements of this subdivision (iv)
be obligated to be so qualified, or to consent to general service of
process in any such jurisdiction;
(v) use its best efforts to cause all Registrable Securities covered
by such registration statement to be registered with or approved by
such other governmental agencies or authorities as may be necessary to
enable the 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
-17-
<PAGE>
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 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
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<PAGE>
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 Company's equity
securities covered by such registration statement on any securities
exchange on which any of the Company's 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, 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
-19-
<PAGE>
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 9.7. The holders of
the Registrable Securities will cooperate with the Company in the
negotiation of the underwriting agreement and will give consideration
to the reasonable suggestions of the Company regarding the form
thereof, provided that nothing herein contained shall diminish the
--------
foregoing obligations of the Company. The holders of Registrable
Securities to be distributed by such underwriters shall be parties to
such underwriting agreement and may, at their option, require that any
or all of the representations and warranties by, and the other
agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of such holders
of Registrable Securities and that any or all of the conditions
precedent to the obligations of such underwriters under such
underwriting agreement be conditions 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
-20-
<PAGE>
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 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 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
-21-
<PAGE>
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 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
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<PAGE>
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 Section 9, the Company will indemnify and hold
harmless the holder of any Registrable Securities covered by such
registration statement, its directors, officers, agents, employees,
general partners, limited partners, each other Person who participates
as an underwriter in the offering or sale of such securities and each
other Person, if any, who controls such holder or any such underwriter
within the meaning of the Securities Act, against any losses, claims,
damages or liabilities, joint or several, to which such holder or
Requesting Holder or any such underwriter within the meaning of the
Securities Act, against any losses, claims, damages or liabilities,
joint or several, to which such holder or Requesting Holder or any
such director, officer, agent, employee, general partner, limited
partner or underwriter or controlling person may become subject under
the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions or proceedings, whether commenced
or threatened, in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such securities
were registered under the Securities Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any omission or alleged omission
to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and the
Company will reimburse such holder, and each such director, officer,
agent, employee, general partner, limited partner, underwriter and
controlling person for any reasonable legal or any other expenses
reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceeding;
provided that the Company shall not be liable in any such case to the
--------
extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of or is based
upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, any such
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<PAGE>
preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement in reliance upon and in conformity with
written information furnished to the Company through an instrument
duly executed by such holder specifically stating that it is for use
in the preparation thereof and, provided further that the Company
----------------
shall not be liable to any Person who participates as an underwriter,
in the offering or sale of Registrable Securities or to any other
Person 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
such Requesting Holder or any such director, officer, agent, employee,
general partner, limited partner, underwriter or controlling person
and shall survive the transfer of such securities by such holder.
(b) Indemnification by the Sellers. In the event of any
------------------------------
registration of Registrable Securities under the Securities Act
pursuant to this Section 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 9.7) the Company, each director of the Company, each officer
of the Company and each other person, if any, who controls the Company
within the meaning of the Securities Act, with respect to any
statement or alleged statement in or omission or alleged omission from
such registration statement, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment
or supplement thereto, if such statement or alleged statement or
omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company through
an instrument duly executed by such seller specifically stating that
it is for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement. Such indemnity shall remain in full force and
effect, regardless of any investigation made by or on behalf of the
Company or any
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<PAGE>
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 9.7, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give
written notice to the latter of the commencement of such action,
provided that the failure of any indemnified party to give notice as
--------
provided herein shall not relieve the indemnifying party of its
obligations under the preceding subdivisions of this section 9.7,
except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such action is
brought against an indemnified party, unless in such indemnified
party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such
claim, the indemnifying party shall be entitled to participate in and
to assume the defense thereof, jointly with any other indemnifying
party similarly notified, to the extent that the indemnifying party
may wish, with counsel reasonably satisfactory to such indemnified
party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof,
the indemnifying party shall not be liable to such indemnified party
for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any
settlement of any such action which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to
such indemnified party of a release from all liability in respect to
such claim or litigation. No indemnified party shall consent to entry
of any judgment or enter into any settlement of any such action the
defense of which has been assumed by an indemnifying party without the
consent of such indemnifying party.
(d) Other Indemnification. Indemnification similar to that
---------------------
specified in the preceding subdivisions of this section 9.7 (with
appropriate modifications) shall be given by the Company and each
seller of Registrable Securities with respect to any required
registration or other qualification of securities under any Federal or
state law or regulation of any governmental authority, other than the
Securities Act.
(e) Indemnification Payments. The indemnification required by
------------------------
this section 9.7 shall be made by periodic
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<PAGE>
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 payable by such indemnified
party as a result of such, 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(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.
ARTICLE 10. DEFINITIONS
- ----------- ----------
As used herein, unless the context otherwise requires, the following
terms have the following meanings:
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<PAGE>
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 Mr. Gary R.
Martino, Mr. Andrei Poludnewycz, Mr. Albert R. Subbloie and the Partnership and
any Person which is, directly or indirectly, controlled by any of the foregoing.
"Affiliate" shall not include Wand/IMA Investments, L.P. or any of its partners.
Base Warrant: The Common Stock Purchase Warrant, dated December 21,
------------
1990, No. W-1, issued by the Company to the Purchaser, initially covering 16,667
shares of Common Stock.
Business Day: Any day other than a Saturday or a Sunday or a day on
------------
which commercial banking institutions in the City of New York or the State of
Connecticut are authorized by law to be closed. Any reference to "days" (unless
Business Days are specified) shall mean calendar days.
Commission: The Securities and Exchange Commission or any other
----------
federal agency at the time administering the Securities Act.
Common Stock: As defined in Section 1.1 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 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 "Controlling" shall have meanings correlative to
the foregoing.
-27-
<PAGE>
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
Securities Exchange Commission (other than a registration statement on Form S-8,
or any successor form thereto, with respect to the issuance of Common Stock (or
securities convertible into or exchangeable for Common Stock or rights to
acquire Common Stock) granted or to be granted to employees, officers or
directors of the Company pursuant to any employee stock option plan, unless as a
result thereof the Company would be required to file reports with respect to any
of its equity securities with the Securities Exchange Commission) respecting an
offering, whether primary or secondary, of Common Stock is declared effective by
the Securities Exchange Commission.
Initiating Holders: Any holder or holders of Registrable Securities
------------------
holding at 66 2/3% of the Registrable Securities (by number of shares or, in the
case of any debt securities which may be Other Securities, 66 2/3% of the
outstanding principal amount of such securities) and initiating a request
pursuant to section 9.1 for the registration of all or part of such holder's or
holders' Registrable Securities.
Intellectual Property Rights: All Trademarks, Patents, Copyrights, and
----------------------------
Know-How and Technical Information.
NASD: The National Association of Securities Dealers, Inc.
----
Know-How and Technical Information: Data, plans, trade secrets,
----------------------------------
technologies, processes, specifications, know-how, operating experience and
information (business, economic and technical) relating to the foregoing.
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<PAGE>
Note Purchase Agreement: As defined in the introduction to the Base
-----------------------
Warrant.
Notes: As defined in the Base Warrant.
-----
Other Securities: Any stock (other than Common Stock) and other
----------------
securities of the Company or any other Person (corporate or otherwise) which the
holders of the Warrants at any time shall be entitled to receive, or shall have
received, upon the exercise of the Warrants, in lieu of or in addition to Common
Stock, or which at any time shall be issuable or shall have been issued in
exchange for or in replacement of Common Stock or Other Securities pursuant to
Section 3 of the Warrants.
Partnership: Information Management Associates, a Connecticut general
-----------
partnership having its principal place of business in Trumbull, Connecticut.
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.
Purchaser: As defined in the introduction to the Base Warrant.
---------
Registrable Securities: (a) any shares of Common Stock or Other
----------------------
Securities issued or issuable upon exercise of the Warrants originally issued in
connection with the issue and sale by the Company of the Notes pursuant to the
Note Purchase Agreement; (b) the shares of Common Stock purchased pursuant to
this Agreement; and (c) any securities issued or issuable with respect to any
securities referred to in the foregoing subdivisions 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
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<PAGE>
have been delivered by the Company and subsequent 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.
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, wit 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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<PAGE>
could constitute a "sale" as that term is defined in section 2(3) of the
Securities Act.
Warrants: As defined in the introduction to the Base Warrant.
--------
ARTICLE 11. MISCELLANEOUS
- ---------- -------------
11.1 Effect on Warrants. The Purchaser is the holder of certain Common
------------------
Stock Purchase Warrants of the Company, each dated December 21, 1990 (the
"Warrants"). The Warrants contain certain anti-dilution provisions which provide
for an increase in the number of shares of Common Stock covered by the Warrants
or a decrease in the Warrant exercise price upon the happening of certain
events. The Purchaser agrees that the issuance of the Shares by the Company
pursuant to this Agreement will not result in any change in the number of shares
of Common Stock covered by the Warrants or in the exercise price per share
contained in the Warrants and hereby irrevocably waives any rights it or any
subsequent holder of the Warrants may have under the anti-dilution provisions of
such Warrants as a result of the issuance of the Shares pursuant to this
Agreement.
11.2 Expenses. Whether or not the transactions contemplated by this
--------
Agreement shall be consummated, the Company will pay on demand all expenses in
connection with such transactions and in connection with any amendments or
waivers (whether or not the same become effective) under or in respect of this
Agreement, including, without limitation: (a) the cost and expenses of printing
or reproducing this Agreement, of furnishing all opinions of counsel for the
Company (including any opinions reasonably requested by your special counsel as
to any legal matter arising hereunder) and all certificates on behalf of the
Company, and of the Company's performance of and compliance with all agreements
and conditions contained herein to be performed or complied with by it; (b) the
cost of delivering to your principal office, insured to your satisfaction, the
Shares; (c) the fees, expenses and disbursements of your special counsel in
connection with such transactions (in an amount not to exceed $15,000), any such
amendments or waivers and in connection with or arising out of any litigation,
investigation or proceeding instituted by any Governmental Agency or any other
Person with respect to this Agreement, or any other agreements contemplated
hereby or thereby or the transactions contemplated hereby or thereby and
requiring your participation or involvement; and (d) the out-of-pocket expenses
incurred by you in connection with such transactions, any such amendments or
waivers and in connection with any such litigation, investigation or proceeding.
The Company also will pay, and will save you and each holder of any Shares
harmless from (i) all claims in respect of the fees, if any, of brokers and
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<PAGE>
finders acting on behalf of the Company, and (ii) any and all liabilities with
respect to any taxes (including interest and penalties) which may be payable in
respect of the execution and delivery of this Agreement, any amendment or waiver
under or in respect of this Agreement, (other than normal federal income taxes
imposed on a holder of Shares or any share of Common Stock issued upon exercise
of Warrants in respect of interest or dividends received) or in respect of any
determination by the Internal Revenue Service to set aside or fail to recognize
the Company's S corporation election.
11.3 Indemnification. The Company agrees to indemnify and hold
---------------
harmless you and your Affiliates and respective directors, officers, general
partners, limited partners, employees, agents and controlling Persons thereof
(each such Person being an "Indemnified Party") from and against any and all
losses, claims, damages and liabilities, joint or several, to which such
Indemnified Party may become subject under any applicable law or otherwise
relating to or arising out of the transactions contemplated by this Agreements
or the execution, delivery, enforcement and performance of this Agreement and
any other documents in any way related to the transactions contemplated by this
Agreement and the performance by you or your Affiliates of the services
contemplated hereby and thereby, and will reimburse any Indemnified Party for
all expenses (including reasonable counsel fees and expenses) as they are
incurred in connection with the investigation of, preparation for or defense of
any pending or threatened claim or any action or proceeding arising therefrom,
whether or not such Indemnified Party is a party thereto. The Company will not
be liable under the foregoing indemnification provision to the extent that any
loss, claim, damage, liability or expense is found to have resulted primarily
from the bad faith, willful misconduct or gross negligence of you as determined
by a final judgment of a court of competent jurisdiction. The agreements in this
section 11.3 shall survive the execution and delivery of this Agreement, the
purchase of the Shares by you under this Agreement and any disposition of any
shares of Common Stock issued upon exercise of any Warrants.
11.4 Amendment, Modification and Waiver. This Agreement shall not be
----------------------------------
altered or otherwise amended except pursuant to an instrument in writing signed
by the Purchaser 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.
11.5 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
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<PAGE>
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.
11.6 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 Purchaser without the prior written consent of the other.
11.7 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.
11.8 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.
11.9 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.
6527 Main Street
Trumbull, CT 06611
Attn: Mr. Gary R. Martino
With a copy to:
Thomas L. Fairfield, Esq.
LeBoeuf, Lamb, Leiby & MacRae
CityPlace II
Hartford, CT 06103
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<PAGE>
If to the Purchaser, to:
WAND/IMA Investments, L.P.
c/o Wand Partners, Inc.
30 Rockefeller Plaza
Suite 3226
New York, NY 10112
Attn: Mr. David J. Callard
With a copy to:
Nancy L. Henry, Esq.
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, NY 10022
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.
11.10 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.
11.11 Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Connecticut.
11.12 Gender. Any reference to the masculine gender shall be deemed to
------
include the feminine and neuter genders unless the context otherwise requires.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
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/Albert R. Subbloie
-------------------------------
Albert R. Subbloie
President
THE PURCHASER:
WAND/IMA Investments, L.P.
By Wand Partners Inc., as General
Partner
By: /s/David J. Callard
-------------------------------
David J. Callard
President
-35-
<PAGE>
EXHIBIT 10.17
AMENDMENT NO. 1
TO
STOCK PURCHASE AGREEMENT
DATED SEPTEMBER 4, 1991
BETWEEN
INFORMATION MANAGEMENT ASSOCIATES, INC.
AND WAND/IMA INVESTMENTS, L.P.
This Agreement is made as of June 1, 1994 by and between Information
Management Associates, Inc., a Connecticut corporation (the "Company") and
Wand/IMA Investments, L.P., a Delaware limited partnership (the "Purchaser").
Capitalized terms that are used but not defined herein shall have the meanings
assigned to such terms in the Stock Purchase Agreement dated as of September 4,
1991 between the Purchaser and the Company (the "Stock Purchase Agreement").
WHEREAS, Mercury Asset Management plc, acting as agent on behalf of
certain of its managed accounts (the "Managed Accounts") is purchasing pursuant
to a Stock Purchase Agreement (the "MAM Stock Purchase Agreement"), of even date
herewith, 117,778 shares of common stock from certain significant shareholders
of the Company; and
WHEREAS, in order to facilitate the transactions contemplated by the
MAM Stock Purchase Agreement, the Company and Purchaser desire to amend the
terms of the Stock Purchase Agreement;
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
parties hereto agree as follows and the Stock Purchase Agreement is hereby
amended as hereinafter set forth:
<PAGE>
SECTION 1
Representations and Warranties of the Company
The Company hereby represents and warrants to WPI as follows:
1.1 Authority and Validity. The execution, delivery and performance
----------------------
of this Amendment No. 1 to the Stock Purchase Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action on the part of the Company. This Amendment No. 1
to the Stock Purchase 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 Amendment No. 1 to the Stock Purchase 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 provisions of its Charter 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 judgment, order, writ, injunction or decree of any court,
administrative agency or governmental body applicable to Company.
SECTION 2
Amendments to Stock Purchase Agreement
The terms and conditions of the Stock Purchase Agreement are hereby
amended as follows:
2.1 Definitions. The definitions of "Initiating Holders,"
-----------
"Registrable Securities" and "Warrants" set forth in Section 10 of the Stock
Purchase Agreement are hereby deleted in their entirety and the following
revised definitions are substituted therefor:
2
<PAGE>
"Initiating Holders: Any holder or holders of Registrable Securities
------------------
holding at least 40% of the Registrable Securities (by number of shares or,
in the case of any debt securities which may be Other Securities, 40% of
the outstanding principal amount of such securities) and initiating a
request pursuant to section 9.1 for the registration of all or part of such
holder's or holders' Registrable Securities."
"Registrable Securities: (a) any shares of Common Stock or Other
----------------------
Securities issued or issuable upon exercise of the Warrants; (b) the shares
of Common Stock issued to Purchaser pursuant to the Stock Purchase
Agreement, dated October 29, 1991, between the Company and Purchaser; (c)
the shares of Common Stock issued to Purchaser pursuant to the Stock
Purchase Agreement, dated September 4, 1991 between the Company and the
Purchaser; and (d) any securities issued or issuable with respect to any
securities referred to in the foregoing subdivisions by way of stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or
otherwise. As to any particular Registrable Securities, once issued such
securities shall cease to be Registrable Securities when (a) a registration
statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been
disposed of in accordance with such registration statement, (b) they shall
have been distributed to the public pursuant to Rule 144 (or any successor
or similar provision ) under the Securities Act, (c) they shall have been
otherwise transferred, new certificates for them not bearing a legend
restricting further transfer shall have been delivered by the Company and
subsequent disposition of them immediately thereafter shall not require
registration or qualification of them (other than by the issuer, an
underwriter or an affiliate) [as such terms are defined in the Securities
Act and the regulations promulgated thereunder] of the issuer) under the
Securities Act or any similar
3
<PAGE>
state law then in force, or (d) they shall have cased to be outstanding."
"Warrants: (i) the Common Stock Purchase Warrants originally issued
--------
pursuant to the Note Purchase Agreement (including any warrants issued in
substitution therefor), (ii) an additional Common Stock Purchase Warrant,
dated December 29, 1990, No. W-3, issued by the Company to Thomas F. Hill,
initially covering 2,381 shares of Common Stock, (iii) an additional Common
Stock Purchase Warrant, dated October 29, 1991, No. W-5, issued by the
Company to Wand Partners Inc., initially covering 2,068 shares of Common
Stock and (iv) an additional Common Stock Purchase Warrant, dated October
29, 1991, No. W-4, issued by the Company to the Purchaser, initially
covering 14,812 shares of Common Stock."
2.2 Effect of Amendment. Except as amended hereby, all provisions of
-------------------
the Stock Purchase Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment as of the date and year first above written.
INFORMATION MANAGEMENT
ASSOCIATES, INC.
By: /s/Gary R. Martino
------------------------------------
Name: Gary R. Martino
Title: Vice President
WAND/IMA INVESTMENTS, L.P.
By: WAND PARTNERS INC.,
as General Partner
By: /s/David J. Callard
------------------------------------
Name: David J. Callard
Title:
4
<PAGE>
Exhibit 10.18
STOCK PURCHASE AGREEMENT
DATED OCTOBER 29, 1991
BETWEEN
INFORMATION MANAGEMENT ASSOCIATES, INC.
AND
WAND/IMA INVESTMENTS, L.P.
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
STOCK PURCHASE AGREEMENT dated as of October 29, 1991 by and among
WAND/IMA INVESTMENTS, L.P. (the "Purchaser"), and INFORMATION MANAGEMENT
ASSOCIATES, INC. (the "Company").
WHEREAS, Purchaser is currently the holder of (i) 13,228 shares of the
company's Common Stock, no par value ("Common Stock"), (ii) a warrant entitling
the Purchaser to purchase 16,667 shares of Common Stock at an exercise price of
$9.00 per share (the "Base Warrant"), (iii) a warrant entitling the Purchaser to
purchase up to 10% of the Company's outstanding Common Stock (on a fully diluted
basis) in the event of the occurrence of certain contingencies at an exercise
price of $9.00 per share (the "Special Warrant"), and (iv) the Company's 15%
Senior Subordinated Note in the original principal amount of $1,600,000 (the
"Original Note"); and
WHEREAS, the Purchaser is purchasing pursuant to this Agreement 29,632
newly issued shares of Common Stock on the terms and conditions set forth
herein; and
WHEREAS, the Purchaser is exercising the Base Warrant in full on the
date hereof and $150,003 principal amount of the Original Note shall be applied
to payment of the purchase price for the shares issued pursuant thereto; and
WHEREAS, pursuant to an Exchange and Note Modification Agreement and
Amendment to Note and Warrant Purchase Agreement, dated the date hereof (the
"Exchange Agreement") between Purchaser and the Company, the Company will issue
to Purchaser a new warrant (the "New Warrant") entitling the Purchaser to
purchase 14,812 shares of Common Stock at a purchase price of $9.00 per share
and containing such other terms and conditions as set forth therein, in
consideration of the surrender by the Purchaser of the Special Warrant for
cancellation and the reduction of the principal amount of the Original Note by
$449,997; and
WHEREAS, the Company is issuing to Wand Partners Inc. ("WPI") on the
date hereof an additional warrant (the "Additional Warrant") entitling WPI to
purchase 2,068 shares of Common Stock at a purchase price of $30.00 per share
and containing such other terms and conditions as are set forth therein, in
consideration of management and advisory services; and
WHEREAS, immediately following the sale of the shares contemplated
hereby and the transactions contemplated in the Exchange Agreement, the Company
is (i) purchasing substantially all of the assets of Coffman Systems Inc.
("CSI") pursuant to an Asset Purchase Agreement, dated October 29, 1991 (the
"CSI Asset Purchase Agreement") among the Company, CSI, James H. Coffman, Jr.
and JHC
<PAGE>
Enterprises, Inc. and (ii) purchasing substantially all of the assets of
Consumer Relations Technology, Inc. ("CRT") pursuant to an Asset Purchase
Agreement, dated October 29, 1991 (the "CRT Asset Purchase Agreement") among the
Company, CRT, James H. Coffman, Jr. and Frank M. Rubin; and
WHEREAS, in connection with the transactions described above, the
Original Note will be amended to reduce the interest rate thereon from 15% per
annum to 12% per annum and to change the principal repayment schedule therein
all as set forth in a 12% Senior Subordinated Note of even date herewith in the
principal amount of $1,000,000 (the "Amended Note").
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. TRANSFER OF SHARES AND RELATED MATTERS
- ---------- --------------------------------------
1.1 The Sale. Subject to the terms and conditions of this Agreement,
--------
the Company hereby agrees to issue and sell to the Purchaser, and the Purchaser
hereby agrees to purchase from the Company, on the date of the Closing (as
hereinafter defined), 29,632 newly issued shares (the "Shares") of the common
stock, no par value, of the Company ("Common Stock") free and clear of all
liens, claims, liabilities, restrictions or other encumbrances at a purchase
price of $50.62 per share (the "Purchase Price").
1.2 Delivery of Shares. On the Closing Date (as hereinafter defined),
------------------
the Company will deliver to the Purchaser, against payment of the Purchase
Price, certificates representing the Shares.
ARTICLE 2. CLOSING
- ---------- -------
The closing for the consummation of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of LeBoeuf, Lamb,
Leiby & MacRae, 520 Madison Avenue, New York, New York, at 10:00 a.m. on October
29, 1991 or at such other time or place as the parties hereto shall mutually
agree (the "Closing Date").
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
- ---------- ---------------------------------------------
The Company hereby represents and warrants to the Purchaser as
follows:
3.1 Authority and Validity. The execution, delivery and performance of
----------------------
this Agreement and the consummation of all the
-3-
<PAGE>
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 Charter 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 Company.
3.2 Organization and Standing; Certificate of Incorporation and
-----------------------------------------------------------
Bylaws. The Company is a 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 no subsidiaries.
------------
3.4 Qualification. Attached as Schedule 3.4 is a true and complete
-------------
list 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. The jurisdictions identified in Exhibit 3.4 are the
only jurisdictions in which the nature of the Company's activities or the
character of the properties it owns or leases makes such qualification
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
--------------
500,000 shares of common stock, of which 113,228 shares are issued and
outstanding. Upon consummation of the sale to Purchaser of 29,632 shares of
Common Stock hereunder and after
-4-
<PAGE>
giving effect to (i) the issuance of 16,667 shares of Common Stock pursuant to
exercise of the Base Warrant, (ii) the issuance of 2,672 shares of Common Stock
to CSI in connection with the purchase of the assets of CSI pursuant to the CSI
Asset Purchase Agreement, and (iii) the issuance of 1,283 shares to Thomas
Pedersen pursuant to a Non-Competition Agreement of even date herewith, the
Company will have 163,482 shares of Common Stock issued and outstanding and held
by the persons identified in EXHIBIT A attached hereto.
---------
Except for (i) such outstanding shares, (ii) the shares of Common Stock issuable
upon exercise of the New Warrant, held by Purchaser, (iii) the shares of Common
Stock issuable upon the exercise of outstanding common stock purchase warrants,
dated December 21, 1990 held by Thomas F. Hill (the "Hill Warrant"), (iv) the
shares of Common Stock issuable upon exercise of the Additional Warrant, and (v)
stock options covering an aggregate of 11,593 shares of Common Stock held by
James H. Coffman, Jr., Frank Rubin, Daniel Riscalla, Carl Boland, Robert
Geisman, Alan Buchalter and Craig Lund, the Company has no issued or outstanding
shares of capital stock or securities convertible or exchangeable into, or
outstanding stock purchase warrants or other options or rights to purchase
shares of its capital stock or other equity securities. All issued and
outstanding shares have been duly authorized and validly issued, are fully paid
and non-assessable. When authorized and issued, the Shares will not be subject
to any pre-emptive rights or rights of first refusal. The 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 Shares will be subject to restrictions on transfer imposed
under applicable state and federal securities laws. The Company has reserved
19,261 shares of Common Stock for issuance pursuant to the New Warrant, the
Additional Warrant and the Hill Warrant.
3.6 Capital Stock and Related Matters. Except as described in Section
---------------------------------
3.5 and EXHIBIT A attached hereto, the Company has no outstanding securities
---------
convertible into or exchangeable for any shares of its capital stock, or any
outstanding rights (either preemptive or other) to subscribe for or to purchase,
or any outstanding options for the purchase of, or any agreements providing for
the issuance (contingent or otherwise) of, or any outstanding calls, commitments
or claims of any character relating to, any capital stock or any stock or
securities convertible into or exchangeable for any capital stock of the
Company. Except as provided in the Warrants, the Company is not subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital stock or any convertible securities, rights or
options of the type described in the preceding sentence. The Company is not a
party to, and does not have knowledge of, any agreement, except as set forth in
this Agreement, the Letter Agreement, dated December 21, 1990, among the
-5-
<PAGE>
Company, the Purchaser and certain shareholders of the Company, the Warrants,
the Amended and Restated Shareholders' Agreement, dated as of October 29, 1991
(the "Shareholders' Agreement"), among the Company and certain shareholders of
the Company identified in EXHIBIT A attached thereto, the Restricted Stock Award
---------
Agreements dated December 21, 1990 between the Company and Joseph LeMay and the
Company and Paul Schmidt, the Company's 1991 Stock Option Plan and the stock
option agreements, each dated October 29, 1991, between the Company and James H.
Coffman, Jr., Frank Rubin, Daniel Riscalla, Carl Boland, Robert Geisman, Alan
Buchalter and Carl Lund restricting the voting or transfer of any shares of the
Company's capital stock. The Company is not required to file, nor has it filed,
pursuant to Section 12 of the Exchange Act, a registration statement relating to
any class of equity securities, provided, however, that under the Warrants and a
-------- -------
Stock Purchase Agreement, dated September 4, 1991 between the Company and
Purchaser, certain holders of Common Stock and certain holders of Warrants have
been granted registration rights.
3.7 Indebtedness of the Company. EXHIBIT B correctly describes all
--------------------------- ---------
secured and unsecured Indebtedness of the Company outstanding, or for which the
Company has commitments, on the date of this Agreement. The Company is not in
default with respect to any Indebtedness or any instrument or agreement relating
thereto.
3.8 Disclosure. Neither this Agreement, the Exhibits hereto, nor the
----------
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.
3.9 Intellectual Property. The Company owns or has valid rights to use
---------------------
all Intellectual Property Rights used in or necessary to conduct the Company's
business as heretofore conducted or planned to be conducted in the foreseeable
future, including, without limitation, all Intellectual Property Rights in or
relating to the so called "Telemar" software and all integrated software modules
in connection therewith, e.g., Voice Modules ("Simple Dial", Intellectual Dial",
----
"Call Router" and "Call Manager"), Base Modules ("Account Management" and
"Scripting"), Data Modules ("Order Entry", "Mail Management", "Lead Management",
"Sales Management", "Application Generation" and "Telemar PC"), and Common
Features ("Telewriter", "Teleprompt" and "Teletext"). EXHIBIT C sets forth a
---------
complete and accurate list of all registered trademarks and copyrights which the
Company owns or is licensed to use and all material License Agreements. The
Company owns no Patents. The Company is the sole and exclusive legal, beneficial
and record owner of all Copyrights and Trademarks specified on EXHIBIT C as well
---------
as all other material Intellectual Property
-6-
<PAGE>
Rights used in or necessary to conduct the Company's business, free and clear of
all liens, claims, charges and encumbrances and free and clear of all licenses
to third parties other than licenses to customers in the ordinary course of
business. To the knowledge of the Company, all License Agreements are valid and
binding obligations of the parties thereto. The Copyright listed on EXHIBIT C
---------
relating to the TELEMAR computer software, and the Copyright in the
documentation related thereto, is a valid and subsisting United States Copyright
and is registered in the United States Copyright Office. To the Company's
knowledge, all the Company's material intellectual property rights (including
those relating to the computer programs, data bases and related documentation)
are valid and enforceable, are subsisting, none are subject to any interference,
opposition, office action, cancellation or other similar proceeding and all fees
have been timely paid. There are no claims pending or, to the best of the
Company's knowledge, threatened, before any court or governmental agency
relating to the validity, enforceability, or the Company's rights to own or use
any Intellectual Property Rights (including, without limitation, those relating
to any of the computer programs, data bases or related documentation) or
alleging that the conduct of the Company's business infringes upon or
constitutes an unauthorized use of the Intellectual Property Rights of any third
party and, to the best of the Company's knowledge, there is no valid basis for
any such claims. To the best of the Company's knowledge, there are no material
infringements or unauthorized uses of any Intellectual Property Rights owned by
or licensed to the Company (including, without limitation, those in the
programs, data bases and related documentation) and no material breaches of any
License Agreements. The Company has taken reasonable security measures to
protect the secrecy and confidentiality of the source code, proprietary screen
displays and documentation relating to the TELEMAR computer programs and
databases and in all other material proprietary Know-How and Technical
Information owned by or licensed to the Company. Except as set forth on EXHIBIT
-------
C, the Company customarily employs proper statutory notice of registration in
- -
connection with registered Trademarks owned by or licensed to the Company and
places appropriate copyright notices on all material computer programs, data
bases, related documentation, and other material Copyrights owned by the
Company. The Company has not entered into any consent, forbearance to sue, or
settlement agreement with any Person relating to any Intellectual Property
Rights (including but not limited to those in the computer programs, data bases
and documentation related thereto) or to those of any third party, except as set
forth on EXHIBIT C. The consummation of the transactions contemplated by this
---------
Agreement will not result in the loss or impairment of any material Intellectual
Property Rights (including but not limited to those in any computer programs,
data bases and documentation related
-7-
<PAGE>
thereto) or the Company's ownership or right to use the same or result in a
breach of any License Agreement.
3.10 Environmental Matters. The Company is in compliance with the
---------------------
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.
3.11 Financial Statements. The audited combined balance sheet and
--------------------
related statement of operations of the Company and Information Management
Associates, a general partnership (the "Partnership") as of December 31, 1990
and the unaudited combined balance sheet and related statement of operations of
the Company and the Partnership as of July 31, 1991 (collectively, the
"Financial Statements") fairly present the Company's and the Partnership's
assets, liabilities, financial position and results of operations on a combined
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 interim statements, to
normal year-end 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
Exhibits hereto.
3.12 Changes. Except as set forth in Schedule 3.12 hereto, since July
-------
31, 1991, there has not been:
(a) any change in the Company's assets, liabilities, condition
(financial or otherwise) or business which individually
8
<PAGE>
or in the aggregate is materially adverse to the Company, or which is not in the
ordinary course of business;
(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.
3.13 Litigation, Etc. There is no 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.
3.14 Compliance with Other Instruments, etc. The Company is not in
--------------------------------------
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.
3.15 Use of Proceeds. The Company will use the proceeds from the sale
---------------
of the Common Stock to fund the business and operations acquired from Coffman
Systems, Inc. and Consumer Relations Technology, Inc. The Company will use any
remaining portion of such proceeds for general corporate purposes.
3.16 No Violations of Securities Laws. Subject to the accuracy of the
--------------------------------
Purchaser's representations in Section 4 hereof, the offer and sale of the
Shares hereunder is and will be exempt from the registration and prospectus
delivery requirements of the Securities Act of 1933 (the "Act") and is 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 Shares to anyone other than
the Purchaser. Neither the Company nor any person acting on its behalf has taken
any action which would
9
<PAGE>
require the registration of the Shares under Section 5 of the Act, including,
without limitation, engaging in any form of general solicitation.
3.17 Brokers or Finders Fees, Etc. 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 Shares contemplated hereby.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
- ---------- -----------------------------------------------
The Purchaser hereby represents and warrants to the Company as
follows:
4.1 Investment. The Purchaser is acquiring the 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 Shares have not
been registered under the Securities Act of 1933, as amended (the "Act") by
reason of a specific exemption from the registration provisions of the 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 Shares must be held
------
indefinitely unless the Shares are subsequently registered under the Act or an
exemption from such registration is available. Each certificate representing (i)
the Shares, and (ii) any other securities issued in respect of the Shares 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. 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 ACT EXCEPT PURSUANT TO AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
4.3 Accredited Investor. The Purchaser is an "accredited investor" as
-------------------
that term is used in Rule 501 promulgated under the Act.
10
<PAGE>
ARTICLE 5. CONDITIONS TO OBLIGATIONS OF THE PURCHASER
- ---------- ------------------------------------------
The obligations of the Purchaser to perform this Agreement are subject
to the satisfaction of the following conditions unless waived by the Purchaser:
5.1 Opinion of Counsel. You shall have received a favorable opinion,
------------------
addressed to you, dated the date of Closing and satisfactory in substance and
form to you, from LeBoeuf, Lamb, Leiby & MacRae, special counsel for the
Company, substantially in the form set forth in EXHIBIT D and covering such
---------
matters incident to the transactions contemplated by this Agreement as you or
your counsel may reasonably request.
5.2 Representations. The representations made by the Company in
---------------
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,
-------------
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 Purchaser. The form and substance of
--------------------------------------
all legal matters contemplated hereby and of all papers delivered hereunder
shall be acceptable to counsel to the Purchaser.
5.5 Government Consents, Authorizations, Etc. All consents,
----------------------------------------
authorizations, orders or approvals of, and filings or registrations with, any
federal, state, local or foreign 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 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.
11
<PAGE>
5.7 No Material Adverse Change. In the judgment of Purchaser, (a) 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 December 31, 1990, and (b) on the
Closing Date the financial condition, assets, liabilities (absolute, accrued,
contingent or otherwise), other than (x) changes which have not been, either in
any case or in the aggregate, materially adverse to the Company, and (y) any
matters of a general economic or political nature which do not affect the
Company uniquely.
5.8 Consents and Permits. The Company shall have received all
--------------------
consents, permits and other authorizations, and made all such filings and
declarations, as may be required pursuant to any law, statute, regulation or
rule (federal, state, local or foreign) in connection with the transactions
contemplated by this Agreement, or 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 you of all such consents, permits, authorizations,
filings and declarations.
5.9 Warrants. The New Warrant and the Additional Warrant shall have
--------
been duly issued and delivered to Purchaser and WPI, respectively.
5.10 Exchange and Note Modification Agreement. The Exchange and Note
----------------------------------------
Modification Agreement shall have been duly executed and delivered by the
Company.
5.11 Amended Note. The Amended Note shall have been duly executed and
------------
delivered by the Company.
ARTICLE 6. CONDITIONS TO OBLIGATIONS OF THE COMPANY
- ---------- ----------------------------------------
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 Purchaser in
---------------
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 Shares to the
--------
Purchaser shall be legally permitted by all laws and regulations to which the
Purchaser and the Company are subject.
-12-
<PAGE>
6.3 Acceptance by Counsel to the Company. The form and substance of
------------------------------------
all legal matters contemplated herein and of all papers delivered hereunder
shall be acceptable to counsel to the Company.
ARTICLE 7. EFFECTIVE TIME AND SURVIVAL OF REPRESENTATIONS AND
- ---------- --------------------------------------------------
WARRANTIES; INDEMNIFICATION, ETC.
---------------------------------
7.1 Effective Time of Representations and Warranties. Except as
------------------------------------------------
otherwise stated the representations and warranties of the Company contained
herein are deemed to be given and effective prior to giving effect to the
purchase by the Company of assets of CSI and CRT pursuant to the CSI Asset
Purchase Agreement and the CRT Asset Purchase Agreement and the transactions
related thereto.
7.2 Survival. All representations and warranties made by any party 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.
7.3 Company's Agreement to Indemnify. The Company hereby agrees to
--------------------------------
indemnify and save the Purchaser 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.
7.4 Rescission. Notwithstanding anything else herein contained, in the
----------
event that the transactions contemplatd by both the CSI Asset Purchase Agreement
and the CRT Asset Purchase Agreement have not closed within 30 days after the
Closing of the transactions contemplated by this Agreement, the Purchaser shall
be entitled, at its option exercisable by written notice delivered to the
Company within 10 days after the expiration of such 30 day period, to rescind
this Agreement and direct the Company to refund the Purchase Price (plus
interest thereon calculated from the date of this Agreement to the date of the
making of the refund at the publicly announced interest rate of the Morgan
Guaranty Trust Company of New York in effect from time to time during such
period), in exchange for delivery by Purchaser to the Company of the
Certificates representing the Shares. Any rescission under this Section 7.4
shall not affect in any way the transactions contemplated by the Exchange
Agreement.
-13-
<PAGE>
ARTICLE 8. RESTRICTION ON TRANSFERABILITY
- ---------- ------------------------------
8.1 Restriction; Procedure for Transfer. The 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 of 1933, as
amended and applicable state securities laws.
8.2 Notice of Proposed Transfer. Prior to any proposed transfer of any
---------------------------
of the Shares (other than a transfer pursuant to registration under the 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 Shares may be effected without registration under the
Act.
ARTICLE 9. REGISTRATION UNDER SECURITIES ACT, ETC.
- ---------- --------------------------------------
9.1 Registration on Request.
-----------------------
(a) Request. At any time or from time to time on the earlier of (x)
-------
December 21, 1995 or (y) the occurrence of an Initial Public Offering, upon
the written request of one or more Initiating Holders, requesting that the
Company effect the registration under the Securities Act of all or part of
such Initiating Holders' Registrable Securities and specifying the intended
method of disposition thereof, the Company will promptly give written
notice of such requested registration to all holders of Registrable
Securities, and thereupon the Company will use its best efforts to effect
the registration under the Securities Act of
(i) the Registrable Securities which the Company has been so
requested to register by such Initiating Holders for disposition in
accordance with the intended method of disposition stated in such
request, and
(ii) all other Registrable Securities the holders of which shall
have made a written request to the Company for registration thereof
within 30 days after the giving of such written notice by the Company
(which request shall specify the intended method of disposition of
such Registrable Securities), and
(iii) subject to the priority provisions of section 9.1(f), all
shares of Common Stock which the Company may
-14-
<PAGE>
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.
The registration rights granted in this Agreement are intended to be
coincident with the registration rights granted to the holders of the
Warrants. In no event, however, shall the total number of registrations
which the Company is required to effect on request hereunder and under the
Warrants exceed two.
(b) Registration Statement Form. Registrations under this Section 9.1
---------------------------
shall be on such appropriate registration form of the Commission (i) as
-
shall be selected by the Company and, as shall be reasonably acceptable to
the holders of more than 50% (by number of shares) of the Registrable
Securities so to be registered and (ii) as shall permit the disposition of
--
such Registrable Securities in accordance with the intended method or
methods of disposition specified in their request for such registration.
The Company agrees to include in any such registration statement all
information which holders of Registrable Securities being registered shall
reasonably request.
(c) Expenses. The Company will pay all Registration Expenses in
--------
connection with the first registration requested pursuant to this section
9.1 and the holders will pay all Registration Expenses in connection with
the second registration pursuant to this section 9.1. Registration Expenses
(and underwriting discounts and commissions and transfer taxes, if any) in
connection with the second registration statement shall be allocated pro
rata among all Persons on whose behalf securities of the Company are
included in such registration, on the basis of the respective amounts of
the securities then being registered on their behalf.
(d) Effective Registration Statement. A registration requested
--------------------------------
pursuant to this section 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
--------
Company has filed a registration statement with respect thereto solely
-15-
<PAGE>
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 requested to be included by
such holders and (ii) second, securities the Company proposes to sell and
--
other securities of the Company included in such registration by the
holders thereof.
9.2 Incidental Registration.
-----------------------
(a) Right to Include Registrable Securities. If the Company at any
---------------------------------------
time proposes to register any of its securities under the Securities Act
(other than by a registration on Form
-16-
<PAGE>
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 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 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
-17-
<PAGE>
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 of such counsel;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement
-18-
<PAGE>
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
-19-
<PAGE>
obligated to be so qualified, or to consent to general service of
process in any such jurisdiction;
(v) use its best efforts to cause all Registrable Securities covered
by such registration statement to be registered with or approved by
such other governmental agencies or authorities as may be necessary to
enable the 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
-20-
<PAGE>
to make the statements therein not misleading in the light of the
circumstances under which they were made, and at the request of any
such seller promptly prepare and furnish to such seller and each
underwriter, if any, a reasonable number of copies of a supplement to
or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities, such
prospectus shall not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light
of the circumstances under which they were made;
(viii) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, an earnings
statement covering the period of at least twelve months, but not more
than eighteen months, beginning with the first full calendar month
after the effective date of such registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of
the Securities Act, and will furnish to each such seller at least five
business days prior to the filing thereof a copy of any amendment or
supplement to such registration statement or prospectus and shall not
file any thereof to which any such seller shall have reasonably
objected on the grounds that such amendment or supplement does not
comply in all material respects with the requirements of the
Securities Act or of the rules or regulations thereunder;
(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 the 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
-21-
<PAGE>
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, 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 9.7. The holders of the Registrable Securities will
cooperate with the Company in the negotiation of the underwriting agreement and
will give
-22-
<PAGE>
consideration to the reasonable suggestions of the Company regarding
the form thereof, provided that nothing herein contained shall diminish the
--------
foregoing obligations of the Company. The holders of Registrable Securities to
be distributed by such underwriters shall be parties to such underwriting
agreement and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such holders of Registrable Securities and that any or all of
the conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions 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
-23-
<PAGE>
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 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
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
-24-
<PAGE>
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 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
Section 9, the Company will indemnify and hold harmless the holder of any
Registrable Securities covered by such registration statement, its directors,
officers, agents, employees, general partners, limited partners, each other
Person who participates as an underwriter in the offering or sale of such
securities and each other Person, if any, who controls such holder or any such
underwriter within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which such holder or
Requesting Holder or any such underwriter within the meaning of the Securities
Act, against any losses, claims, damages or liabilities, joint or several, to
which such holder or Requesting Holder or any such director, officer, agent,
employee, general partner, limited partner or underwriter or controlling person
may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any registration statement under which such securities were
-25-
<PAGE>
registered under the Securities Act, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and the Company will reimburse such holder, and each
such director, officer, agent, employee, general partner, limited partner,
underwriter and controlling person for any reasonable legal or any other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceeding; provided that
--------
the Company shall not be liable in any such case to the extent that any such
loss, claim, damage, liability (or action or proceeding in respect thereof) or
expense arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
any such preliminary prospectus, final prospectus, summary prospectus, amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company through an instrument duly executed by such holder
specifically stating that it is for use in the preparation thereof and, provided
--------
further that the Company shall not be liable to any Person who participates as
- -------
an underwriter, in the offering or sale of Registrable Securities or to any
other Person 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 such Requesting Holder or
any such director, officer, agent, employee, general partner, limited partner,
underwriter or controlling person and shall survive the transfer of such
securities by such holder.
(b) Indemnification by the Sellers. In the event of any registration
------------------------------
of Registrable Securities under the Securities Act pursuant to this Section 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
-26-
<PAGE>
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 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
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<PAGE>
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 payable by such
indemnified party as a result of such, 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(f) were
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<PAGE>
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.
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 Mr. Gary R.
Martino, Mr. andrei Poludnewycz, Mr. Albert R. Subbloie and the Partnership and
any Person which is, directly or indirectly, controlled by any of the foregoing.
"Affiliate" shall not include Wand/IMA Investments, L.P. or any of its partners.
Base Warrant: The Common Stock Purchase Warrant, dated December 21,
------------
1990, No. W-1, issued by the Company to the Purchaser, initially covering 16,667
shares of Common Stock.
Business Day: Any day other than a Saturday or a Sunday or a day on
------------
which commercial banking institutions in the City of New York or the State of
Connecticut are authorized by law to be closed. Any reference to "days" (unless
Business Days are specified) shall mean calendar days.
Commission: The Securities and Exchange Commission or any other
----------
federal agency at the time administering the Securities Act.
Common Stock: As defined in Section 1.1 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
-29-
<PAGE>
right, without limitation as to amount, either to all or to a share of the
balance of current dividends and liquidating dividends after the payment of
dividends and distributions on any shares entitled to preference.
Company: As defined in the introduction to this 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
Securities Exchange Commission (other than a registration statement on Form S-8,
or any successor form thereto, with respect to the issuance of Common Stock (or
securities convertible into or exchangeable for Common Stock or rights to
acquire Common Stock) granted or to be granted to employees, officers or
directors of the Company pursuant to any employee stock option plan, unless as a
result thereof the Company would be required to file reports with respect to any
of its equity securities with the Securities Exchange Commission) respecting an
offering, whether primary or secondary, of Common Stock is declared effective by
the Securities Exchange Commission.
Initiating Holders: Any holder or holders of Registrable Securities
------------------
holding at 66 2/3% of the Registrable Securities (by number of shares or, in the
case of any debt securities which may be Other Securities, 66 2/3% of the
outstanding principal amount of
-30-
<PAGE>
such securities) 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 and
----------------------------
Technical Information.
Know-How and Technical Information: 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 Warrant: The Common Stock Purchase Warrant, dated October 29,
-----------
1991, No. W-1, issued by the Company to the Purchaser, initially covering 14,812
shares of Common Stock.
Note Purchase Agreement: The Note and Warrant Purchase Agreement,
-----------------------
dated December 21, 1990, between the Company and the Purchaser.
Notes: The Company's Senior Subordinated Notes issued pursuant to the
-----
Note and Warrant Purchase Agreement.
Other Securities: Any stock (other than Common Stock) and other
----------------
securities of the Company or any other Person (corporate or otherwise) which the
holders of the Warrants at any time shall be entitled to receive, or shall have
received, upon the exercise of the Warrants, in lieu of or in addition to Common
Stock, or which at any time shall be issuable or shall have been issued in
exchange for or in replacement of Common Stock or Other Securities pursuant to
Section 3 of the Warrants.
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.
Purchaser: Wand/IMA Investments, L.P., a Delaware limited partnership.
---------
Registrable Securities: (a) any shares of Common Stock or Other
----------------------
Securities issued or issuable upon exercise of the
-31-
<PAGE>
Warrants; (b) the shares of Common Stock purchased pursuant to this Agreement;
(c) the shares of Common Stock issued to Purchaser pursuant to a Stock Purchase
Agreement, dated September 4, 1991; and (d) any securities issued or issuable
with respect to any securities referred to in the foregoing subdivisions 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 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.
-32-
<PAGE>
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 could constitute a "sale" as that
term is defined in section 2(3) of the Securities Act.
Warrants: The Base Warrant, the New Warrant, the Additional Warrant,
--------
the Common Stock Purchase Warrant, dated December 21, 1990, No. W-3, issued by
the Company to Thomas F. Hill, initially covering 2,381 shares of Common Stock
and any warrants issued in substitution therefor.
ARTICLE 11. MISCELLANEOUS
- ----------- -------------
11.1 Effect on Warrants. The Purchaser is the holder of certain
------------------
Warrants (as such term is defined in Article 10 hereof). The Warrants contain
certain anti-dilution provisions which provide for an increase in the number of
shares of Common Stock covered by the Warrants or a decrease in the Warrant
exercise price upon the happening of certain events. The Purchaser agrees that
the issuance of the Shares by the Company pursuant to this Agreement will not
result in any change in the number of shares of Common Stock covered by the
Warrants or in the exercise price per share contained in the Warrants and hereby
irrevocably waives any rights it or any subsequent holder of the Warrants may
have under the anti-dilution provisions of such Warrants as a result of the
issuance of the Shares pursuant to this Agreement.
11.2 Expenses. Whether or not the transactions contemplated by this
--------
Agreement shall be consummated, the Company will pay on demand all expenses in
connection with such transactions and in connection with any amendments or
waivers (whether or not the same become effective) under or in respect of this
Agreement and the transactions contemplated hereby, including, without
limitation: (a) the cost and expenses of printing or
-33-
<PAGE>
reproducing this Agreement, the Exchange Agreement, the New Warrant, the
Additional Warrant and the Amended Note, of furnishing all opinions of counsel
for the Company (including any opinions reasonably requested by Purchaser's
special counsel as to any legal matter arising hereunder) and all certificates
on behalf of the Company, and of the Company's performance of and compliance
with all agreements and conditions contained herein and therein to be performed
or complied with by it; (b) the cost of delivering to your principal office,
insured to your satisfaction, the Shares; (c) the fees, expenses and
disbursements of your special counsel in connection with such transactions (in
an amount not to exceed $15,000), any such amendments or waivers and in
connection with or arising out of any litigation, investigation or proceeding
instituted by any Governmental Agency or any other Person with respect to this
Agreement, or any other agreements contemplated hereby or thereby or the
transactions contemplated hereby or thereby and requiring your participation or
involvement; and (d) the out-of-pocket expenses incurred by you in connection
with such transactions, any such amendments or waivers and in connection with
any such litigation, investigation or proceeding. The Company also will pay, and
will save you and each holder of any Shares harmless from (i) all claims in
respect of the fees, if any, of brokers and finders acting on behalf of the
Company, and (ii) any and all liabilities with respect to any taxes (including
interest and penalties) which may be payable in respect of the execution and
delivery of this Agreement, any amendment or waiver under or in respect of this
Agreement, (other than normal federal income taxes imposed on a holder of Shares
or any share of Common Stock issued upon exercise of Warrants in respect of
interest or dividends received) or in respect of any determination by the
Internal Revenue Service to set aside or fail to recognize the Company's S
corporation election.
11.3 Indemnification. The Company agrees to indemnify and hold
---------------
harmless Purchaser and Purchaser's Affiliates and respective directors,
officers, general partners, limited partners, employees, agents and controlling
Persons thereof (each such Person being an "Indemnified Party") from and against
any and all losses, claims, damages and liabilities, joint or several, to which
such Indemnified Party may become subject under any applicable law or otherwise
relating to or arising out of the transactions contemplated by this Agreements
or the execution, delivery, enforcement and performance of this Agreement and
any other documents in any way related to the transactions contemplated by this
Agreement and the performance by Purchaser or Purchaser's Affiliates of the
services contemplated hereby and thereby, and will reimburse any Indemnified
Party for all expenses (including reasonable counsel fees and expenses) as they
are incurred in connection with the investigation of, preparation for or defense
of any pending or threatened claim or any action or proceeding arising
-34-
<PAGE>
therefrom, whether or not such Indemnified Party is a party thereto. The Company
will not be liable under the foregoing indemnification provision to the extent
that any loss, claim, damage, liability or expense is found to have resulted
primarily from the bad faith, willful misconduct or gross negligence of
Purchaser as determined by a final judgment of a court of competent
jurisdiction. The agreements in this section 11.3 shall survive the execution
and delivery of this Agreement, the purchase of the Shares by Purchaser under
this Agreement and any disposition of any shares of Common Stock issued upon
exercise of any Warrants.
11.4 Amendment, Modification and Waiver. This Agreement shall not be
----------------------------------
altered or otherwise amended except pursuant to an instrument in writing signed
by the Purchaser 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.
11.5 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 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.
11.6 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 Purchaser without the prior written consent of the other.
11.7 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.
11.8 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.
11.9 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
-35-
<PAGE>
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.
6527 Main Street
Trumbull, CT 06611
Attn: Mr. Gary R. Martino
With a copy to:
Thomas L. Fairfield, Esq.
LeBoeuf, Lamb, Leiby & MacRae
CityPlace II
Hartford, CT 06103
If to the Purchaser, to:
WAND/IMA Investments, L.P.
c/o Wand Partners, Inc.
30 Rockefeller Plaza
Suite 3226
New York, NY 10112
Attn: Mr. David J. Callard
With a copy to:
Nancy L. Henry, Esq.
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, NY 10022
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.
11.10 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.
11.11 Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Connecticut.
-36-
<PAGE>
11.12 Gender. Any reference to the masculine gender shall be deemed to
------
include the feminine and neuter genders unless the context otherwise requires.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-37-
<PAGE>
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/Albert R. Subbloie
--------------------------------
Albert R. Subbloie
President
THE PURCHASER:
WAND/IMA Investments, L.P.
By: Wand Partners Inc., as General Partner
By: /s/ David J. Callard
--------------------------------
David J. Callard
President
-38-
<PAGE>
EXHIBIT 10.19
AMENDMENT NO. 1
TO
STOCK PURCHASE AGREEMENT
DATED OCTOBER 29, 1991
BETWEEN
INFORMATION MANAGEMENT ASSOCIATES, INC.
AND WAND/IMA INVESTMENTS, L.P.
This Agreement is made as of June 1, 1994 by and between Information
Management Associates, Inc., a Connecticut corporation (the "Company") and
Wand/IMA Investments, L.P., a Delaware limited partnership (the "Purchaser").
Capitalized terms that are used but not defined herein shall have the meanings
assigned to such terms in the Stock Purchase Agreement dated as of October 29,
1991 between the Purchaser and the Company (the "Stock Purchase Agreement").
WHEREAS, Mercury Asset Management plc, acting as agent on behalf of
certain of its managed accounts (the "Managed Accounts") is purchasing pursuant
to a Stock Purchase Agreement (the "MAM Stock Purchase Agreement"), of even date
herewith, 117,778 shares of common stock from certain significant shareholders
of the Company; and
WHEREAS, in order to facilitate the transactions contemplated by the
MAM Stock Purchase Agreement, the Company and Purchaser desire to amend the
terms of the Stock Purchase Agreement;
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
parties hereto agree as follows and the Stock Purchase Agreement is hereby
amended as hereinafter set forth:
<PAGE>
SECTION 1
Representations and Warranties of the Company
The Company hereby represents and warrants to WPI as follows:
1.1 Authority and Validity. The execution, delivery and performance of
----------------------
this Amendment No. 1 to the Stock Purchase Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of the Company. This Amendment No. 1 to
the Stock Purchase 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
Amendment No. 1 to the Stock Purchase 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
provisions of its Charter 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 judgment, order, writ,
injunction or decree of any court, administrative agency or governmental body
applicable to Company.
SECTION 2
Amendments to Stock Purchase Agreement
The terms and conditions of the Stock Purchase Agreement are hereby
amended as follows:
2.1 Definitions. The definition of "Initiating Holders" set forth in
-----------
Section 10 of the Stock Purchase Agreement is hereby deleted in its entirety and
the following revised definitions is substituted therefor:
"Initiating Holders: Any holder or holders of Registrable Securities
------------------
holding at least
2
<PAGE>
40% of the Registrable Securities (by number of shares or, in the case of
any debt securities which may be Other Securities, 40% of the outstanding
principal amount of such securities) and initiating a request pursuant to
section 9.1 for the registration of all or part of such holder's or holders'
Registrable Securities."
2.2 Effect of Amendment. Except as amended hereby, all provisions of
-------------------
the Stock Purchase Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment as of the date and year first above written.
INFORMATION MANAGEMENT
ASSOCIATES, INC.
By: /s/ Gary R. Martino
---------------------
Name: Gary R. Martino
Title: Vice President
WAND/IMA INVESTMENTS, L.P.
By: WAND PARTNERS INC.,
as General Partner
By: /s/ David J. Callard
---------------------
Name: David J. Callard
Title:
3
<PAGE>
Exhibit 10.20
EXCHANGE AND NOTE MODIFICATION AGREEMENT
AND AMENDMENT TO NOTE AND WARRANT PURCHASE AGREEMENT
This AGREEMENT is made as of October 29, 1991, by and between
Information Management Associates, Inc., a Connecticut corporation, (the
"Company"), and WAND/IMA Investments, L.P., a Delaware limited partnership
("Wand").
WHEREAS, Wand is currently the holder of (i) 13,228 shares of the
company's Common Stock, no par value ("Common Stock"), (ii) a warrant entitling
Wand to purchase 16,667 shares of Common Stock at an exercise price of $9.00 per
share (the "Base Warrant"), (iii) a warrant entitling Wand to purchase up to 10%
of the Company's outstanding Common Stock (on a fully diluted basis) in the
event of the occurrence of certain contingencies at an exercise price of $9.00
per share (the "Special Warrant"), and (iv) the Company's 15% Senior
Subordinated Note in the original principal amount of $1,600,000 (the "Original
Note"); and
WHEREAS, Wand is purchasing pursuant to a Stock Purchase Agreement
(the "Stock Purchase Agreement"), of even date herewith, 29,632 newly issued
shares of Common Stock on the terms and conditions set forth therein; and
WHEREAS, Wand is exercising the Base Warrant in full on the date
hereof and $150,003 of the principal amount of the Original Note shall be
applied as full payment of the purchase price for the shares issued pursuant
thereto; and
WHEREAS, pursuant to this Exchange and Note Modification Agreement,
the Company will issue to Wand a new warrant (the "New Warrant") entitling Wand
to purchase 14,812 shares of Common Stock at a purchase price of $9.00 per share
and containing such other terms and conditions as are set forth therein, in
consideration of the surrender by Wand of the Special Warrant for cancellation
and the reduction of the principal amount of the Original Note by $449,997; and
WHEREAS, in connection with the transactions contemplated hereby, the
Original Note will be amended to reduce the interest rate thereon from 15% per
annum to 12% per annum and to change the principal repayment schedule therein
all as set forth in a 12% Senior Subordinated Note of even date herewith (the
"Amended Note"); and
WHEREAS, the parties desire to amend the Note and Warrant Purchase
Agreement, dated December 21, 1990 (the "Note and Warrant Purchase Agreement")
between the Company and Wand in accordance with the provisions of Section 19
thereof to change the principal
<PAGE>
repayment schedule set forth therein and as otherwise set forth herein.
NOW, THEREFORE, in consideration of the foregoing and for good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
hereto agree as follows and the Note and Warrant Purchase Agreement is hereby
amended as hereinafter set forth:
SECTION 1
Authorization and Exchange of Warrant
1.1 Authorization of New Warrant. On or prior to the date hereof, the
----------------------------
Company has authorized the issuance and sale to Wand of the New Warrant to
purchase 14,812 shares of Common Stock having the rights, preferences,
privileges and restrictions set forth in the form of New Warrant attached hereto
as Exhibit 1.1 and has authorized the issuance and sale of 14,812 shares of the
Common Stock pursuant to the New Warrant.
1.2 Authorization of Amended Note. On or prior to the date hereof, the
-----------------------------
Company has authorized the issuance of the Amended Note in the principal amount
of $1,000,000 bearing interest at the rate of 12% per annum having the rights,
preferences, privileges and restrictions set forth in the form of Amended Note
attached hereto as Exhibit 1.2 and as set forth in the Note and Warrant Purchase
Agreement.
1.3 Exchange. In consideration of the respective agreements of Wand
--------
and the Company contained herein and in the Stock Purchase Agreement, upon the
terms and subject to the conditions set forth herein, at the Closing (defined
below) the Company will deliver to Wand the New Warrant and the Amended Note.
The Amended Note reflects: (i) the application of $150,003 of the principal of
the Original Note to the payment of the purchase price of the shares issued to
Wand pursuant to exercise of the Base Warrant ; (ii) the application of $449,997
of the principal of the Original Note and the surrender of the Special Warrant
for cancellation in consideration of the issuance of the New Warrant, and (iii)
the amendment of the Original Note to reduce the interest rate thereon from 15%
to 12% per annum. At the Closing (defined below) Wand shall deliver to the
Company the Special Warrant and the Original Note.
1.4 Amendment of Note and Warrant Purchase Agreement. The first
------------------------------------------------
sentence of Section 7.2 of the Note and Warrant Purchase Agreement is hereby
deleted in its entirety and the following substituted therefor: "On each of
December 21, 1994, December 21, 1995 and December 21, 1996 the Company will
prepay $250,000 (or
-2-
<PAGE>
such lesser principal amount as shall then be outstanding) of the Notes." The
Note and Warrant Purchase Agreement shall in all respects continue to be in full
force and effect and all references in the Note and Warrant Purchase Agreement
to the Company's 15% Senior Subordinated Notes shall be deemed to refer to the
Amended Note and all references to Warrants shall be deemed to include the New
Warrant.
1.5 Closing. The closing (the "Closing") of the exchange of the
-------
Special Warrant and the issuance of the New Warrant and the Amended Note is
being held at the offices of LeBoeuf, Lamb, Leiby & MacRae, 520 Madison Avenue,
New York, New York, on the date hereof.
SECTION 2
Representations and Warranties of the Company
The Company hereby represents and warrants to Wand as follows:
2.1 Authority and Validity. The execution, delivery and performance of
----------------------
this Agreement, the New Warrant, the Additional Warrant and the Amended Note and
the consummation of the transactions contemplated thereby have been duly and
validly authorized by all necessary corporate action on the part of the Company.
Each of this Agreement, the New Warrant, the Additional Warrant and the Amended
Note 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, the New
Warrant, the Additional Warrant or the Amended Note 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 Charter 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 judgment, order, writ,
injunction or decree of any court, administrative agency or governmental body
applicable to Company.
2.2 Representations and Warranties in the Stock Purchase Agreement.
--------------------------------------------------------------
The representations of the Company made in the Stock Purchase Agreement
(including the Schedules thereto) are true and correct in all material respects
and are incorporated by reference herein to the same extent as if repeated at
length herein and the
-3-
<PAGE>
Company hereby makes all of such representations and warranties for Wand's
benefit.
SECTION 3
Survival of Representations and Warranties;
Indemnification
3.1 Survival. All representations and warranties made by any party 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.
3.2 Company's Agreement to Indemnify. The Company hereby agrees to
--------------------------------
indemnify and save Wand 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.
SECTION 4
Representations and Warranties of Wand
Wand hereby represents and warrants to the Company as follows:
4.1 Investment. Wand is acquiring the New Warrant and the Amended Note
----------
for investment for its own account and not with a view to, or for resale in
connection with, any distribution thereof. Wand understands that the New Warrant
and the Amended Note have not been registered under the Securities Act of 1933,
as amended (the "Act") by reason of a specific exemption from the registration
provisions of the Act which depends upon, among other things, the bona fide
nature of Wand's investment intent as expressed herein.
4.2 Resale. Wand acknowledges that the New Warrant and the Amended
------
Note must be held indefinitely unless the said securities are subsequently
registered under the Act or an exemption from such registration is available.
The New Warrant, the Amended Note and each certificate representing any other
securities issued in respect of the New Warrant upon any exercise
-4-
<PAGE>
thereof, 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. 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 ACT EXCEPT PURSUANT TO AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
4.3 Accredited Investor. Wand is an "accredited investor" as that term
-------------------
is used in Rule 501 promulgated under the Act.
SECTION 5
Miscellaneous
5.1 Definitions. Any capitalized terms not defined below, or elsewhere
-----------
in this Agreement, shall have the meanings specified in the Stock Purchase
Agreement.
5.2 Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Connecticut.
5.3 Successors and Assigns. This Agreement shall be binding upon and
----------------------
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 Wand
- -------
without prior written consent of the other.
5.4 Notices. Except as otherwise provided herein, all notices, demands
-------
and communications provided for herein or made hereunder shall be delivered as
specified in the Stock Purchase Agreement.
5.5 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 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.
-5-
<PAGE>
5.6 Amendments and Waivers. Any change or amendment hereto or any
----------------------
waiver hereunder must be in writing and signed by the party (or any successor
thereto) against whom change, amendment or waiver is sought to be enforced.
5.7 Severability. If any provision of this Agreement is held for any
------------
reason to be unenforceable by a court of competent jurisdiction, the remainder
of this Agreement shall, nevertheless, remain in full force and effect in such
jurisdiction.
5.8 Headings. The headings of this Agreement are intended solely for
--------
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement
5.9 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
INFORMATION MANAGEMENT
ASSOCIATES, INC.
By: /s/ Albert R. Subbloie
-----------------------------
Albert R. Subbloie, President
WAND/IMA Investments, L.P.
By: Wand Partners Inc.,
as General Partner
By: /s/ David J. Callard
-----------------------------
David J. Callard, President
-7-
<PAGE>
Exhibit 10.21
THIS NOTE IS SUBJECT TO THE TERMS OF A SUBORDINATION AGREEMENT, DATED
AS OF MAY 15, 1991, AMONG INFORMATION MANAGEMENT ASSOCIATES, INC.,
SILICON VALLEY BANK AND WAND/IMA INVESTEMENTS, L.P.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933 AND ACCORDINGLY MAY NOT BE OFFERED OR SOLD
UNLESS SUCH OFFER OR SALE IS EITHER REGISTERED PURSUANT TO OR IS EXEMPT
FROM THE REGISTRATION REQUIREMENTS OF SAID ACT.
12% Senior Subordinated Note due 1997
No. R-2 New York, N.Y.
$1,000,000 October 29, 1991
Information Management Associates, Inc., a Connecticut corporation
(the "Company"), for value received, hereby promises to pay to Wand/IMA
Investments, L.P., or registered assigns, the principal amount of $1,000,000.00
on December 21, 1997, with interest (computed on the basis of a 360-day year of
twelve 30-day months) on the unpaid balance of such principal amount at the rate
of 12% per annum from the date hereof, payable quarterly on March 21, 1991 and
on each June 21, September 21, December 21 and March 21 thereafter, until such
unpaid balance shall become due and payable (whether at maturity or at a date
fixed for prepayment or by declaration or otherwise), and with interest on any
overdue principal (including any overdue prepayment of principal) and (to the
extent permitted by applicable law) on any overdue interest, at the rate of 12%
per annum until paid, payable quarterly as aforesaid or, at the option of the
registered holder hereof, on demand. Payments of principal and interest on this
Note shall be made in lawful money of the United States of America at the
principal office of the Company, or at such other office or agency in the State
of Connecticut or the Borough of Manhattan, the City and State of New York as
the Company shall have designated by written notice to the registered holder of
this Note as provided in the Note and Warrant Purchase Agreement referred to
below.
This Note is one of the Company's 12% Senior Subordinated Notes due
1997 (the "Notes"), originally issued in the aggregate principal amount of
$1,600,000 pursuant to the Note and Warrant Purchase Agreement, dated December
21, 1990, between the Company and certain investors. A complete and correct copy
of the Note and Warrant Purchase Agreement is available for inspection at the
principal office of Information Management Associates, Inc. and will be
furnished to the holder of this Note upon written request and without charge.
The registered holder of this Note is entitled
1
<PAGE>
to the benefits of such Note and Warrant Purchase Agreement and may enforce the
agreements of the Company contained in such agreements and exercise the remedies
provided for thereby or otherwise available in respect thereof.
This Note is a registered Note and, as provided in such Note and
Warrant Purchase Agreement, is transferable only upon surrender of this Note for
registration of transfer, duly endorsed, or accompanied by a written instrument
of transfer duly executed, by the registered holder hereof or his attorney duly
authorized in writing. The Company may treat the person in whose name this Note
is registered as the owner hereof for the purpose of receiving payment and for
all other purposes, and the Company shall not be affected by any notice to the
contrary.
The Notes are subject to required and optional prepayment, in whole or
in part, all as specified in such Note and Warrant Purchase Agreement.
In case an Event of Default, as defined in such Note and Warrant
Purchase Agreement, shall occur and be continuing, the unpaid balance of the
principal of this Note may, subject to the limitations set forth in the Note and
Warrant Purchase Agreement, become due and payable in the manner and with the
effect provided in such Note and Warrant Purchase Agreement.
Payments of principal of and interest on this Note will be
subordinate, to the extent provided in such Note and Warrant Purchase Agreement,
to certain Senior Indebtedness (as such term is defined in such Note and Warrant
Purchase Agreement).
This Note is made and delivered in New York, New York, and shall be
governed by the laws of the State of New York.
INFORMATION MANAGEMENT ASSOCIATES,
INC.
By: /s/Albert R. Subbloie
-------------------------------
Name: Albert R. Subbloie
Title: President
2
<PAGE>
EXHIBIT 10.22
This Warrant and any shares acquired upon the exercise of this
Warrant have not been registered under the Securities Act of 1933, as
amended, and may not be transferred, sold or otherwise disposed of except
while such a registration is in effect or pursuant to an exemption from
registration under such Act.
INFORMATION MANAGEMENT ASSOCIATES, INC.
Common Stock Purchase Warrant
NEW YORK, NEW YORK
No. W-4 October 29, 1991
Information Management Associates, Inc., a Connecticut corporation
(the "Company"), for value received, hereby certifies that Wand/IMA Investments,
L.P., or registered assigns, is entitled to purchase from the Company 14,812
authorized, validly issued, fully paid and nonassessable shares of Common Stock,
no par value per share (the "Common Stock") of the Company at the purchase price
per share of $9, at any time or from time to time commencing at 9:00 A.M., New
York City time on the Warrant Exercise Date and prior to 5:00 P.M., New York
City time, on December 21, 2000, all subject to the terms, conditions and
adjustments set forth below in this Warrant.
This Warrant is being issued by the Company pursuant to an Exchange
and Note Modification Agreement, dated October 29, 1991, in exchange for the
surrender of one of the Common Stock Purchase Warrants originally issued in
connection with the issue and sale by the Company of 15% Senior Subordinated
Notes due 1997, pursuant to the Note and Warrant Purchase Agreement (the
"Purchase Agreement"), dated December 21, 1990, between the Company and Wand/IMA
Investments, L.P., a Delaware limited partnership (the "Purchaser"). Certain
capitalized terms used in this Warrant are defined in section 14; references to
an "Exhibit" are, unless otherwise specified, to one of the Exhibits attached to
this Warrant and references to a "section" are, unless otherwise specified, to
one of the sections of this Warrant.
1. Exercise of Warrant. 1.1 Manner of Exercise. Commencing on the
------------------- ------------------
Warrant Exercise Date, this Warrant may be exercised by the holder hereof, in
whole or in part, during normal business hours on any Business Day, by surrender
of this Warrant to the Company at its office maintained pursuant to subdivision
(a) of section 12.2, accompanied by a subscription in substantially the form
attached to this Warrant (or a reasonable facsimile thereof) duly executed by
such holder and accompanied by payment, in cash, by certified or official bank
check payable to the order of the
<PAGE>
Company, or in the manner provided in section 1.5 (or by any combination of such
methods), in the amount obtained by multiplying (a) the number of shares of
Common Stock (without giving effect to any adjustment thereof) designated in
such subscription by (b) $9, and such holder shall thereupon be entitled to
receive the number of duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock (or Other Securities) determined as
provided in sections 2 through 4.
1.2 When Exercise Effective. Each exercise of this Warrant shall be
-----------------------
deemed to have been effected immediately prior to the close of business on the
Business Day an which this Warrant shall have been surrendered to the Company as
provided in section 1.1, and at such time the Person or Persons in whose name or
names any certificate or certificates for shares of Common Stock (or Other
Securities) shall be issuable upon such exercise as provided in section 1.3
shall be deemed to have become the holder or holders of record thereof.
1.3 Delivery of Stock Certificates, etc. As soon as practicable after
-----------------------------------
each exercise of this Warrant, in whole or in part, and in any event within five
Business Days thereafter, the Company at its expense (including the payment by
it of any applicable issue taxes) will cause to be issued in the name of and
delivered to the holder hereof or, subject to section 9, as such holder (upon
payment by such holder of any applicable transfer taxes) may direct,
(a) a certificate or certificates for the number of duly authorized,
validly issued, fully paid and nonassessable shares of Common Stock (or
Other Securities) to which such holder shall be entitled upon such exercise
plus, in lieu of any fractional share to which such holder would otherwise
be entitled, cash in an amount equal to the same fraction of the Market
Price per share on the Business Day next preceding the date of such
exercise, and
(b) in case such exercise is in part only, a new Warrant or Warrants
of like tenor, calling in the aggregate on the face or faces thereof for
the number of shares of Common Stock equal (without giving effect to any
adjustment thereof) to the number of such shares called for on the face of
this Warrant minus the number of such shares designated by the holder upon
such exercise as provided in section 1.1
1.4 Company to Reaffirm Obligations. The Company will, at the time of
-------------------------------
each exercise of this Warrant, upon the request of the holder hereof,
acknowledge in writing its continuing obligation to afford to such holder all
rights (including, without limitation, any rights to registration of the shares
of Common Stock or Other
-2-
<PAGE>
Securities issued upon such exercise) to which such holder shall continue to be
entitled after such exercise in accordance with the terms of this Warrant,
provided that if the holder of this Warrant shall fail to make any such request,
such failure shall not affect the continuing obligation of the Company to afford
such rights to such holder.
1.5 Payment by Application of Notes. Upon any exercise of this
-------------------------------
Warrant, the holder hereof may, at its option, instruct the Company, by written
notice accompanying the surrender of this Warrant at the time of such exercise,
to apply to the payment required by section 1.1 all or any part of the unpaid
principal amount of any one or more Notes at the time held by such holder, in
which case the Company will accept the principal amount specified in such notice
in satisfaction of a like amount of such payment. In case less than the entire
unpaid principal amount of any Note shall be so specified, the principal amount
so specified shall be credited, as of the date of such exercise, against the
required prepayments of principal then remaining unpaid on such Note in the
inverse order of their maturity dates. Upon any partial application of a Note,
the Company at its expense shall forthwith issue and deliver to or upon the
order of the holder thereof a new Note or Notes in principal amount equal to the
unpaid principal amount of such surrendered Note which has not been applied
against such payment, such new Note or Notes to be dated and to bear interest
from the date to which interest has been paid on such surrendered Note. Within
two Business Days after receipt of any such notice, the Company will pay to the
holder of the Notes giving such notice, in the manner provided in the Notes and
in the Purchase Agreement, all unpaid interest on the principal amount so
specified in such notice, accrued to the date of the exercise of such Warrant.
1.6 Notice of Triggering Date.
-------------------------
(a) Within two Business Days after the Triggering Date, the Company
shall mail to each holder of a Warrant a written notice (the "First Warrant
Exercise Notice") (i) specifying that the Triggering Date has occurred,
describing the event giving rise to the Triggering Date and, if such event
is a proposed Initial Public Offering, Liquidity Event or Change in
Control, describing the nature, terms and conditions of such event and the
date on which such event is expected to be consummated, and (ii) specifying
the date on which such Warrant shall become exercisable (the "Warrant
Exercise Date"). If the Triggering Date is December 31, 1993, the Warrant
Exercise Date shall be as promptly as practicable thereafter. If the event
giving rise to the Triggering Date is a proposed Initial Public Offering,
Liquidity Event or Change in Control, the Warrant Exercise Date shall be at
least
-3-
<PAGE>
five Business Days before the date on which such transaction is to be
consummated.
(b) The Company shall promptly mail to each holder of a Warrant
supplemental notices of any material changes in the nature, terms and
conditions of any proposed transaction giving rise to the Triggering Date
from those disclosed to holders of the Warrants in prior notices delivered
under section 1.6(a).
2. Adjustment of Common Stock Issuable Upon Exercise.
-------------------------------------------------
2.1 General: Warrant Price. The number of shares of Common Stock which
----------------------
the holder of this Warrant shall be entitled to receive upon each exercise
hereof shall be determined by multiplying the number of shares of Common Stock
which would otherwise (but for the provisions of this section 2) be issuable
upon such exercise, as designated by the holder hereof pursuant to section 1.1,
by a fraction of which (a) the numerator is $9 and (b) the denominator is the
Warrant Price in effect on the date of such exercise. The "Warrant Price" shall
initially be $9 per share, shall be adjusted and readjusted from time to time as
provided in this section 2 and, as so adjusted or readjusted, shall remain in
effect until a further adjustment or readjustment thereof is required by this
section 2.
2.2 Adjustment of Warrant Price.
---------------------------
2.2.1 Issuance of Additional Shares of Common Stock. In case the
---------------------------------------------
Company at any time or from time to time after the date hereof shall issue or
sell Additional Shares of Common Stock (including Additional Shares of Common
Stock deemed to be issued pursuant to section 2.3 or 2.4) without consideration
or for a consideration per share less than the greater of the Current Market
price and the Warrant Price in effect immediately prior to such issue or sale,
then, and in each such case, subject to section 2.8, such Warrant Price shall be
reduced, concurrently with such issue or sale, to a price (calculated to the
nearest .001 of a cent) determined by multiplying such Warrant Price by a
fraction
(a) the numerator of which shall be (i) the number of shares of Common
Stock outstanding immediately prior to such issue or sale plus (ii) the
number of shares of Common Stock which the aggregate consideration received
by the Company for the total number of such Additional Shares of Common
Stock so issued or sold would purchase at the greater of such Current
Market Price and such Warrant Price, and
(b) the denominator of which shall be the number of shares of Common
Stock outstanding immediately after such issue or sale,
-4-
<PAGE>
provided that, for the purpose of this section 2.2.1, (w) immediately after any
- --------
Additional Shares of Common Stock are deemed to have been issued pursuant to
section 2.3 or 2.4, such Additional Shares shall be deemed to be outstanding,
(x) treasury shares shall not be deemed to be outstanding, (y) if all or any
part of the 7,500 shares issued to Joseph Lemay or Paul Schmidt pursuant to
restricted stock awards on December 20, 1990, shall be forfeited, and cease to
be outstanding (whether because of cancellation or by virtue of becoming
treasury shares) then this section shall not apply to the issue of up to the
number of shares forfeited, as adjusted to account for any intervening stock
dividend, stock split, reclassification, recapitalization or other similar event
and (z) no adjustment of the Warrant Price pursuant to this section 2.2.2 shall
be required as a consequence of the issuance or sale of the Common Stock upon
exercise of the Options to acquire 5% of the Common Stock issued to employees
pursuant to section 2.3 or the options to acquire 11,593 shares of Common Stock
issued to former employees of Coffman Systems, Inc. in connection with the
acquisition by the Company of the assets of Coffman Systems, Inc. and Consumer
Relations Technology, Inc.
2.2.2 Extraordinary Dividends and Distributions. In case the Company
-----------------------------------------
at any time or from time to time after the date hereof shall declare, order, pay
or make a dividend or other distribution (including, without limitation, any
distribution of other or additional stock or other securities or property or
Options by way of dividend or spin-off, reclassification, capitalization or
similar corporate rearrangement) on the Common Stock, other than (a) a dividend
payable in Additional Shares of Common Stock or (b) for so long as the Company
qualifies as an S corporation for federal income tax purposes, an annual cash
dividend not in excess of the amount equal to the taxable income of the Company
for the preceding calendar year multiplied by the maximum marginal federal
income tax rate on individuals for the preceding calendar year, then, and in
each such case, subject to section 2.8, the Warrant Price in effect immediately
prior to the close of business on the record date fixed for the determination of
holders of any class of securities entitled to receive such dividend or
distribution shall be reduced, effective as of the close of business on such
record date, to a price (calculated to the nearest .001 of a cent) determined by
multiplying such Warrant Price by a fraction
(x) the numerator of which shall be the Current Market Price in effect
on such record date or, if the Common Stock trades on an ex-dividend basis,
on the date prior to the commencement of ex-dividend trading, less the
amount of such dividend or distribution (as determined in good faith by the
Board of Directors of the Company) applicable to one share of Common Stock,
and
-5-
<PAGE>
(y) the denominator of which shall be such Current Market Price
provided that, in the event that the amount of such dividend applicable to one
- --------
share of Common Stock as so determined is equal to or greater than such Current
Market Price or in the event that such fraction is less than 1/2, in lieu of the
foregoing adjustment, adequate provision shall be made so that the holder of
this Warrant shall receive a pro rata share of such dividend based upon the
maximum number of shares of Common Stock at the time issuable to such holder
(determined without regard to whether the Warrant is exercisable at such time).
2.3 Treatment of Options and Convertible Securities. In case the
-----------------------------------------------
Company at any time or from time to time after the date hereof shall issue,
sell, grant or assume, or shall fix a record date for the determination of
holders of any class of securities entitled to receive, any Options (except for
Options issued or issuable to employees of the Company entitling such employees
to acquire up to a maximum of 5% of the Common Stock on a fully diluted basis
determined at the time of the issuance or grant of these employee options or the
options to acquire 11,593 shares of Common Stock issued to former employees of
Coffman Systems, Inc. in connection with the acquisition by the Company of the
assets of Coffman Systems, Inc. and Consumer Relations Technology, Inc.) or
Convertible Securities, then, and in each such case, the maximum number of
Additional Shares of Common Stock (as set forth in the instrument relating
thereto, without regard to any provisions contained therein for a subsequent
adjustment of such number) issuable upon the exercise of such Options or, in the
case of Convertible Securities and Options therefor, the conversion or exchange
of such Convertible Securities, shall be deemed to be Additional Shares of
Common Stock issued as of the time of such issue, sale, grant or assumption or,
in case such a record date shall have been fixed, as of the close of business on
such record date (or, if the Common Stock trades on an ex-dividend basis, on the
date prior to the commencement of ex-dividend trading), provided that such
--------
Additional Shares of Common Stock shall not be deemed to have been issued unless
the consideration per share (determined pursuant to section 2.5) of such shares
would be less than the greater of the Current Market Price and the Warrant Price
in effect on the date of and immediately prior to such issue, sale, grant or
assumption or immediately prior to the close of business on such record date
(or, if the Common Stock trades on an ex-dividend basis, on the date prior to
the commencement of ex-dividend trading), as the case may be, and provided,
--------
further, that in any such case in which Additional Shares of Common Stock are
- -------
deemed to be issued
-6-
<PAGE>
(a) no further adjustment of the Warrant Price shall be made upon the
subsequent issue or sale of Convertible Securities or shares of Common
Stock upon the exercise of such Options or the conversion or exchange of
such Convertible Securities, except in the case of any such Options or
Convertible Securities which contain provisions requiring an adjustment,
subsequent to the date of the issue or sale thereof, of the number of
Additional Shares of Common Stock issuable upon the exercise of such
Options or the conversion or exchange of such Convertible Securities by
reason of (x) a change of control of the Company, (y) the acquisition by
any Person or group of Persons of any specified number or percentage of the
Voting Securities of the Company or (z) any similar event or occurrence,
each such case to be deemed hereunder to involve a separate issuance of
Additional Shares of Common Stock, Options or Convertible Securities, as
the case may be;
(b) if such Options or Convertible Securities by their terms provide,
with the passage of time or otherwise, for any increase in the
consideration payable to the Company, or decrease in the number of
Additional Shares of Common Stock issuable, upon the exercise, conversion
or exchange thereof (by change of rate or otherwise), the Warrant Price
computed upon the original issue, sale, grant or assumption thereof (or
upon the occurrence of the record date, or date prior to the commencement
of ex-dividend trading, as the case may be, with respect thereto), and any
subsequent adjustments based thereon, shall, upon any such increase or
decrease becoming effective, be recomputed to reflect such increase or
decrease insofar as it affects such Options, or the rights of conversion or
exchange under such Convertible Securities, which are outstanding at such
time;
(c) upon the expiration (or purchase by the Company and cancellation
or retirement) of any such Options which shall not have been exercised or
the expiration of any rights of conversion or exchange under any such
Convertible Securities which (or purchase by the Company and cancellation
or retirement of any such Convertible Securities the rights of conversion
or exchange under which) shall not have been exercised, the Warrant Price
computed upon the original issue, sale, grant or assumption thereof (or
upon the occurrence of the record date, or date prior to the commencement
of ex-dividend trading, as the case may be, with respect thereto), and any
subsequent adjustments based thereon, shall, upon such expiration (or such
cancellation or retirement, as the case may be), be recomputed as if:
-7-
<PAGE>
(i) in the case of Options for Common Stock or Convertible
Securities, the only Additional Shares of Common Stock issued or sold
were the Additional Shares of Common Stock, if any, actually issued or
sold upon the exercise of such Options or the conversion or exchange
of such Convertible Securities and the consideration received therefor
was the consideration actually received by the Company for the issue,
sale, grant or assumption of all such Options, whether or not
exercised, plus the consideration actually received by the Company
upon such exercise, or for the issue or sale of all such Convertible
Securities which were actually converted or exchanged, plus the
additional consideration, if any, actually received by the Company
upon such conversion or exchange, and
(ii) in the case of Options for Convertible Securities, only the
Convertible Securities, if any, actually issued or sold upon the
exercise of such Options were issued at the time of the issue, sale,
grant or assumption of such Options, and the consideration received by
the Company for the Additional Shares of Common Stock deemed to have
then been issued was the consideration actually received by the
Company for the issue, sale, grant or assumption of all such Options,
whether or not exercised, plus the consideration deemed to have been
received by the Company (pursuant to section 2.5) upon the issue or
sale of such Convertible Securities with respect to which such Options
were actually exercised;
(d) no readjustment pursuant to subdivision (b) or (c) above shall
have the effect of increasing the Warrant Price by an amount in excess of
the amount of the adjustment thereof originally made in respect of the
issue, sale, grant or assumption of such Options or Convertible Securities;
and
(e) in the case of any such Options which expire by their terms not
more than 30 days after the date of issue, sale, grant or assumption
thereof, no adjustment of the Warrant Price shall be made until the
expiration or exercise of all such Options, whereupon such adjustment shall
be made in the manner provided in subdivision (c) above.
2.4 Treatment of Stock Dividends, Stock Splits, etc. In case the
-----------------------------------------------
Company at any time or from time to time after the date hereof shall declare or
pay any dividend on the Common Stock payable in Common Stock, or shall effect a
subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock (by reclassification or otherwise than by payment
-8-
<PAGE>
of a dividend in Common Stock), then, and in each such case, Additional Shares
of Common Stock shall be deemed to have been issued (a) in the case of any such
dividend, immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive such
dividend, or (b) in the case of any such subdivision, at the close of business
on the day immediately prior to the day upon which such corporate action becomes
effective.
2.5 Computation of Consideration. For the purposes of this section 2,
----------------------------
(a) the consideration for the issue or sale of any Additional Shares
of Common Stock shall, irrespective of the accounting treatment of such
consideration,
(i) insofar as it consists of cash, be computed at the net amount
of cash received by the Company,
(ii) insofar as it consists of property (including securities)
other than cash, be computed at the fair value thereof at the time of
such issue or sale, as determined in good faith by the Board of
Directors of the Company, and
(iii) in case Additional Shares of Common Stock are issued or
sold together with other stock or securities or other assets of the
Company for a consideration which covers both, be the portion of such
consideration so received, computed as provided in clauses (i) and
(ii) above, allocable to such Additional Shares of Common Stock, all
as determined in good faith by the Board of Directors of the Company;
(b) Additional Shares of Common Stock deemed to have been issued
pursuant to section 2.3, relating to Options and Convertible Securities,
shall be deemed to have been issued for a consideration per share
determined by dividing
(i) the total amount, if any, received and receivable by the
Company as consideration for the issue, sale, grant or assumption of
the Options or Convertible Securities in question, plus the minimum
aggregate amount of additional consideration (as set forth in the
instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration to
protect against dilution) payable to the Company upon the exercise in
full of such Options or the conversion or exchange of such Convertible
Securities or, in the case of Options for Convertible
-9-
<PAGE>
Securities, the exercise of such Options for Convertible Securities
and the conversion or exchange of such Convertible Securities, in each
case computing such consideration as provided in the foregoing
subdivision (a),
by
(ii) the maximum number of shares of Common Stock (as set forth
in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number to
protect against dilution) issuable upon the exercise of such Options
or the conversion or exchange of such Convertible Securities; and
(c) Additional Shares of Common Stock deemed to have been issued
pursuant to section 2.4, relating to stock dividends, stock splits, etc.,
shall be deemed to have been issued for no consideration.
2.6 Adjustments for Combinations, etc. In case the outstanding shares
---------------------------------
of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Warrant Price in
effect immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or consolidation, be
proportionately increased.
2.7 Dilution in Case of Other Securities. In case any Other Securities
------------------------------------
shall be issued or sold or shall become subject to issue or sale upon the
conversion or exchange of any stock (or Other Securities) of the Company (or any
issuer of Other Securities or any other Person referred to in section 3) or to
subscription, purchase or other acquisition pursuant to any Options issued or
granted by the Company (or any such other issuer or Person) for a consideration
such as to dilute, on a basis consistent with the standards established in the
other provisions of this section 2, the purchase rights granted by this Warrant,
then, and in each such case, the computations, adjustments and readjustments
provided for in this section 2 with respect to the Warrant Price shall be made
as nearly as possible in the manner so provided and applied to determine the
amount of Other Securities from time to time receivable upon the exercise of the
Warrants, so as to protect the holders of the Warrants against the effect of
such dilution.
2.8 Minimum Adjustment of Warrant Price. If the amount of any
-----------------------------------
adjustment of the Warrant Price required pursuant to this section 2 would be
less than one percent (1%) of the Warrant Price in effect at the time such
adjustment is otherwise so required
-10-
<PAGE>
to be made, such amount shall be carried forward and adjustment with respect
thereto made at the time of and together with any subsequent adjustment which,
together with such amount and any other amount or amounts so carried forward,
shall aggregate at least one percent (1%) of such Warrant Price.
3. Consolidation, Merger, etc. 3.1 Adjustments for Consolidation,
-------------------------- -----------------------------
Merger, Sale of Assets, Reorganization, etc. In case the Company after the date
- -------------------------------------------
hereof (a) shall consolidate with or merge into any other Person and shall not
be the continuing or surviving corporation of such consolidation or merger, or
(b) shall permit any other Person to consolidate with or merge into the Company
and the Company shall be the continuing or surviving Person but, in connection
with such consolidation or merger, the Common Stock or Other Securities shall be
changed into or exchanged for stock or Other Securities of any other Person or
cash or any other property, or (c) shall transfer all or substantially all of
its properties or assets to any other Person, or (d) shall effect a capital
reorganization or reclassification of the Common Stock or Other Securities
(other than a capital reorganization or reclassification resulting in the issue
of Additional Shares of Common Stock for which adjustment in the Warrant Price
is provided in section 2.2.1 or 2.2.2), then, and in the case of each such
transaction, proper provision shall be made so that, upon the basis and the
terms and in the manner provided in this Warrant, the holder of this Warrant,
upon the exercise hereof at any time after the consummation of such transaction,
shall be entitled to receive (at the aggregate Warrant Price in effect at the
time of such consummation for all Common Stock or Other Securities issuable upon
such exercise immediately prior to such consummation), in lieu of the Common
Stock or Other Securities issuable upon such exercise prior to such consummation
the highest amount of securities, cash or other property to which such holder
would actually have been entitled as a shareholder upon such consummation if
such holder had exercised the Rights represented by this Warrant immediately
prior thereto.
3.2 Assumption of Obligations. Notwithstanding anything contained in
-------------------------
the Warrants or in the Purchase Agreement to the contrary, the Company will not
effect any of the transactions described in clauses (a) through (d) of section
3.1 unless, prior to the consummation thereof, each Person (other than the
Company) which may be required to deliver any stock, securities, cash or
property upon the exercise of this Warrant as provided herein shall assume, by
written instrument delivered to, and reasonably satisfactory to, the holder of
this Warrant, (a) the obligations of the Company under this Warrant (and if the
Company shall survive the consummation of such transaction, such assumption
shall be in addition to, and shall not release the Company from, any continuing
obligations of the Company under this Warrant) and (b) the
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<PAGE>
obligation to deliver to such holder such shares of stock, securities, cash or
property as, in accordance with the foregoing provisions of this section 3, such
holder may be entitled to receive, and such Person shall have similarly
delivered to such holder an opinion of counsel for such Person, which counsel
shall be reasonably Satisfactory to such holder, stating that this Warrant shall
thereafter continue in full force and effect and the terms hereof (including,
without limitation, all of the provisions of this section 3) shall be applicable
to the stock, securities, cash or property which such Person may be required to
deliver upon any exercise of this Warrant or the exercise of any rights pursuant
hereto. Nothing in this section 3 shall be deemed to authorize the Company to
enter into any transaction not otherwise permitted by the Purchase Agreement.
4. Other Dilutive Events. In case any event shall occur as to which
---------------------
the provisions of section 2 or section 3 are not strictly applicable but the
failure to make any adjustment would not fairly protect the purchase rights
represented by this Warrant in accordance with the essential intent and
principles of such sections, then, in each such case, the Company shall appoint
a firm of independent certified public accountants of recognized national
standing (which may be the regular auditors of the Company), which shall give
their opinion upon the adjustment, if any, on a basis consistent with the
essential intent and principles established in sections 2 and 3, necessary to
preserve, without dilution, the purchase rights represented by this Warrant.
Upon receipt of such opinion, the Company will promptly mail a copy thereof to
the holder of this Warrant and shall make the adjustments described therein.
5. No Dilution or Impairment. The Company will not, by amendment of
-------------------------
its certificate of incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the holder of
this Warrant against dilution or other impairment. Without limiting the
generality of the foregoing, the Company (a) will not permit the par value of
any shares of stock receivable upon the exercise of this Warrant to exceed the
amount payable therefor upon such exercise, (b) will take all such action as may
be necessary or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable shares of stock on the exercise of the
Warrants from time to time outstanding, (c) will not take any action which
results in any adjustment of the Warrant Price if the total number of shares of
Common Stock (or Other Securities) issuable after the
-12-
<PAGE>
action upon the exercise of all of the Warrants would exceed the total number of
shares of Common Stock (or Other Securities) then authorized by the Company's
certificate of incorporation and available for the purpose of issue upon such
exercise, and (d) will not issue any capital stock of any class which is
preferred as to dividends or as to the distribution of assets upon voluntary or
involuntary dissolution, liquidation or winding-up, unless the rights of the
holders thereof shall be limited to a fixed sum or percentage of par value or a
sum determined by reference to a formula based on a published index of interest
rates, an interest rate publicly announced by a financial institution or a
similar indicator of interest rates in respect of participation in dividends and
to a fixed sum or percentage of par value in any such distribution of assets.
6. Accountants' Report as to Adjustments. In each case of any
-------------------------------------
adjustment or readjustment in the shares of Common Stock (or Other Securities)
issuable upon the exercise of this Warrant, the Company at its expense will
promptly compute such adjustment or readjustment in accordance with the terms of
this Warrant and prepare a report setting forth such adjustment or readjustment
and showing in reasonable detail the method of calculation thereof and the facts
upon which such adjustment or readjustment is based, including a statement of
(a) the consideration received or to be received by the Company for any
Additional Shares of Common Stock issued or sold or deemed to have been issued,
(b) the number of shares of Common Stock outstanding or deemed to be
outstanding, and (c) the Warrant Price in effect immediately prior to such issue
or sale and as adjusted and readjusted (if required by section 2) on account
thereof. The Company will forthwith mail a copy of each such report to each
holder of a Warrant and will, upon the written request at any time of any holder
of a Warrant, furnish to such holder a like report setting forth the Warrant
Price at the time in effect and showing in reasonable detail how it was
calculated. The Company will also keep copies of all such reports at its office
maintained pursuant to subdivision (a) of section 12.2 and will cause the same
to be available for inspection at such office during normal business hours by
any holder of a Warrant or any prospective Purchaser of a Warrant designated by
the holder thereof. Upon the written request at any time of any holder of a
Warrant, the Company will cause independent certified public accountants of
recognized national standing (which may be the regular auditors of the Company)
selected by the Company to verify the Company's computations of adjustment or
readjustment of terms of the Warrant (other than any computation of the fair
value of property as determined in good faith by the Board of Directors) and
related reports.
7. Notices of Corporate Action. In the event of
---------------------------
-13-
<PAGE>
(a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend (other than, for so long as the Company
qualifies as an S corporation for federal income tax purposes, an annual
cash dividend not in excess of the amount equal to the taxable income of
the Company for the preceding calendar year multiplied by the maximum
federal income tax rate on individuals for the preceding calendar year) or
other distribution, or any right to subscribe for, purchase or otherwise
acquire any shares of stock of any class or any other securities or
property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any consolidation
or merger involving the Company and any other Person or any transfer of all
or substantially all the assets of the Company to any other Person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
the Company will mail to each holder of a Warrant a notice specifying (i) the
date or expected date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right, and (ii) the date or expected date on which any
such reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up is to take place and the time,
if any such time is to be fixed, as of which the holders of record of Common
Stock (or Other Securities) shall be entitled to exchange their shares of Common
Stock (or Other Securities) for the securities or other property deliverable
upon such reorganization, reclassification, recapitalization, consolidation,
merger, transfer, dissolution, liquidation or winding-up. Such notice shall be
mailed at least 45 days prior to the date therein specified.
8. Registration of Common Stock. If any shares of Common Stock
----------------------------
required to be reserved for purposes of exercise of this Warrant require
registration with or approval of any governmental authority under any federal or
state law (other than the Securities Act and applicable state securities laws)
before such shares may be issued upon exercise, the Company will, at its expense
and as expeditiously as possible, use its best efforts to cause such shares to
be duly registered or approved, as the case may be. At any such time as Common
Stock is listed on any national securities exchange, the Company will, at its
expense, obtain
-14-
<PAGE>
promptly and maintain the approval for listing on each such exchange, upon
official notice of issuance, the shares of Common Stock issuable upon exercise
of the then outstanding Warrants and maintain the listing of such shares after
their issuance; and the Company will also list on such national securities
exchange, will register under the Exchange Act and will maintain such listing
of, any Other Securities that at any time are issuable upon exercise of the
Warrants, if and at the time that any securities of the same class shall be
listed on such national securities exchange by the Company.
9. Restrictions on Transfer. 9.1 Restrictive Legends. Except as
------------------------ -------------------
otherwise permitted by this section 9, each Warrant (including each Warrant
issued upon the transfer of any Warrant) shall be stamped or otherwise imprinted
with a legend in substantially the following form:
"This Warrant and any shares acquired upon the exercise of this
Warrant have not been registered under the Securities Act of 1933 and may
not be transferred in the absence of such registration or an exemption
therefrom under such Act. This Warrant and such shares may be transferred
only in compliance with the conditions specified in this Warrant."
Except as otherwise permitted by this section 9, each certificate for Common
Stock (or Other Securities) issued upon the exercise of any Warrant, and each
certificate issued upon the transfer of any such Common Stock (or Other
Securities), shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"The Shares represented by this certificate have not been registered
under the Securities Act of 1933 and may not be transferred in the absence
of such registration or an exemption therefrom under such Act. Such shares
may be transferred only in compliance with the conditions specified in
certain Common Stock Purchase Warrants issued by Information Management
Associates, Inc. pursuant to the Note and Warrant Purchase Agreement, dated
December 21, 1990, between Information Management Associates, Inc. and
Wand/IMA Investments, L.P. A complete and correct copy of the form of such
Warrant is available for inspection at the principal office of Information
Management Associates, Inc. and will be furnished to the holder of such
shares upon written request and without charge."
9.2 Notice of Proposed Transfer; Opinions of Counsel. Prior to any
------------------------------------------------
transfer of any Restricted Securities which are not
-15-
<PAGE>
registered under an effective registration statement under the Securities Act,
the holder thereof will give written notice to the Company of such holder's
intention to effect such transfer and to comply in all other respects with this
section 9.2. Each such notice (a) shall describe the manner and circumstances of
the proposed transfer in sufficient detail to enable counsel to render the
opinions referred to below, and (b) shall designate counsel for the holder
giving such notice. The holder giving such notice will submit a copy thereof to
the counsel designated in such notice, which counsel shall be experienced in
securities law matters. If in the opinion of such counsel the proposed transfer
may be effected without registration of such shares of Restricted Securities
under the Securities Act, the transferring holder shall thereupon be entitled to
transfer such shares in accordance with the terms of the notice delivered by
such holder to the Company. Each certificate representing such shares issued
upon or in connection with such transfer shall bear the restrictive legends
required by section 9.1, unless in the opinion of the transferring holder's
counsel and counsel to the Company (which counsel shall be experienced in
securities laws matters) such restrictive legends are not required or advisable.
The holder of the Restricted Securities seeking transfer thereof will pay the
reasonable fees and disbursements of counsel (other than house counsel) for any
holder of Restricted Securities in connection with all opinions rendered by such
counsel pursuant to this section 9.2 and pursuant to section 9.3.
9.3 Termination of Restrictions. The restrictions imposed by this
---------------------------
section 9 upon the transferability of Restricted Securities shall cease and
terminate as to any particular Restricted Securities (a) when such securities
shall have been effectively registered under the Securities Act, or (b) when, in
the opinions of both counsel for the holder thereof and counsel for the Company
(each of whom shall be experienced in securities laws matters), such
restrictions are no longer required in order to insure compliance with the
Securities Act. Whenever such restrictions shall cease and terminate as to any
Restricted Securities, the holder thereof shall be entitled to receive from the
Company, without expense (other than applicable transfer taxes, if any), new
securities of like tenor not bearing the applicable legends required by section
9.1.
10. Availability of Information. If the Company shall have filed a
---------------------------
registration statement pursuant to the requirements of section 12 of the
Exchange Act or a registration statement pursuant to the requirements of the
Securities Act, the Company will comply with the reporting requirements of
Sections 13 and 15(d) of the Exchange Act and will comply with all other public
information reporting requirements of the Commission from time to time in
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<PAGE>
effect and relating to assuring the availability of an exemption from the
Securities Act for the sale of any Restricted Securities pursuant to Rule 144 of
any comparable or similar rule promulgated by the Commission under the
Securities Act. The Company will also cooperate with each holder of any
Restricted Securities in supplying such information as may be necessary for such
holder to complete and file any information reporting forms presently or
hereafter required by the Commission as a condition to the availability of an
exemption from the Securities Act for the sale of any Restricted Securities. The
Company will furnish to each holder of any Warrants, promptly upon their
becoming available, copies of all financial statements, reports, notices and
proxy statements sent or made available generally by the Company to its
Stockholders, and, upon the written request of any holder, copies of all regular
and periodic reports and all registration statements and prospectuses filed by
the Company with any securities exchange or with the Commission.
11. Reservation of Stock, etc. The Company will at all times reserve
-------------------------
and keep available, solely for issuance and delivery upon exercise of the
Warrants, the number of shares of Common Stock (or Other Securities) from time
to time issuable upon exercise of all Warrants at the time outstanding. All
shares of Common Stock (or Other Securities) issuable upon exercise of any
Warrants shall be duly authorized and, when issued upon such exercise, Shall be
validly issued and, in the case of shares, fully paid and nonassessable with no
liability on the part of the holders thereof.
12. Ownership, Transfer and Substitution of Warrants. 12.1 Ownership
------------------------------------------------ ---------
of Warrants. The Company may treat the person in whose name any Warrant is
- -----------
registered on the register kept at the office of the Company maintained pursuant
to subdivision (a) of section 12.2 as the owner and holder thereof for all
purposes, notwithstanding any notice to the contrary, except that, if and when
any Warrant is properly assigned in blank, the Company may (but shall not be
obligated to) treat the bearer thereof as the owner of such Warrant for all
purposes, notwithstanding any notice to the contrary. Subject to section 9, a
Warrant, if Properly assigned, may be exercised by a new holder without a new
Warrant first having been issued.
12.2 Office; Transfer and Exchange of Warrants.
-----------------------------------------
(a) The Company will maintain an office where notices, presentations
and demands in respect of this Warrant may be made upon it. Such office
shall be maintained at 6527 Main Street, Trumbull, CT 06611, until such
time as the Company shall notify the holders of the Warrants of any change
of location of such office.
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<PAGE>
(b) Upon the surrender of any Warrant, properly endorsed, for
registration of transfer or for exchange at the office of the Company
maintained pursuant to subdivision (a) of this section 12.2, the Company at
its expense will (subject to compliance with section 9, if applicable)
execute and deliver to or upon the order of the holder thereof a new
Warrant or Warrants of like tenor, in the name of such holder or as such
holder (upon payment by such holder of any applicable transfer taxes) may
direct, calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock called for on the face or faces of the
Warrant or Warrants so surrendered.
12.3 Replacement of Warrants. Upon receipt of evidence reasonably
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant
held by a Person other than the Purchaser or any institutional investor, upon
delivery of indemnity reasonably satisfactory to the Company in form and amount
or, in the case of any such mutilation, upon surrender of such Warrant for
cancellation at the office of the Company maintained pursuant to subdivision (a)
of section 12.2, the Company at its expense will execute and deliver, in lieu
thereof, a new Warrant of like tenor.
13. Registration under Securities Act, etc.
--------------------------------------
13.1 Registration on Request.
-----------------------
(a) Request. At any time or from time to time on the earlier of (x)
-------
December 21, 1995 or (y) the occurrence of an Initial Public Offering, upon the
written request of one or more Initiating Holders, requesting that the Company
effect the registration under the Securities Act of all or part of such
Initiating Holders' Registrable Securities and specifying the intended method of
disposition thereof, the Company will promptly give written notice of such
requested registration to all holders of Registrable Securities, and thereupon
the Company will use its best efforts to effect the registration under the
Securities Act of
(i) the Registrable Securities which the Company has been so
requested to register by such Initiating Holders for disposition in
accordance with the intended method of disposition stated in such
request, and
(ii) all other Registrable Securities the holders of which shall
have made a written request to the Company for registration thereof
within 30 days after the giving of such written notice by the Company
(which request
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<PAGE>
shall specify the intended method of disposition of such Registrable
Securities), and
(iii) subject to the priority provisions of section 13.1(f), all
shares of Common Stock which the Company may elect to register in
connection with the offering of Registrable Securities pursuant to
this Section 13.1; and
(iv) subject to the priority provisions of section 13.1(f), shares of
Common Stock held by other Persons having registration rights,
all to the extent requisite to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities and the
additional shares of Common Stock, if any so to be registered, provided that the
provisions of this section 13.1(a) shall not require the Company to effect more
than two registrations of Registrable Securities. The registration rights
granted in this Warrant are intended to be coincident with the registration
rights granted to the Purchaser pursuant to two Stock Purchase Agreements, dated
September 4, 1991 and October 29, 1991, respectively, between the Purchaser and
the Company and with the registration rights granted to the holders of the
Warrants.
(b) Registration Statement Form. Registrations under this section 13.1
---------------------------
shall be on Such appropriate registration form of the Commission (i) as shall be
selected by the Company and, as shall be reasonably acceptable to the holders of
more than 50% (by number of shares) of the Registrable Securities so to be
registered and (ii) as shall permit the disposition of such Registrable
Securities in accordance with the intended method or methods of disposition
specified in their request for such registration. The Company agrees to include
in any such registration statement all information which holders of Registrable
Securities being registered shall reasonably request.
(c) Expenses. The Company will pay all Registration Expenses in
--------
connection with the first registration requested pursuant to this section 13.1
and the holders will pay all Registration Expenses in connection with the second
registration pursuant to this section 13.1. Registration Expenses (and
underwriting discounts and commissions and transfer taxes, if any) in connection
with the second registration statement shall be allocated pro rata among all
Persons on whose behalf securities of the Company are included in such
registration, on the basis of the respective amounts of the securities then
being registered on their behalf.
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<PAGE>
(d) Effective Registration Statement. A registration requested
--------------------------------
pursuant to this section 13.1 shall not be deemed to have been effected (i)
unless a registration statement with respect thereto has become effective,
provided that a registration which does not become effective after the Company
has filed a registration statement with respect thereto solely by reason of the
refusal to proceed of the Initiating Holders (other than a refusal to proceed
based upon the advice of counsel relating to a matter with respect to the
Company) shall be deemed to have been effected by the Company at the request of
such Initiating Holders unless the Initiating Holders shall have elected to pay
all Registration Expenses in connection with such registration, (ii) if, after
it has become effective, such registration is interfered with by any stop order,
injunction or other order or requirement of the Commission or other governmental
agency or court for any reason, or (iii) the conditions to closing specified in
the purchase agreement or underwriting agreement entered into in connection with
such registration are not satisfied, other than by reason of some act or
omission by such Initiating Holders.
(e) Selection of Underwriters. If a requested registration pursuant to
-------------------------
this section 13.1 involves an underwritten offering, the underwriter or
underwriters thereof shall be selected by the holders of at least a majority (by
number of shares) of the Registrable Securities as to which registration has
been requested and shall be acceptable to the Company, which shall not
unreasonably withhold its acceptance of such underwriters.
(f) Priority in Requested Registrations. If a requested registration
-----------------------------------
pursuant to this section 13.1 involves an underwritten offering, and the
managing underwriter shall advise the Company in writing (with a copy to each
holder of Registrable Securities requesting registration) that, in its opinion,
the number of securities requested to be included in such registration
(including securities of the Company which are not Registrable Securities)
exceeds the number which can be sold in such offering within a price range
acceptable to the holders of a majority of the Registrable Securities requested
to be included in such registration, the Company will include in such
registration, to the extent of the number which the Company is so advised can be
sold in such offering, (i) first Registrable Securities requested to be included
in such registration, pro rata among the holders thereof requesting such
securities requested to be included by such holders and (ii) second, securities
the Company proposes to sell and other securities of the Company included in
such registration by the holders thereof.
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<PAGE>
13.2 Incidental Registration.
-----------------------
(a) Right to Include Registrable Securities. If the Company at any
---------------------------------------
time proposes to register any of its securities under the Securities Act (other
than by a registration on Form S-4 or S-8, or any successor or similar forms and
other than pursuant to section 13.1), whether or not for sale for its own
account, it will each such time give prompt written notice to all holders of
Registrable Securities of its intention to do so and of such holders' rights
under this section 13.2. Upon the written request of any such holder made within
30 days after the receipt of any such notice (which request shall specify the
Registrable Securities intended to be disposed of by such holder and the
intended method of disposition thereof), the Company will use its best efforts
to effect the registration under the Securities Act of all Registrable
Securities which the Company has been so requested to register by the holders
thereof, to the extent requisite to permit the disposition (in accordance with
the intended methods thereof as aforesaid) of the Registrable Securities so to
be registered, by inclusion of such Registrable Securities in the registration
statement which covers the securities which the Company proposes to register,
provided that if, at any time after giving written notice of its intention to
register any securities and prior to the effective date of the registration
statement filed in connection with such registration, the Company shall
determine for any reason either not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to each holder of Registrable Securities and, thereupon, (i) in
the case of a determination not to register, shall be relieved of its obligation
to register any Registrable Securities in connection with such registration (but
not from its obligation to pay the Registration Expenses in connection
therewith), without prejudice, however, to the rights of any holder or holders
of Registrable Securities entitled to do so to request that such registration be
effected as a registration under section 13.1, and (ii) in the case of a
determination to delay registering, shall o 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 13.2 shall relieve
the Company of its obligation to effect any registration upon request under
section 13.1. The Company will pay all Registration Expenses in connection with
each registration of Registrable Securities requested pursuant to this section
13.2.
(b) Priority in Incidental Registrations. If (i) a registration
------------------------------------
pursuant to this section 13.2 involves an underwritten offering of the
securities so being registered,
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whether or not for sale for the account of the Company, to be distributed (on a
firm commitment basis) by or through one or more underwriters of recognized
standing under underwriting terms appropriate for such a transaction, (ii) the
Registrable Securities so requested to be registered for sale for the account of
holders of Registrable Securities are not also to be included in such
underwritten offering (either because the Company has not been requested so to
include such Registrable Securities pursuant to section 13.4(b) or, if requested
to do so, is not obligated to do so under section 13.4(b)), and (iii) the
managing underwriter of such underwritten offering shall inform the Company and
holders of the Registrable Securities requesting Such registration by letter of
its belief that the distribution of all or a specified number of such
Registrable Securities concurrently with the securities being distributed by
such underwriters would interfere with the successful marketing of the
securities being distributed by such underwriters (such writing to state the
basis of such belief and the approximate number of such Registrable Securities
which may be distributed without such effect), then the Company may, upon
written notice to all holders of such Registrable Securities, reduce pro rata
(if and to the extent stated by such managing underwriter to be necessary to
eliminate such effect) the number of such Registrable Securities the
registration of which shall have been requested by each holder of Registrable
Securities so that the resultant aggregate number of such Registrable Securities
so included in such registration shall be equal to the number of shares stated
in such managing underwriters letter.
13.3 Registration Procedures. If and whenever the Company is required
-----------------------
to use its best efforts to effect the registration of any Registrable Securities
under the Securities Act as provided in sections 13.1 and 13.2 the Company
shall, as expeditiously as possible:
(i) prepare and (within 90 days after the end of the period within
which requests for registration may be given to the Company or in any event
as soon thereafter as possible) file with the Commission the requisite
registration statement to effect such registration (including such audited
financial statements as may be required by the Securities Act or the rules
and regulations promulgated thereunder) and thereafter use its reasonable
best efforts to cause such registration statement to become and remain
effective for the time period required by this Agreement, provided, that
--------
before filing such registration statement or any amendments thereto the
Company will furnish to the counsel selected by the holders of Registrable
Securities which are to be
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<PAGE>
included in such registration copies of all such documents proposed to be
filed, which documents will be subject to the review of such counsel;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such
registration statement until the earlier of such time as all of such
securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such registration
statement or (i) in the case of a registration pursuant to section 13.1,
the expiration of 180 days after such registration statement becomes
effective, or (ii) in the case of a registration pursuant to section 13.2,
the expiration of 90 days after such registration statement becomes
effective, it being understood that following the expiration of the
relevant time period, the Company shall 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
jurisdiction as any seller thereof and any underwriter of the securities
being sold by such seller shall reasonably request, to keep such
registration 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
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<PAGE>
jurisdictions of the securities owned by such seller, except that the
Company shall not for any such purpose be required to qualify generally to
do business as a foreign corporation in any jurisdiction wherein it would
not but for the requirements of this subdivision (iv) be obligated to be so
qualified, or to consent to general service of process in any such
jurisdiction;
(v) use its best efforts to cause all Registrable Securities covered
by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable
the 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
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<PAGE>
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 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 Registrable Securities
covered by such registration statement on any securities exchange on which
any of the Registrable Securities are then listed.
The Company may require each seller of Registrable Securities as to which any
registration is being effected to furnish the Company such information regarding
such seller and the distribution of such
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<PAGE>
securities as the Company may from time to time reasonably request in writing.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of the
occurrence of any event of the kind described in subdivision (vii) of this
section 13.3, such holder will forthwith discontinue such holder's disposition
of Registrable Securities pursuant to the registration statement relating to
such Registrable Securities until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (vii) of this
section 13.3 and, if so directed by the Company, will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies, then in
such holder's possession of the prospectus relating to such Registrable
Securities current at the time of receipt of such notice. In the event the
Company shall give any such notice, the period mentioned in paragraph (ii) of
this section 13.3 shall be extended by the length of the period from and
including the date when each seller of any Registrable Securities covered by
such registration statement shall have received such notice to the date on which
each such seller has received the copies of the supplemented or amended
prospectus contemplated by paragraph (vii) of this section 13.3.
If any such registration or comparable statement refers to any holder
of Registrable Securities by name or otherwise as the holder of any securities
of the 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.
13.4 Underwritten Offerings.
----------------------
(a) Requested Underwritten Offerings. If requested by the underwriters
--------------------------------
for any underwritten offering by holders of Registrable Securities pursuant
to a registration requested under section 13.1, the Company will enter into
an underwriting agreement with such underwriters for such offering, such
agreement to be satisfactory in substance and form to the Company, each
such holder and the underwriters, and to contain such representations and
warranties by the
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<PAGE>
Company and such other terms as are generally prevailing in agreements of
this type, including, without limitation, indemnities to the effect and to
the extent provided in section 13.7. The holders of the Registrable
Securities will cooperate with the Company in the negotiation of the
underwriting agreement and will give consideration to the reasonable
suggestions of the Company regarding the form thereof, provided that
--------
nothing herein contained shall diminish the foregoing obligations of the
Company. The holders of Registrable Securities to be distributed by such
underwriters shall be parties to such underwriting agreement and may, at
their option, require that any or all of the representations and warranties
by, and the other agreements on the part of, the Company to and for the
benefit of such underwriters shall also be made to and for the benefit of
such holders of Registrable Securities and that any or all of the
conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of such
holders of Registrable Securities. Any such holder of Registrable
Securities shall not be required to make any representations or warranties
to or agreements with the Company or the underwriters other than
representations, warranties or agreements regarding such holder, such
holder's Registrable Securities and such holder's intended method of
distribution and any other representation required by law.
(b) Incidental Underwritten Offerings. If the Company at any time
---------------------------------
proposes to register any of its securities under the Securities Act as
contemplated by section 13.2 and such securities are to be distributed by
or through one or more underwriters, the Company will, if requested by any
holder of Registrable Securities as provided in section 13.2 and subject to
the provisions of section 13.2(b), use its best efforts to arrange for such
underwriters to include all the Registrable Securities to be offered and
sold by such holder among the securities to be distributed by such
underwriters, provided that if the managing underwriter of such
--------
underwritten offering shall inform the holders of the Registrable
Securities requesting such registration and the holders of any other shares
of securities which shall have exercised, in respect of such underwritten
offering, registration rights comparable to the rights under section 13.2
by letter of its belief that inclusion in such underwritten distribution of
all or a specified number of such Registrable Securities or of such other
shares of securities so requested to be included would interfere with the
successful marketing of the securities (other than such Registrable
Securities and other shares of securities so requested to be included) by
the underwriters (such writing to state the basis of such belief and the
approximate number of such Registrable Securities and shares
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<PAGE>
of other securities so requested to be included which may be included in such
underwritten offering without such effect), then the Company may, upon written
notice to all holders of such Registrable Securities and of such other shares of
securities so requested to be included, exclude pro rata from such underwritten
offering (if and to the extent stated by such managing underwriter to be
necessary to eliminate such effect) the number of such Registrable Securities
and shares of such other securities so requested to be included the registration
of which shall have been requested by each holder of Registrable Securities and
by the holders of such other securities, so that the resultant aggregate number
of such Registrable Securities and of such other shares of securities so
requested to be included which are included in such underwritten offering shall
be equal to the approximate number of shares stated in such managing
underwriter's letter. The holders of Registrable Securities to be distributed by
such underwriters shall be parties to the underwriting agreement between the
Company and such underwriters and may, at their option, require that any or all
of the representations and warranties by, and the other agreements on the part
of, the Company to and for the benefit of such underwriters shall also be made
to and for the benefit of such holders of Registrable Securities and that any or
all of the conditions precedent to the obligations of such underwriters under
such underwriting agreement be conditions precedent to the obligations of such
holders of Registrable Securities. Any such holder of Registrable Securities
shall not be required to make any representations or warranties to or agreements
with the Company or the underwriters other than representations, warranties or
agreements regarding such holder, such holder's Registrable Securities and such
holder's intended method of distribution and any other representation required
by law.
(c) Holdback Agreements.
-------------------
(i) Each holder of Registrable Securities agrees by acquisition of
such Registrable Securities, if so required by the managing
underwriter, not to effect any public sale or distribution of any
equity securities of the Company, during the seven days prior to and
the 90 days after any underwritten registration pursuant to section
13.1 or 13.2 has become effective, except as part of such underwritten
registration, whether or not such holder participates in such
registration.
(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
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<PAGE>
of such securities during the seven days prior to and the 90 days
after any underwritten registration pursuant to section 13.1 or 13.2
has become effective, except as part of such underwritten registration
and except pursuant to registrations on Form S-4 and S-8, or any
successor or similar forms thereto, and (y) to cause each holder of
its equity securities or any securities convertible into or
exchangeable or exercisable for any of such securities, in each case
purchased from the Company at any time after the date of this
Agreement (other than in a public offering) to agree not to effect any
such public sale or distribution of such securities during such
period.
13.5 Preparation; Reasonable Investigation. In connection with the
-------------------------------------
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company will give the holders of Registrable
Securities registered under such registration statement, their underwriters, if
any, and their respective counsel and accountants, the opportunity to
participate in the preparation of such registration statement, each prospectus
included therein or filed with the Commission, and each amendment thereof or
supplement thereto, and will give each of them such access to its books and
records and such opportunities to discuss the business of the Company with its
officers and the independent public accountants who have certified its financial
statements as shall be necessary, in the opinion of such holders' and such
underwriters' respective counsel, to conduct a reasonable investigation within
the meaning of the Securities Act.
13.6 Indemnification.
---------------
(a) Indemnification by the Company. In the event of any registration
------------------------------
of any securities of the Company under the Securities Act pursuant to this
Section 13, the Company will indemnify and hold harmless the holder of any
Registrable Securities covered by such registration statement, its
directors, officers, agents, employees, general partners, limited partners,
each other Person who participates as an underwriter in the offering or
sale of such securities and each other Person, if any, who controls such
holder or any such underwriter within the meaning of the Securities Act,
against any losses, claims, damages or liabilities, joint or several, to
which such holder or Requesting Holder or any such director, officer,
agent, employee, general partner, limited partner or underwriter or
controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions or Proceedings, whether commenced or threatened, in respect
thereof) arise out of or are based upon any untrue statement
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<PAGE>
or alleged untrue statement of any material fact contained in any
registration statement under which such securities were registered under
the Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or
any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and the Company will reimburse such holder, and each such
director, officer, agent, employee, general partner, limited partner,
underwriter and controlling person for any reasonable legal or any other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceeding; provided
--------
that the Company shall not be liable in any such case to the extent that
any such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by such holder specifically stating that it is for
use in the preparation thereof and, provided further that the Company shall
-------- -------
not be liable to any Person who participates as an underwriter, in the
offering or sale of Registrable Securities or to any other Person, if any,
who controls such underwriter within the meaning of the Securities Act, in
any such case to the extent that any such loss, claim, damage, liability
(or action or proceeding in respect thereof) or expense arises out of such
Person's failure to send or give a copy of the final prospectus, as the
same may be then supplemented or amended, within the time required by the
Securities Act to the Person asserting an untrue statement or alleged
untrue statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such Person if such
statement or omission was corrected in such final prospectus. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such holder or such Requesting Holder
or any such director, officer, agent, employee, general partner, limited
partner, underwriter or controlling person and shall survive the transfer
of such securities by such holder.
(b) Indemnification by the Sellers. In the event of any registration
------------------------------
of Registrable Securities under the Securities Act pursuant to this Section
13, each seller of Registrable Securities will (severally and not jointly)
indemnify and hold harmless (in the same manner and to the
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same extent as set forth in subdivision (a) of this section 13.7) the
Company, each director of the Company, each officer of the Company and each
other person, if any, who controls the Company within the meaning of the
Securities Act, with respect to any statement or alleged statement in or
omission or alleged omission from such registration statement, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, if such statement or
alleged statement or omission or alleged omission was made in reliance upon
and in conformity with written information furnished to the Company through
an instrument duly executed by such seller specifically stating that it is
for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement.
Such indemnity shall remain in full force and effect, regardless of any
investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of such
securities by such seller.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified
----------------------
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this section 13.7, such
indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the
commencement of such action, provided that the failure of any indemnified
--------
party to give notice as provided herein shall not relieve the indemnifying
party of its obligations under the preceding subdivisions of this section
13.7, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such action is
brought against an indemnified party, unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, the indemnifying
party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified, to
the extent that the indemnifying party may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the consent of
the indemnified party, consent to entry of any judgment or enter into any
settlement of any such action which does not include as an unconditional
term thereof the giving
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<PAGE>
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 13.7 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification
of securities under any Federal or state law or regulation of any
governmental authority, other than the Securities Act.
(e) Indemnification Payments. The indemnification required by this
------------------------
section 13.7 shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred.
(f) Contribution. If for any reason the indemnification provided for
------------
in the preceding paragraphs of this Section 13 is unavailable to an
indemnified party or is insufficient to hold it harmless as contemplated by
the preceding clauses (a) and (b), then the indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim, damage,
liability or expense in such proportion as is appropriate to reflect not
only the relative benefits received by the indemnified party and the
indemnifying party, but also the relative fault of the indemnified party
and the indemnifying party in connection with the actions which resulted in
such loss, claim, damage, liability or expense, as well as any other
relevant equitable considerations. The relative fault of such indemnifying
party and indemnified party shall be determined by reference to, among
other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission
to state a material fact, has been made by, or relates to information
supplied by, such indemnifying party or indemnified party, and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such action. The amount paid or payable by a party as a
result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include any legal or other fees or expenses
reasonably incurred by such party in connection with any investigation or
proceeding.
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<PAGE>
The Parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 13(f) were determined by pro rata
allocation or by any other method of allocation which does not take into
account the equitable considerations referred to in the immediately
preceding paragraph. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation. No holder of Registrable Securities shall be
required to contribute in an amount greater than the dollar amount of
proceeds received by such holder with respect to the sale of such holder's
Registrable Securities.
13.7 Other Registration Rights. The Company shall not enter into any
-------------------------
agreement or arrangement to provide any Person with registration rights that are
inconsistent with the registration and other rights provided hereunder to
holders of the Warrants.
14. Definitions. As used herein, unless the context otherwise
-----------
requires, the following terms have the following respective meanings:
Additional Shares of Common Stock: All shares (including treasury
---------------------------------
shares) of Common Stock issued or sold (or, pursuant to section 2.3 or 2.4,
deemed to be issued) by the Company after the date hereof, whether or not
Subsequently reacquired or retired by the Company, other than
(a) shares issued upon the exercise of the Warrants,
(b) such additional number of shares as may become issuable upon the
exercise of any of the securities referred to in the foregoing clause (a)
by reason of adjustments required pursuant to antidilution provisions
applicable to such securities as in effect on the date hereof, but only if
and to the extent that such adjustments are required as the result of the
original issuance of the Warrants, and
(c) such additional number of shares as may become issuable upon the
exercise of any of the securities referred to in the foregoing clause (a)
by reason of adjustments required pursuant to antidilution provisions
applicable to such securities as in effect on the date hereof, in order to
reflect any subdivision or combination of Common Stock, by reclassification
or otherwise, or any dividend on Common Stock payable in Common Stock.
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Business Day: Any day other than a Saturday or 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.
Change in Control: Any transaction the result of which is that Mr.
-----------------
Gary R. Martino, Mr. Andre Poludnewycz and Mr. Albert R. Subbloie, as a group,
shall, directly or indirectly, own less than 30% of the common equity of the
Company on a fully-diluted basis. "Change in Control" shall not include (a) so
long as Messrs. Martino, Poludnewycz and Subbloie, as a group, continue to
Control at least 30% of the common equity of the Company on a fully-diluted
basis, the creation of any will or trust for the sole benefit of the spouses and
lineal descendants of such persons, or (b) the transfer of common equity through
testamentary disposition or the laws of intestate succession as a result of the
death of the first to die of Messrs. Martino, Poludnewycz or Subbloie.
Commission: The Securities and Exchange Commission or any other
----------
federal agency at the time administering the Securities Act.
Common Stock: As defined in the introduction to this Warrant, such
------------
term to include any stock into which such Common Stock shall have been changed
or any stock resulting from any reclassification of such Common Stock, and all
other stock of any class or classes (however designated) of the Company the
holders of which have the right, without limitation as to amount, either to all
or to a share of the balance of current dividends and liquidating dividends
after the payment of dividends and distributions on any shares entitled to
preference.
Company: As defined in the introduction to this Warrant, such term to
-------
include any corporation which shall succeed to or assume the obligations of the
Company hereunder in compliance with section 3.
Convertible Securities: Any evidences of indebtedness, shares of stock
----------------------
(other than Common Stock) or other securities directly or indirectly convertible
into or exchangeable for Additional Shares of Common Stock.
Current Market Price: On any date specified herein, the average daily
--------------------
Market Price during the period of the most recent 20 days, ending on such date,
on which the national securities exchanges were open for trading, except that if
no Common Stock is then listed or admitted to trading on any national securities
exchange or quoted in the over-the-counter market, the Current Market Price
shall be the Market Price on such date.
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<PAGE>
Event of Default: Any of the Events specified in Section 13 of the
----------------
Purchase Agreement as an Event of Default.
Exchange Act: The Securities Exchange Act of 1934, or any similar
------------
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
Independent Financial Expert: means a nationally recognized investment
----------------------------
banking firm, ranking in the top twenty (as determined by the Securities
Industries Association, Inc. or a similar securities information data company)
as lead manager for primary common stock offerings in the year prior to the year
in which it is called upon to give independent financial advice to the Company
as described herein and that does not (and whose directors, officers, employees
and Affiliates do not) have a direct or indirect financial interest in the
Company or any of its Affiliates, that has not been, since the beginning of the
year prior to the year in which it is called upon to give independent financial
advice to the Company as described herein, and at the time it is called upon to
give independent financial advice to the Company is not (and none of whose
directors, officers, employees or Affiliates is) a promoter, director or officer
of the Company or any of its Affiliates and that does not provide any advice or
opinions to the Company or any of its Affiliates except as an Independent
Financial Expert. The Company will bear the expense of compensation of the
Independent Financial Expert for services or opinions it may provide in that
capacity.
Initial Public Offering: An Initial Public Offering shall mean the
-----------------------
first time a registration statement filed under the Securities Act with the
Securities Exchange Commission (other than a registration statement on Form S-8,
or any successor form thereto, with respect to the issuance of Common Stock (or
securities convertible into or exchangeable for Common Stock or rights to
acquire Common Stock) granted or to be granted to employees, officers or
directors of the Company pursuant to any employee stock option plan, unless as a
result thereof the Company would be required to file reports with respect to any
of its equity securities with the Securities Exchange Commission) respecting an
offering, whether primary or secondary, of Common Stock is declared effective by
the Securities Exchange Commission.
Initiating Holders: Any holder or holders of Registrable Securities
------------------
holding at least 66-2/3% of the Registrable Securities (by number of shares or,
in the case of any debt securities which may be Other Securities, 66-2/3% of the
outstanding principal amount of such Securities) and initiating a request
pursuant to
-35-
<PAGE>
section 13.1 for the registration of all or part of such holder's or holders'
Registrable Securities.
Letter Agreement: The Letter Agreement, dated December 21, 1990, among
----------------
the Company, Joseph R. Lemay, Gary R. Martino, Andrei Poludnewycz, Paul J.
Schmidt, Albert R. Subbloie, Wendell Covalt, Dennis Dobson, Wand/IMA
Investments, L.P. and Thomas F. Hill.
Liquidity Event: Any of the following: (i) an Initial Public Offering,
---------------
(ii)a merger or consolidation involving the Company, or (iii) a sale of all or
substantially all of the assets of the Company.
Market Price: On any date specified herein, the amount per share of
------------
the Common Stock, equal to (a) the last sale price of such Common Stock, regular
way, on such date or, if no such sale takes place on such date, the average of
the closing bid and asked prices thereof on such date, in each case as
officially reported on the principal national securities exchange on which such
Common Stock is then listed or admitted to trading, or (b) if such Common Stock
is not then listed or admitted to trading on any national securities exchange
but is designated as a national market system security by the NASD, the last
trading price of the Common Stock on such date, or (c) if there shall have been
no trading on such date or if the Common Stock is not so designated, the average
of the closing bid and asked prices of the Common Stock on such date as shown by
the NASD automated quotation system, or (d) if such Common Stock is not then
listed or admitted to trading on any national exchange or quoted in the
over-the-counter market, the higher of (x) the book value thereof as determined
by any firm of independent public accountants of recognized standing selected by
the Board of Directors of the Company as of the last day of any month ending
within 60 days preceding the date as of which the determination is to be made or
(y) the fair value thereof determined in good faith by the Board of Directors of
the Company as of a date which is within 18 days of the date as of which the
determination is to be made.
NASD: The National Association of Securities Dealers, Inc.
----
Notes: The 15% Senior Subordinated Notes, due December 1997, of this
-----
Company originally issued in the aggregate principal amount of $1.6 million
pursuant to the Purchase Agreement, such term to include any such notes issued
in substitution for such notes, including, without limitation, the Company's 12%
Senior Subordinated Note, dated October 29, 1991 in the principal amount of
$1,000,000.
-36-
<PAGE>
Options: Rights, options or warrants to subscribe for, purchase or
-------
otherwise acquire either Additional Shares of Common Stock or Convertible
Securities.
Other Securities: Any stock (other than Common Stock) and other
----------------
securities of the Company or any other Person (corporate or otherwise) which the
holders of the Warrants at any time shall be entitled to receive, or shall have
received, upon the exercise of the Warrants, in lieu of or in addition to Common
Stock, or which at any time shall be issuable or shall have been issued in
exchange for or in replacement of Common Stock or Other Securities pursuant to
section 3 or otherwise.
Person: A corporation, an association, a partnership, an organization,
------
a business, an individual, a government or political subdivision thereof or a
governmental agency.
Purchase Agreement: As defined in the introduction to this Warrant.
------------------
Purchaser: As defined in the introduction to this Warrant.
---------
Registrable Securities: (a) any shares of Common Stock or Other
----------------------
Securities issued or issuable upon exercise of the Warrants; (b) the shares of
Common Stock issued or to be issued to Purchaser pursuant to the Stock Purchase
Agreement, dated October 29, 1991, between the Company and Purchaser; (c) the
shares of Common Stock issued to Purchaser pursuant to the Stock Purchase
Agreement, dated September 4, 1991 between the Company and Purchaser; and (d)
any securities issued or issuable with respect to any securities referred to in
the foregoing subdivision by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization or otherwise. As to any particular Registrable
Securities, once issued such securities shall cease to be Registrable Securities
when (a) a registration statement with respect to the sale of such securities
shall have become effective under the Securities Act and such securities shall
have been disposed of in accordance with such registration statement, (b) they
shall have been distributed to the public pursuant to Rule 144 (or any successor
or similar provision) under the Securities Act, (c) they shall have been
otherwise transferred, new certificates for them not bearing a legend
restricting further transfer shall have been delivered by the Company and
subsequent disposition of them 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
-37-
<PAGE>
issuer) under the Securities Act or any similar state law then in force, or (d)
they shall have ceased to be outstanding.
Registration Expenses: All expenses incident to the Company's
---------------------
performance of or compliance with section 13, including, without limitation, all
registration, filing and NASD fees, all fees and expenses of complying with
securities or blue sky laws, all word processing, duplicating and printing
expenses, messenger and delivery expenses, the fees and disbursements of counsel
for the Company and of its independent public accountants, including the
expenses of any special audits or "cold comfort" letters required by or incident
to such performance and compliance, the reasonable fees and disbursements of any
counsel and accountants retained by the holder or holders of more than 51% of
the Registrable Securities being registered, premiums and other costs of
policies of insurance (if any) against liabilities arising out of the public
offering of the Registrable Securities being registered or officers and
directors insurance and any fees and disbursements of underwriters customarily
paid by issuers or sellers of securities, but excluding underwriting discounts
and commissions and transfer taxes, if any.
Restricted Securities: All of the following: (a) any Warrants bearing
---------------------
the applicable legend or legends referred to in section 9.1, (b) any shares of
Common Stock (or Other Securities) which have been issued upon the exercise of
Warrants and which are evidenced by a certificate or certificates bearing the
applicable legend or legends referred to in such section and (c) unless the
context otherwise requires, any shares of Common Stock (or Other Securities)
which are at the time issuable upon the exercise of Warrants and which, when so
issued, will be evidenced by a certificate or certificates bearing the
applicable legend or legends referred to in such section.
Securities Act: The Securities Act of 1933, or any similar federal
--------------
statute, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time.
Transfer: Any sale, assignment, pledge or other disposition of any
--------
security, or of any interest therein, which could constitute a "sale" as that
term is defined in section 2(3) of the Securities Act.
Triggering Date: The earliest to occur of: (i) the date on which the
---------------
Board of Directors of the Company authorizes the Company to proceed with an
Initial Public Offering; (ii) the date on which a registration statement
relating to an Initial Public Offering is filed with the Commission; (iii) the
date on which the Board of Directors of the Company authorizes the Company to
take
-38-
<PAGE>
any action toward the consummation of a Liquidity Event; (iv) the date on which
any Shareholder (as defined in the Letter Agreement) send a Take-Along Notice
(as defined in the Letter Agreement) to any holder of a Warrant of any proposed
transaction that would result in a Change in Control; (v) the date on which a
Change in Control occurs; (vi) so long as any Note is outstanding, the date on
which any Event of Default occurs; (vii) if no Notes are outstanding but any
Warrant or Registrable Security is outstanding, the date on which any Event of
Default occurs pursuant to Section 8, 9.1(i), 9.2, 9.4, 9.5, 9.6 or 9.8 under
the Purchase Agreement; and (viii) December 31, 1993.
Value Report: A valuation report rendered by an Independent Financial
------------
Expert pursuant to Section 15 or Section 16 of this Agreement.
Warrant Exercise Date: As defined in section 1.6(a).
---------------------
Warrant Exercise Notice: As defined in section 1.6(a).
-----------------------
Warrant Price: As defined in section 2.1.
-------------
Warrants: (i) The Common Stock Purchase Warrants originally issued
--------
pursuant to the Purchase Agreement (including any warrants issued in
substitution therefor), (ii) this Common Stock Purchase Warrant, (iii) an
additional Common Stock Purchase Warrant, dated October 29, 1991, No. W-5,
issued by the Company to Wand Partners, Inc., initially covering 2,068 shares of
Common Stock and (iv) the Common Stock Purchase Warrant, dated December 21,
1990, No. W-3, issued by the Company to Thomas F. Hill, initially covering 2,381
shares of Common Stock.
15. Determinations of Value By the Board of Directors. Wherever this
-------------------------------------------------
Agreement provides for the Board of Directors to make a good faith determination
of value, the procedures set forth in this section 15 shall be applicable. The
Company shall promptly (but in no event more than ten Business Days thereafter)
provide written notice (the "Valuation Notice") to each Warrant holder of each
determination of value or fair value made by the Board of Directors pursuant to
the terms of this Agreement. The Valuation Notice shall state the Board's
conclusions as to value, the purpose of the valuation (including designation of
the provision of this Agreement requiring the determination), and a summary of
the method used by the Board to reach its conclusions.
If requested in writing by any holder or holders of Registrable
Securities holding at least a majority of the Registrable Securities within 30
days of the date of the Valuation Notice, the Company will appoint, at the
Company's expense, an Independent Financial Expert to review and render a Value
Report
-39-
<PAGE>
concerning the Board of Directors Valuation. The conclusions of the Independent
Financial Expert shall be final and binding on the Company and the Registrable
Holders.
16. Company Obligation to Repurchase.
--------------------------------
(a) Repurchase Option. Any holder or holders of Registrable Securities
-----------------
holding at least a majority of the Registrable Securities may require the
Company to repurchase (the "Repurchase Option") all or any part of the
Registrable Securities if on or before December 21, 1996, there has not
been an Initial Public Offering.
(b) Repurchase Option Price. Upon an election by a holder or holders
-----------------------
of Warrants pursuant to section 16(a), the Company shall repurchase the
Warrants designated by holders desiring to effect the repurchase at a price
equal to or greater than (i) the value of the Common Stock into which the
Warrant is exercisable less (ii) the Warrant Price then in effect and
relating to such number of shares of Common Stock (such net price being the
"Repurchase Price"). The value of such Common Stock shall be determined by
an Independent Financial Expert (to be selected as provided below in
section 16(d)) using one or more valuation methods that the Independent
Financial Expert in its professional judgment determines to be most
appropriate but without giving effect to the discount for any lack of
liquidity of the Common Stock or to the fact that the Company may have no
class of equity securities registered under the Securities Exchange Act of
1934. The Independent Financial Expert shall deliver, promptly upon
completion, to the Company and to each of the holders exercising the
Repurchase Option a Value Report stating the method of valuation considered
or used and the value of said Common Stock as of the Valuation Date and
containing a statement as to the nature and scope of the examination or
investigation upon which the determination of value was made.
The Independent Financial Expert shall consult with management of the
Company in order to allow management to provide information and data
relevant to, and comment on the proposed value of, such Independent
Financial Expert's report to the Company. The Independent Financial Expert
may revise its Value Report based on such consultation provided that the
final value shall reflect both the initial valuation and the determination
to revise it. If the Independent Financial Expert becomes aware of any
material changes since the Valuation Date in the business or financial
conditions or prospects of the Company, such Independent Financial Expert
shall specify such material changes in the Value Report.
-40-
<PAGE>
(c) Valuation Date. The "Valuation Date" with respect to any
--------------
Repurchase Option shall mean the date five Business Days prior to the date
of the holder's or holders' written notice to the Company of the election
to exercise the Repurchase Option stated in this section 16.
(d) Procedures.
----------
(i) Any holder or holders electing a Repurchase Option pursuant to
Section 16(a) shall give written notice of such election (the
"Repurchase Notice") to the Company. The Repurchase Notice shall
include the name of the holders electing the Repurchase Option (the
"Electing Holders") and the number of shares (by holder) that the
Company shall be required at that time to repurchase.
(ii) Within five Business Days of its receipt of the Repurchase
Notice, the Company shall give written notice to each Electing Holder
of the Company's choice of an Independent Financial Expert to prepare
the Value Report. Within five Business Days after the date of this
notice, Electing Holders owning a majority of the shares identified in
the Repurchase Notice shall notify the Company in writing (the
"Holders' IFE Notice") of their approval or disapproval of the
Company's initial choice of Independent Financial Expert and, in the
event of disapproval, such holders shall propose an alternative firm
as Independent Financial Expert. Within two Business Days after its
receipt of the Holders' IFE Notice, the Company shall notify the
Electing Holders of its approval or disapproval of their selection. If
the Company does not accept the Independent Financial Expert chosen by
the Electing Holders, then the two Independent Financial Experts
previously selected pursuant to this section shall promptly be
requested by the Company and the Electing Holders to jointly select a
firm to act as Independent Financial Expert to Prepare the Value
Report. Their joint selection, which shall be made within five
Business Days, shall be final and binding upon both the Company and
the Electing Holders.
(iii) The Company shall consult and cooperate with the selected
Independent Financial Expert to facilitate the final delivery of its
Value Report no later than sixty calendar days after the date of the
Repurchase Notice. The Value Report shall be final and binding upon
both the Company and the Electing Holders.
(iv) The Company shall pay the Repurchase Price in immediately
available funds to the holder or holders
-41-
<PAGE>
electing the Repurchase Option within sixty calendar days of the
delivery of the Value Report.
17. Remedies. The Company stipulates that the remedies at law of the
--------
holder of this Warrant in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate and that, to the fullest extent
permitted by law, such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.
18. No Rights or Liabilities as Stockholder. Nothing contained in this
---------------------------------------
Warrant shall be construed as conferring upon the holder hereof any rights as a
stockholder of the Company or as imposing any obligation on such holder to
purchase any securities or as imposing any liabilities on such holder as a
stockholder of the Company, whether such obligation or liabilities are asserted
by the Company or by creditors of the Company.
19. Notices. All notices and other communications under this Warrant
-------
shall be in writing and shall be mailed by registered or certified mail, return
receipt requested, addressed (a) if to any holder of any Warrant, at the
registered address of such holder as set forth in the register kept at the
principal office of the Company, or (b) if to the Company, to the attention of
its President at its office maintained pursuant to subdivision (a) of section
12.2, provided that the exercise of any Warrant shall be effective in the manner
provided in section 1.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-42-
<PAGE>
20. Miscellaneous. This Warrant and any term hereof may be changed,
-------------
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of the State of New York. The section headings in this
Warrant are for purposes of convenience only and shall not constitute a part
hereof.
INFORMATION MANAGEMENT ASSOCIATES, INC.
By: /s/ Albert R. Subbloie
------------------------------
Albert R. Subbloie
President
-43-
<PAGE>
FORM OF SUBSCRIPTION
[To be executed only upon exercise of Warrant]
To Information Management Associates, Inc.
The undersigned registered holder of the within Warrant hereby
irrevocably exercises such Warrant for, and purchases thereunder, _______ *
shares of Common Stock of Information Management Associates, Inc. and herewith
makes payment of $ therefor, and requests that the certificates for such
shares be issued in the name of, and delivered to,
, whose address is
Dated:
------------------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of Warrant)
------------------------------------
[Street Address)
------------------------------------
(City) (State) (Zip Code)
- ----------------------
* Insert here the number of shares called for on the face of
this Warrant (or, in the case of a partial exercise, the
portion thereof as to which this Warrant is being
exercised), in either case without making any adjustment for
Additional Shares of Common Stock or any other stock or
other securities or property or cash which, pursuant to the
adjustment provisions of this Warrant, may be delivered upon
exercise. In the case of a partial exercise, a new Warrant
or Warrants will be issued and delivered, representing the
unexercised portion of the Warrant, to the holder
surrendering the Warrant.
-44-
<PAGE>
FORM OF ASSIGNMENT
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of the within
Warrant hereby sells, assigns and transfers unto________________________________
_______________the right represented by such Warrant to purchase_______shares of
Common Stock of Information Management Associates, Inc. to which such Warrant
relates, and appoints______________________________________________________
_______________Attorney to make such transfer on the books of Information
Management Associates, Inc. maintained for such purpose, with full power of
substitution in the premises.
Dated:
-------------------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of Warrant)
--------------------------------------
(Street Address)
---------------------------------------
(City) (State) (Zip Code)
Signed in the presence of:
- -------------------------
-45-
<PAGE>
EXHIBIT 10.23
INFORMATION MANAGEMENT ASSOCIATES, INC.
AMENDMENT NO. 1
TO
COMMON STOCK PURCHASE WARRANT
This Agreement is made as of June 1, 1994 by and between Information
Management Associates, Inc., a Connecticut corporation (the "Company") and
Wand/IMA Investments, L.P., a Delaware limited partnership (the "Wand/IMA
Partnership").
WHEREAS, the Wand/IMA Partnership is currently the holder of (i)
595,270 shares of the Company's common stock, no par value ("Common Stock"),
(ii) a Warrant (No. W-4) initially entitling the Wand/IMA Partnership to
purchase 14,812 shares of common stock at $9 per share (subject to adjustment
upon the occurrence of certain events) (the "New Warrant"), and (iii) the
Company's 12% Senior Subordinated Note due 1997 in the outstanding principal
amount of $1,000,000;
WHEREAS, Mercury Asset Management plc, acting as agent on behalf of
certain of its managed accounts (the "Managed Accounts") is purchasing pursuant
to a Stock Purchase Agreement (the "Stock Purchase Agreement"), of even date
herewith, 117,778 shares of common stock from certain significant shareholders
of the Company; and
WHEREAS, in order to facilitate the transactions contemplated by the
Stock Purchase Agreement, the Company and the Wand/IMA Partnership desire to
amend the terms of the New Warrant;
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
parties hereto agree as follows and the New Warrant (No. W-4) is hereby amended
as hereinafter set forth:
<PAGE>
SECTION 1
Representations and Warranties of the Company
The Company hereby represents and warrants to the Wand/IMA Partnership
as follows:
1.1 Authority and Validity. The execution, delivery and performance of
----------------------
this Amendment to the New Warrant and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of the Company. This Amendment to the New Warrant
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 Amendment to the New Warrant, 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 provisions of its Charter 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 judgment, order, writ, injunction or decree of any court,
administrative agency or governmental body applicable to Company.
SECTION 2
Amendments to Warrant
The terms and conditions of the New Warrant (No. W-4) are hereby
amended as follows:
2.1 Definitions. The definition of "Initiating Holders" set forth in
-----------
Section 14 of the New Warrant is hereby deleted in its entirety and the
following revised definition is substituted therefor:
"Initiating Holders: Any holder or holders of Registrable Securities
------------------
holding at least 40% of the Registrable Securities (by number of
2
<PAGE>
shares or, in the case of any debt securities which may be Other
Securities, 40% of the outstanding principal amount of such securities) and
initiating a request pursuant to section 13.1 for the registration of all
or part of such holder's or holders' Registrable Securities."
2.2 Effect of Amendment. Except as amended hereby, all provisions of
-------------------
the New Warrant shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment as of the date and year first above written.
INFORMATION MANAGEMENT
ASSOCIATES, INC.
By: /s/ Gary R. Martino
-------------------------
Name:
Title:
WAND/IMA INVESTMENTS, L.P.
By: WAND PARTNERS INC.,
as General Partner
By: /s/ David J. Callard
-------------------------
Name: David J. Callard
Title:
3
<PAGE>
EHHIBIT 10.24
INFORMATION MANAGEMENT ASSOCIATES, INC.
AMENDMENT NO. 2
TO
COMMON STOCK PURCHASE WARRANT
-----------------------------
This Agreement is made as of November 16, 1994 by and between
Information Management Associates, Inc., a Connecticut corporation (the
"Company") and Wand/IMA Investments, L.P. ("Wand/IMA").
WHEREAS, Wand/IMA is currently the holder of a Warrant (No. W-4)
initially entitling Wand/IMA to purchase 14,812 shares of common stock at $9.00
per share (subject to adjustment upon the occurrence of certain events) (the
"New Warrant");
WHEREAS, the New Warrant was previously amended as of June 1, 1994;
WHEREAS, the Company and Wand/IMA desire to further amend the terms of
the New Warrant;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein and for other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto agree as follows and the New Warrant
(No. W-4) is hereby amended as hereinafter set forth.
SECTION 1. AMENDMENTS TO WARRANT
The terms and conditions of the New Warrant (No. W-4) are hereby
amended as follows:
1.1 Section 1.1 is hereby amended by inserting immediately following
the reference therein to "section 1.5" the phrase "or section 1.6".
1.2 Section 1.6 is hereby renumbered 1.7.
1.3 The following is hereby added as section 1.6:
"1.6 Payment by Application of Shares Otherwise Issuable. Upon any
---------------------------------------------------
exercise of this Warrant, the holder hereof may, at its option, instruct
the Company, by written notice accompanying the surrender of this Warrant
at the time of such exercise, to apply to the payment required by section
1.1 such number of the shares of Common Stock otherwise issuable to such
holder upon such
<PAGE>
exercise as shall be specified in such notice, in which case an amount
equal to the excess of the aggregate Current Market Price of such specified
number of shares on the date of exercise over the portion of the payment
required by section 1.1 attributable to such shares shall be deemed to have
been paid to the Company and the number of shares issuable upon such
exercise shall be reduced by such specified number."
1.4 Section 13.1(c) is hereby deleted in its entirety and the
following is substituted therefor:
"(c) Expenses. The Company will pay all Registration Expenses in
--------
connection with each registration requested pursuant to this section 13.1.
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 are
included in such registration, on the basis of the respective amounts of
the securities then being registered on their behalf."
1.5 Section 16(a) is hereby deleted in its entirety and the following
is substituted therefor:
"(a) Repurchase Option. Any holder or holders of Warrants holding at
-----------------
least a majority of the total outstanding Warrants (measured by the number
of shares of Common Stock into which such Warrants are exercisable) may
require the Company to repurchase (the "Repurchase Option") all or any part
of the Warrants if on or before December 21, 1996, there has not been an
Initial Public Offering."
1.6 The second sentence of Section 16(d)(i) is hereby deleted in its
entirety and the following is substituted therefor:
"The Repurchase Notice shall include the name of the holders electing
the Repurchase Option (the "Electing Holders") and the number of Warrants
(by holder) that the Company shall be required at that time to repurchase."
1.7 The second sentence of Section 16(d)(ii) is hereby deleted in its
entirety and the following is substituted therefor:
"Within five (5) Business Days after the date of this notice, Electing
Holders owning a majority of the Warrants (measured by the number of shares
of Common Stock into which such Warrants are exercisable) identified in the
Repurchase Notice shall notify the
2
<PAGE>
Company in writing (the "Holders IFE Notice") of their approval or
disapproval of the Company's initial choice of Independent Financial Expert
and, in the event of disapproval, such holders shall propose an alternative
firm as Independent Financial Expert."
SECTION 2. EFFECT OF AMENDMENT
Except as amended hereby, all provisions of the New Warrant shall
remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amendment as of the date and year first above written.
INFORMATION MANAGEMENT ASSOCIATES,
INC.
By: /s/Gary R. Martino
------------------------------
Name:Gary R. Martino
Title:Chairman
WAND/IMA INVESTMENTS, L.P., by Wand
Partners Inc., its General Partner
By: /s/David J. Callard
------------------------------
David J. Callard, President
3
<PAGE>
Exhibit 10.25
INFORMATION MANAGEMENT ASSOCIATES, INC.
AMENDMENT NO. 3
TO
COMMON STOCK PURCHASE WARRANT
-----------------------------
This Agreement is made as of September 20, 1996 by and between Information
Management Associate, Inc., a Connecticut corporation (the "Company") and Wand/
IMA Investments, L.P., a Delaware limited partnership ("Wand/IMA").
WHEREAS, Wand/IMA is currently the holder of a Warrant (No. W-4) initially
entitling Wand/IMA to purchase 14,812 shares of Common Stock at $9.00 per share
(subject to adjustment upon the occurrence of certain events) (the "New
Warrant");
WHEREAS, on January 26, 1993 the Company effected a ten-for-one stock
split; thereafter the New Warrant entitled Wand/IMA to purchase 148,120 shares
of Common Stock at $.90 per share (subject to adjustment upon the occurrence of
certain events);
WHEREAS, the New Warrant was previously amended as of June 1, 1994 and as
of November 16, 1994;
WHEREAS, the Company and Wand/IMA desire to further amend the terms of the
New Warrant;
NOW, THEREFORE, in consideration of the mutual agreements contained herein
and for other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows and the New Warrant (No. W-4)
is hereby amended as hereinafter set forth.
SECTION 1. AMENDMENTS TO WARRANT
The terms and conditions of the New Warrant (No. W-4) are hereby amended
as follows:
1.1 The first paragraph of the New Warrant is hereby deleted in its
entirety and the following is substituted therefor:
<PAGE>
"Information Management Associates, Inc., a Connecticut corporation (the
"Company"), for value received, hereby certifies that Wand/IMA Investments,
L.P., or registered assigns, is entitled to purchase from the Company 148,120
authorized, validly issued, fully paid and nonassessable shares of Common
Stock, no par value per share (the "Common Stock") of the Company at the
purchase price per share of $.90 at any time or from time to time commencing
at 9:00 A.M., New York City time, on the Warrant Exercise Date and prior to
5:00 P.M., New York City time, on December 21, 2002, all subject to the terms,
conditions and adjustments set forth below in this Warrant."
1.2 Section 1.1 is hereby deleted in its entirety and the following is
substituted therefor:
"1. Exercise of Warrant. 1.1 Manner of Exercise. This Warrant may be
------------------- ------------------
exercised by the holder hereof, in whole or in part, during normal business
hours on any Business Day, by surrender of this Warrant to the Company at its
office maintained pursuant to subdivision (a) of section 12.2, accompanied by
a subscription in substantially the form attached to this Warrant (or a
reasonable facsimile thereof) duly executed by such holder and accompanied by
payment, in cash, by certified or official bank check payable to the order of
the Company, or in the manner provided in section 1.5 (or by any combination
of such methods), in the amount obtained by multiplying (a) the number of
shares of Common Stock (without giving effect to any adjustment thereof)
designated in such subscription by (b) $.90, and such holder shall thereupon
be entitled to receive the number of duly authorized, validly issued, fully
paid and nonassessable shares of Common Stock (or Other Securities) determined
as provided in sections 2 through 4."
1.3 Section 2.1 is hereby deleted in its entirety and the following is
substituted therefor:
"2. Adjustment of Common Stock Issuable Upon Exercise 2.1 General: Warrant
------------------------------------------------- -------
Price. The number of shares of Common Stock which the holder of this Warrant
-----
shall be entitled to receive upon each
2
<PAGE>
exercise hereof shall be determined by multiplying the number of shares of
Common Stock which would otherwise (but for the provisions of this Section 2)
be issuable upon such exercise, as designated by the holder hereof pursuant to
section 1.1, by a fraction of which (a) the numerator is $.90 and (b) the
denominator is the Warrant Price in effect on the date of such exercise. The
"Warrant Price" shall initially be $.90 per share, shall be adjusted and
readjusted from time to time as provided in this section 2 and, as so adjusted
or readjusted, shall remain in effect until a further adjustment or
readjustment thereof is required by this section 2."
1.4 Section 16(a) is hereby deleted in its entirety and the following is
substituted therefor:
"(a) Repurchase option. Any holder or holders of Warrants holding at least
-----------------
a majority of the total outstanding Warrants (measured by the number of shares
of Common Stock into which such Warrants are exercisable) may require the
Company to repurchase (the "Repurchase Option") all or any part of the
Warrants if on or before January 31, 1998, there has not been an Initial
Public Offering."
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Wand/IMA as follows:
1.1 Authority and Validity. The execution, delivery and performance of this
----------------------
Amendment to the New Warrant and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of the Company. This Amendment to the New
Warrant 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
Amendment to the New Warrant, nor the consummation
3
<PAGE>
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 provisions of its Charter 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
judgment, order, writ, injunction or decree of any court, administrative
agency or governmental body applicable to Company.
SECTION 3. EFFECT OF AMENDMENT
Except as amended hereby, all provisions of the New Warrant shall remain
in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment
as of the date and year first above written.
INFORMATION MANAGEMENT ASSOCIATES, INC.
By: /s/ Gary R. Martino
--------------------------
Name: Gary R. Martino
Title: Chairman
WAND/IMA INVESTMENTS, L.P. by Wand
Partners Inc., its General Partner
By: /s/ David J. Callard
--------------------------
Name: David J. Callard
Title: President
4
<PAGE>
EXHIBIT 10.26
This Warrant and any shares acquired upon the exercise of this
Warrant have not been registered under the Securities Act of 1933, as
amended, and may not be transferred, sold or otherwise disposed of
except while such a registration is in effect or pursuant to an
exemption from registration under such Act.
INFORMATION MANAGEMENT ASSOCIATES, INC.
Common Stock Purchase Warrant
No. W-5 NEW YORK, NEW YORK
October 29, 1991
Information Management Associates, Inc., a Connecticut corporation
(the "Company"), for value received, hereby certifies that Wand Partners Inc.,
or registered assigns, is entitled to purchase from the Company 2,068
authorized, validly issued, fully paid and nonassessable shares of Common Stock,
no par value per share (the "Common Stock") of the Company at the purchase price
per share of $30, at any time or from time to time prior to 5:00 P.M., New York
City time, on December 21, 2000, all subject to the terms, conditions and
adjustments set forth below in this Warrant.
This Warrant is being issued by the Company in consideration of
management and advisory services provided by Wand Partners Inc. to the Company.
Certain capitalized terms used in this Warrant are defined in section 14;
references to an "Exhibit" are, unless otherwise specified, to one of the
Exhibits attached to this Warrant and references to a "section" are, unless
otherwise specified, to one of the sections of this Warrant.
1. Exercise of Warrant. 1.1 Manner of Exercise. This Warrant may be
------------------- ------------------
exercised by the holder hereof, in whole or in part, during normal business
hours on any Business Day, by surrender of this Warrant to the Company at its
office maintained pursuant to subdivision (a) of section 12.2, accompanied by a
subscription in substantially the form attached to this Warrant (or a reasonable
facsimile thereof) duly executed by such holder and accompanied by payment, in
cash, by certified or official bank check payable to the order of the Company,
or in the manner provided in section 1.5 (or by any combination of such
methods), in the amount obtained by multiplying (a) the number of shares of
Common Stock (without giving effect to any adjustment thereof) designated in
such subscription by (b) $9, and such holder shall thereupon be entitled to
receive the number of duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock (or Other Securities) determined as
provided in sections 2 through 4.
<PAGE>
1.2 When Exercise Effective. Each exercise of this Warrant shall be
-----------------------
deemed to have been effected immediately prior to the close of business on the
Business Day on which this Warrant shall have been surrendered to the Company as
provided in section 1.1, and at such time the Person or Persons in whose name or
names any certificate or certificates for shares of Common Stock (or Other
Securities) shall be issuable upon such exercise as provided in section 1.3
shall be deemed to have become the holder or holders of record thereof.
1.3 Delivery of Stock Certificates, etc. As soon as practicable after
-----------------------------------
each exercise of this Warrant, in whole or in part, and in any event within five
Business Days thereafter, the Company at its expense (including the payment by
it of any applicable issue taxes) will cause to be issued in the name of and
delivered to the holder hereof or, subject to section 9, as such holder (upon
payment by such holder of any applicable transfer taxes) may direct,
(a) a certificate or certificates for the number of duly authorized,
validly issued, fully paid and nonassessable shares of Common Stock (or
Other Securities) to which such holder shall be entitled upon such exercise
plus, in lieu of any fractional share to which such holder would otherwise
be entitled, cash in an amount equal to the same fraction of the Market
Price per share on the Business Day next preceding the date of such
exercise, and
(b) in case such exercise is in part only, a new Warrant or Warrants
of like tenor, calling in the aggregate on the face or faces thereof for
the number of shares of Common Stock equal (without giving effect to any
adjustment thereof) to the number of such shares called for on the face of
this Warrant minus the number of such shares designated by the holder upon
such exercise as provided in section 1.1.
1.4 Company to Reaffirm Obligations. The Company will, at the time of
-------------------------------
each exercise of this Warrant, upon the request of the holder hereof,
acknowledge in writing its continuing obligation to afford to such holder all
rights (including, without limitation, any rights to registration of the shares
of Common Stock or Other Securities issued upon such exercise) to which such
holder shall continue to be entitled after such exercise in accordance with the
terms of this Warrant, provided that if the holder of this Warrant shall fail to
--------
make any such request, such failure shall not affect the continuing obligation
of the Company to afford such rights to such holder.
1.5 Payment by Application of Notes. Upon any exercise of this
-------------------------------
Warrant, the holder hereof may, at its option, instruct the
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<PAGE>
Company, by written notice accompanying the surrender of this Warrant at the
time of such exercise, to apply to the payment required by section 1.1 all or
any part of the unpaid principal amount of any one or more Notes at the time
held by such holder, in which case the Company will accept the principal amount
specified in such notice in satisfaction of a like amount of such payment. In
case less than the entire unpaid principal amount of any Note shall be so
specified, the principal amount so specified shall be credited, as of the date
of such exercise, against the required prepayments of principal then remaining
unpaid on such Note in the inverse order of their maturity dates. Upon any
partial application of a Note, the Company at its expense shall forthwith issue
and deliver to or upon the order of the holder thereof a new Note or Notes in
principal amount equal to the unpaid principal amount of such surrendered Note
which has not been applied against such payment, such new Note or Notes to be
dated and to bear interest from the date to which interest has been paid on such
surrendered Note. Within two Business Days after receipt of any such notice, the
Company will pay to the holder of the Notes giving such notice, in the manner
provided in the Notes and in the Purchase Agreement, all unpaid interest on the
principal amount so specified in such notice, accrued to the date of the
exercise of such Warrant.
2. Adjustment of Common Stock Issuable Upon Exercise. 2.1 General;
------------------------------------------------- --------
Warrant Price. The number of shares of Common Stock which the holder of this
- -------------
Warrant shall be entitled to receive upon each exercise hereof shall be
determined by multiplying the number of shares of Common Stock which would
otherwise (but for the provisions of this section 2) be issuable upon such
exercise, as designated by the holder hereof pursuant to section 1.1, by a
fraction of which (a) the numerator is $30 and (b) the denominator is the
Warrant Price in effect on the date of such exercise. The "Warrant Price" shall
initially be $30 per share, shall be adjusted and readjusted from time to time
as provided in this section 2 and, as so adjusted or readjusted, shall remain in
effect until a further adjustment or readjustment thereof is required by this
section 2.
2.2 Adjustment of Warrant Price.
---------------------------
2.2.1 Issuance of Additional Shares of Common Stock. In case the
---------------------------------------------
Company at any time or from time to time after the date hereof shall issue or
sell Additional Shares of Common Stock (including Additional Shares of Common
Stock deemed to be issued pursuant to section 2.3 or 2.4) without consideration
or for a consideration per share less than the greater of the Current Market
Price and the Warrant Price in effect immediately prior to such issue or sale,
then, and in each such case, subject to section 2.8, such Warrant Price shall be
reduced, concurrently with such issue
-3-
<PAGE>
or sale, to a price (calculated to the nearest .001 of a cent) determined by
multiplying such Warrant Price by a fraction
(a) the numerator of which shall be (i) the number of shares of Common
Stock outstanding immediately prior to such issue or sale plus (ii) the
number of shares of Common Stock which the aggregate consideration received
by the Company for the total number of such Additional Shares of Common
Stock so issued or sold would purchase at the greater of such Current
Market Price and such Warrant Price, and
(b) the denominator of which shall be the number of shares of Common
Stock outstanding immediately after such issue or sale,
provided that, for the purpose of this section 2.2.1, (w) immediately after any
- --------
Additional Shares of Common Stock are deemed to have been issued pursuant to
section 2.3 or 2.4, such Additional Shares shall be deemed to be outstanding,
(x) treasury shares shall not be deemed to be outstanding, (y) if all or any
part of the 7,500 shares issued to Joseph Lemay or Paul Schmidt pursuant to
restricted stock awards on December 20, 1990 shall be forfeited, and cease to be
outstanding (whether because of cancellation or by virtue of becoming treasury
shares) then this section shall not apply to the issue of up to the number of
shares forfeited, as adjusted to account for any intervening stock dividend,
stock split, reclassification, recapitalization or other similar event and (z)
no adjustment of the Warrant Price pursuant to this section 2.2.2 shall be
required as a consequence of the issuance or sale of the Common Stock upon
exercise of the Options to acquire 5% of the Common Stock issued to employees
pursuant to section 2.3 or the options to acquire 11,593 shares of Common Stock
issued to former employees of Coffman Systems, Inc. in connection With the
acquisition by the Company of the assets of Coffman Systems, Inc. and Consumer
Relations Technology, Inc.
2.2.2 Extraordinary Dividends and Distributions. In case the Company
-----------------------------------------
at any time or from time to time after the date hereof shall declare, order, pay
or make a dividend or other distribution (including, without limitation, any
distribution of other or additional stock or other securities or property or
Options by way of dividend or spin-off, reclassification, recapitalization or
similar corporate rearrangement) on the Common Stock, other than (a) a dividend
payable in Additional Shares of Common Stock or (b) for so long as the Company
qualifies as an S corporation for federal income tax purposes, an annual cash
dividend not in excess of the amount equal to the taxable income of the Company
for the preceding calendar year multiplied by the maximum marginal federal
income tax rate on individuals for the preceding calendar year, then, and in
each such case, subject to
-4-
<PAGE>
section 2.8, the Warrant Price in effect immediately prior to the close of
business on the record date fixed for the determination of holders of any class
of securities entitled to receive such dividend or distribution shall be
reduced, effective as of the close of business on such record date, to a price
(calculated to the nearest .001 of a cent) determined by multiplying such
Warrant Price by a fraction
(x) the numerator of which shall be the Current Market Price in effect
on such record date or, if the Common Stock trades on an ex-dividend basis,
on the date prior to the commencement of ex-dividend trading, less the
amount of such dividend or distribution (as determined in good faith by the
Board of Directors of the Company) applicable to one share of Common Stock,
and
(y) the denominator of which shall be such Current Market Price
provided that, in the event that the amount of such dividend applicable to one
- --------
share of Common Stock as so determined is equal to or greater than such Current
Market Price or in the event that such fraction is less than 1/2, in lieu of the
foregoing adjustment, adequate provision shall be made so that the holder of
this Warrant shall receive a pro rata share of such dividend based upon the
maximum number of shares of Common Stock at the time issuable to such holder
(determined without regard to whether the Warrant is exercisable at such time).
2.3 Treatment of Options and Convertible Securities. In case the
-----------------------------------------------
Company at any time or from time to time after the date hereof shall issue,
sell, grant or assume, or shall fix a record date for the determination of
holders of any class of securities entitled to receive, any Options (except for
Options issued or issuable to employees of the Company entitling such employees
to acquire up to a maximum of 5% of the Common Stock on a fully diluted basis
determined at the time of the issuance or grant of these employee options or the
options to acquire 11,593 shares of Common Stock issued to former employees of
Coffman Systems, Inc. in connection with the acquisition by the Company of the
assets of Coffman Systems, Inc. and Consumer Relations Technology, Inc.) or
Convertible Securities, then, and in each such case, the maximum number of
Additional Shares of Common Stock (as set forth in the instrument relating
thereto, without regard to any provisions contained therein for a subsequent
adjustment of such number) issuable upon the exercise of such Options or, in the
case of Convertible Securities and Options therefor, the conversion or exchange
of such Convertible Securities, shall be deemed to be Additional Shares of
Common Stock issued as of the time of such issue, sale, grant or assumption or,
in case such a record date
-5-
<PAGE>
shall have been fixed, as of the close of business on such record date (or, if
the Common Stock trades on an ex-dividend basis, on the date prior to the
commencement of ex-dividend trading), provided that such Additional Shares of
--------
Common Stock shall not be deemed to have been issued unless the consideration
per share (determined pursuant to section 2.5) of such shares would be less than
the greater of the Current Market Price and the Warrant Price in effect on the
date of and immediately prior to such issue, sale, grant or assumption or
immediately prior to the close of business on such record date (or, if the
Common Stock trades on an ex- dividend basis, on the date prior to the
commencement of ex- dividend trading), as the case may be, and provided,
--------
further, that in any such case in which Additional Shares of Common Stock are
- -------
deemed to be issued
(a) no further adjustment of the Warrant Price shall be made upon the
subsequent issue or sale of Convertible Securities or shares of Common
Stock upon the exercise of such Options or the conversion or exchange of
such Convertible Securities, except in the case of any such Options or
Convertible Securities which contain provisions requiring an adjustment,
subsequent to the date of the issue or sale thereof, of the number of
Additional Shares of Common Stock issuable upon the exercise of such
Options or the conversion or exchange of such Convertible Securities by
reason of (x) a change of control of the Company, (y) the acquisition by
any Person or group of Persons of any specified number or percentage of the
Voting Securities of the Company or (z) any similar event or occurrence,
each such case to be deemed hereunder to involve a separate issuance of
Additional Shares of Common Stock, Options or Convertible Securities, as
the case may be;
(b) if such Options or Convertible Securities by their terms Provide,
with the passage of time or otherwise, for any increase in the
consideration payable to the Company, or decrease in the number of
Additional Shares of Common Stock issuable, upon the exercise, conversion
or exchange thereof (by change of rate or otherwise), the Warrant Price
computed upon the original issue, sale, grant or assumption thereof (or
upon the occurrence of the record date, or date prior to the commencement
of ex-dividend trading, as the case may be, with respect thereto), and any
subsequent adjustment based thereon, shall, upon any such increase or
decrease becoming effective, be recomputed to reflect such increase or
decrease insofar as it affects such Options, or the rights of conversion or
exchange under such Convertible Securities, which are outstanding at such
time;
-6-
<PAGE>
(c) upon the expiration (or purchase by the Company and cancellation
or retirement) of any such Options which shall not have been exercised or
the expiration of any rights of conversion or exchange under any such
Convertible Securities which (or purchase by the Company and cancellation
or retirement of any such Convertible Securities the rights of conversion
or exchange under which) shall not have been exercised, the Warrant Price
computed upon the original issue, sale, grant or assumption thereof (or
upon the occurrence of the record date, or date prior to the commencement
of ex-dividend trading, as the case may be, with respect thereto), and any
subsequent adjustments based thereon, shall, upon such expiration (or such
cancellation or retirement, as the case may be), be recomputed as if:
(i) in the case of Options for Common Stock or Convertible
Securities, the only Additional Shares of Common Stock issued or sold
were the Additional Shares of Common Stock, if any, actually issued or
sold upon the exercise of such Options or the conversion or exchange
of such Convertible Securities and the consideration received therefor
was the consideration actually received by the Company for the issue,
sale, grant or assumption of all such Options, whether or not
exercised, plus the consideration actually received by the Company
upon such exercise, or for the issue or sale of all such Convertible
Securities which were actually converted or exchanged, plus the
additional consideration, if any, actually received by the Company
upon such conversion or exchange, and
(ii) in the case of Options for Convertible Securities, only the
Convertible Securities, if any, actually issued or sold upon the
exercise of such Options were issued at the time of the issue, sale,
grant or assumption of such Options, and the consideration received by
the Company for the Additional Shares of Common Stock deemed to have
then been issued was the consideration actually received by the
Company for the issue, sale, grant or assumption of all such Options,
whether or not exercised, plus the consideration deemed to have been
received by the Company (pursuant to section 2.5) upon the issue or
sale of such Convertible Securities with respect to which such Options
were actually exercised;
(d) no readjustment pursuant to subdivision (b) or (c) above shall
have the effect of increasing the Warrant Price by an amount in excess of
the amount of the adjustment
-7-
<PAGE>
thereof originally made in respect of the issue, sale, grant or assumption
of such Options or Convertible Securities; and
(e) in the case of any such Options which expire by their terms not
more than 30 days after the date of issue, sale, grant or assumption
thereof, no adjustment of the Warrant Price shall be made until the
expiration or exercise of all such Options, whereupon such adjustment shall
be made in the manner provided in subdivision (c) above.
2.4 Treatment of Stock Dividends, Stock Splits, etc. In case the
-----------------------------------------------
Company at any time or from time to time after the date hereof shall declare or
pay any dividend on the Common Stock payable in Common Stock, or shall effect a
subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in Common Stock), then, and in each such case, Additional Shares of
Common Stock shall be deemed to have been issued (a) in the case of any such
dividend, immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive such
dividend, or (b) in the case of any such subdivision, at the close of business
on the day immediately prior to the day upon which such corporate action becomes
effective.
2.5 Computation of Consideration. For the purposes of this section 2,
----------------------------
(a) the consideration for the issue or sale of any Additional Shares
of Common Stock shall, irrespective of the accounting treatment of such
consideration,
(i) insofar as it consists of cash, be computed at the net amount
of cash received by the Company,
(ii) insofar as it consists of property (including securities)
other than cash, be computed at the fair value thereof at the time of
such issue or sale, as determined in good faith by the Board of
Directors of the Company, and
(iii) in case Additional Shares of Common Stock are issued or
sold together with other stock or securities or other assets of the
Company for a consideration which covers both, be the portion of such
consideration so received, computed as provided in clauses (i) and
(ii) above, allocable to such Additional Shares of Common Stock, all
as determined in good faith by the Board of Directors of the Company;
-8-
<PAGE>
(b) Additional Shares of Common Stock deemed to have been issued
pursuant to section 2.3, relating to Options and Convertible Securities,
shall be deemed to have been issued for a consideration per share
determined by dividing
(i) the total amount, if any, received and receivable by the
Company as consideration for the issue, sale, grant or assumption of
the Options or Convertible Securities in question, plus the minimum
aggregate amount of additional consideration (as set forth in the
instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration to
protect against dilution) payable to the Company upon the exercise in
full of such Options or the conversion or exchange of such Convertible
Securities or, in the case of Options for Convertible Securities, the
exercise of such Options for Convertible Securities and the conversion
or exchange of such Convertible Securities, in each case computing
such consideration as provided in the foregoing subdivision (a),
by
(ii) the maximum number of shares of Common Stock (as set forth
in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number to
protect against dilution) issuable upon the exercise of such Options
or the conversion or exchange of such Convertible Securities; and
(c) Additional Shares of Common Stock deemed to have been issued
pursuant to section 2.4, relating to stock dividends, stock splits, etc.,
shall be deemed to have been issued for no consideration.
2.6 Adjustments for Combinations, etc. In case the outstanding shares
---------------------------------
of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Warrant Price in
effect immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or consolidation, be
proportionately increased.
2.7 Dilution in Case of Other Securities. In case any Other Securities
------------------------------------
shall be issued or sold or shall become subject to issue or sale upon the
conversion or exchange of any stock (or Other Securities) of the Company (or any
issuer of Other Securities or any other Person referred to in section 3) or to
subscription,
-9-
<PAGE>
purchase or other acquisition pursuant to any Options issued or granted by the
Company (or any such other issuer or Person) for a consideration such as to
dilute, on a basis consistent with the standards established in the other
provisions of this section 2, the purchase rights granted by this Warrant, then,
and in each such case, the computations, adjustments and readjustments provided
for in this section 2 with respect to the Warrant Price shall be made as nearly
as possible in the manner so provided and applied to determine the amount of
Other Securities from time to time receivable upon the exercise of the Warrants,
so as to protect the holders of the Warrants against the effect of such
dilution.
2.8 Minimum Adjustment of Warrant Price. If the amount of any
-----------------------------------
adjustment of the Warrant Price required pursuant to this Section 2 would be
less than one percent (1%) of the Warrant Price in effect at the time such
adjustment is otherwise so required to be made, such amount shall be carried
forward and adjustment with respect thereto made at the time of and together
with any subsequent adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate at least one percent (l%)
of such Warrant Price.
3. Consolidation, Merger, etc. 3.1 Adjustments for Consolidation,
-------------------------- ------------------------------
Merger, Sale of Assets, Reorganization, etc. In case the Company after the date
- -------------------------------------------
hereof (a) shall consolidate with or merge into any other Person and shall not
be the continuing or surviving corporation of such consolidation or merger, or
(b) shall permit any other Person to consolidate with or merge into the Company
and the Company shall be the continuing or surviving Person but, in connection
with such consolidation or merger, the Common Stock or Other Securities shall be
changed into or exchanged for stock or Other Securities of any other Person or
cash or any other property, or (c) shall transfer all or substantially all of
its properties or assets to any other Person, or (d) shall effect a capital
reorganization or reclassification of the Common Stock or Other Securities
(other than a capital reorganization or reclassification resulting in the issue
of Additional Shares of Common Stock for which adjustment in the Warrant Price
is provided in section 2.2.1 or 2.2.2), then, and in the case of each such
transaction, proper provision shall be made so that, upon the basis and the
terms and in the manner provided in this Warrant, the holder of this Warrant,
upon the exercise hereof at any time after the consummation of such transaction,
shall be entitled to receive (at the aggregate Warrant Price in effect at the
time of such consummation for all Common Stock or Other Securities issuable upon
such exercise immediately prior to such consummation), in lieu of the Common
Stock or Other Securities issuable upon such exercise prior to such consummation
the highest amount of securities, cash or other property to which such holder
would actually have been entitled as a shareholder upon such consummation if
such holder had
-10-
<PAGE>
thereto exercised the Rights represented by this Warrant immediately prior
thereto.
3.2 Assumption of Obligations. Notwithstanding anything contained in
-------------------------
the Warrants or in the Purchase Agreement to the contrary, the Company will not
effect any of the transactions described in clauses (a) through (d) of section
3.1 unless, prior to the consummation thereof, each Person (other than the
Company) which may be required to deliver any stock, securities, cash or
property upon the exercise of this Warrant as provided herein shall assume, by
written instrument delivered to, and reasonably satisfactory to, the holder of
this Warrant, (a) the obligations of the Company under this Warrant (and if the
Company shall survive the consummation of such transaction, such assumption
shall be in addition to, and shall not release the Company from, any continuing
obligations of the Company under this Warrant) and (b) the obligation to deliver
to such holder such shares of stock, securities, cash or property as, in
accordance with the foregoing provisions of this section 3, such holder may be
entitled to receive, and such Person shall have similarly delivered to such
holder an opinion of counsel for such Person, which counsel shall be reasonably
satisfactory to such holder, stating that this Warrant shall thereafter continue
in full force and effect and the terms hereof (including, without limitation,
all of the provisions of this section 3) shall be applicable to the stock,
securities, cash or property which such Person may be required to deliver upon
any exercise of this Warrant or the exercise of any rights pursuant hereto.
Nothing in this section 3 shall be deemed to authorize the Company to enter into
any transaction not otherwise permitted by the Purchase Agreement
4. Other Dilutive Events. In case any event shall occur to which the
---------------------
provisions of section 2 or section 3 are not strictly applicable but the failure
to make any adjustment would not fairly protect the purchase rights represented
by this Warrant in accordance with the essential intent and principles of such
sections, then, in each such case, the Company shall appoint a firm of
independent certified public accountants of recognized national standing (which
may be the regular auditors of the Company), which shall give their opinion upon
the adjustment, if any, on a basis consistent with the essential intent and
principles established in sections 2 and 3, necessary to preserve, without
dilution, the purchase rights represented by this Warrant. Upon receipt of such
opinion, the Company will promptly mail a copy thereof to the holder of this
Warrant and shall make the adjustments described therein.
5. No Dilution or Impairment. The Company will not, by amendment of
-------------------------
its certificate of incorporation or through any consolidation, merger,
reorganization, transfer of assets,
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<PAGE>
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of this Warrant,
but will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such action as may be necessary or appropriate in order
to protect the rights of the holder of this Warrant against dilution or other
impairment. Without limiting the generality of the foregoing, the Company (a)
will not permit the par value of any shares of stock receivable upon the
exercise of this Warrant to exceed the amount payable therefor upon such
exercise, (b) will take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of stock on the exercise of the Warrants from time to time
outstanding, (c) will not take any action which results in any adjustment of the
Warrant Price if the total number of shares of Common Stock (or Other
Securities) issuable after the action upon the exercise of all of the Warrants
would exceed the total number of shares of Common Stock (or Other Securities)
then authorized by the Company's certificate of incorporation and available for
the purpose of issue upon such exercise, and (d) will not issue any capital
stock of any class which is preferred as to dividends or as to the distribution
of assets upon voluntary or involuntary dissolution, liquidation or winding-up,
unless the rights of the holders thereof shall be limited to a fixed sum or
percentage of par value or a sum determined by reference to a formula based on a
published index of interest rates, an interest rate publicly announced by a
financial institution or a similar indicator of interest rates in respect of
participation in dividends and to a fixed sum or percentage of par value in any
such distribution of assets.
6. Accountants' Report as to Adjustments. In each case of any
-------------------------------------
adjustment or readjustment in the shares of Common Stock (or Other Securities)
issuable upon the exercise of this Warrant, the Company at its expense will
promptly compute such adjustment or readjustment in accordance with the terms of
this Warrant and prepare a report setting forth such adjustment or readjustment
and showing in reasonable detail the method of calculation thereof and the facts
upon which such adjustment or readjustment is based, including a statement of
(a) the consideration received or to be received by the Company for any
Additional Shares of Common Stock issued or sold or deemed to have been issued,
(b) the number of shares of Common Stock outstanding or deemed to be
outstanding, and (c) the Warrant Price in effect immediately prior to such issue
or sale and as adjusted and readjusted (if required by section 2) on account
thereof. The Company will forthwith mail a copy of each such report to each
holder of a Warrant and will, upon the written request at any time of any holder
of a Warrant, furnish to such holder a like report setting forth the Warrant
Price at the time in effect and showing in reasonable detail how it was
calculated. The
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<PAGE>
Company will also keep copies of all such reports at its office maintained
pursuant to subdivision (a) of section 12.2 and will cause the same to be
available for inspection at such office during normal business hours by any
holder of a Warrant or any prospective purchaser of a Warrant designated by the
holder thereof. Upon the written request at any time of any holder of a Warrant,
the Company will cause independent certified public accountants of recognized
national standing (which may be the regular auditors of the Company) selected by
the Company to verify the Company's computations of adjustment or readjustment
of terms of the Warrant (other than any computation of the fair value of
property as determined in good faith by the Board of Directors) and related
reports.
7. Notices of Corporate Action. In the event of
---------------------------
(a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend (other than, for so long as the Company
qualifies as an S corporation for federal income tax purposes, an annual
cash dividend not in excess of the amount equal to the taxable income of
the Company for the preceding calendar year multiplied by the maximum
federal income tax rate on individuals for the preceding calendar year) or
other distribution, or any right to subscribe for, purchase or otherwise
acquire any shares of stock of any class or any other securities or
property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any consolidation
or merger involving the Company and any other Person or any transfer of all
or substantially all the assets of the Company to any other Person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
the Company will mail to each holder of a Warrant a notice specifying (i) the
date or expected date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right, and (ii) the date or expected date on which any
such reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up is to take place and the time,
if any such time is to be fixed, as of which the holders of record of Common
Stock (or Other Securities) shall be entitled to exchange their shares of Common
Stock (or Other
-13-
<PAGE>
Securities) for the securities or other property deliverable upon such
reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up. Such notice shall be mailed at
least 45 days prior to the date therein specified.
8. Registration of Common Stock. If any shares of Common Stock
----------------------------
required to be reserved for purposes of exercise of this Warrant require
registration with or approval of any governmental authority under any federal or
state law (other than the Securities Act and applicable state securities laws)
before such shares may be issued upon exercise, the Company will, at its expense
and as expeditiously as possible, use its best efforts to cause such shares to
be duly registered or approved, as the case may be. At any such time as Common
Stock is listed on any national securities exchange, the Company will, at its
expense, obtain promptly and maintain the approval for listing on each such
exchange, upon official notice of issuance, the shares of Common Stock issuable
upon exercise of the then outstanding Warrants and maintain the listing of such
shares after their issuance; and the Company will also list on such national
securities exchange, will register under the Exchange Act and will maintain such
listing of, any Other Securities that at any time are issuable upon exercise of
the Warrants, if and at the time that any securities of the same class shall be
listed on such national securities exchange by the Company.
9. Restrictions on Transfer. 9.1 Restrictive Legends. Except as
------------------------ -------------------
otherwise permitted by this section 9, each Warrant (including each Warrant
issued upon the transfer of any Warrant) shall be stamped or otherwise imprinted
with a legend in substantially the following form:
"This Warrant and any shares acquired upon the exercise of this
Warrant have not been registered under the Securities Act of 1933 and may
not be transferred in the absence of such registration or an exemption
therefrom under such Act. This Warrant and such shares may be transferred
only in compliance with the conditions specified in this Warrant."
Except as otherwise permitted by this section 9, each certificate for Common
Stock (or Other Securities) issued upon the exercise of any Warrant, and each
certificate issued upon the transfer of any such Common Stock (or Other
Securities), shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933 and may
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<PAGE>
not be transferred in the absence of such registration or an exemption
therefrom under such Act. Such shares may be transferred only in compliance
with the conditions specified in certain Common Stock Purchase Warrants
issued by Information Management Associates, Inc. pursuant to the Note and
Warrant Purchase Agreement, dated December 21, 1990, between Information
Management Associates, Inc. and Wand/IMA Investments, L.P. A complete and
correct copy of the form of such Warrant is available for inspection at the
principal office of Information Management Associates, Inc. and will be
furnished to the holder of such shares upon written request and without
charge."
9.2 Notice of Proposed Transfer; Opinions of Counsel. Prior to any
------------------------------------------------
transfer of any Restricted Securities which are not registered under an
effective registration statement under the Securities Act, the holder thereof
will give written notice to the Company of such holder's intention to effect
such transfer and to comply in all Other respects with this section 9.2. Each
such notice (a) shall describe the manner and circumstances of the proposed
transfer in sufficient detail to enable counsel to render the opinions referred
to below, and (b) shall designate counsel for the holder giving such notice. The
holder giving such notice will submit a copy thereof to the counsel designated
in such notice, which counsel shall be experienced in securities law matters. If
in the opinion of such counsel the proposed transfer may be effected without
registration of such shares of Restricted Securities under the Securities Act,
the transferring holder shall thereupon be entitled to transfer such shares in
accordance with the terms of the notice delivered by such holder to the Company.
Each certificate representing such shares issued upon or in connection with such
transfer shall bear the restrictive legends required by section 9.1, unless in
the opinion of the transferring holder's counsel and counsel to the Company
(which counsel shall be experienced in securities laws matters) such restrictive
legends are not required or advisable.
The holder of the Restricted Securities seeking transfer thereof will pay the
reasonable fees and disbursements of counsel (other than house counsel) for any
holder of Restricted Securities in connection with all opinions rendered by such
counsel pursuant to this section 9.2 and pursuant to section 9.3.
9.3 Termination of Restrictions. The restrictions imposed by this
---------------------------
section 9 upon the transferability of Restricted Securities shall cease and
terminate as to any particular Restricted Securities (a) when such securities
shall have been effectively registered under the Securities Act, or (b) when, in
the opinions of both counsel for the holder thereof and counsel for
-15-
<PAGE>
the Company (each of whom shall be experienced in securities laws matters), such
restrictions are no longer required in order to insure compliance with the
Securities Act. Whenever such restrictions shall cease and terminate as to any
Restricted Securities, the holder thereof shall be entitled to receive from the
Company, without expense (other than applicable transfer taxes, if any), new
securities of like tenor not bearing the applicable legends required by section
9.1.
10. Availability of Information. If the Company shall have filed a
---------------------------
registration statement pursuant to the requirements of section 12 of the
Exchange Act or a registration statement pursuant to the requirements of the
Securities Act, the Company will comply with the reporting requirements of
Sections 13 and 15(d) of the Exchange Act and will comply with all other public
information reporting requirements of the Commission from time to time in effect
and relating to assuring the availability of an exemption from the Securities
Act for the sale of any Restricted Securities pursuant to Rule 144 of any
comparable or similar rule promulgated by the Commission under the Securities
Act. The Company will also cooperate with each holder of any Restricted
Securities in supplying such information as may be necessary for such holder to
complete and file any information reporting forms presently or hereafter
required by the Commission as a condition to the availability of an exemption
from the Securities Act for the sale of any Restricted Securities. The Company
will furnish to each holder of any Warrants, promptly upon their becoming
available, copies of all financial statements, reports, notices and proxy
statements sent or made available generally by the Company to its stockholders,
and, upon the written request of any holder, copies of all regular and periodic
reports and all registration statements and prospectuses filed by the Company
with any securities exchange or with the Commission.
11. Reservation of Stock, etc. The Company will at all times reserve
--------------------------
and keep available, solely for issuance and delivery upon exercise of the
Warrants, the number of shares of Common Stock (or Other Securities) from time
to time issuable upon exercise of all Warrants at the time outstanding. All
shares of Common Stock (or Other Securities) issuable upon exercise of any
Warrants shall be duly authorized and, when issued upon such exercise, shall be
validly issued and, in the case of shares, fully paid and nonassessable with no
liability on the part of the holders thereof.
12. Ownership, Transfer and Substitution of Warrants. 12.1 Ownership
------------------------------------------------ ---------
of Warrants. The Company may treat the person in whose name any Warrant is
- -----------
registered on the register kept at the office of the Company maintained pursuant
to subdivision (a) of section 12.2 as the owner and holder thereof for all
purposes, notwithstanding any notice to the contrary, except that, if and
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<PAGE>
when any Warrant is properly assigned in blank, the Company may (but shall not
be obligated to) treat the bearer thereof as the owner of such Warrant for all
purposes, notwithstanding any notice to the contrary. Subject to section 9, a
Warrant, if properly assigned, may be exercised by a new holder without a new
Warrant first having been issued.
12.2 Office; Transfer and Exchange of Warrants.
-----------------------------------------
(a) The Company will maintain an office where notices, presentations
and demands in respect of this Warrant may be made upon it. Such office
shall be maintained at 6527 Main Street, Trumbull, CT 06611, until such time
as the Company shall notify the holders of the Warrants of any change of
location of such office.
(b) Upon the surrender of any Warrant, properly endorsed, for
registration of transfer or for exchange at the office of the Company
maintained pursuant to subdivision (a) of this section 12.2, the Company at
its expense will (subject to compliance with section 9, if applicable)
execute and deliver to or upon the order of the holder thereof a new Warrant
or Warrants of like tenor, in the name of such holder or as such holder
(upon payment by such holder of any applicable transfer taxes) may direct,
calling in the aggregate on the face or faces thereof for the number of
shares of Common Stock called for on the face or faces of the Warrant or
Warrants so surrendered.
12.3 Replacement of Warrants. Upon receipt of evidence reasonably
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant
held by a Person other than the Purchaser or any institutional investor, upon
delivery of indemnity reasonably satisfactory to the Company in form and amount
or, in the case of any such mutilation, upon surrender of such Warrant for
Cancellation at the office of the Company maintained pursuant to subdivision (a)
of section 12.2, the Company at its expense will execute and deliver, in lieu
thereof, a new Warrant of like tenor.
13. Registration under Securities Act, etc.
--------------------------------------
13.1 Registration on Request.
-----------------------
(a) Request. At any time or from time to time on the earlier of (x)
-------
December 21, 1995 or (y) the occurrence of an Initial Public Offering, upon
the written request of one or more Initiating Holders, requesting that the
Company effect the registration under the Securities Act of all or part of
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<PAGE>
such Initiating Holders' Registrable Securities and specifying the intended
method of disposition thereof, the Company will promptly give written notice
of such requested registration to all holders of Registrable Securities, and
thereupon the Company will use its best efforts to effect the registration
under the Securities Act of
(i) the Registrable Securities which the Company has been so
requested to register by such Initiating Holders for disposition in
accordance with the intended method of disposition stated in such
request, and
(ii) all other Registrable Securities the holders of which shall
have made a written request to the Company for registration thereof
within 30 days after the giving of such written notice by the Company
(which request shall specify the intended method of disposition of such
Registrable Securities), and
(iii) subject to the priority provisions of section 13.1(f), all
shares of Common Stock which the Company may elect to register in
connection with the offering of Registrable Securities pursuant to this
Section 13.1; and
(iv) subject to the priority provisions of section 13.1(f), shares
of Common Stock held by other Persons having registration rights,
all to the extent requisite to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities and the
additional shares of Common Stock, if any so to be registered, provided that the
provisions of this section 13.1(a) shall not require the Company to effect more
than two registrations of Registrable Securities. The registration rights
granted in this Warrant are intended to be coincident with the registration
rights granted to the Purchaser pursuant to two Stock Purchase Agreements, dated
September 4, 1991 and October 29, 1991, respectively, between the Purchaser and
the Company and with the registration rights granted to the holders of the
Warrants.
(b) Registration Statement Form. Registrations under this section 13.1
---------------------------
shall be on such appropriate registration form of the Commission (i) as
shall be selected by the Company and, as shall be reasonably acceptable to
the holders of more than 50% (by number of shares) of the Registrable
Securities so to be registered and (ii) as shall permit the disposition of
such Registrable Securities in accordance with the intended method or
methods of disposition specified in their request for such registration. The
Company agrees to include in any such registration statement all information
which holders of
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<PAGE>
Registrable Securities being registered shall reasonably request.
(c) Expenses. The Company will pay all Registration Expenses in
--------
connection with the first registration requested pursuant to this section
13.1 and the holders will pay all Registration Expenses in connection with
the second registration pursuant to this section 13.1. Registration Expenses
(and underwriting discounts and commissions and transfer taxes, if any) in
connection with the second registration statement shall be allocated pro
rata among all Persons on whose behalf securities of the Company are
included in such registration, on the basis of the respective amounts of the
securities then being registered on their behalf.
(d) Effective Registration Statement. A registration requested
--------------------------------
pursuant to this section 13.1 shall not be deemed to have been effected (i)
unless a registration statement with respect thereto has become effective,
provided that a registration which does not become effective after the
--------
Company has filed a registration statement with respect thereto solely by
reason of the refusal to proceed of the Initiating Holders (other than a
refusal to proceed based upon the advice of counsel relating to a matter
with respect to the Company) shall be deemed to have been effected by the
Company at the request of such Initiating Holders unless the Initiating
Holders shall have elected to pay all Registration Expenses in connection
with such registration, (ii) if, after it has become effective, such
registration is interfered with by any stop order, injunction or other order
or requirement of the Commission or other governmental agency or court for
any reason, or (iii) the conditions to Closing specified in the purchase
agreement or underwriting agreement entered into in connection with such
registration are not satisfied, other than by reason of some act or omission
by such Initiating Holders.
(e) Selection of Underwriters. If a requested registration pursuant to
-------------------------
this section 13.1 involves an underwritten offering, the underwriter or
underwriters thereof shall be selected by the holders of at least a majority
(by number of shares) of the Registrable Securities as to which registration
has been requested and shall be acceptable to the Company, which shall not
unreasonably withhold its acceptance of such underwriters.
(f) Priority in Requested Registrations. If a requested registration
-----------------------------------
pursuant to this section 13.1 involves an underwritten offering, and the
managing underwriter shall advise the Company in writing (with a copy to
each holder of
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<PAGE>
Registrable Securities requesting registration) that, in its opinion, the
number of securities requested to be included in such registration
(including securities of the Company which are not Registrable Securities)
exceeds the number which can be sold in such offering within a price range
acceptable to the holders of a majority of the Registrable Securities
requested to be included in such registration, the Company will include in
such registration, to the extent of the number which the Company is so
advised can be sold in such offering, (i) first Registrable Securities
requested to be included in such registration, pro rata among the holders
thereof requesting such securities requested to be included by such holders
and (ii) second, securities the Company proposes to sell and other
securities of the Company included in such registration by the holders
thereof.
13.2 Incidental Registration.
-----------------------
(a) Right to Include Registrable Securities. If the Company at any
---------------------------------------
time proposes to register any of its securities under the Securities Act
(other than by a registration on Form S- 4 or S-8, or any successor or
similar forms and other than pursuant to section 13.1), whether or not for
sale for its own account, it will each such time give prompt written notice
to all holders of Registrable Securities of its intention to do so and of
such holders' rights under this section 13.2. Upon the written request of
any such holder made within 30 days after the receipt of any such notice
(which request shall specify the Registrable Securities intended to be
disposed of by such holder and the intended method of disposition thereof),
the Company will use its best efforts to effect the registration under the
Securities Act of all Registrable Securities which the Company has been so
requested to register by the holders thereof, to the extent requisite to
permit the disposition (in accordance with the intended methods thereof as
aforesaid) of the Registrable Securities so to be registered, by inclusion
of such Registrable Securities in the registration statement which covers
the securities which the Company proposes to register, provided that if, at
--------
any time after giving written notice of its intention to register any
securities and prior to the effective date of the registration statement
filed in connection with such registration, the Company shall determine for
any reason either not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to each holder of Registrable Securities and, thereupon, (i)
in the case of a determination not to register, shall be relieved of its
obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses
in connection therewith),
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<PAGE>
without prejudice, however, to the rights of any holder or holders of
Registrable Securities entitled to do so to request that such registration be
effected as a registration under section 13.1, and (ii) in the case of a
determination to delay registering, shall be permitted to delay registering any
Registrable Securities, for the same period as the delay in registering such
other securities. No registration effected under this section 13.2 shall relieve
the Company of its obligation to effect any registration upon request under
section 13.1. The Company will pay all Registration Expenses in connection with
each registration of Registrable Securities requested pursuant to this section
13.2.
(b) Priority in Incidental Registrations. If (i) a registration
------------------------------------
pursuant to this section 13.2 involves an underwritten offering of the
securities so being registered, whether or not for sale for the account of
the Company, to be distributed (on a firm commitment basis) by or through
one or more underwriters of recognized standing under underwriting terms
appropriate for such a transaction, (ii) the Registrable Securities so
requested to be registered for sale for the account of holders of
Registrable Securities are not also to be included in such underwritten
offering (either because the Company has not been requested so to include
such Registrable Securities pursuant to section 13.4(b) or, if requested to
do so, is not obligated to do so under section 13.4(b)), and (iii) the
managing underwriter of such underwritten offering shall inform the Company
and holders of the Registrable Securities requesting such registration by
letter of its belief that the distribution of all or a specified number of
such Registrable Securities Concurrently with the securities being
distributed by such underwriters would interfere with the successful
marketing of the securities being distributed by such underwriters (such
writing to state the basis of such belief and the approximate number of such
Registrable Securities which may be distributed without such effect), then
the Company may, upon written notice to all holders of such Registrable
Securities, reduce pro rata (if and to the extent stated by such managing
underwriter to be necessary to eliminate such effect) the number of such
Registrable Securities the registration of which shall have been requested
by each holder of Registrable Securities so that the resultant aggregate
number of such Registrable Securities so included in such registration shall
be equal to the number of shares stated in such managing underwriter's
letter.
13.3 Registration Procedures. If and whenever the Company is required
-----------------------
to use its best efforts to effect the registration of any Registrable Securities
under the Securities Act
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<PAGE>
as provided in sections 13.1 and 13.2 the Company shall, as expeditiously as
possible:
(i) prepare and (within 90 days after the end of the period within
which requests for registration may be given to the Company or in any event
as soon thereafter as possible) file with the Commission the requisite
registration statement to effect such registration (including such audited
financial statements as may be required by the Securities Act or the rules
and regulations promulgated thereunder) and thereafter use its reasonable
best efforts to cause such registration statement to become and remain
effective for the time period required by this Agreement, provided, that
--------
before filing such registration statement or any amendments thereto the
Company will furnish to the counsel selected by the holders of Registrable
Securities which are to be included in such registration copies of all such
documents proposed to be filed, which documents will be subject to the
review of such counsel;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such
registration statement until the earlier of such time as all of such
securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such registration
statement or (i) in the case of a registration pursuant to section 13.1,
the expiration of 180 days after such registration statement becomes
effective, or (ii) in the case of a registration pursuant to section 13.2,
the expiration of 90 days after such registration statement becomes
effective, it being understood that following the expiration of the
relevant time period, the Company shall 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
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<PAGE>
Rule 424 under the Securities Act, in conformity with the requirements of
the Securities Act, and such other documents, as such seller may reasonably
request in order to facilitate the public sale or other disposition of the
Registrable Securities owned by such seller;
(iv) use its reasonable best efforts to register or qualify all
Registrable Securities and other securities covered by such registration
statement under such other securities laws or blue sky laws of such
jurisdictions as any seller thereof and any underwriter of the securities
being sold by such seller shall reasonably request, to keep such
registrations or qualifications in effect for so long as such registration
statement remains in effect, and take any other action which may be
reasonably necessary or advisable to enable such seller and underwriter to
consummate the disposition in such jurisdictions of the securities owned by
such seller, except that the Company shall not for any such purpose be
required to qualify generally to do business as a foreign corporation in
any jurisdiction wherein it would not but for the requirements of this
subdivision (iv) be obligated to be so qualified, or to consent to general
service of process in any such jurisdiction;
(v) use its best efforts to cause all Registrable Securities covered
by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable
the 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,
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<PAGE>
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 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;
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(ix) enter into such agreements and take such other actions as sellers
of such Registrable Securities holding 51% of the shares so to be sold
shall reasonably request in order to expedite or facilitate the disposition
of such Registrable Securities;
(x) use its reasonable best efforts to list all Registrable Securities
covered by such registration statement on any securities exchange on which
any of the Registrable Securities are then listed.
The Company may require each seller of Registrable Securities as to which any
registration is being effected to furnish the Company such information regarding
such seller and the distribution of such securities as the Company may from time
to time reasonably request in writing.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of the
occurrence of any event of the kind described in subdivision (vii) of this
section 13.3, such holder will forthwith discontinue such holder's disposition
of Registrable Securities pursuant to the registration statement relating to
such Registrable Securities until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (vii) of this
section 13.3 and, if so directed by the Company, will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies, then in
such holder's possession of the prospectus relating to such Registrable
Securities current at the time of receipt of such notice. In the event the
Company shall give any such notice, the period mentioned in paragraph (ii) of
this section 13.3 shall be extended by the length of the period from and
including the date when each seller of any Registrable Securities covered by
such registration statement shall have received such notice to the date on which
each such seller has received the copies of the supplemented or amended
prospectus contemplated by paragraph (vii) of this section 13.3.
If any such registration or comparable statement refers to any holder of
Registrable Securities by name or otherwise as the holder of any securities of
the 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
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the Securities Act or any similar federal statute or the rules and regulations
promulgated thereunder then in force, the deletion of the reference to such
holder.
13.4 Underwritten Offerings.
----------------------
(a) Requested Underwritten Offerings. If requested by the underwriters
--------------------------------
for any underwritten offering by holders of Registrable Securities pursuant
to a registration requested under section 13.1, the Company will enter into
an underwriting agreement with such underwriters for such offering, such
agreement to be satisfactory in substance and form to the Company, each such
holder and the underwriters, and to contain such representations and
warranties by the Company and such other terms as are generally prevailing
in agreements of this type, including, without limitation, indemnities to
the effect and to the extent provided in section 13.7. The holders of the
Registrable Securities will cooperate with the Company in the negotiation of
the underwriting agreement and will give consideration to the reasonable
suggestions of the Company regarding the form thereof, provided that nothing
--------
herein contained shall diminish the foregoing obligations of the Company.
The holders of Registrable Securities to be distributed by such underwriters
shall be parties to such underwriting agreement and may, at their option,
require that any or all of the representations and warranties by, and the
other agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of such holders of
Registrable Securities and that any or all of the conditions precedent to
the obligations of such underwriters under such underwriting agreement be
conditions precedent to the obligations of such holders of Registrable
Securities. Any such holder of Registrable Securities shall not be required
to make any representations or warranties to or agreements with the Company
or the underwriters other than representations, warranties or agreements
regarding such holder, such holder's Registrable Securities and such
holder's intended method of distribution and any other representation
required by law.
(b) Incidental Underwritten Offerings. If the Company at any time
---------------------------------
proposes to register any of its securities under the Securities Act as
contemplated by section 13.2 and such securities are to be distributed by or
through one or more underwriters, the Company will, if requested by any
holder of Registrable Securities as provided in section 13.2 and subject to
the provisions of section 13.2(b), use its best efforts to arrange for such
underwriters to include all the Registrable Securities to be offered and
sold by such holder among the securities to be distributed by such
underwriters, provided
--------
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that if the managing underwriter of such underwritten offering shall inform
the holders of the Registrable Securities requesting such registration and
the holders of any other shares of securities which shall have exercised, in
respect of such underwritten offering, registration rights comparable to the
rights under section 13.2 by letter of its belief that inclusion in such
underwritten distribution of all or a specified number of such Registrable
Securities or of such other shares of securities so requested to be included
would interfere with the successful marketing of the securities (other than
such Registrable Securities and other shares of securities so requested to
be included) by the underwriters (such writing to state the basis of such
belief and the approximate number of such Registrable Securities and shares
of other securities so requested to be included which may be included in
such underwritten offering without such effect), then the Company may, upon
written notice to all holders of such Registrable Securities and of such
other shares of securities so requested to be included, exclude pro rata
from such underwritten offering (if and to the extent stated by such
managing underwriter to be necessary to eliminate such effect) the number of
such Registrable Securities and shares of such other securities so requested
to be included the registration of which shall have been requested by each
holder of Registrable Securities and by the holders of such other
securities, so that the resultant aggregate number of such Registrable
Securities and of such other shares of securities so requested to be
included which are included in such underwritten offering shall be equal to
the approximate number of shares stated in such managing underwriters
letter. The holders of Registrable Securities to be distributed by such
underwriters shall be parties to the underwriting agreement between the
Company and such underwriters and may, at their option, require that any or
all of the representations and warranties by, and the other agreements on
the part of, the Company to and for the benefit of such underwriters shall
also be made to and for the benefit of such holders of Registrable
Securities and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be
conditions precedent to the obligations of such holders of Registrable
Securities. Any such holder of Registrable Securities shall not be required
to make any representations or warranties to or agreements with the Company
or the underwriters other than representations, warranties or agreements
regarding such holder, such holder's Registrable Securities and such
holder's intended method of distribution and any other representation
required by law.
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<PAGE>
(c) Holdback Agreements.
-------------------
(i) Each holder of Registrable Securities agrees by acquisition of
such Registrable Securities, if so required by the managing
underwriter, not to effect any public sale or distribution of any
equity securities of the Company, during the seven days prior to and
the 90 days after any underwritten registration pursuant to section
13.1 or 13.2 has become effective, except as part of such underwritten
registration, whether or not such holder participates in such
registration.
(ii) The Company agrees (x) if so required by the managing
underwriter not to effect any public sale or distribution of its equity
securities or securities convertible into or exchangeable or
exercisable for any of such securities during the seven days prior to
and the 90 days after any underwritten registration pursuant to section
13.1 or 13.2 has become effective, except as part of such underwritten
registration and except pursuant to registrations on Form S-4 and S-8,
or any successor or similar forms thereto, and (y) to cause each holder
of its equity securities or any securities convertible into or
exchangeable or exercisable for any of such securities, in each case
purchased from the Company at any time after the date of this Agreement
(other than in a public offering) to agree not to effect any such
public sale or distribution of such securities during such period.
13.5 Preparation; Reasonable Investigation. In connection with the
-------------------------------------
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company will give the holders of Registrable
Securities registered under such registration statement, their underwriters, if
any, and their respective counsel and accountants, the opportunity to
participate in the preparation of such registration statement, each prospectus
included therein or filed with the Commission, and each amendment thereof or
supplement thereto, and will give each of them such access to its books and
records and such opportunities to discuss the business of the Company with its
officers and the independent public accountants who have certified its financial
statements as shall be necessary, in the opinion of such holders' and such
underwriters' respective counsel, to conduct a reasonable investigation within
the meaning of the Securities Act.
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<PAGE>
13.6 Indemnification.
---------------
(a) Indemnification by the Company. In the event of any registration
------------------------------
of any securities of the Company under the Securities Act pursuant to this
Section 13, the Company will indemnify and hold harmless the holder of any
Registrable Securities covered by such registration statement, its
directors, officers, agents, employees, general partners, limited partners,
each other Person who participates as an underwriter in the offering or sale
of such securities and each other Person, if any, who controls such holder
or any such underwriter within the meaning of the Securities Act, against
any losses, Claims, damages or liabilities, joint or several, to which such
holder or Requesting Holder or any such director, officer, agent, employee,
general partner, limited partner or underwriter or Controlling Person may
become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such securities were
registered under the Securities Act, any preliminary prospectus, final
prospectus or summary Prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and the Company will reimburse such
holder, and each such director, officer, agent, employee, general partner,
limited partner, underwriter and controlling person for any reasonable legal
or any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, liability, action or
proceeding; provided that the Company shall not be liable in any such case
--------
to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and
in conformity with written information furnished to the Company through an
instrument duly executed by such holder specifically stating that it is for
use in the preparation thereof and, provided further that the Company shall
-------- -------
not be liable to any Person who participates as an underwriter, in the
offering or sale of Registrable Securities or to any other Person, if any,
who controls such underwriter within the meaning of the Securities Act, in
any such case to the extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof)
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<PAGE>
or expense arises out of such Person's failure to send or give a copy of the
final prospectus, as the same may be then supplemented or amended, within
the time required by the Securities Act to the Person asserting an untrue
statement or alleged untrue statement or omission or alleged omission at or
prior to the written confirmation of the sale of Registrable Securities to
such Person if such statement or omission was corrected in such final
prospectus. Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of such holder or such Requesting
Holder or any such director, officer, agent, employee, general partner,
limited partner, underwriter or controlling person and shall Survive the
transfer of such securities by such holder.
(b) Indemnification by the Sellers. In the event of any registration
------------------------------
of Registrable Securities under the Securities Act pursuant to this section
13, each seller of Registrable Securities will (severally and not jointly)
indemnify and hold harmless (in the same manner and to the same extent as
set forth in subdivision (a) of this section 13.7) the Company, each
director of the Company, each officer of the Company and each other person,
if any, who controls the Company within the meaning of the Securities Act,
with respect to any statement or alleged statement in or omission or alleged
omission from such registration statement, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, if such statement or alleged statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by
such seller specifically stating that it is for use in the preparation of
such registration statement, preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement. Such indemnity shall remain in
full force and effect, regardless of any investigation made by or on behalf
of the Company or any such director, officer or controlling person and shall
survive the transfer of such securities by such seller.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified
-----------------------
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this section 13.7, such
indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the commencement
of such action, provided that the failure of any indemnified party to give
--------
notice as provided herein shall not relieve the indemnifying party of its
obligations under the preceding subdivisions of this section
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<PAGE>
13.7, except to the extent that the indemnifying party is actually prejudiced by
such failure to give notice. In case any such action is brought against an
indemnified party, unless in such indemnified party's reasonable judgment a
conflict of interest between such indemnified and indemnifying parties may exist
in respect of such claim, the indemnifying party shall be entitled to
participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that the indemnifying party
may wish, with counsel reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without the
consent of the indemnified party, consent to entry of any judgment or enter into
any settlement of any such action which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect to such claim or litigation. No
indemnified party shall consent to entry of any judgment or enter into any
settlement of any such action the defense of which has been assumed by an
indemnifying party without the consent of such indemnifying party.
(d) Other Indemnification. Indemnification similar to that specified
---------------------
in the preceding subdivisions of this section 13.7 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification of
securities under any Federal or state law or regulation of any governmental
authority, other than the Securities Act.
(e) Indemnification Payments. The indemnification required by this
------------------------
section 13.7 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
(f) Contribution. If for any reason the indemnification provided for
------------
in the preceding paragraphs of this Section 13 is unavailable to an indemnified
party or is insufficient to hold it harmless as contemplated by the preceding
clauses (a) and (b), then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, claim, damage, liability or expense
in such proportion as is appropriate to reflect not only the relative benefits
received
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<PAGE>
by the indemnified party and the indemnifying party, but also the relative fault
of the indemnified party and the indemnifying party in connection with the
actions which resulted in such loss, claim, damage, liability or expense, as
well as any other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified party shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied by,
such indemnifying party or indemnified party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action. The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include
any legal or other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 13(f) were determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
No Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation. No holder of
Registrable Securities shall be required to contribute in an amount greater than
the dollar amount of proceeds received by such holder with respect to the sale
of such holder's Registrable Securities.
13.7 Other Registration Rights.
-------------------------
The Company shall not enter into any agreement or arrangement to
provide any Person with registration rights that are inconsistent with the
registration and other rights provided hereunder to holders of the Warrants.
14. Definitions. As used herein, unless the context otherwise
-----------
requires, the following terms have the following respective meanings:
Additional Shares of Common Stock: All shares (including treasury
---------------------------------
shares) of Common Stock issued or sold (or, pursuant to section 2.3 or 2.4,
deemed to be issued) by the Company after the date hereof, whether or not
subsequently reacquired or retired by the Company, other than
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(a) shares issued upon the exercise of the Warrants,
(b) such additional number of shares as may become issuable upon the
exercise of any of the securities referred to in the foregoing clause (a)
by reason of adjustments required pursuant to antidilution provisions
applicable to such securities as in effect on the date hereof, but only if
and to the extent that such adjustments are required as the result of the
original issuance of the Warrants, and
(c) such additional number of shares as may become issuable upon the
exercise of any of the securities referred to in the foregoing clause (a)
by reason of adjustments required pursuant to antidilution provisions
applicable to such securities as in effect on the date hereof, in order to
reflect any subdivision or combination of Common Stock, by reclassification
or otherwise, or any dividend on Common Stock payable in Common Stock.
Business Day: Any day other than a Saturday or Sunday or a day on
------------
which commercial banking institutions in the City of New York or the state of
Connecticut are authorized by law to be closed. Any reference to "days" (unless
Business Days are specified) shall mean calendar days.
Commission: The Securities and Exchange Commission or any other
----------
federal agency at the time administering the Securities Act.
Common Stock: As defined in the introduction to this Warrant, such
------------
term to include any stock into which such Common Stock shall have been changed
or any stock resulting from any reclassification of such Common Stock, and all
other stock of any class or classes (however designated of the Company the
holders of which have the right, without limitation as to amount, either to all
or to a share of the balance of current dividends and liquidating dividends
after the payment of dividends and distributions on any shares entitled to
preference.
Company: As defined in the introduction to this Warrant, such term to
-------
include any corporation which shall succeed to or assume the obligations of the
Company hereunder in compliance with section 3.
Convertible Securities: Any evidences of indebtedness, shares of stock
----------------------
(other than Common Stock) or other securities directly or indirectly convertible
into or exchangeable for Additional Shares of Common Stock.
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Current Market Price: On any date specified herein, the average daily
--------------------
Market Price during the period of the most recent 20 days, ending on such date,
on which the national securities exchanges were open for trading, except that if
no Common Stock is then listed or admitted to trading on any national securities
exchange or quoted in the over-the-counter market, the Current Market Price
shall be the Market Price on such date.
Event of Default: Any of the Events specified in Section 13 of the
----------------
Purchase Agreement as an Event of Default.
Exchange Act: The Securities Exchange Act of 1934, or any similar
------------
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
Independent Financial Expert: means a nationally recognized investment
----------------------------
banking firm, ranking in the top twenty (as determined by the Securities
Industries Association, Inc. or a similar securities information data company)
as lead manager for primary common stock offerings in the year prior to the year
in which it is called upon to give independent financial advice to the Company
as described herein and that does not (and whose directors, officers, employees
and Affiliates do not) have a direct or indirect financial interest in the
Company or any of its Affiliates, that has not been, since the beginning of the
year prior to the year in which it is called upon to give independent financial
advice to the Company as described herein, and at the time it is called upon to
give independent financial advice to the Company is not (and none of whose
directors, officers, employees or Affiliates is) a promoter, director or officer
of the Company or any of its Affiliates and that does not provide any advice or
opinions to the Company or any of its Affiliates except as an Independent
Financial Expert. The Company will bear the expense of compensation of the
Independent Financial Expert for services or opinions it may provide in that
capacity.
Initial Public Offering: An Initial Public Offering shall mean the
-----------------------
first time a registration statement filed under the Securities Act with the
Securities Exchange Commission (other than a registration statement on Form S-8,
or any successor form thereto, with respect to the issuance of Common Stock (or
securities convertible into or exchangeable for Common Stock or rights to
acquire Common Stock) granted or to be granted to employees, officers or
directors of the Company pursuant to any employee stock option plan, unless as a
result thereof the Company would be required to file reports with respect to any
of its equity securities with the Securities Exchange Commission) respecting an
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offering, whether primary or secondary, of Common Stock is declared effective by
the Securities Exchange Commission.
Initiating Holders: Any holder or holders of Registrable Securities
------------------
holding at least 66-2/3% of the Registrable Securities (by number of shares or,
in the case of any debt securities which may be Other Securities, 66-2/3% of the
outstanding principal amount of such securities) and initiating a request
pursuant to section 13.1 for the registration of all or part of such holder's or
holders' Registrable Securities.
Letter Agreement: The Letter Agreement, dated December 21, 1990, among
----------------
the Company, Joseph R. Lemay, Gary R. Martino, Andrei Poludnewycz, Paul J.
Schmidt, Albert R. Subbloie, Wendell Covalt, Dennis Dobson, Wand/IMA
Investments, L.P. and Thomas F. Hill.
Market Price: On any date specified herein, the amount per share of
------------
the Common Stock, equal to (a) the last sale price of such Common Stock, regular
way, on such date or, if no such sale takes place on such date, the average of
the closing bid and asked prices thereof on such date, in each case as
officially reported on the Principal national securities exchange on which such
Common Stock is then listed or admitted to trading, or (b) if such Common Stock
is not then listed or admitted to trading on any national securities exchange
but is designated as a national market system security by the NASD, the last
trading price of the Common Stock on such date, or (c) if there shall have been
no trading on such date or if the Common Stock is not so designated, the average
of the closing bid and asked prices of the Common Stock on such date as shown by
the NASD automated quotation system, or (d) if such Common Stock is not then
listed or admitted to trading on any national exchange or quoted in the
over-the-counter market, the higher of (x) the book value thereof as determined
by any firm of independent public accountants of recognized standing selected by
the Board of Directors of the Company as of the last day of any month ending
within 60 days preceding the date as of which the determination is to be made or
(y) the fair value thereof determined in good faith by the Board of Directors of
the Company as of a date which is within 18 days of the date as of which the
determination is to be made.
NASD: The National Association of Securities Dealers, Inc.
----
Notes: The 15% Senior Subordinated Notes, due December 1997, of this
-----
Company originally issued in the aggregate principal amount of $1.6 million
pursuant to the Purchase Agreement, such term to include any such notes issued
in substitution for such notes, including, without limitation, the Company's 12%
Senior
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<PAGE>
Subordinated Note, dated October 29, 1991 in the principal amount of $1,000,000.
Options: Rights, options or warrants to subscribe for, purchase or
-------
otherwise acquire either Additional Shares of Common Stock or Convertible
Securities.
Other Securities: Any stock (other than Common Stock) and other
----------------
securities of the Company or any other Person (corporate or otherwise) which the
holders of the Warrants at any time shall be entitled to receive, or shall have
received, upon the exercise of the Warrants, in lieu of or in addition to Common
Stock, or which at any time shall be issuable or shall have been issued in
exchange for or in replacement of Common Stock or Other Securities pursuant to
section 3 or otherwise.
Person: A corporation, an association, a partnership, an organization,
------
a business, an individual, a government or political subdivision thereof or a
governmental agency.
Purchase Agreement: The Note and Warrant Purchase Agreement, dated
------------------
December 21, 1990, between the Company and the Purchaser.
Purchaser: Wand/IMA Investments, L.P., a Delaware limited Partnership.
---------
Registrable Securities: (a) any shares of Common Stock or Other
----------------------
Securities issued or issuable upon exercise of the Warrants; (b) the shares of
Common Stock issued or to be issued to Purchaser pursuant to the Stock Purchase
Agreement, dated October 29, 1991, between the Company and Purchaser; (c) the
shares of Common Stock issued to Purchaser pursuant to the Stock Purchase
Agreement, dated September 4, 1991 between the Company and Purchaser; and (d)
any securities issued or issuable with respect to any securities referred to in
the foregoing subdivision by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization or otherwise. As to any particular Registrable
Securities, once issued such securities shall cease to be Registrable Securities
when (a) a registration statement with respect to the sale of such securities
shall have become effective under the Securities Act and such securities shall
have been disposed of in accordance with such registration statement, (b) they
shall have been distributed to the public pursuant to Rule 144 (or any successor
or similar provision) under the Securities Act, (c) they shall have been
otherwise transferred, new certificates for them not bearing a legend
restricting further transfer shall have been delivered by the Company and
subsequent disposition of them immediately thereafter shall not require
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<PAGE>
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 13, including, without limitation, all
registration, filing and NASD fees, all fees and expenses of complying with
securities or blue sky laws, all word processing, duplicating and printing
expenses, messenger and delivery expenses, the fees and disbursements of counsel
for the Company and of its independent public accountants, including the
expenses of any special audits or "cold comfort" letters required by or incident
to such performance and compliance, the reasonable fees and disbursements of any
counsel and accountants retained by the holder or holders of more than 51% of
the Registrable Securities being registered, premiums and other costs of
policies of insurance (if any) against liabilities arising out of the public
offering of the Registrable Securities being registered or officers and
directors insurance and any fees and disbursements of underwriters customarily
paid by issuers or sellers of securities, but excluding underwriting discounts
and commissions and transfer taxes, if any.
Restricted Securities: All of the following: (a) any Warrants bearing
---------------------
the applicable legend or legends referred to in section 9.1, (b) any shares of
Common Stock (or Other Securities) which have been issued upon the exercise of
Warrants and which are evidenced by a certificate or certificates bearing the
applicable legend or legends referred to in such section and (c) unless the
context otherwise requires, any shares of Common Stock (or Other Securities)
which are at the time issuable upon the exercise of Warrants and which, when so
issued, will be evidenced by a certificate or certificates bearing the
applicable legend or legends referred to in such section.
Securities Act: The Securities Act of 1933, or any similar federal
--------------
statute, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time.
Transfer: Any sale, assignment, pledge or other disposition of any
--------
security, or of any interest therein, which could constitute a "sale" as that
term is defined in section 2(3) of the Securities Act.
Value Report: A valuation report rendered by an Independent Financial
------------
Expert pursuant to section 15 or section 16 of this Agreement.
-37-
<PAGE>
Warrant Price: As defined in section 2.1.
-------------
Warrants: (i) The Common Stock Purchase Warrants originally issued
--------
pursuant to the Purchase Agreement (including any warrants issued in
substitution therefor), (ii) this Common Stock Purchase Warrant, (iii) a Common
Stock Purchase Warrant, dated October 29, 1991, No. W-4, issued by the Company
to Wand/IMA Investments, L.P. initially covering 14,812 shares of Common Stock
and (iv) the Common Stock Purchase Warrant, dated December 21, 1990, No. W-3,
issued by the Company to Thomas F. Hill, initially covering 2,381 shares of
Common Stock.
15. Determinations of Value By the Board of Directors. Wherever this
-------------------------------------------------
Agreement provides for the Board of Directors to make a good faith determination
of value, the procedures set forth in this section 15 shall be applicable. The
Company shall promptly (but in no event more than ten Business Days thereafter)
provide written notice (the "Valuation Notice") to each Warrant holder of each
determination of value or fair value made by the Board of Directors pursuant to
the terms of this Agreement. The Valuation Notice shall state the Board's
conclusions as to value, the purpose of the valuation (including designation of
the provision of this Agreement requiring the determination), and a summary of
the method used by the Board to reach its conclusions.
If requested in writing by any holder or holders of Registrable
Securities holding at least a majority of the Registrable Securities within 30
days of the date of the Valuation Notice, the Company will appoint, at the
Company's expense, an Independent Financial Expert to review and render a Value
Report concerning the Board of Directors Valuation. The conclusions of the
Independent Financial Expert shall be final and binding on the Company and the
Registrable Holders.
16. Company Obligation to Repurchase.
--------------------------------
(a) Repurchase Option. Any holder or holders of Registrable Securities
-----------------
holding at least a majority of the Registrable Securities may require the
Company to repurchase (the "Repurchase Option") all or any part of the
Registrable Securities if on or before December 21, 1996, there has not been an
Initial Public Offering.
(b) Repurchase Option Price. Upon an election by a holder or holders
-----------------------
of Warrants pursuant to section 16(a), the Company shall repurchase the Warrants
designated by holders desiring to effect the repurchase at a price equal to or
greater than (i) the value of the Common Stock into which the Warrant is
exercisable less (ii) the Warrant Price then in effect and relating to such
number of shares of Common Stock
-38-
<PAGE>
(such net price being the "Repurchase Price"). The value of such Common Stock
shall be determined by an Independent Financial Expert (to be selected as
provided below in section 16(d)) using one or more valuation methods that the
Independent Financial Expert in its professional judgment determines to be most
appropriate but without giving effect to the discount for any lack of liquidity
of the Common Stock or to the fact that the Company may have no class of equity
securities registered under the Securities Exchange Act of 1934. The Independent
Financial Expert shall deliver, promptly upon completion, to the Company and to
each of the holders exercising the Repurchase Option a Value Report stating the
method of valuation considered or used and the value of said Common Stock as of
the Valuation Date and containing a statement as to the nature and scope of the
examination or investigation upon which the determination of value was made.
The Independent Financial Expert shall consult with management of the
Company in order to allow management to provide information and data relevant
to, and comment on the proposed value of, such Independent Financial Expert's
report to the Company. The Independent Financial Expert may revise its Value
Report based on such consultation provided that the final value shall reflect
both the initial valuation and the determination to revise it. If the
Independent Financial Expert becomes aware of any material changes since the
Valuation Date in the business or financial conditions or prospects of the
Company, such Independent Financial Expert shall specify such material changes
in the Value Report.
(c) Valuation Date. The "Valuation Date" with respect to any
--------------
Repurchase Option shall mean the date five Business Days prior to the date of
the holder's or holders' written notice to the Company of the election to
exercise the Repurchase Option stated in this section 16.
(d) Procedures.
----------
(i) Any holder or holders electing a Repurchase Option pursuant
to Section 16(a) shall give written notice of such election (the
"Repurchase Notice") to the Company. The Repurchase Notice shall
include the name of the holders electing the Repurchase Option (the
"Electing Holders") and the number of shares (by holder) that the
Company shall be required at that time to repurchase.
(ii) Within five Business Days of its receipt of the Repurchase
Notice, the Company shall give written notice to each Electing Holder
of the Company's choice of
-39-
<PAGE>
an Independent Financial Expert to prepare the Value Report. Within
five Business Days after the date of this notice, Electing Holders
owning a majority of the shares identified in the Repurchase Notice
shall notify the Company in writing (the "Holders' IFE Notice") of
their approval or disapproval of the Company's initial choice of
Independent Financial Expert and, in the event of disapproval, such
holders shall propose an alternative firm as Independent Financial
Expert. Within two Business Days after its receipt of the Holders' IFE
Notice, the Company shall notify the Electing Holders of its approval
or disapproval of their selection. If the Company does not accept the
Independent Financial Expert chosen by the Electing Holders, then the
two Independent Financial Experts previously selected pursuant to this
section shall promptly be requested by the Company and the Electing
Holders to jointly select a firm to act as Independent Financial
Expert to prepare the Value Report. Their joint selection, which shall
be made within five Business Days, shall be final and binding upon
both the Company and the Electing Holders.
(iii) The Company shall consult and cooperate with the selected
Independent Financial Expert to facilitate the final delivery of its
Value Report no later than sixty calendar days after the date of the
Repurchase Notice. The Value Report shall be final and binding upon
both the Company and the Electing Holders.
(iv) The Company shall pay the Repurchase Price in immediately
available funds to the holder or holders electing the Repurchase
Option within sixty calendar days of the delivery of the Value Report.
17. Remedies. The Company stipulates that the remedies at law of the
--------
holder of this Warrant in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate and that, to the fullest extent
permitted by law, such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.
18. No Rights or Liabilities as Stockholder. Nothing contained in this
---------------------------------------
Warrant shall be construed as conferring upon the holder hereof any rights as a
stockholder of the Company or as imposing any obligation on such holder to
purchase any securities or as imposing any liabilities on such holder as a
stockholder of
-40-
<PAGE>
the Company, whether such obligation or liabilities are asserted by the Company
or by creditors of the Company.
19. Notices. All notices and other communications under this Warrant
-------
shall be in writing and shall be mailed by registered or certified mail, return
receipt requested, addressed (a) if to any holder of any Warrant, at the
registered address of such holder as set forth in the register kept at the
principal office of the Company, or (b) if to the Company, to the attention of
its President at its office maintained pursuant to subdivision (a) of section
12.2, provided that the exercise of any Warrant shall be effective in the manner
--------
provided in section 1.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-41-
<PAGE>
20. Miscellaneous. This Warrant and any term hereof may be changed,
-------------
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of the State of New York. The section headings in this
Warrant are for purposes of convenience only and shall not constitute a part
hereof.
INFORMATION MANAGEMENT ASSOCIATES, INC.
By: /s/ Albert R. Subbloie
----------------------------------
Albert R. Subbloie
President
-42-
<PAGE>
FORM OF SUBSCRIPTION
--------------------
[To be executed only upon exercise of Warrant]
To Information Management Associates, Inc.
The undersigned registered holder of the within Warrant hereby
irrevocably exercises such Warrant for, and purchases thereunder, _______*
Shares of Common Stock of Information Management Associates, Inc. and herewith
makes payment of $ therefor, and requests that the certificates for such
shares be issued in the name of, and delivered to,
, whose address is
Dated:
----------------------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of Warrant)
----------------------------------------
[Street Address]
----------------------------------------
(City) (State) (Zip Code)
- --------
* Insert here the number of shares called for on the face of this Warrant
(or, in the case of a partial exercise, the portion thereof as to which
this Warrant is being exercised), in either case without making any
adjustment for Additional Shares of Common Stock or any other stock or
other securities or property or cash which, pursuant to the adjustment
provisions of this Warrant, may be delivered upon exercise. In the case of
a partial exercise, a new Warrant or Warrants will be issued and delivered,
representing the unexercised portion of the Warrant, to the holder
surrendering the Warrant.
-43-
<PAGE>
FORM OF ASSIGNMENT
------------------
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of the
within Warrant hereby sells, assigns and transfers unto the right
represented by such Warrant to purchase shares of Common Stock of
Information Management Associates, Inc. to which such Warrant relates, and
appoints Attorney to make such transfer on the books of Information
Management Associates, Inc. maintained for such purpose, with full power of
substitution in the premises.
Dated:
----------------------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of Warrant)
----------------------------------------
[Street Address]
----------------------------------------
(City) (State) (Zip Code)
Signed in the presence of:
- --------------------------
-44-
<PAGE>
Exhibit 10.27
INFORMATION MANAGEMENT ASSOCIATES, INC.
AMENDMENT NO. 1
TO
COMMON STOCK PURCHASE WARRANT
This Agreement is made as of June 1, 1994 by and between Information
Management Associates, Inc., a Connecticut corporation (the "Company") and Wand
Partners Inc., a Delaware corporation ("WPI").
WHEREAS, WPI is currently the holder of a Warrant (No. W-5) initially
entitling WPI to purchase 2,068 shares of common stock at $30 per share (subject
to adjustment upon the occurrence of certain events) (the "WPI Warrant");
WHEREAS, Mercury Asset Management plc, acting as agent on behalf of
certain of its managed accounts (the "Managed Accounts") is purchasing pursuant
to a Stock Purchase Agreement (the "Stock Purchase Agreement"), of even date
herewith, 117,778 shares of common stock from certain significant shareholders
of the Company; and
WHEREAS, in order to facilitate the transactions contemplated by the
Stock Purchase Agreement, the Company and WPI desire to amend the terms of the
WPI Warrant;
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
parties hereto agree as follows and the WPI Warrant (No. W-5) is hereby amended
as hereinafter set forth:
<PAGE>
SECTION 1
Representations and Warranties of the Company
The Company hereby represents and warrants to WPI as follows:
1.1 Authority and Validity. The execution, delivery and performance of
----------------------
this Amendment to the WPI Warrant and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of the Company. This Amendment to the WPI Warrant
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 Amendment to the WPI Warrant, 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 provisions of its Charter 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 judgment, order, writ, injunction or decree of any court,
administrative agency or governmental body applicable to Company.
SECTION 2
Amendments to Warrant
The terms and conditions of the WPI Warrant (No. W-5) are hereby
amended as follows:
2.1 Definitions. The definition of "Initiating Holders" set forth in
-----------
Section 14 of the WPI Warrant is hereby deleted in its entirety and the
following revised definition is substituted therefor:
"Initiating Holders: Any holder or holders of Registrable Securities
------------------
holding at least 40% of the Registrable Securities (by number of
2
<PAGE>
shares or, in the case of any debt securities which may be Other
Securities, 40% of the outstanding principal amount of such securities) and
initiating a request pursuant to section 13.1 for the registration of all
or part of such holder's or holders' Registrable Securities."
2.2 Effect of Amendment. Except as amended hereby, all provisions of
-------------------
the WPI Warrant shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment as of the date and year first above written.
INFORMATION MANAGEMENT
ASSOCIATES, INC.
By: /s/ Gary R. Martino
-------------------------
Name:
Title:
WAND PARTNERS INC.
By: /s/ David J. Callard
-------------------------
Name: David J. Callard
Title:
3
<PAGE>
EXHIBIT 10.28
INFORMATION MANAGEMENT ASSOCIATES, INC.
AMENDMENT NO. 2
TO
COMMON STOCK PURCHASE WARRANT
-----------------------------
This Agreement is made as of November 16, 1994 by and between
Information Management Associates, Inc., a Connecticut corporation (the
"Company") and Wand Partners Inc. ("WPI").
WHEREAS, WPI is currently the holder of a Warrant (No. W-5) initially
entitling WPI to purchase 2,068 shares of common stock at $30.00 per share
(subject to adjustment upon the occurrence of certain events) (the "WPI
Warrant");
WHEREAS, the WPI Warrant was previously amended as of June 1, 1994;
WHEREAS, the Company and WPI desire to further amend the terms of the
WPI Warrant;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein and for other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto agree as follows and the WPI Warrant
(No. W-5) is hereby amended as hereinafter set forth.
SECTION 1. AMENDMENTS TO WARRANT
The terms and conditions of the WPI Warrant (No. W-5) are hereby
amended as follows:
1.1 Section 1.1 is hereby amended by inserting immediately following
the reference therein to "section 1.5" the phrase "or section 1.6".
1.2 The following is hereby added as section 1.6:
"1.6 Payment by Application of Shares Otherwise Issuable. Upon any
---------------------------------------------------
exercise of this Warrant, the holder hereof may, at its option, instruct
the Company, by written notice accompanying the surrender of this Warrant
at the time of such exercise, to apply to the payment required by section
1.1 such number of the shares of Common Stock otherwise issuable to such
holder upon such exercise as shall be specified in such notice, in which
case an amount equal to the excess of the aggregate Current Market Price of
such specified number of shares on the date of exercise over the portion of
the payment required by section 1.1 attributable to such shares shall be
deemed to have been paid to the Company and the number of shares issuable
upon such exercise shall be reduced by such specified number."
<PAGE>
1.3 Section 13.1(c) is hereby deleted in its entirety and the
following is substituted therefor:
"(c) Expenses. The Company will pay all Registration Expenses in
--------
connection with each registration requested pursuant to this section 13.1.
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 are
included in such registration, on the basis of the respective amounts of
the securities then being registered on their behalf."
1.4 Section 16(a) is hereby deleted in its entirety and the following
is substituted therefor:
"(a) Repurchase Option. Any holder or holders of Warrants holding
-----------------
at least a majority of the total outstanding Warrants (measured by the
number of shares of Common Stock into which such Warrants are exercisable)
may require the Company to repurchase (the "Repurchase Option") all or any
part of the Warrants if on or before December 21, 1996, there has not been
an Initial Public Offering."
1.5 The second sentence of Section 16(d)(i) is hereby deleted in its
entirety and the following is substituted therefor:
"The Repurchase Notice shall include the name of the holders
electing the Repurchase Option (the "Electing Holders") and the number of
Warrants (by holder) that the Company shall be required at that time to
repurchase."
1.6 The second sentence of Section 16(d)(ii) is hereby deleted in its
entirety and the following is substituted therefor:
"Within five (5) Business Days after the date of this notice,
Electing Holders owning a majority of the Warrants (measured by the number
of shares of Common Stock into which such Warrants are exercisable)
identified in the Repurchase Notice shall notify the Company in writing
(the "Holders IFE Notice") of their approval or disapproval of the
Company's initial choice of Independent Financial Expert and, in the event
of disapproval, such holders shall propose an alternative firm as
Independent Financial Expert."
SECTION 2. EFFECT OF AMENDMENT
Except as amended hereby, all provisions of the WPI Warrant shall
remain in full force and effect.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment as of the date and year first above written.
INFORMATION MANAGEMENT ASSOCIATES,
INC.
By: /s/ Gary R. Martino
--------------------------------
Name: Gary R. Martino
Title: Chairman
WAND PARTNERS INC.
By: /s/ David J. Callard
--------------------------------
David J. Callard, President
3
<PAGE>
Exhibit 10.29
INFORMATION MANAGEMENT ASSOCIATES, INC.
AMENDMENT NO. 3
TO
COMMON STOCK PURCHASE WARRANT
-----------------------------
This Agreement is made as of September 20, 1996 by and between Information
Management Associate, Inc., a Connecticut corporation (the "Company") and Wand
Partners Inc., a Delaware corporation ("WPI").
WHEREAS, WPI is currently the holder of a Warrant (No. W-5) initially
entitling WPI to purchase 2,068 shares of Common Stock at $30.00 per share
(subject to adjustment upon the occurrence of certain events) (the "WPI
Warrant");
WHEREAS, on January 26, 1993 the Company effected a ten-for-one stock
split; thereafter the WPI Warrant entitled WPI to purchase 20,680 shares of
Common Stock at $3.00 per share (subject to adjustment upon the occurrence of
certain events);
WHEREAS, the WPI Warrant was previously amended as of June 1, 1994 and as
of November 16, 1994;
WHEREAS, the Company and WPI desire to further amend the terms of the WPI
Warrant;
NOW, THEREFORE, in consideration of the mutual agreements contained herein
and for other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows and the WPI Warrant (No. W-5)
is hereby amended as hereinafter set forth.
SECTION 1. AMENDMENTS TO WARRANT
The terms and conditions of the WPI Warrant (No. W-5) are hereby amended
as follows:
1.1 The first paragraph of the WPI Warrant is hereby deleted in its
entirety and the following is substituted therefor:
<PAGE>
"Information Management Associates, Inc., a Connecticut corporation (the
"Company"), for value received, hereby certifies that Wand Partners Inc., or
registered assigns, is entitled to purchase from the Company 20,680
authorized, validly issued, fully paid and nonassessable shares of Common
Stock, no par value per share (the "Common Stock") of the Company at the
purchase price per share of $3.00 at any time or from time to time commencing
at 9:00 A.M., New York City time, on the Warrant Exercise Date and prior to
5:00 P.M., New York City time, on December 21, 2002, all subject to the terms,
conditions and adjustments set forth below in this Warrant."
1.2 Section 1.1 is hereby deleted in its entirety and the following is
substituted therefor:
"1. Exercise of Warrant. 1.1 Manner of Exercise. This Warrant may be
------------------- ------------------
exercised by the holder hereof, in whole or in part, during normal business
hours on any Business Day, by surrender of this Warrant to the Company at its
office maintained pursuant to subdivision (a) of section 12.2, accompanied by
a subscription in substantially the form attached to this Warrant (or a
reasonable facsimile thereof) duly executed by such holder and accompanied by
payment, in cash, by certified or official bank check payable to the order of
the Company, or in the manner provided in section 1.5 (or by any combination
of such methods), in the amount obtained by multiplying (a) the number of
shares of Common Stock (without giving effect to any adjustment thereof)
designated in such subscription by (b) $3, and such holder shall thereupon
be entitled to receive the number of duly authorized, validly issued, fully
paid and nonassessable shares of Common Stock (or Other Securities) determined
as provided in sections 2 through 4."
1.3 Section 2.1 is hereby deleted in its entirety and the following is
substituted therefor:
"2. Adjustment of Common Stock Issuable Upon Exercise 2.1 General: Warrant
------------------------------------------------- -------
Price. The number of shares of Common Stock which the holder of this Warrant
-----
shall be entitled to receive upon each
2
<PAGE>
exercise hereof shall be determined by multiplying the number of shares of
Common Stock which would otherwise (but for the provisions of this Section 2)
be issuable upon such exercise, as designated by the holder hereof pursuant to
section 1.1, by a fraction of which (a) the numerator is $3.00 and (b) the
denominator is the Warrant Price in effect on the date of such exercise. The
"Warrant Price" shall initially be $3.00 per share, shall be adjusted and
readjusted from time to time as provided in this section 2 and, as so adjusted
or readjusted, shall remain in effect until a further adjustment or
readjustment thereof is required by this section 2."
1.4 Section 16(a) is hereby deleted in its entirety and the following is
substituted therefor:
"(a) Repurchase option. Any holder or holders of Warrants holding at least
-----------------
a majority of the total outstanding Warrants (measured by the number of shares
of Common Stock into which such Warrants are exercisable) may require the
Company to repurchase (the "Repurchase Option") all or any part of the
Warrants if on or before January 31, 1998, there has not been an Initial
Public Offering."
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to WPI as follows:
1.1 Authority and Validity. The execution, delivery and performance of this
----------------------
Amendment to the WPI Warrant and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of the Company. This Amendment to the WPI
Warrant 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
Amendment to the WPI Warrant, nor the consummation
3
<PAGE>
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 provisions of its Charter 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
judgment, order, writ, injunction or decree of any court, administrative
agency or governmental body applicable to Company.
SECTION 3. EFFECT OF AMENDMENT
Except as amended hereby, all provisions of the WPI Warrant shall remain
in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment
as of the date and year first above written.
INFORMATION MANAGEMENT ASSOCIATES, INC.
By: /s/ Gary R. Martino
--------------------------
Name: Gary R. Martino
Title: Chairman
WAND PARTNERS INC.
By: /s/ David J. Callard
--------------------------
Name: David J. Callard
Title: President
4
<PAGE>
Exhibit 10.30
STOCK PURCHASE AGREEMENT
DATED MARCH 26, 1993
AMONG
INFORMATION MANAGEMENT ASSOCIATES, INC.
AND
THE PURCHASERS LISTED ON SCHEDULE A ATTACHED HERETO
<PAGE>
Table of Contents
ARTICLE 1. TRANSFER OF SHARES AND RELATED MATTERS................. 1
1.1 The Sale............................................... 1
1.2 Delivery of Shares..................................... 1
ARTICLE 2. CLOSING................................................ 1
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......... 1
3.1 Authority and Validity................................. 1
3.2 Organization and Standing; Certificate of
Incorporation and Bylaws............................... 2
3.3 Subsidiaries........................................... 2
3.4 Qualification.......................................... 2
3.5 Capitalization......................................... 2
3.6 Capital Stock and Related Matters...................... 3
3.7 Indebtedness of the Company............................ 3
3.8 Disclosure............................................. 3
3.9 Intellectual Property.................................. 4
3.10 Environmental Matters.................................. 4
3.11 Financial Statements................................... 4
3.12 Changes................................................ 4
3.13 Litigation, Etc........................................ 5
3.14 Compliance with Other Instruments, etc................. 5
3.15 Use of Proceeds........................................ 5
3.16 No Violations of Securities Laws....................... 5
3.17 Brokers or Finders Fees, Etc........................... 5
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS....... 6
4.1 Investment............................................. 6
4.2 Resale................................................. 6
4.3 Accredited Investor.................................... 6
4.4 Access to Information.................................. 6
4.5 Confidentiality........................................ 6
4.6 No Agents.............................................. 7
ARTICLE 5. CONDITIONS TO OBLIGATIONS OF THE PURCHASERS............ 7
5.1 Opinion of Counsel..................................... 7
5.2 Representations........................................ 7
5.4 Acceptance by Counsel to the Purchasers................ 7
5.5 Government Consents, Authorizations, Etc............... 7
5.6 No Litigation or Legislation........................... 8
5.7 No Material Adverse Change............................. 8
5.8 Consents and Permits................................... 8
ARTICLE 6. CONDITIONS TO OBLIGATIONS OF THE COMPANY............... 8
6.1 Representations........................................ 8
6.2 Legality............................................... 8
-i-
<PAGE>
6.3 Acceptance by Counsel to the Company................... 9
ARTICLE 7. SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION, ETC................................... 9
7.1 Survival............................................... 9
7.2 Company's Agreement to Indemnify....................... 9
7.3 Financial Statements................................... 9
ARTICLE 8. RESTRICTION ON TRANSFERABILITY......................... 9
8.1 Restriction; Procedure for Transfer.................... 9
8.2 Notice of Proposed Transfer............................ 9
ARTICLE 9. REGISTRATION UNDER SECURITIES ACT, ETC................. 10
9.1 Right to Request Registration...........................10
9.2 Incidental Registration................................ 12
9.3 Registration Procedures................................ 14
9.4 Underwritten Offerings................................. 18
9.5 Preparation; Reasonable Investigation.................. 20
9.6 Indemnification........................................ 20
ARTICLE 10. DEFINITIONS............................................ 21
ARTICLE 11. MISCELLANEOUS.......................................... 23
11.1 Amendment, Modification and Waiver..................... 23
11.2 Expenses; Transfer Taxes, Etc.......................... 23
11.3 Binding Effect; Benefits; Parties in Interest.......... 24
11.4 Entire Agreement....................................... 24
11.5 Headings............................................... 24
11.6 Notices................................................ 24
11.7 Counterparts........................................... 25
11.8 Governing Law.......................................... 25
11.9 Gender................................................. 25
-ii-
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
STOCK PURCHASE AGREEMENT dated as of March 26, 1993 by and among the
purchasers listed on Schedule A attached hereto (collectively, the
"Purchasers"), and INFORMATION MANAGEMENT ASSOCIATES, INC. (the "Company").
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. TRANSFER OF SHARES AND RELATED MATTERS
- ---------- --------------------------------------
1.1 The Sale. Subject to the terms and conditions of this Agreement,
--------
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 set forth opposite
such Purchaser's name on Schedule A attached hereto (collectively, the "Shares")
of the common stock, no par value, of the Company ("Common Stock") free and
clear of all liens, claims, liabilities, restrictions or other encumbrances at a
purchase price of $6.62 per share (the "Purchase Price").
1.2 Delivery of Shares. On the Closing Date (as hereinafter defined),
------------------
the Company will deliver to the Purchasers, against payment of the Purchase
Price, certificates representing the Shares.
ARTICLE 2. CLOSING
- ---------- -------
The closing for the consummation of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of LeBoeuf, Lamb,
Leiby & MacRae, Hartford, Connecticut, 10:00 a.m. on March 26, 1993 or at such
other time or place as the parties hereto shall mutually agree (the "Closing
Date").
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
- ---------- ---------------------------------------------
The Company hereby represents and warrants to the Purchasers as
follows:
3.1 Authority and Validity. The execution, delivery and performance of
----------------------
this Agreement and the consummation of 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,
<PAGE>
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 Charter 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 Company.
3.2 Organization and Standing; Certificate of Incorporation and
-----------------------------------------------------------
Bylaws. The Company is a 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 no subsidiaries.
------------
3.4 Qualification. Attached as Schedule 3.4 is a true and complete
------------- ------------
list 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. The jurisdictions identified in Schedule 3.4 are the
------------
only jurisdictions in which the nature of the Company's activities or the
character of the properties it owns or leases makes such qualification
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. Attached as Schedule 3.5 is a true and accurate
-------------- ------------
list of the authorized capital stock of the Company and the issued and
outstanding stock of the Company. Attached as Schedule 3.5 is a true and
------------
accurate list of the issued or outstanding shares of capital stock or securities
convertible or exchangeable into, or outstanding stock purchase warrants or
other options or rights to purchase shares of its capital stock or other equity
securities of the Company. All issued and outstanding shares have been duly
authorized and validly issued, are fully paid and non-assessable. When
authorized and issued, the Shares will not be subject to any pre-emptive rights
or rights of first refusal. The Shares, when issued in compliance with the
provisions
-2-
<PAGE>
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 Shares will be subject to restrictions on transfer imposed under
applicable state and federal securities laws.
3.6 Capital Stock and Related Matters. Attached as Schedule 3.5 is a
---------------------------------
true and correct list identifying each stockholder of the Company and the number
of shares of Common Stock owned by each such stockholder. All of the outstanding
shares of Common Stock will be validly issued and outstanding, fully paid and
non-assessable. Except as set forth on Schedule 3.5 hereof, the Company has no
------------
outstanding securities convertible into or exchangeable for any shares of its
Capital Stock, or any outstanding rights (either preemptive or other) to
subscribe for or to purchase, or any outstanding options for the purchase of, or
any agreements providing for the issuance (contingent or otherwise) of, or any
outstanding calls, commitments or claims of any character relating to, any
Capital Stock or any stock or securities convertible into or exchangeable for
any Capital Stock of the Company. Except as set forth on Schedule 3.5 hereof or
------------
as disclosed in the Confidential Offering Memorandum provided to Purchasers in
connection herewith (the "Offering Memorandum"), the Company is not subject to
any obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its Capital Stock or any convertible securities, rights or
options of the type described in the preceding sentence. The Company is not a
party to, and does not have knowledge of, any agreement (except as set forth on
Schedule 3.5 hereof or as disclosed in the Offering Memorandum) restricting the
- ------------
voting or transfer of any shares of the Company's Capital Stock. The Company is
not required to file, nor has it filed, pursuant to Section 12 of the Exchange
Act, a registration statement relating to any class of equity securities,
provided, however, that under the Amended and Restated Shareholders' Agreement,
- -------- -------
dated as of October 29, 1991, certain shareholders of the Company have been
granted "piggy-back" registration rights and Wand/IMA Investments, L.P., Wand
Partners, Inc. and Thomas F. Hill have certain "demand" and piggyback
registration rights under certain common stock purchase warrants, and certain
stock purchase agreements as more fully described in the Offering Memorandum.
3.7 Indebtedness of the Company. Schedule 3.7 correctly describes all
--------------------------- ------------
secured and unsecured Indebtedness of the Company outstanding, or for which the
Company has commitments, on the date of this Agreement. The Company is not in
default with respect to any Indebtedness or any instrument or agreement relating
thereto.
3.8 Disclosure. Neither this Agreement, the Exhibits hereto, nor the
----------
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
-3-
<PAGE>
necessary in order to make the statements contained herein or therein not
misleading.
3.9 Intellectual Property. The Company owns or has valid rights to use
---------------------
all Intellectual Property Rights, including proprietary information, trademarks,
trade names, and copyrights, used in or necessary to conduct the Company's
business as heretofore conducted 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.
3.10 Environmental Matters. The Company is in compliance with the
---------------------
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.
3.11 Financial Statements. The unaudited balance sheet and related
--------------------
statement of operations of the Company as of December 31, 1992 (collectively,
the "Financial Statements") fairly present the Company's assets, liabilities,
financial position and results of operations as of the date thereof and for the
period then ended, and were prepared in accordance with generally accepted
accounting principles, consistently applied (subject, in the case of interim
statements, to normal year-end 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 Exhibits hereto or in the Offering Memorandum.
3.12 Changes. Except as set forth in Schedule 3.12 hereto, since
------- -------------
December 31, 1992, there has not been:
(a) any change in the Company's assets, liabilities, condition
(financial or otherwise) or business which individually
-4-
<PAGE>
or in the aggregate is materially adverse to the Company, or which is not
in the ordinary course of business;
(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 except that the Company effected a 10-for-1 stock
split in January 1993; and
(d) any other event or condition which has materially and adversely
affected the Company's business.
3.13 Litigation, Etc. Except as described in Schedule 3.13, there is
---------------
no 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.
3.14 Compliance with Other Instruments, etc. The Company is not in
--------------------------------------
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.
3.15 Use of Proceeds. The Company will use the proceeds from the sale
---------------
of the Shares for general corporate purposes.
3.16 No Violations of Securities Laws. Subject to the accuracy of the
--------------------------------
Purchasers's representations in Section 4 hereof, the offer and sale of the
Shares hereunder is and will be exempt from the registration and prospectus
delivery requirements of the Securities Act of 1933 (the "Act") and is 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 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 Shares under
Section 5 of the Act, including, without limitation, engaging in any form of
general solicitation.
-5-
<PAGE>
3.17 Brokers or Finders Fees, Etc. 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 Shares contemplated hereby.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
- --------- ------------------------------------------------
Each Purchaser hereby represents and warrants to the Company as
follows:
4.1 Investment. Such Purchaser is acquiring the 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 Shares have not
been registered under the Securities Act of 1933, as amended (the "Act"), by
reason of a specific exemption from the registration provisions of the Act which
depends upon, among other things, accuracy of the Purchaser's representations
herein and the bona fide nature of the Purchaser's investment intent as
expressed herein.
4.2 Resale. Such Purchaser acknowledges that the Shares must be held
------
indefinitely unless the Shares are subsequently registered under the Act or an
exemption from such registration is available. Each certificate representing (i)
the Shares, and (ii) any other securities issued in respect of the Shares 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 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 ACT
EXCEPT PURSUANT TO AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED.
4.3 Accredited Investor. Such Purchaser is an "accredited investor" as
-------------------
that term is used in Rule 501 promulgated under the Act.
4.4 Access to Information. Such Purchaser acknowledges that he has
---------------------
received such information and made such investigation and analysis as 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.
-6-
<PAGE>
4.5 Confidentiality. Such Purchaser agrees to keep permanently
---------------
confidential the information provided or to be provided to the Purchaser by the
Company in connection with the purchase and sale of the Shares, including
without limitation the Offering Memorandum, this Agreement, the Schedules and
Exhibits attached hereto and any and all information, financial or otherwise,
relating to the Company which may hereafter be provided to such Purchaser.
4.6 No Agents. Such Purchaser acknowledges that the Shares are being
---------
offered by the Company through its directors and executive officers and that no
other person has acted as agent or broker in connection with the offering and
sale of the Shares and no other person has been authorized to give any
information or make any representation concerning the Company or the Shares. The
only information relating to the Company on which such Purchaser has relied is
the information contained in the Offering Memorandum or included in this
Agreement, the Schedules or Exhibits attached hereto, and the closing documents
delivered herewith.
ARTICLE 5. CONDITIONS TO OBLIGATIONS OF THE Purchasers
- ---------- -------------------------------------------
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. You shall have received a favorable opinion,
------------------
addressed to you, dated the date of Closing and satisfactory in substance and
form to you, from LeBoeuf, Lamb, Leiby & MacRae, special counsel for the
Company, substantially in the form set forth in Schedule 5.1.
------------
5.2 Representations. The representations made by the Company in
---------------
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,
-------------
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 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,
----------------------------------------
authorizations, orders or approvals of, and filings or registrations with, any
federal, state, local or foreign
-7-
<PAGE>
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 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 the 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 December 31, 1992, other than (x)
changes which have not been, either in any case or in the aggregate, materially
adverse to the Company, and (y) any matters of a general economic or political
nature which do not affect the Company uniquely.
5.8 Consents and Permits. The Company shall have received all
--------------------
consents, permits and other authorizations, and made all such filings and
declarations, as may be required pursuant to any law, statute, regulation or
rule (federal, state, local or foreign) in connection with the transactions
contemplated by this Agreement, or 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.
ARTICLE 6. CONDITIONS TO OBLIGATIONS OF THE COMPANY
- ---------- ----------------------------------------
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 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 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
------------------------------------
all legal matters contemplated herein and of all
-8-
<PAGE>
papers delivered hereunder shall be acceptable to counsel to the Company.
ARTICLE 7. SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
- ---------- -------------------------------------------
INDEMNIFICATION, ETC.
---------------------
7.1 Survival. All representations and warranties made by any party 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.
7.3 Financial Statements. Until the Company is required to file
--------------------
reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
as amended (the "Exchange Act"), at which time this provision shall terminate
and be of no further force or effect, the Company agrees to provide to the
Purchasers copies of its quarterly and annual financial statements within 45
days after the end of each fiscal quarter and within 120 days after the end of
each fiscal year, respectively. In addition, each Purchaser shall have the right
to request such additional information regarding the Company as such Purchaser
may reasonably request.
ARTICLE 8. RESTRICTION ON TRANSFERABILITY
- ---------- ------------------------------
8.1 Restriction; Procedure for Transfer. The 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 of 1933, as
amended, and applicable state securities laws.
8.2 Notice of Proposed Transfer. Prior to any proposed transfer of any
---------------------------
of the Shares (other than a transfer pursuant to registration under the Act),
the holder thereof shall give written notice to the Company of such holder's
intention to effect such transfer at least thirty (30) days prior to the date of
transfer and shall specify the proposed purchase price and the other terms and
conditions relating to such proposed transfer. Each such notice shall describe
the manner and circumstances of the proposed transfer in sufficient detail, and
shall be accompanied by a
-9-
<PAGE>
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 Shares may be effected without registration
under the Act.
ARTICLE 9. REGISTRATION UNDER SECURITIES ACT, ETC.
- ---------- ---------------------------------------
9.1 Right to Request Registration.
------------------------------
(a) If (i) Wand/IMA Investments, L.P. ("Wand/IMA") exercises its right
to require the Company to redeem the common stock purchase warrants and
shares issued or issuable upon exercise of such common stock purchase
warrants held by Wand/IMA, and the Company shall have effected such
redemption; and (ii) the Company shall not have completed a registered
public offering of Common Stock pursuant to the Securities Act, then on or
after March 26, 1999, upon the written request of one or more Initiating
Holders, requesting that the Company effect the registration under the
Securities Act of all or part of such Initiating Holders' Registrable
Securities and specifying the intended method of disposition thereof, the
Company will promptly give written notice of such requested registration to
all holders of Registrable Securities, and thereupon the Company will use
its best efforts to effect the registration under the Securities Act of:
(i) the Registrable Securities which the Company has been so
requested to register by such Initiating Holders for
disposition in accordance with the intended method of
disposition stated in such request; and
(ii) all other Registrable Securities the holders of which shall
have made a written request to the Company for registration thereof
within 30 days after the giving of such written notice by the Company
(which request shall specify the intended method of disposition of
such Registrable Securities); and
(iii) subject to the priority provisions of section 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
-10-
<PAGE>
Company to effect more than one registration of Registrable Securities.
(b) Registration Statement Form. Registrations under this Section 9.1
---------------------------
shall be on such appropriate registration form of the Commission (i) as
shall be selected by the Company and, as shall be reasonably acceptable to
the holders of more than 50% (by number of shares) of the Registrable
Securities so to be registered and (ii) as shall permit the disposition of
such Registrable Securities in accordance with the intended method or
methods of disposition specified in their request for such registration.
The Company agrees to include in any such registration statement all
information which holders of Registrable Securities being registered shall
reasonably request.
(c) Expenses. The Company will pay all Registration Expenses in
--------
connection with one registration requested pursuant to this section 9.1.
(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
--------
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, or (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) if 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.
-11-
<PAGE>
(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 requested to be included by
such holders and (ii) second, securities the Company proposes to sell and
other securities of the Company included in such registration by the
holders thereof.
9.2 Incidental Registration.
------------------------
(a) Right to Include Registrable Securities. If the Company at any
---------------------------------------
time proposes to register any of its securities under the Securities Act
(other than by a registration on Form S-4 or S-8, or any successor or
similar forms), 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 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
-12-
<PAGE>
obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses
in connection therewith), 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. 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 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 (other than such Registrable Securities and
other shares or securities so requested to be included) being distributed
by such underwriters within a price range acceptable to the holders of
securities other than the Registrable Securities covered by such
registration requested to be included in such registration (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 and the holders of any other shares or securities which shall
have exercised in respect of such offering, registration rights comparable
to the rights granted under this section 9.2 (which other shares or
securities are not to be included in such underwritten offering), 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 and shares or other securities so that the resultant aggregate
number of such Registrable Securities and other shares or other securities
so included in such registration shall be equal to the number of shares
stated in such managing underwriter's letter. Notwithstanding the
foregoing, with respect to any registration initiated pursuant to the
exercise of "demand" registration rights by any holder of securities of the
Company, other than the holders of the Registrable Securities
-13-
<PAGE>
the holders of Registrable Securities shall have no right to include any
Registrable Securities in such registration unless all of the securities
requested to be registered by the holders exercising such "demand"
registration rights have been included in such registration and have not
been subjected to any reduction by underwriters.
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 Section 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 of such counsel;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the
Securities Act with respect to the disposition of all securities
covered by such registration statement until the earlier of such time
as all of such securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set
forth in such registration statement or 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
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<PAGE>
of the prospectus contained in such registration statement (including
each preliminary prospectus and any summary prospectus) and any other
prospectus filed under Rule 424 under the Securities Act, in
conformity with the requirements of the Securities Act, and such other
documents, as such seller may reasonably request in order to
facilitate the public sale or other disposition of the Registrable
Securities owned by such seller;
(iv) use its reasonable best efforts to register or qualify all
Registrable Securities and other securities covered by such
registration statement under such other securities laws or blue sky
laws of such jurisdictions as any seller thereof and any underwriter
of the securities being sold by such seller shall reasonably request,
to keep such registrations or qualifications in effect for so long as
such registration statement remains in effect, and take any other
action which may be reasonably necessary or advisable to enable such
seller and underwriter to consummate the disposition in such
jurisdictions of the securities owned by such seller, except that the
Company shall not for any such purpose be required to qualify
generally to do business as a foreign corporation in any jurisdiction
wherein it would not but for the requirements of this subdivision (iv)
be obligated to be so qualified, or to consent to general service of
process in any such jurisdiction;
(v) use its best efforts to cause all Registrable Securities
covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the 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
(vii) 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
(viii) 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
-15-
<PAGE>
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;
(ix) 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 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; 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
-16-
<PAGE>
comply in all material respects with the requirements of the
Securities Act or of the rules or regulations thereunder;
(x) 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;
(xi) use its reasonable best efforts to list all Company's equity
securities covered by such registration statement on any securities
exchange on which any of the Company's 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 (ix) 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 (ix) 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, 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 (ix) 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
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<PAGE>
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) 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)
within a price range acceptable to the Company or in the case of a
secondary offering, the holders of securities other than Registrable
Securities requested to be included in such registration 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 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
agreement between the Company and such underwriters and may, at their
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<PAGE>
option, require 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. Notwithstanding the foregoing, with respect to any
registration initiated pursuant to the exercise of "demand" registration
rights by any holder of securities of the Company other than the holders
of Registrable Securities, the holders of Registrable Securities shall
have no right to include any Registrable Securities in such registration
unless all of the securities requested to be registered by the holders
exercising such "demand" registration rights have been included in such
registration and have not been subjected to any reduction by underwriters.
(b) 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
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<PAGE>
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 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 Section 9, the Company will indemnify and hold
harmless the holder of any Registrable Securities covered by such
registration statement, its directors, officers, agents, employees,
general partners, limited partners, each other Person who participates
as an underwriter in the offering or sale of such securities and each
other Person, if any, who controls such holder or any such underwriter
within the meaning of the Securities Act, against any losses, claims,
damages or liabilities, joint or several, to which such holder or
Requesting Holder or any such underwriter within the meaning of the
Securities Act, against any losses, claims, damages or liabilities,
joint or several, to which such holder or Requesting Holder or any
such director, officer, agent, employee, general partner, limited
partner or underwriter or controlling person may become subject under
the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions or proceedings, whether commenced
or threatened, in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such securities
were registered under the Securities Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any omission or alleged omission
to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and the
Company will reimburse such holder, and each such director, officer,
agent, employee, general partner, limited partner, underwriter and
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<PAGE>
controlling person for any reasonable legal or any other expenses
reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceeding;
provided that the Company shall not be liable in any such case to the
--------
extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of or is based
upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement in reliance upon and in conformity with
written information furnished to the Company through an instrument
duly executed by such holder specifically stating that it is for use
in the preparation thereof and, provided further that the Company
-------- -------
shall not be liable to any Person who participates as an underwriter,
in the offering or sale of Registrable Securities or to any other
Person 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
such Requesting Holder or any such director, officer, agent, employee,
general partner, limited partner, underwriter or controlling person
and shall survive the transfer of such securities by such holder.
(b) Indemnification by the Sellers. In the event of any
------------------------------
registration of Registrable Securities under the Securities Act
pursuant to this Section 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 9.5) 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
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<PAGE>
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 9.5, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give
written notice to the latter of the commencement of such action,
provided that the failure of any indemnified party to give notice as
--------
provided herein shall not relieve the indemnifying party of its
obligations under the preceding subdivisions of this section 9.5,
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 9.5 (with
appropriate modifications) shall be given by the Company and each
seller of Registrable Securities with respect to any required
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<PAGE>
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 9.5 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 payable by such indemnified
party as a result of such, 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 9.5(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.
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<PAGE>
ARTICLE 10. DEFINITIONS
- ----------- -----------
As used herein, unless the context otherwise requires, the following
terms have the following meanings:
Commission: The Securities and Exchange Commission or any other
----------
federal agency at the time administering the Securities Act.
Common Stock: As defined in Section 1.1 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 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 "Controlling" 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.
Intellectual Property Rights: All Trademarks, Patents, Copyrights, and
----------------------------
Know-How and Technical Information.
Initial Public Offering: An Initial Public Offering shall mean the
-----------------------
first time a registration statement filed under the Securities Act with the
Securities and Exchange Commission (other than a registration statement on Form
S-8, or any successor form thereto, with respect to the issuance of Common Stock
(or securities convertible into or exchangeable for Common Stock or rights to
acquire Common Stock) granted or to be granted to
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<PAGE>
employees, officers or directors of the Company pursuant to any employee stock
option plan, unless as a result thereof the Company would be required to file
reports with respect to any of its equity securities with the Securities and
Exchange Commission) respecting an offering, whether primary or secondary, of
Common Stock is declared effective by the Securities and Exchange Commission.
Initiating Holders: Any Purchasers holding at least 51% 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.
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.
Know-How and Technical Information: Data, plans, trade secrets,
----------------------------------
technologies, processes, specifications, know-how, operating experience and
information (business, economic and technical) relating to the foregoing.
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.
Purchasers: As defined in the introduction to this Agreement.
----------
Registrable Securities: (a) The shares of Common Stock purchased
----------------------
pursuant to this Agreement; and (b) any securities issued or issuable with
respect to any securities referred to in the
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<PAGE>
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 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.
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.
-26-
<PAGE>
Transfer: Any sale, assignment, pledge or other disposition of any
--------
security, or of any interest therein, which could constitute a "sale" as that
term is defined in Section 2(3) of the Securities Act.
Wand/IMA: As defined in Section 9.1 of this Agreement.
--------
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 $6.62
(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 $6.62 (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 $6.62 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, 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
-27-
<PAGE>
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 Securities and Exchange Commission which
is declared effective by the Securities and Exchange 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 Securities and Exchange 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 hereby shall be borne by the Company. The Company
shall pay all sales, use and excise taxes and all registration, recording or
-28-
<PAGE>
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.
6527 Main Street
Trumbull, CT 06611
Attn: Mr. Gary R. Martino
With a copy to:
Thomas L. Fairfield, Esq.
LeBoeuf, Lamb, Leiby & MacRae
CityPlace II
Hartford, CT 06103
If to any Purchaser, to such Purchaser at the address set
forth in Schedule A.
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.
-29-
<PAGE>
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.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-30-
<PAGE>
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/ Albert R. Subbloie
-------------------------------
Albert R. Subbloie
President
THE PURCHASERS:
/s/ Joseph Niciforo
-----------------------------------
Joseph Niciforo
/s/ Michael Herlehy
-----------------------------------
Michael Herlehy
/s/ Kevin Callahan
-----------------------------------
Kevin Callahan
/s/ Gregory Collins
-----------------------------------
Gregory Collins
/s/ Victor Nesi
-----------------------------------
Victor Nesi
/s/ William Trousdale
-----------------------------------
William Trousdale
/s/ Floyd Donahue
-----------------------------------
Floyd Donahue
/s/ Charles Heller
-----------------------------------
Charles Heller
-31-
<PAGE>
Schedule A
----------
List of Purchasers
------------------
<TABLE>
<CAPTION>
Name, Address and Purchase
Social Security Number Price
- ---------------------- --------
<S> <C>
Joseph Niciforo $200,000
[ADDRESS]
Michael Herlehy $200,000
[ADDRESS]
Kevin Callahan $100,000
[ADDRESS]
Gregory Collins $100,000
[ADDRESS]
Victor Nesi $100,000
[ADDRESS]
William Trousdale $ 50,000
[ADDRESS]
Dr. Floyd Donahue $ 50,000
[ADDRESS]
Charles Heller $ 25,000
[ADDRESS]
</TABLE>
<PAGE>
Exhibit 10.31
STOCK PURCHASE AGREEMENT
DATED AS OF JUNE 1, 1994
AMONG
GARY R. MARTINO, ALBERT R. SUBBLOIE, JR., PAUL SCHMIDT AND ANDREI
POLUDNEWYCZ (COLLECTIVELY, THE "SELLERS")
AND
MERCURY ASSET MANAGEMENT PLC AS AGENT FOR
CERTAIN OF ITS DISCRETIONARY ACCOUNTS
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE 1. TRANSFER OF SHARES AND RELATED MATTERS................. 1
1.1 The Sale.................................................... 1
--------
1.2 Payment of Purchase Price and Delivery of Shares............ 1
------------------------------------------------
ARTICLE 2. CLOSING................................................ 1
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE SELLERS.......... 2
3.1 Ownership of Shares......................................... 2
-------------------
3.2 Authorization and Execution................................. 2
---------------------------
3.3 Consents and Approvals...................................... 2
----------------------
3.4 Governmental Approvals...................................... 2
----------------------
3.5 Brokers and Finders......................................... 2
-------------------
3.6 Financial Statements........................................ 3
--------------------
3.7 Business Generally.......................................... 3
------------------
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER........ 3
- ---------- -----------------------------------------------
4.1 Investment.................................................. 3
----------
4.2 Resale...................................................... 4
------
4.3 Accredited Investor......................................... 4
-------------------
4.4 Access to Information....................................... 4
---------------------
ARTICLE 5. SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION, ETC................................... 5
5.1 Survival.................................................... 5
--------
5.2 Sellers' Agreement to Indemnify............................. 5
-------------------------------
ARTICLE 6. RESTRICTION ON TRANSFERABILITY......................... 5
------------------------------
6.1 Restriction; Procedure for Transfer......................... 5
-----------------------------------
6.2 Notice of Proposed Transfer................................. 5
---------------------------
ARTICLE 7. REGISTRATION UNDER SECURITIES ACT, ETC................. 5
7.1 Incidental Registration..................................... 5
-----------------------
7.2 Registration Procedures..................................... 7
-----------------------
7.3 Underwritten Offerings...................................... 11
----------------------
7.4 Preparation; Reasonable Investigation....................... 13
-------------------------------------
7.5 Indemnification............................................. 13
---------------
ARTICLE 8. RULE 144............................................... 17
ARTICLE 9. DEFINITIONS............................................ 17
ARTICLE 10. MISCELLANEOUS.......................................... 19
-------------
10.1 Amendment, Modification and Waiver.......................... 19
----------------------------------
10.2 Expenses; Transfer Taxes, Etc............................... 19
-----------------------------
10.3 Binding Effect; Benefits; Parties in Interest............... 20
---------------------------------------------
10.4 Entire Agreement............................................ 20
----------------
</TABLE>
-i-
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
STOCK PURCHASE AGREEMENT dated as of June 1, 1994 by and among MERCURY
ASSET MANAGEMENT PLC, an English public company limited by shares, acting as
agent (the "Agent") for certain of its discretionarily managed accounts (the
"Purchasers") (such shares to be registered in the name of the nominee set forth
on Schedule A hereto) and GARY R. MARTINO, ALBERT R. SUBBLOIE, JR., PAUL SCHMIDT
AND ANDREI POLUDNEWYCZ (collectively, the "SELLERS").
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. TRANSFER OF SHARES AND RELATED MATTERS
- ---------- --------------------------------------
1.1 The Sale. Subject to the terms and conditions of this Agreement,
--------
on the date of the Closing (as hereinafter defined), the Sellers hereby
severally agree to sell, transfer, convey and deliver to the Purchasers, and the
Purchasers hereby agree to purchase from the Sellers, the number of shares set
forth opposite each respective Seller's name on Schedule B attached hereto
(collectively, the "Shares") of the common stock, no par value ("Common Stock"),
of Information Management Associates, Inc. (the "Company") free and clear of all
liens, claims, liabilities, restrictions or other encumbrances at a purchase
price of $9.00 per share (the "Purchase Price").
1.2 Payment of Purchase Price and Delivery of Shares. On the Closing
------------------------------------------------
Date (as hereinafter defined), the Purchasers shall pay to each of the Sellers
by certified or bank check or wire transfer an amount equal to the Purchase
Price multiplied by the number of shares set forth opposite each such Seller's
name on Schedule B attached hereto and the Sellers will deliver to the
Purchasers, certificates representing the Shares duly endorsed in blank or with
a fully executed stock power attached, all in proper form for transfer with all
transfer taxes, if any, paid by Sellers.
ARTICLE 2. CLOSING
- ---------- -------
The closing for the consummation of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of LeBoeuf, Lamb,
Greene & MacRae, New York, New York, 10:00 a.m. on June 2, 1994 or at such other
time or place as the parties hereto shall mutually agree (the "Closing Date").
1
<PAGE>
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE SELLERS
- ---------- ---------------------------------------------
Each Seller severally represents and warrants to the Purchasers, as to
himself, as follows:
3.1 Ownership of Shares. The Seller owns of record and beneficially
-------------------
the number and type of Shares set forth opposite the Seller's name in Schedule B
hereto. The Seller has good, marketable and valid title to the Shares to be sold
by him hereunder, free and clear of all liens, pledges, encumbrances, claims,
security interests, charges, voting trusts, voting agreement, other agreements,
rights, options, warrants or restrictions of any kind, nature or description
other than pursuant to this Agreement. The delivery to Buyer of such Shares
pursuant to this Agreement will transfer valid title thereto, free and clear of
all pledges, liens, claims, charges, security interests and other encumbrances
of any nature whatsoever. No person or entity has any agreement or option or any
right or privilege (whether preemptive or contractual) capable of becoming an
agreement or option for the purchase of any such Shares from the Seller.
3.2 Authorization and Execution. The Seller has the legal capacity to
---------------------------
enter into this Agreement and to perform his obligations hereunder and to
consummate the transactions contemplated hereby. This Agreement has been duly
executed and delivered by the Seller and constitutes the legal, valid and
binding obligation of the Seller, enforceable against him in accordance with its
terms.
3.3 Consents and Approvals. Neither the execution and delivery of this
----------------------
Agreement nor the consummation of the transactions contemplated hereby will
violate, result in a breach of any of the terms or provisions of, constitute a
default (or an event which, with the giving of notice or the passage of time or
both, would constitute a default) under, result in the acceleration of any
indebtedness under or performance required by, result in any right of
termination of, increase any amounts payable under, decrease any amounts
receivable under, change any other rights pursuant to, or conflict with, any
material agreement, indenture or other instrument to which the Seller, or the
Company, is a party or by which any of his, or its, properties are bound, or any
judgment, decree, order or award of any court, governmental body or arbitrator
(domestic or foreign) against the Seller, or the Company.
3.4 Governmental Approvals. No approval, authorization, consent or
----------------------
order or action of or filing with any court, administrative agency or other
governmental authority is required for the execution and delivery by Seller of
this Agreement or the consummation by him of the transactions contemplated
hereby.
3.5 Brokers and Finders. No broker, agent, finder or consultant or
-------------------
other person has been retained by or on behalf of
2
<PAGE>
Seller or is entitled to be paid based upon any agreements or understandings
made by Seller in connection with the transactions contemplated hereby. Neither
the Purchasers nor the Seller shall have liability for any broker's fee,
finder's fee, consultant's fee or other similar third party remuneration by
reason of any action of Seller arising out of the transactions contemplated
hereby.
3.6 Financial Statements. (a) The Sellers have heretofore delivered or
--------------------
made available to the Purchaser the audited balance sheets at December 31, 1993,
1992 and 1991 of the Company and the related statements of income, stockholders
equity and cash flows for the years then ended, including the related notes and
auditors' report thereon (the "Financial Statements"). The Financial Statements
(i) present fairly the financial position of the Company at the dates thereof
and present fairly its results of operations and cash flows for the years then
ended and (ii) have been prepared in conformity with generally accepted
accounting principals ("GAAP") applied consistently with respect to the
immediately preceding fiscal year period except as set forth in the Notes to the
Financial Statements or in the auditor's report thereon.
(b) Sellers have heretofore delivered or made available to the
Purchaser the unaudited balance sheet at February 28, 1994 of the Company (the
"February Balance Sheet") and the related statements of income and cash flow for
the three months then ended (such February Balance Sheet and related statements,
collectively, the "February Financial Statements"), each of which (i) presents
fairly the financial condition of the Company at February 28, 1994 and presents
fairly its results of operations and cash flows for the period then ended and
(ii) has been prepared in conformity with GAAP, applied consistently with the
Financial Statements, subject to normal year-end adjustments.
(c) To the knowledge of the Sellers, there has been no material
adverse change in the business, results of operations, assets or financial
condition of the Company since December 31, 1993.
3.7 Business Generally. The Seller is not aware of the existence of
------------------
any conditions which could be reasonably expected to have a material adverse
effect on the business and operations of the Company, other than general
business and economic conditions generally affecting the industry and markets in
which the Company participates.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
- ---------- -----------------------------------------------
The Purchasers represent and warrant to the Company and the Sellers as
follows:
4.1 Investment. Each of the Purchasers is acquiring the Shares for
----------
investment for its own account and not with a view to, or for resale in
connection with, any distribution thereof. The
3
<PAGE>
Purchasers understand that the Shares have not been registered under the
Securities Act of 1933, as amended (the "Act"), by reason of a specific
exemption from the registration provisions of the Act which depends upon, among
other things, accuracy of the Purchasers' representations herein and the bona
fide nature of the Purchasers' investment intent as expressed herein. The
investment made pursuant to this Agreement is in accord with the nature and size
of the Purchasers' present investments and net worth, and each Purchaser is
financially able to bear the economic risk of this investment, including the
ability to hold the Shares for an indefinite period of time or to suffer a
complete loss of this investment.
4.2 Resale. Each Purchaser acknowledges that the Shares must be held
------
indefinitely unless the Shares are subsequently registered under the Act or an
exemption from such registration is available. Each certificate representing (i)
the Shares, and (ii) any other securities issued in respect of the Shares 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 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 ACT EXCEPT PURSUANT TO AN OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
4.3 Accredited Investor. Each Purchaser is an "accredited investor" as
-------------------
that term is used in Rule 501 promulgated under the Act.
4.4 Access to Information. Each Purchaser acknowledges that it has
---------------------
received such information and made such investigation and analysis as it 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.
4
<PAGE>
ARTICLE 5. SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
- ---------- -------------------------------------------
INDEMNIFICATION, ETC.
--------------------
5.1 Survival. All representations and warranties made herein shall
--------
survive the execution and delivery of this Agreement and the sale and delivery
of the Shares pursuant hereto for two (2) years from the Closing Date, and all
statements contained in any certificate or other instrument delivered by any
party hereunder shall be deemed to constitute representations and warranties
made by such party. Notwithstanding the foregoing, the representations and
warranties in Section 3.1 shall survive indefinitely and the covenants and
agreements made herein shall survive for so long as the Purchasers own any of
the Shares.
5.2 Sellers' Agreement to Indemnify. Each of the Sellers hereby
-------------------------------
severally 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 such Seller, contained in or made pursuant to this
Agreement, including any Exhibit or Schedule attached hereto or certificate
delivered hereunder; provided, however, that the maximum liability of each
Seller under this indemnification shall not exceed the aggregate purchase price
paid to each such Seller.
ARTICLE 6. RESTRICTION ON TRANSFERABILITY
- ---------- ------------------------------
6.1 Restriction; Procedure for Transfer. The Shares shall not be
-----------------------------------
transferable except upon the conditions specified in this Article 6, which
conditions are intended to ensure compliance with the Securities Act of 1933, as
amended, and applicable state securities laws.
6.2 Notice of Proposed Transfer. Prior to any proposed transfer of any
---------------------------
of the Shares (other than a transfer pursuant to registration under the Act),
the holder thereof shall give written notice to the Company of such holder's
intention to effect such transfer at least thirty (30) days prior to the date of
transfer and shall specify the proposed purchase price and the other terms and
conditions relating to such proposed 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 Shares may be effected without registration
under the Act.
ARTICLE 7. REGISTRATION UNDER SECURITIES ACT, ETC.
- ---------- --------------------------------------
7.1 Incidental Registration.
-----------------------
5
<PAGE>
(a) Right to Include Registrable Securities. If the Company at
---------------------------------------
any time proposes to register any of its securities under the
Securities Act (other than by a registration on Form S-4 or S-8, or
any successor or similar forms), 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 7.1. Upon the written request
of any such holder made within 30 days after the receipt of any such
notice (which request shall specify the Registrable Securities
intended to be disposed of by such holder and the intended method of
disposition thereof), the Company will use its best efforts to effect
the registration under the Securities Act of all Registrable
Securities which the Company has been so requested to register by the
holders thereof, to the extent requisite to permit the disposition (in
accordance with the intended methods thereof as aforesaid) of the
Registrable Securities so to be registered, by inclusion of such
Registrable Securities in the registration statement which covers the
securities which the Company proposes to register, provided that if,
--------
at any time after giving written notice of its intention to register
any securities and prior to the effective date of the registration
statement filed in connection with such registration, the Company
shall determine for any reason either not to register or to delay
registration of such securities, the Company may, at its election,
give written notice of such determination to each holder of
Registrable Securities and, thereupon, (i) in the case of a
-
determination not to register, shall be relieved of its obligation to
register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration
Expenses in connection therewith), 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. The Company will pay all
Registration Expenses in connection with each registration of
Registrable Securities requested pursuant to this Section 7.1.
(b) Priority in Incidental Registrations. If (i) a registration
------------------------------------ -
pursuant to this Section 7.1 involves an underwritten offering of the
securities so being registered, whether or not for sale for the
account of the Company, to be distributed (on a firm commitment basis)
by or through one or more underwriters of recognized standing under
underwriting terms appropriate for such a transaction, (ii) the
--
Registrable Securities so requested to be registered for sale for the
account of holders of Registrable Securities are not also to be
included in such underwritten offering (either because the Company has
not been requested so to include such Registrable Securities pursuant
to Section 7.3(b) or, if requested to do so, is not obligated to do so
under Section 7.3(b), and (iii) the managing underwriter of such
---
underwritten offering shall
6
<PAGE>
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 (other than such Registrable Securities and other shares or
securities so requested to be included) being distributed by such
underwriters within a price range acceptable to the holders of
securities other than the Registrable Securities covered by such
registration requested to be included in such registration (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 and the holders of any other shares or
securities which shall have exercised in respect of such offering,
registration rights comparable to the rights granted under this
Section 7.1 (which other shares or securities are not to be included
in such underwritten offering), 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 and shares or other
securities so that the resultant aggregate number of such Registrable
Securities and other shares or other securities so included in such
registration shall be equal to the number of shares stated in such
managing underwriter's letter. Notwithstanding the foregoing, with
respect to any registration initiated pursuant to the exercise of
"demand" registration rights by any holder of securities of the
Company, the holders of Registrable Securities shall have no right to
include any Registrable Securities in such registration unless all of
the securities requested to be registered by the holders exercising
such "demand" registration rights have been included in such
registration and have not been subjected to any reduction by
underwriters.
7.2 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 Section 7.1 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
7
<PAGE>
included in such registration copies of all such documents proposed to
be filed, which documents will be subject to the review of such
counsel;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the
Securities Act with respect to the disposition of all securities
covered by such registration statement until the earlier of such time
as all of such securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set
forth in such registration statement or 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;
8
<PAGE>
(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
9
<PAGE>
and furnish to such seller and each underwriter, if any, a reasonable
number of copies of a supplement to or an amendment of such prospectus
as may be necessary so that, as thereafter delivered to the purchasers
of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were
made; 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;
(viii) 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;
(ix) use its reasonable best efforts to list all Company's equity
securities covered by such registration statement on any securities
exchange on which any of the Company's 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 7.2, 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
10
<PAGE>
(vii) of this Section 7.2 and, if so directed by the Company, will deliver to
the Company (at the Company's expense) all copies, other than permanent file
copies, then in such holder's possession of the prospectus relating to such
Registrable Securities current at the time of receipt of such notice. In the
event the Company shall give any such notice, the periods mentioned in
subdivision (ii) of this Section 7.2 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 subdivision (vii) of this
Section 7.2.
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.
7.3 Underwritten Offerings.
----------------------
(a) Incidental Underwritten Offerings. If the Company at any time
---------------------------------
proposes to register any of its securities under the Securities Act as
contemplated by Section 7.1 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 7.1 and
subject to the provisions of Section 7.1(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 7.1 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)
within a price range acceptable to the Company or in the case of a
secondary
11
<PAGE>
offering, the holders of securities other than Registrable Securities
requested to be included in such registration 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 other securities
so requested to be included in the registration, 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 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.
Notwithstanding the foregoing, with respect to any registration
initiated pursuant to the exercise of "demand" registration rights by
any holder of securities of the Company, the holders of Registrable
Securities shall have no right to include any Registrable Securities
in such registration unless all of the securities requested to be
registered by the holders exercising such "demand" registration rights
have been included in such registration and have not been subjected to
any reduction by underwriters.
(b) 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 7.1 has become effective, except
as part of such
12
<PAGE>
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 7.1 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.
7.4 Preparation; Reasonable Investigation. In connection with the
-------------------------------------
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company will give the holders of Registrable
Securities registered under such registration statement, their underwriters, if
any, and their respective counsel and accountants, the opportunity to
participate in the preparation of such registration statement, each prospectus
included therein or filed with the Commission, and each amendment thereof or
supplement thereto, and will give each of them such access to its books and
records and such opportunities to discuss the business of the Company with its
officers and the independent public accountants who have certified its financial
statements as shall be necessary, in the opinion of such holders' and such
underwriters' respective counsel, to conduct a reasonable investigation within
the meaning of the Securities Act.
7.5 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 7, the Company will indemnify and hold harmless
the holder of any Registrable Securities covered by such registration
statement, its directors, officers, agents, employees, general partners,
limited partners, each other Person who participates as an underwriter in
the offering or sale of such securities and each other Person, if any, who
controls such holder or any such underwriter within the meaning of the
Securities Act, against any losses, claims, damages or liabilities, joint
or several, to which such holder or any such director, officer, agent,
employee, general partner, limited partner or underwriter or controlling
person may become subject under the
13
<PAGE>
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in any registration
statement under which such securities were registered under the Securities
Act, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and the
Company will reimburse such holder, and each such director, officer, agent,
employee, general partner, limited partner, underwriter and controlling
person for any reasonable legal or any other expenses reasonably incurred
by them in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided that the Company shall not be
--------
liable in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement thereto in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by
such holder specifically stating that it is for use in the preparation
thereof and, provided further that the Company shall not be liable to any
----------------
Person who participates as an underwriter in the offering or sale of
Registrable Securities or to any other Person, if any, who controls such
underwriter within the meaning of the Securities Act, in any such case to
the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of such Person's
failure to send or give a copy of the final prospectus, as the same may be
then supplemented or amended, within the time required by the Securities
Act to the Person asserting 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 director, officer, agent, employee,
general partner, limited partner, underwriter or controlling person and
shall survive the transfer of such securities by such holder.
(b) Indemnification by the Sellers. In the event of any registration
------------------------------
of Registrable Securities under the Securities Act pursuant to this Article
7, 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
14
<PAGE>
forth in subdivision (a) of this Section 7.5) 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 7.5, such
indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the
commencement of such action, provided that the failure of any indemnified
--------
party to give notice as provided herein shall not relieve the indemnifying
party of its obligations under the preceding subdivisions of this Section
7.5, 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
15
<PAGE>
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 7.5 (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 7.5 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 7.5 is unavailable to an
indemnified party or is insufficient to hold it harmless as contemplated by
the preceding clauses (a) and (b), then the indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such, 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 7.5(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
16
<PAGE>
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.
ARTICLE 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 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 Article 8.
ARTICLE 9. DEFINITIONS
- ---------- -----------
As used herein, unless the context otherwise requires, the following
terms have the following meanings:
Commission: The Securities and Exchange Commission or any other
----------
federal agency at the time administering the Securities Act.
Common Stock: As defined in Section 1.1 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 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.
17
<PAGE>
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; "Controlled" and "Controlling" shall have meanings correlative to
the foregoing.
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.
NASD: The National Association of Securities Dealers, Inc.
----
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.
Purchasers: As defined in the introduction to this Agreement.
----------
Registrable Securities: (a) The shares of Common 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 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 Article 7, 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
18
<PAGE>
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.
Transfer: Any sale, assignment, pledge or other disposition of any
---------
security, or of any interest therein, which could constitute a "sale" as that
term is defined in Section 2(3) of the Securities Act.
ARTICLE 10. MISCELLANEOUS
- ----------- -------------
10.1 Amendment, Modification and Waiver. This Agreement shall not be
----------------------------------
altered or otherwise amended except pursuant to an instrument in writing signed
by the Purchaser and the Sellers, 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.
10.2 Expenses; Transfer Taxes, Etc. Each of the Sellers and the
-----------------------------
Purchasers shall bear their own fees, costs and expenses (including legal fees)
incurred in connection with, relating to or arising out of the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby; provided, that the Sellers shall be severally
obligated to pay all sales, use and excise taxes and all registration, recording
or transfer taxes which may be payable in connection with the transfer of Shares
by such Seller hereunder.
10.3 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
-------- -------
Sellers or the Purchasers without the prior written consent of the other.
10.4 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.
19
<PAGE>
10.5 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.
10.6 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 or Sellers to:
c/o Information Management Associates, Inc.
6527 Main Street
Trumbull, CT 06611
Attn: Mr. Gary R. Martino
With a copy to:
Thomas L. Fairfield, Esq.
LeBoeuf, Lamb, Greene & MacRae
CityPlace II
Hartford, CT 06103
If to the Agent or the Purchasers to:
Mercury Asset Management PLC
33 King William Street
London, England EC4 R9AS
Attn: Ian Armitage
Telephone: 011-44-71-280-2394
Telecopy: 011-44-71-280-2810
Copies to:
David J. Callard
Wand Partners Inc.
30 Rockefeller Plaza
Suite 3226
New York, NY 10112
and
Nancy L. Henry, Esq.
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, NY 10022
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
20
<PAGE>
given, in the case of personal delivery, on the date of delivery and in the case
of mailing five (5) days after such mailing.
10.7 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.
10.8 Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Connecticut.
10.9 Gender. Any reference to the masculine gender shall be deemed to
------
include the feminine and neuter genders unless the context otherwise requires.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered on the date first above written.
THE AGENT:
MERCURY ASSET MANAGEMENT PLC, as
agent for the Purchasers
By: /s/N.T. Turner
---------------------------------
Name: N.T. Turner
Title: Assistant Director
THE SELLERS:
/s/Gary R. Martino
-----------------------------------
Gary R. Martino
/s/Albert R. Subbloie
-----------------------------------
Albert R. Subbloie
/s/Paul Schmidt
-----------------------------------
Paul Schmidt
/s/Andrei Poludnewycz
-----------------------------------
Andrei Poludnewycz
21
<PAGE>
THE COMPANY:
INFORMATION MANAGEMENT ASSOCIATES,
INC.
By: /s/Gary R. Martino
--------------------------------
Name: Gary R. Martino
Title: CFO
22
<PAGE>
Schedule A
----------
Purchasers
----------
<TABLE>
<CAPTION>
Aggregate
Number of Shares Purchase
Nominee Name of Common Stock Price
- ------------ ---------------- ---------
<S> <C> <C>
Rowan Nominees Limited 117,778 $1,060,002
</TABLE>
23
<PAGE>
Schedule B
----------
List of Sellers
---------------
<TABLE>
<CAPTION>
Aggregate
Number of Shares Purchase
of Common Stock Price
---------------- ---------
<S> <C> <C>
Gary R. Martino 45,000 $ 405,000
Albert R. Subbloie 45,000 $ 405,000
Paul Schmidt 5,278 $ 47,502
Andrei Poludnewycz 22,500 $ 202,500
------- ----------
TOTAL 117,778 $1,060,002
</TABLE>
24
<PAGE>
EXHIBIT 10.32
STOCK PURCHASE AGREEMENT
DATED AS OF JUNE 1, 1994
AMONG
GARY R. MARTINO, ALBERT R. SUBBLOIE, JR., PAUL SCHMIDT AND ANDREI
POLUDNEWYCZ (COLLECTIVELY, THE "SELLERS")
AND
THE PURCHASERS LISTED ON SCHEDULE A ATTACHED HERETO
<PAGE>
Table of Contents
<TABLE>
<S> <C>
ARTICLE 1. TRANSFER OF SHARES AND RELATED MATTERS........................ 1
1.1 The Sale........................................................... 1
--------
1.2 Payment of Purchase Price and Delivery of Shares................... 1
------------------------------------------------
ARTICLE 2. CLOSING....................................................... 1
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE SELLERS................. 2
3.1 Ownership of Shares................................................ 2
-------------------
3.2 Authorization and Execution........................................ 2
---------------------------
3.3 Consents and Approvals............................................. 2
----------------------
3.4 Governmental Approvals............................................. 2
----------------------
3.5 Brokers and Finders................................................ 2
-------------------
3.6 Financial Statements............................................... 3
--------------------
3.7 Business Generally................................................. 3
------------------
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER............... 3
- ---------- -----------------------------------------------
4.1 Investment......................................................... 3
----------
4.2 Resale............................................................. 4
------
4.3 Sophisticated Investor............................................. 4
----------------------
4.4 Access to Information.............................................. 4
---------------------
ARTICLE 5. SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION, ETC.......................................... 5
5.1 Survival........................................................... 5
--------
5.2 Sellers' Agreement to Indemnify.................................... 5
-------------------------------
ARTICLE 6. RESTRICTION ON TRANSFERABILITY................................ 5
------------------------------
6.1 Restriction; Procedure for Transfer................................ 5
-----------------------------------
6.2 Notice of Proposed Transfer........................................ 5
---------------------------
ARTICLE 7. REGISTRATION UNDER SECURITIES ACT, ETC........................ 5
7.1 Incidental Registration............................................ 5
-----------------------
7.2 Registration Procedures............................................ 7
-----------------------
7.3 Underwritten Offerings............................................. 11
----------------------
7.4 Preparation; Reasonable Investigation.............................. 13
-------------------------------------
7.5 Indemnification.................................................... 13
---------------
ARTICLE 8. RULE 144...................................................... 17
ARTICLE 9. DEFINITIONS................................................... 17
ARTICLE 10. MISCELLANEOUS................................................. 19
-------------
10.1 Amendment, Modification and Waiver................................. 19
----------------------------------
10.2 Expenses; Transfer Taxes, Etc...................................... 19
-----------------------------
10.3 Binding Effect; Benefits; Parties in Interest...................... 19
---------------------------------------------
10.4 Entire Agreement................................................... 19
----------------
</TABLE>
-i-
<PAGE>
10.5 Headings.......................................... 20
--------
10.6 Notices........................................... 20
-------
10.7 Counterparts...................................... 21
------------
10.8 Governing Law..................................... 21
-------------
10.9 Gender............................................ 21
------
-ii-
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
STOCK PURCHASE AGREEMENT dated as of June 1, 1994 by and among the
purchasers listed on Schedule A attached hereto (the "Purchasers") and GARY R.
MARTINO, ALBERT R. SUBBLOIE, JR., PAUL SCHMIDT AND ANDREI POLUDNEWYCZ
(collectively, the "SELLERS").
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. TRANSFER OF SHARES AND RELATED MATTERS
- ---------- --------------------------------------
1.1 The Sale. Subject to the terms and conditions of this Agreement,
--------
on the date of the Closing (as hereinafter defined), the Sellers hereby
severally agree to sell, transfer, convey and deliver to the Purchasers, and the
Purchasers hereby agree to purchase from the Sellers, the number of shares set
forth opposite each respective Seller's name on Schedule B attached hereto
(collectively, the "Shares") of the common stock, no par value ("Common Stock"),
of Information Management Associates, Inc. (the "Company") free and clear of all
liens, claims, liabilities, restrictions or other encumbrances at a purchase
price of $9.00 per share (the "Purchase Price").
1.2 Payment of Purchase Price and Delivery of Shares. On the Closing
------------------------------------------------
Date (as hereinafter defined), the Purchasers shall pay to each of the Sellers
by certified or bank check or wire transfer an amount equal to the Purchase
Price multiplied by the number of shares set forth opposite each such Seller's
name on Schedule B attached hereto and the Sellers will deliver to the
Purchasers, certificates representing the Shares duly endorsed in blank or with
a fully executed stock power attached, all in proper form for transfer with all
transfer taxes, if any, paid by Sellers.
ARTICLE 2. CLOSING
- ---------- -------
The closing for the consummation of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of LeBoeuf, Lamb,
Greene & MacRae, New York, New York, 10:00 a.m. on June 2, 1994 or at such other
time or place as the parties hereto shall mutually agree (the "Closing Date").
1
<PAGE>
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE SELLERS
- ---------- ---------------------------------------------
Each Seller severally represents and warrants to the Purchasers, as to
himself, as follows:
3.1 Ownership of Shares. The Seller owns of record and beneficially
-------------------
the number and type of Shares set forth opposite the Seller's name in Schedule B
hereto. The Seller has good, marketable and valid title to the Shares to be sold
by him hereunder, free and clear of all liens, pledges, encumbrances, claims,
security interests, charges, voting trusts, voting agreements, other agreements,
rights, options, warrants or restrictions of any kind, nature or description
other than pursuant to this Agreement. The delivery to Buyer of such Shares
pursuant to this Agreement will transfer valid title thereto, free and clear of
all pledges, liens, claims, charges, security interests and other encumbrances
of any nature whatsoever. No person or entity has any agreement or option or any
right or privilege (whether preemptive or contractual) capable of becoming an
agreement or option for the purchase of any such Shares from the Seller.
3.2 Authorization and Execution. The Seller has the legal capacity to
---------------------------
enter into this Agreement and to perform his obligations hereunder and to
consummate the transactions contemplated hereby. This Agreement has been duly
executed and delivered by the Seller and constitutes the legal, valid and
binding obligation of the Seller, enforceable against him in accordance with its
terms.
3.3 Consents and Approvals. Neither the execution and delivery of this
----------------------
Agreement nor the consummation of the transactions contemplated hereby will
violate, result in a breach of any of the terms or provisions of, constitute a
default (or an event which, with the giving of notice or the passage of time or
both, would constitute a default) under, result in the acceleration of any
indebtedness under or performance required by, result in any right of
termination of, increase any amounts payable under, decrease any amounts
receivable under, change any other rights pursuant to, or conflict with, any
material agreement, indenture or other instrument to which the Seller, or the
Company, is a party or by which any of his, or its, properties are bound, or any
judgment, decree, order or award of any court, governmental body or arbitrator
(domestic or foreign) against the Seller, or the Company.
3.4 Governmental Approvals. No approval, authorization, consent or
----------------------
order or action of or filing with any court, administrative agency or other
governmental authority is required for the execution and delivery by Seller of
this Agreement or the consummation by him of the transactions contemplated
hereby.
3.5 Brokers and Finders. No broker, agent, finder or consultant or
-------------------
other person has been retained by or on behalf of
2
<PAGE>
Seller or is entitled to be paid based upon any agreements or understandings
made by Seller in connection with the transactions contemplated hereby. Neither
the Purchasers nor the Seller shall have liability for any broker's fee,
finder's fee, consultant's fee or other similar third party remuneration by
reason of any action of Seller arising out of the transactions contemplated
hereby.
3.6 Financial Statements. (a) The Sellers have heretofore delivered or
--------------------
made available to the Purchasers the audited balance sheets at December 31,
1993, 1992 and 1991 of the Company and the related statements of income,
stockholders equity and cash flows for the years then ended, including the
related notes and auditors' report thereon (the "Financial Statements"). The
Financial Statements (i) present fairly the financial position of the Company at
the dates thereof and present fairly its results of operations and cash flows
for the years then ended and (ii) have been prepared in conformity with
generally accepted accounting principals ("GAAP") applied consistently with
respect to the immediately preceding fiscal year period except as set forth in
the Notes to the Financial Statements or in the auditor's report thereon.
(b) Sellers have heretofore delivered or made available to the
Purchaser the unaudited balance sheet at February 28, 1994 of the Company (the
"February Balance Sheet") and the related statements of income and cash flow for
the three months then ended (such February Balance Sheet and related statements,
collectively, the "February Financial Statements"), each of which (i) presents
fairly the financial condition of the Company at February 28, 1994 and presents
fairly its results of operations and cash flows for the period then ended and
(ii) has been prepared in conformity with GAAP, applied consistently with the
Financial Statements, subject to normal year-end adjustments.
(c) To the knowledge of the Sellers, there has been no material
adverse change in the business, results of operations, assets or financial
condition of the Company since December 31, 1993.
3.7 Business Generally. The Seller is not aware of the existence of
------------------
any conditions which could be reasonably expected to have a material adverse
effect on the business and operations of the Company, other than general
business and economic conditions generally affecting the industry and markets in
which the Company participates.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
- ---------- -----------------------------------------------
Each Purchaser represents and warrants to the Company and the Sellers,
as to himself, as follows:
4.1 Investment. The Purchaser is acquiring the Shares for investment
----------
for his own account and not with a view to, or for resale in connection with,
any distribution thereof. The Purchaser
3
<PAGE>
understands that the Shares have not been registered under the Securities Act of
1933, as amended (the "Act"), by reason of a specific exemption from the
registration provisions of the Act which depends upon, among other things,
accuracy of the Purchaser's representations herein and the bona fide nature of
the Purchaser's investment intent as expressed herein. The investment made
pursuant to this Agreement is in accord with the nature and size of the
Purchaser's present investments and net worth, and each Purchaser is financially
able to bear the economic risk of this investment, including the ability to hold
the Shares for an indefinite period of time or to suffer a complete loss of this
investment.
4.2 Resale. The Purchaser acknowledges that the Shares must be held
------
indefinitely unless the Shares are subsequently registered under the Act or an
exemption from such registration is available. Each certificate representing (i)
the Shares, and (ii) any other securities issued in respect of the Shares 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 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 ACT EXCEPT PURSUANT TO AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
4.3 Sophisticated Investor. The Purchaser has sufficient knowledge and
----------------------
experience in investment matters so as to be capable of evaluating the merits
and risks of purchasing the Shares.
4.4 Access to Information. The Purchaser acknowledges that he has
---------------------
received such information and made such investigation and analysis as 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.
4
<PAGE>
ARTICLE 5. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION,
- ---------- -----------------------------------------------------------
ETC.
---
5.1 Survival. All representations and warranties made herein shall
--------
survive the execution and delivery of this Agreement and the sale and delivery
of the Shares pursuant hereto for two (2) years from the Closing Date, and all
statements contained in any certificate or other instrument delivered by any
party hereunder shall be deemed to constitute representations and warranties
made by such party. Notwithstanding the foregoing, the representations and
warranties in Section 3.1 shall survive indefinitely and the covenants and
agreements made herein shall survive for so long as the Purchasers own any of
the Shares.
5.2 Sellers' Agreement to Indemnify. Each of the Sellers hereby
-------------------------------
severally 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 such Seller, contained in or made pursuant to this
Agreement, including any Exhibit or Schedule attached hereto or certificate
delivered hereunder; provided, however, that the maximum liability of each
Seller under this indemnification shall not exceed the aggregate purchase price
paid to each such Seller.
ARTICLE 6. RESTRICTION ON TRANSFERABILITY
- ---------- ------------------------------
6.1 Restriction; Procedure for Transfer. The Shares shall not be
-----------------------------------
transferable except upon the conditions specified in this Article 6, which
conditions are intended to ensure compliance with the Securities Act of 1933, as
amended, and applicable state securities laws.
6.2 Notice of Proposed Transfer. Prior to any proposed transfer of any
---------------------------
of the Shares (other than a transfer pursuant to registration under the Act),
the holder thereof shall give written notice to the Company of such holder's
intention to effect such transfer at least thirty (30) days prior to the date of
transfer and shall specify the proposed purchase price and the other terms and
conditions relating to such proposed 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 Shares may be effected without registration
under the Act.
ARTICLE 7. REGISTRATION UNDER SECURITIES ACT, ETC.
- ---------- ---------------------------------------
7.1 Incidental Registration.
-----------------------
5
<PAGE>
(a) Right to Include Registrable Securities. If the Company at any
---------------------------------------
time proposes to register any of its securities under the Securities Act
(other than by a registration on Form S-4 or S-8, or any successor or
similar forms), 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 7.1. Upon the written request of any such holder made within 30
days after the receipt of any such notice (which request shall specify the
Registrable Securities intended to be disposed of by such holder and the
intended method of disposition thereof), the Company will use its best
efforts to effect the registration under the Securities Act of all
Registrable Securities which the Company has been so requested to register
by the holders thereof, to the extent requisite to permit the disposition
(in accordance with the intended methods thereof as aforesaid) of the
Registrable Securities so to be registered, by inclusion of such
Registrable Securities in the registration statement which covers the
securities which the Company proposes to register, provided that if, at any
--------
time after giving written notice of its intention to register any
securities and prior to the effective date of the registration statement
filed in connection with such registration, the Company shall determine for
any reason either not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to each holder of Registrable Securities and, thereupon, (i)
-
in the case of a determination not to register, shall be relieved of its
obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses
in connection therewith), 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. The Company will pay all Registration Expenses in connection
with each registration of Registrable Securities requested pursuant to this
Section 7.1.
(b) Priority in Incidental Registrations. If (i) a registration
------------------------------------ -
pursuant to this Section 7.1 involves an underwritten offering of the
securities so being registered, whether or not for sale for the account of
the Company, to be distributed (on a firm commitment basis) by or through
one or more underwriters of recognized standing under underwriting terms
appropriate for such a transaction, (ii) the Registrable Securities so
--
requested to be registered for sale for the account of holders of
Registrable Securities are not also to be included in such underwritten
offering (either because the Company has not been requested so to include
such Registrable Securities pursuant to Section 7.3(b) or, if requested to
do so, is not obligated to do so under Section 7.3(b), and (iii) the
---
managing underwriter of such underwritten offering shall
6
<PAGE>
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 (other than such Registrable
Securities and other shares or securities so requested to be included)
being distributed by such underwriters within a price range acceptable to
the holders of securities other than the Registrable Securities covered by
such registration requested to be included in such registration (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 and the holders of any other shares or securities
which shall have exercised in respect of such offering, registration rights
comparable to the rights granted under this Section 7.1 (which other shares
or securities are not to be included in such underwritten offering), 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 and shares or other securities so that the resultant aggregate
number of such Registrable Securities and other shares or other securities
so included in such registration shall be equal to the number of shares
stated in such managing underwriter's letter. Notwithstanding the
foregoing, with respect to any registration initiated pursuant to the
exercise of "demand" registration rights by any holder of securities of the
Company, the holders of Registrable Securities shall have no right to
include any Registrable Securities in such registration unless all of the
securities requested to be registered by the holders exercising such
"demand" registration rights have been included in such registration and
have not been subjected to any reduction by underwriters.
7.2 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 Section 7.1 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
7
<PAGE>
included in such registration copies of all such documents proposed to be
filed, which documents will be subject to the review of such counsel;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such
registration statement until the earlier of such time as all of such
securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such registration
statement or 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;
8
<PAGE>
(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
9
<PAGE>
and furnish to such seller and each underwriter, if any, a reasonable
number of copies of a supplement to or an amendment of such prospectus as
may be necessary so that, as thereafter delivered to the purchasers of such
securities, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made; 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;
(viii) 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;
(ix) use its reasonable best efforts to list all Company's equity
securities covered by such registration statement on any securities
exchange on which any of the Company's 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 7.2, 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
10
<PAGE>
(vii) of this Section 7.2 and, if so directed by the Company, will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in such holder's possession of the prospectus
relating to such Registrable Securities current at the time of receipt of
such notice. In the event the Company shall give any such notice, the
periods mentioned in subdivision (ii) of this Section 7.2 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 subdivision (vii) of this Section 7.2.
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.
7.3 Underwritten Offerings.
----------------------
(a) Incidental Underwritten Offerings. If the Company at any time
---------------------------------
proposes to register any of its securities under the Securities Act as
contemplated by Section 7.1 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 7.1 and
subject to the provisions of Section 7.1(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 7.1 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)
within a price range acceptable to the Company or in the case of a
secondary
11
<PAGE>
offering, the holders of securities other than Registrable Securities
requested to be included in such registration 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 other securities so requested to be included in
the registration, 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 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. Notwithstanding the foregoing, with respect to any
registration initiated pursuant to the exercise of "demand" registration
rights by any holder of securities of the Company, the holders of
Registrable Securities shall have no right to include any Registrable
Securities in such registration unless all of the securities requested
to be registered by the holders exercising such "demand" registration
rights have been included in such registration and have not been
subjected to any reduction by underwriters.
(b) 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
7.1 has become effective, except as part of such
12
<PAGE>
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 7.1 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.
7.4 Preparation; Reasonable Investigation. In connection with the
-------------------------------------
preparation and filing of each registration statement under the Securities
Act pursuant to this Agreement, the Company will give the holders of
Registrable Securities registered under such registration statement, their
underwriters, if any, and their respective counsel and accountants, the
opportunity to participate in the preparation of such registration
statement, each prospectus included therein or filed with the Commission,
and each amendment thereof or supplement thereto, and will give each of
them such access to its books and records and such opportunities to discuss
the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be
necessary, in the opinion of such holders' and such underwriters'
respective counsel, to conduct a reasonable investigation within the
meaning of the Securities Act.
7.5 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 7, the Company will indemnify and hold
harmless the holder of any Registrable Securities covered by such
registration statement, its directors, officers, agents, employees,
general partners, limited partners, each other Person who participates
as an underwriter in the offering or sale of such securities and each
other Person, if any, who controls such holder or any such underwriter
within the meaning of the Securities Act, against any losses, claims,
damages or liabilities, joint or several, to which such holder or any
such director, officer, agent, employee, general partner, limited
partner or underwriter or controlling person may become subject under
the
13
<PAGE>
Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such securities
were registered under the Securities Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any omission or alleged omission
to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and the
Company will reimburse such holder, and each such director, officer,
agent, employee, general partner, limited partner, underwriter and
controlling person for any reasonable legal or any other expenses
reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceeding;
provided that the Company shall not be liable in any such case to the
--------
extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of or is based
upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement thereto in reliance upon and in conformity
with written information furnished to the Company through an
instrument duly executed by such holder specifically stating that it
is for use in the preparation thereof and, provided further that the
----------------
Company shall not be liable to any Person who participates as an
underwriter in the offering or sale of Registrable Securities or to
any other Person, if any, who controls such underwriter within the
meaning of the Securities Act, in any such case to the extent that any
such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of such Person's failure to
send or give a copy of the final prospectus, as the same may be then
supplemented or amended, within the time required by the Securities
Act to the Person asserting 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
director, officer, agent, employee, general partner, limited partner,
underwriter or controlling person and shall survive the transfer of
such securities by such holder.
(b) Indemnification by the Sellers. In the event of any
------------------------------
registration of Registrable Securities under the Securities Act
pursuant to this Article 7, 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
14
<PAGE>
forth in subdivision (a) of this Section 7.5) 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 7.5, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give
written notice to the latter of the commencement of such action,
provided that the failure of any indemnified party to give notice as
--------
provided herein shall not relieve the indemnifying party of its
obligations under the preceding subdivisions of this Section 7.5,
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
15
<PAGE>
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 7.5 (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 7.5 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 7.5 is unavailable to
an indemnified party or is insufficient to hold it harmless as
contemplated by the preceding clauses (a) and (b), then the
indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified
party as a result of such, 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 7.5(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
16
<PAGE>
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.
ARTICLE 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 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 Article 8.
ARTICLE 9. DEFINITIONS
- ---------- -----------
As used herein, unless the context otherwise requires, the following
terms have the following meanings:
Commission: The Securities and Exchange Commission or any other federal
----------
agency at the time administering the Securities Act.
Common Stock: As defined in Section 1.1 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 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.
17
<PAGE>
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; "Controlled" and "Controlling" shall have meanings correlative to
the foregoing.
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.
NASD: The National Association of Securities Dealers, Inc.
----
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.
Purchasers: As defined in the introduction to this Agreement.
----------
Registrable Securities: (a) The shares of Common 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 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 Article 7, 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
18
<PAGE>
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.
Transfer: Any sale, assignment, pledge or other disposition of any
--------
security, or of any interest therein, which could constitute a "sale" as that
term is defined in Section 2(3) of the Securities Act.
ARTICLE 10. MISCELLANEOUS
- ----------- -------------
10.1 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 Sellers, 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.
10.2 Expenses; Transfer Taxes, Etc. Each of the Sellers and the
-----------------------------
Purchasers shall bear their own fees, costs and expenses (including legal fees)
incurred in connection with, relating to or arising out of the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby; provided, that the Sellers shall be severally
obligated to pay all sales, use and excise taxes and all registration, recording
or transfer taxes which may be payable in connection with the transfer of Shares
by such Seller hereunder.
10.3 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 Sellers or
- -------- -------
the Purchaser without the prior written consent of the other.
10.4 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.
19
<PAGE>
10.5 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.
10.6 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 or Sellers to:
c/o Information Management Associates, Inc.
6527 Main Street
Trumbull, CT 06611
Attn: Mr. Gary R. Martino
With a copy to:
Thomas L. Fairfield, Esq.
LeBoeuf, Lamb, Greene & MacRae
CityPlace II
Hartford, CT 06103
If to the Purchasers to:
David J. Callard
Wand Partners Inc.
30 Rockefeller Plaza
Suite 3226
New York, NY 10112
and
Nancy L. Henry, Esq.
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, NY 10022
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.
10.7 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.
20
<PAGE>
10.8 Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Connecticut.
10.9 Gender. Any reference to the masculine gender shall be deemed to
------
include the feminine and neuter genders unless the context otherwise requires.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered on the date first above written.
THE PURCHASERS:
/s/David J. Callard
-----------------------------------
David J. Callard
/s/ Bruce W. Schnitzer
-----------------------------------
Bruce W. Schnitzer
/s/Malcolm P. Appelbaum
-----------------------------------
Malcolm P. Appelbaum
THE SELLERS:
/s/Gary R. Martino
-----------------------------------
Gary R. Martino
/s/Albert R. Subbloie
-----------------------------------
Albert R. Subbloie
/s/Paul Schmidt
-----------------------------------
Paul Schmidt
/s/Andrei Poludnewycz
-----------------------------------
Andrei Poludnewycz
21
<PAGE>
THE COMPANY:
INFORMATION MANAGEMENT ASSOCIATES, INC.
By: /s/Gary R. Martino
-------------------------------
Name: Gary R. Martino
Title: CFO
22
<PAGE>
Schedule A
----------
Purchasers
----------
<TABLE>
<CAPTION>
Aggregate
Name, Address and Number of Shares Purchase
Social Security Number of Common Stock Price
- ---------------------- --------------- --------
<S> <C> <C>
David J. Callard 14,167 $127,503
Bruce W. Schnitzer 14,166 $127,494
Malcolm P. Appelbaum 1,111 $9,999
----- ------
TOTALS 29,444 $264,996
</TABLE>
23
<PAGE>
Schedule B
----------
List of Sellers
---------------
<TABLE>
<CAPTION>
Aggregate
Number of Shares Purchase
of Common Stock Price
--------------- --------
<S> <C> <C>
Gary R. Martino 10,556 $ 95,004
Albert R. Subbloie 10,556 $ 95,004
Paul Schmidt 3,055 $ 27,495
Andrei Poludnewycz 5,277 $ 47,493
------- ---------
TOTAL 29,444 $264,996
</TABLE>
24
<PAGE>
EXHIBIT 10.33
STOCK PURCHASE AGREEMENT
DATED NOVEMBER 14, 1994
AMONG
INFORMATION MANAGEMENT ASSOCIATES, INC.
AND
THE PURCHASERS LISTED ON SCHEDULE A ATTACHED HERETO
<PAGE>
Table of Contents
<TABLE>
<S> <C> <C>
ARTICLE 1. TRANSFER OF SHARES AND RELATED MATTERS............... 1
1.1 The Sale.............................................. 1
1.2 Delivery of Shares.................................... 1
ARTICLE 2. CLOSING.............................................. 1
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE
COMPANY.............................................. 1
3.1 Authority and Validity................................ 1
3.2 Organization and Standing; Certificate of
Incorporation and Bylaws.............................. 2
3.3 Subsidiaries.......................................... 2
3.4 Qualification......................................... 2
3.5 Capitalization........................................ 2
3.6 Indebtedness of the Company........................... 3
3.7 Disclosure............................................ 3
3.8 Intellectual Property................................. 3
3.9 Environmental Matters................................. 3
3.10 Financial Statements.................................. 4
3.11 Changes............................................... 4
3.12 Litigation, Etc....................................... 4
3.13 Compliance with Other Instruments, etc................ 5
3.14 Use of Proceeds....................................... 5
3.15 No Violations of Securities Laws...................... 5
3.16 Brokers or Finders Fees, Etc.......................... 5
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE
PURCHASERS........................................... 5
4.1 Investment............................................ 5
4.2 Resale................................................ 5
4.3 Accredited Investor................................... 6
4.4 Access to Information................................. 6
4.5 Confidentiality....................................... 6
4.6 No Agents............................................. 6
ARTICLE 5. CONDITIONS TO OBLIGATIONS OF THE PURCHASERS.......... 7
5.1 Representations....................................... 7
5.2 Authorization......................................... 7
5.3 Acceptance by Counsel to the Purchasers............... 7
5.4 Government Consents, Authorizations, Etc.............. 7
5.5 No Litigation or Legislation.......................... 7
5.6 No Material Adverse Change............................ 7
5.7 Consents and Permits.................................. 8
ARTICLE 6. CONDITIONS TO OBLIGATIONS OF THE COMPANY............. 8
6.1 Representations....................................... 8
6.2 Legality.............................................. 8
6.3 Acceptance by Counsel to the Company.................. 8
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE 7. SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION, ETC................................. 8
7.1 Survival.............................................. 8
7.2 Company's Agreement to Indemnify...................... 8
7.3 Financial Statements.................................. 8
ARTICLE 8. RESTRICTION ON TRANSFERABILITY....................... 9
8.1 Restriction; Procedure for Transfer................... 9
8.2 Notice of Proposed Transfer........................... 9
ARTICLE 9. REGISTRATION UNDER SECURITIES ACT, ETC............... 9
9.1 Right to Request Registration......................... 9
9.2 Incidental Registration............................... 11
9.3 Registration Procedures............................... 13
9.4 Underwritten Offerings................................ 17
9.5 Preparation; Reasonable Investigation................. 19
9.6 Indemnification....................................... 20
ARTICLE 10. DEFINITIONS.......................................... 23
ARTICLE 11. MISCELLANEOUS........................................ 26
11.1 Preemptive Rights..................................... 26
11.2 Amendment, Modification and Waiver.................... 28
11.3 Expenses; Transfer Taxes, Etc......................... 28
11.4 Binding Effect; Benefits; Parties in Interest......... 28
11.5 Entire Agreement...................................... 28
11.6 Headings.............................................. 28
11.7 Notices............................................... 29
11.8 Counterparts.......................................... 29
11.9 Governing Law......................................... 29
11.10 Gender................................................ 29
</TABLE>
-ii-
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
STOCK PURCHASE AGREEMENT dated as of November 14, 1994 by and among
the purchasers listed on Schedule A attached hereto (collectively, the
"Purchasers"), and INFORMATION MANAGEMENT ASSOCIATES, INC. (the "Company").
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. TRANSFER OF SHARES AND RELATED MATTERS
- --------- --------------------------------------
1.1 The Sale. Subject to the terms and conditions of this Agreement,
--------
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 set forth opposite
such Purchaser's name on Schedule A attached hereto (collectively, the "Shares")
of the common stock, no par value, of the Company ("Common Stock") free and
clear of all liens, claims, liabilities, restrictions or other encumbrances at a
purchase price of $9.00 per share (the "Purchase Price").
1.2 Delivery of Shares. On the Closing Date (as hereinafter defined),
------------------
the Company will deliver to the Purchasers, against payment of the Purchase
Price, certificates representing the Shares.
ARTICLE 2. CLOSING
- --------- -------
The closing for the consummation of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of LeBoeuf, Lamb,
Greene & MacRae, Hartford, Connecticut, 10:00 a.m. on November 14, 1994 or at
such other 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 Purchasers as
follows:
3.1 Authority and Validity. The execution, delivery and performance
----------------------
of this Agreement and the consummation of 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,
<PAGE>
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 Charter 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 Company.
3.2 Organization and Standing; Certificate of Incorporation and
------------------------- --------------------------------
Bylaws. The Company is a corporation duly organized and existing under the laws
- ------
of the State of Connecticut and is in good standing under such laws. (A copy of
a good standing certificate from the State of Connecticut is attached hereto as
Schedule 3.2). The Company has the 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. Information Management Associates Limited, a United
------------
Kingdom Company, is a wholly owned subsidiary and the only subsidiary of the
Company.
3.4 Qualification. Attached as Schedule 3.4 is a true and complete
------------- ------------
list of all jurisdictions in which the Company has qualified as a foreign
corporation authorized to do business. The jurisdictions identified in Schedule
--------
3.4 are the only jurisdictions in which the nature of the Company's activities
- ---
or the character of the properties it owns or leases makes such qualification
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. Shown on the attached Schedule 3.5 is a true and
-------------- ------------
accurate list of the authorized capital stock of the Company and the issued and
outstanding stock of the Company. Also shown on the attached Schedule 3.5 is a
------------
true and accurate list of the issued or outstanding shares of capital stock or
securities convertible or exchangeable into, or outstanding stock purchase
warrants or other options or rights to purchase shares of its capital stock or
other equity securities of the Company. All issued and outstanding shares have
been duly authorized and validly issued, are fully paid and non-assessable. When
authorized and issued, the Shares will not be subject to any pre-emptive rights
or rights of first refusal. The Shares, when issued in compliance
-2-
<PAGE>
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 Shares will be subject to restrictions on transfer imposed under
applicable state and federal securities laws.
3.6 Indebtedness of the Company. Schedule 3.6 correctly describes all
--------------------------- ------------
secured and unsecured Indebtedness of the Company outstanding, or for which the
Company had commitments, as of June 30, 1994. As of June 30, 1994, the Company
was not in default with respect to any Indebtedness or any instrument or
agreement relating thereto.
3.7 Disclosure. Neither this Agreement, the Schedules hereto, nor the
----------
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 all Intellectual Property Rights, including proprietary information,
trademarks, trade names, and copyrights, used in or necessary to conduct the
Company's business as heretofore conducted 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
---------------------
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 audited balance sheet and related
--------------------
statement of operations of the Company as of December 31, 1993 (the "Audited
Financial Statements") and the unaudited balance sheet and related statement of
operations of the Company as of June, 30, 1994 (the "Interim Financial
Statements" and together with the Audited Financial Statements (the "Financial
Statements"),
-3-
<PAGE>
set forth in Schedule 3.11 hereto, fairly present the Company's assets,
-------------
liabilities, financial position and results of operations as of the dates
thereof and for the periods then ended, and were prepared in accordance with
generally accepted accounting principles, consistently applied (subject, in the
case of interim statements, to normal year-end 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 3.12 hereto, since June
------- -------------
30, 1994, 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;
(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 described in Schedule 3.12, there is
--------------- -------------
no 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
--------------------------------------
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
-4-
<PAGE>
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 the Shares for general corporate purposes.
3.15 No Violations of Securities Laws. Subject to the accuracy of the
--------------------------------
Purchasers' representations in Article 4 hereof, the offer and sale of the
Shares hereunder is and will be exempt from the registration and prospectus
delivery requirements of the Securities Act and is 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 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 Shares under Section 5 of the Securities Act,
including, without limitation, engaging in any form of general solicitation.
3.16 Brokers or Finders Fees, Etc. 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 Shares contemplated hereby.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
- ---------- ------------------------------------------------
Each Purchaser hereby represents and warrants to the Company as
follows:
4.1 Investment. Such Purchaser is acquiring the 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 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, accuracy of the Purchaser's representations herein and the bona
fide nature of the Purchaser's investment intent as expressed herein.
4.2 Resale. Such Purchaser acknowledges that the Shares must be held
------
indefinitely unless the Shares are subsequently registered under the Securities
Act or an exemption from such registration is available. Each certificate
representing (i) the Shares, and (ii) any other securities issued in respect of
the Shares 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):
-5-
<PAGE>
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, OR 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 ACT
EXCEPT PURSUANT TO AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED.
4.3 Accredited Investor. Such Purchaser is an "accredited investor"
-------------------
as that term is used in Rule 501 promulgated under the Securities Act. An
accredited investor is (i) an individual who either individually or jointly with
his spouse has a net worth (i.e., total assets in excess of total liabilities)
of at least $1,000,000, (ii) an individual whose individual annual income
exceeded $200,000 or whose income with that of his spouse exceeded $300,000 in
each of the last two years and who reasonably expects to reach the same income
level in the current year, (iii) an individual who is an executive officer or
director of the Company, (iv) certain institutional investors, (v) a
corporation, a Massachusetts or similar business trust or partnership, not
formed for the specific purpose of acquiring the Shares, with total assets in
excess of $5,000,000, (vi) certain other trusts directed by sophisticated
persons, or (vii) an entity in which all of the equity owners are accredited
investors. Such Purchaser is sophisticated in business and financial matters and
is capable of evaluating the merits of an investment in the Shares.
4.4 Access to Information. Such Purchaser (i) has received such
---------------------
information and made such investigation and analysis as 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 and (ii) been provided with copies of such documents as he has requested
from the Company.
4.5 Confidentiality. Such Purchaser agrees to keep permanently
---------------
confidential the information provided or to be provided to the Purchaser by the
Company in connection with the purchase and sale of the Shares, including
without limitation this Agreement and the Schedules attached hereto and any and
all information, financial or otherwise, relating to the Company which may
hereafter be provided to such Purchaser.
4.6 No Agents. Such Purchaser acknowledges that the Shares are being
---------
offered by the Company through its directors and executive officers and that no
other person has acted as agent or broker in connection with the offering and
sale of the Shares and no other person has been authorized to give any
information or make any representation concerning the Company or the Shares.
-6-
<PAGE>
ARTICLE 5. CONDITIONS TO OBLIGATIONS OF THE PURCHASERS
- --------- -------------------------------------------
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 Representations. The representations made by the Company in
---------------
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.
5.2 Authorization. All action necessary to authorize the execution,
-------------
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.
5.3 Acceptance by Counsel to the Purchasers. The form and substance
---------------------------------------
of all legal matters contemplated hereby and of all papers delivered hereunder
shall be acceptable to counsel to the Purchasers.
5.4 Government Consents, Authorizations, Etc. All consents,
----------------------------------------
authorizations, orders or approvals of, and filings or registrations with, any
federal, state, local or foreign 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.
5.5 No Litigation or Legislation. No federal, state, local or 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.
5.6 No Material Adverse Change. In the judgment of the 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 June 30, 1994, other than (x)
changes which have not been, either in any case or in the aggregate, materially
adverse to the Company, and (y) any matters of a general economic or political
nature which do not affect the Company uniquely.
-7-
<PAGE>
5.7 Consents and Permits. The Company shall have received all
--------------------
consents, permits and other authorizations, and made all such filings and
declarations, as may be required pursuant to any law, statute, regulation or
rule (federal, state, local or foreign) in connection with the transactions
contemplated by this Agreement, or 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.
ARTICLE 6. CONDITIONS TO OBLIGATIONS OF THE COMPANY
- --------- ----------------------------------------
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
---------------
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 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
------------------------------------
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.
----------------------------------------------------------------
7.1 Survival. All representations and warranties made by any party to
--------
this Agreement, including, without limitation, all representations and
warranties made on any Schedule 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
Schedule attached hereto or certificate delivered hereunder.
7.3 Financial Statements. Until the Company is required to file
--------------------
reports pursuant to Section 13 or 15(d) of the Exchange
-8-
<PAGE>
Act, at which time this provision shall terminate and be of no further force or
effect, the Company agrees to provide to the Purchasers copies of its quarterly
and annual financial statements within 45 days after the end of each fiscal
quarter and within 120 days after the end of each fiscal year, respectively. In
addition, each Purchaser shall have the right to request such additional
information regarding the Company as such Purchaser may reasonably request.
ARTICLE 8. RESTRICTION ON TRANSFERABILITY
- --------- ------------------------------
8.1 Restriction; Procedure for Transfer. The 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 any
---------------------------
of the 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 at least thirty (30) days prior
to the date of transfer and shall specify the proposed purchase price and the
other terms and conditions relating to such proposed 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 Shares may be effected
without registration under the Securities Act.
ARTICLE 9. REGISTRATION UNDER SECURITIES ACT, ETC.
- --------- --------------------------------------
9.1 Right to Request Registration.
------------------------------
(a) If (i) Wand/IMA Investments, L.P. ("Wand/IMA") exercises its right
to require the Company to redeem the common stock purchase warrants and
shares issued or issuable upon exercise of such common stock purchase
warrants held by Wand/IMA, and the Company shall have effected such
redemption; and (ii) the Company shall not have completed a registered
public offering of Common Stock pursuant to the Securities Act, then on or
after March 26, 1999, upon the written request of one or more Initiating
Holders, requesting that the Company effect the registration under the
Securities Act of all or part of such Initiating Holders' Registrable
Securities and specifying the intended method of disposition thereof, the
Company will promptly give written notice of such requested registration to
all holders of Registrable Securities, and thereupon the Company will use
its best efforts to effect the registration under the Securities Act of:
-9-
<PAGE>
(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 one registration of Registrable Securities.
(b) Registration Statement Form. Registrations under this Section 9.1
---------------------------
shall be on such appropriate registration form of the Commission (i) as
-
shall be selected by the Company and, as shall be reasonably acceptable to
the holders of more than 50% (by number of shares) of the Registrable
Securities so to be registered and (ii) as shall permit the disposition of
--
such Registrable Securities in accordance with the intended method or
methods of disposition specified in their request for such registration.
The Company agrees to include in any such registration statement all
information which holders of Registrable Securities being registered shall
reasonably request.
(c) Expenses. The Company will pay all Registration Expenses in
--------
connection with one registration requested pursuant to this Section 9.1.
(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
--------
Company has filed a registration statement with respect thereto solely
-10-
<PAGE>
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, or (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) if 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 requested to be included by
such holders and (ii) second, securities the Company proposes to sell and
--
other securities of the Company included in such registration by the
holders thereof.
9.2 Incidental Registration.
-----------------------
(a) Right to Include Registrable Securities. If the Company at any
---------------------------------------
time proposes to register any of its securities under the Securities Act
(other than by a registration on Form S-4 or S-8, or any successor or
similar forms), whether or not
-11-
<PAGE>
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 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),
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. 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 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
-12-
<PAGE>
Securities concurrently with the securities being distributed by such
underwriters would interfere with the successful marketing of the
securities (other than such Registrable Securities and other shares or
securities so requested to be included) being distributed by such
underwriters within a price range acceptable to the holders of securities
other than the Registrable Securities covered by such registration
requested to be included in such registration (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 and
the holders of any other shares or securities which shall have exercised in
respect of such offering, registration rights comparable to the rights
granted under this Section 9.2 (which other shares or securities are not to
be included in such underwritten offering), 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 and shares or other
securities so that the resultant aggregate number of such Registrable
Securities and other shares or other securities so included in such
registration shall be equal to the number of shares stated in such managing
underwriter's letter. Notwithstanding the foregoing, with respect to any
registration initiated pursuant to the exercise of "demand" registration
rights by any holder of securities of the Company, other than the holders
of the Registrable Securities, the holders of Registrable Securities shall
have no right to include any Registrable Securities in such registration
unless all of the securities requested to be registered by the holders
exercising such "demand" registration rights have been included in such
registration and have not been subjected to any reduction by underwriters.
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 Section 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
-13-
<PAGE>
included in such registration copies of all such documents proposed to be
filed, which documents will be subject to the review of such counsel;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such
registration statement until the earlier of such time as all of such
securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such registration
statement or 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
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<PAGE>
obligated to be so qualified, or to consent to general service of process
in any such jurisdiction;
(v) use its best efforts to cause all Registrable Securities
covered by such registration statement to be registered with or approved by
such other governmental agencies or authorities as may be necessary to
enable the 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
(vii) 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
(viii) 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;
(ix) 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,
-15-
<PAGE>
and at the request of any such seller promptly prepare and furnish to such
seller and each underwriter, if any, a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such securities, such
prospectus shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances
under which they were made; 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;
(x) 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;
(xi) use its reasonable best efforts to list all Company's equity
securities covered by such registration statement on any securities
exchange on which any of the Company's 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 (ix) 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
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<PAGE>
the supplemented or amended prospectus contemplated by subdivision (ix) 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, 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 (ix) 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) 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
-17-
<PAGE>
securities so requested to be included) within a price range acceptable to
the Company or in the case of a secondary offering, the holders of
securities other than Registrable Securities requested to be included in
such registration 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 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 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. Notwithstanding
the foregoing, with respect to any registration initiated pursuant to the
exercise of "demand" registration rights by any holder of securities of the
Company other than the holders of Registrable Securities, the holders of
Registrable Securities shall have no right to include any Registrable
Securities in such registration unless all of the securities requested to
be registered by the holders exercising such "demand" registration rights
have been included in such registration and have not been subjected to any
reduction by underwriters.
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<PAGE>
(b) 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 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.
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<PAGE>
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, its directors, officers, agents, employees,
general partners, limited partners, each other Person who participates
as an underwriter in the offering or sale of such securities and each
other Person, if any, who controls such holder or any such underwriter
within the meaning of the Securities Act, against any losses, claims,
damages or liabilities, joint or several, to which such holder or
Requesting Holder or any such underwriter within the meaning of the
Securities Act, against any losses, claims, damages or liabilities,
joint or several, to which such holder or Requesting Holder or any
such director, officer, agent, employee, general partner, limited
partner or underwriter or controlling person may become subject under
the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions or proceedings, whether commenced
or threatened, in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such securities
were registered under the Securities Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any omission or alleged omission
to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and the
Company will reimburse such holder, and each such director, officer,
agent, employee, general partner, limited partner, underwriter and
controlling person for any reasonable legal or any other expenses
reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceeding;
provided that the Company shall not be liable in any such case to the
--------
extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of or is based
upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement in reliance upon and in conformity with
written information furnished to the Company through an instrument
duly executed by such holder specifically stating that it is for use
in the preparation thereof and, provided further that the Company
-------- -------
shall not be liable to any Person who participates as an underwriter,
in the offering or sale of Registrable Securities or to any other
Person who participates as an underwriter, in the offering or sale of
Registrable Securities or to any other Person, if any, who controls
such
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<PAGE>
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
such Requesting Holder or any such director, officer, agent, employee,
general partner, limited partner, underwriter or controlling person
and shall survive the transfer of such securities by such holder.
(b) Indemnification by the Sellers. In the event of any
------------------------------
registration of Registrable Securities under the Securities Act
pursuant to this 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 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
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<PAGE>
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 Article 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 payable by such indemnified
party as a result of such, 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
-22-
<PAGE>
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.
ARTICLE 10. DEFINITIONS
- ---------- -----------
As used herein, unless the context otherwise requires, the following
terms have the following meanings:
Commission: The Securities and Exchange Commission or any other
----------
federal agency at the time administering the Securities Act.
Common Stock: As defined in Section 1.1 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 the payment of
dividends and distributions on any shares entitled to preference.
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<PAGE>
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 "Controlling" 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.
Intellectual Property Rights: All Trademarks, Patents, Copyrights, and
----------------------------
Know-How and Technical Information.
Initial Public Offering: An Initial Public Offering shall mean the
-----------------------
first time a registration statement filed under the Securities Act with the
Securities and Exchange Commission (other than a registration statement on Form
S-8, or any successor form thereto, with respect to the issuance of Common Stock
(or securities convertible into or exchangeable for Common Stock or rights to
acquire Common Stock) granted or to be granted to employees, officers or
directors of the Company pursuant to any employee stock option plan, unless as a
result thereof the Company would be required to file reports with respect to any
of its equity securities with the Securities and Exchange Commission) respecting
an offering, whether primary or secondary, of Common Stock is declared effective
by the Securities and Exchange Commission.
Initiating Holders: Any Purchasers holding at least 51% 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.
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
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<PAGE>
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.
Know-How and Technical Information: Data, plans, trade secrets,
----------------------------------
technologies, processes, specifications, know-how, operating experience and
information (business, economic and technical) relating to the foregoing.
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.
Purchasers: As defined in the introduction to this Agreement.
----------
Registrable Securities: (a) The shares of Common 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 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.
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<PAGE>
Registration Expenses: All expenses incident to the Company's
---------------------
performance of or compliance with Article 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.
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 could constitute a "sale" as that
term is defined in Section 2(3) of the Securities Act.
Wand/IMA: As defined in Section 9.1 of this Agreement.
--------
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 $9.00
(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
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<PAGE>
option or warrant exercise price of less than $9.00 (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 $9.00 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, 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 Securities and Exchange Commission which
is declared effective by the Securities and Exchange 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.
-27-
<PAGE>
(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 Securities and Exchange 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 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.
-28-
<PAGE>
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.
One Corporate Drive
Suite 414
Shelton, CT 06484
Attn: Mr. Gary R. Martino
With a copy to:
Thomas L. Fairfield, Esq.
LeBoeuf, Lamb, Greene & MacRae
Goodwin Square
225 Asylum Street
Hartford, CT 06103
If to any Purchaser, to such Purchaser at the address set forth in
Schedule A.
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.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-29-
<PAGE>
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/ Albert R. Subbloie
-------------------------------
Albert R. Subbloie
President
THE PURCHASERS:
/s/ Gregory S. Collins
-------------------------------
Gregory Collins
/s/ Victor Nesi
-------------------------------
Victor Nesi
-30-
<PAGE>
Schedule A
----------
List of Purchasers
------------------
<TABLE>
<CAPTION>
Name and Address Purchase Number of Shares
Social Security Number Price of Common Stock
- ---------------------- -------- ----------------
<S> <C> <C>
Gregory Collins $135,000 15,000
[ADDRESS]
Victor Nesi $49,995 5,555
[ADDRESS]
</TABLE>
<PAGE>
Exhibit 10.34
STOCK PURCHASE AGREEMENT
DATED AS OF NOVEMBER 16, 1994
BETWEEN
INFORMATION MANAGEMENT ASSOCIATES, INC.
AND
WAND/IMA INVESTMENTS, L.P.
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
STOCK PURCHASE AGREEMENT dated as of November 16, 1994 by and between
WAND/IMA INVESTMENTS, L.P. (the "Purchaser") and INFORMATION MANAGEMENT
ASSOCIATES, INC. (the "Company").
WHEREAS, the Purchaser is purchasing pursuant to this Agreement 111,111
newly issued shares of Common Stock 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. TRANSFER OF SHARES AND RELATED MATTERS
- ---------- --------------------------------------
1.1 The Sale. Subject to the terms and conditions of this Agreement, the
--------
Company hereby agrees to issue and sell to the Purchaser, and the Purchaser
hereby agrees to purchase from the Company, on the date of the Closing (as
hereinafter defined), 111,111 newly issued shares (the "Shares") of the common
stock, no par value, of the Company ("Common Stock") free and clear of all
liens, claims, liabilities, restrictions or other encumbrances at a purchase
price of $9.00 per share (the "Purchase Price").
1.2 Delivery of Shares. On the Closing Date (as hereinafter defined), the
------------------
Company will deliver to the Purchaser, against payment of the Purchase Price,
certificates representing the Shares.
ARTICLE 2. CLOSING
- ---------- -------
The closing for the consummation of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of LeBoeuf, Lamb,
Greene & MacRae, Hartford, Connecticut, at 10:00 a.m. on November 16, 1994 or at
such other time or place as the parties hereto shall mutually agree (the
"Closing Date").
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
- ----------- ---------------------------------------------
The Company hereby represents and warrants to the Purchaser as follows:
3.1 Authority and Validity. The execution, delivery and performance of
----------------------
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
-2-
<PAGE>
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
------------------------------------------
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
------------
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
------------- ------------
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 for Massachusetts and Illinois where the
Company will be in good standing after the filing of delinquent annual reports.
The jurisdictions identified in Schedule 3.4 are the only jurisdictions in which
------------
the nature of the Company's activities or the character of the properties it
owns or leases makes such qualification 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
--------------
5,000,000 shares of common stock, of which 1,759,537 shares were issued and
outstanding as of November 10, 1994. All issued and outstanding shares have
been duly authorized and validly issued, are fully paid and non-assessable.
When authorized and
-3-
<PAGE>
issued, the Shares will not be subject to any preemptive rights or rights of
first refusal. The 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 Shares will be
subject to restrictions on transfer imposed under applicable state and federal
securities laws. Set forth on Schedule 3.5 attached hereto is a list, as of
November 10, 1994, 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 Common Stock and no outstanding warrants, stock options or rights to purchase
Common Stock, except that the Company has offered up to approximately 40,000
shares of Common Stock to certain individuals at a price of $9.00 per share,
which shares are not described in Schedule 3.5. Said offering of up to
approximately 40,000 shares of Common Stock is referred to herein as the
"Simultaneous Offering".
3.6 Indebtedness of the Company. Schedule 3.6 correctly describes all
--------------------------- ------------
secured and unsecured indebtedness of the Company for borrowed money outstanding
or for which the Company has commitments, on the date of this Agreement. 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
----------
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
---------------------
all Intellectual Property Rights used in or necessary to conduct the Company's
business as heretofore conducted 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
---------------------
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
-4-
<PAGE>
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 audited consolidated balance sheet and
--------------------
related statement of operations of the Company as of December 31, 1993 and the
unaudited consolidated balance sheet and related statement of operations of the
Company as of June 30, 1994 (collectively, the "Financial Statements"), which
have been provided to the Purchaser, 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 interim statements, to
normal year-end 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 December
------- -------------
31, 1993, 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;
(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
--------------- -------------
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
-5-
<PAGE>
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
--------------------------------------
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
---------------
the Shares for general corporate purposes.
3.15 No Violations of Securities Laws. Subject to the accuracy of the
--------------------------------
Purchaser's representations in Section 4 hereof, the offer and sale of the
Shares hereunder and the offer and sale of Common Stock in connection with the
Simultaneous Offering 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 Shares to
anyone other than the Purchaser and certain offerees in connection with the
Simultaneous Offering. Neither the Company nor any person acting on its behalf
has taken any action which would require the registration of the Shares under
Section 5 of the Act, including, without limitation, engaging in any form of
general solicitation.
3.16 Brokers or Finders Fees, Etc. 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 Shares contemplated hereby.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
----------- -----------------------------------------------
The Purchaser hereby represents and warrants to the Company as follows:
4.1 Investment. The Purchaser is acquiring the 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 Shares have not been
registered under the
-6-
<PAGE>
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 Shares must be held
------
indefinitely unless the Shares are subsequently registered under the Securities
Act or an exemption from such registration is available. Each certificate
representing (i) the Shares, and (ii) any other securities issued in respect of
the Shares 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. 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 ACT 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
-------------------
ownership interest in the Purchaser, other than Malcolm P. Appelbaum, is an
"accredited investor" as that term is used in Rule 501 promulgated under the
Securities Act. Malcolm P. Appelbaum is a sophisticated investor having such
knowledge and experience in financial and business matters that he is capable of
evaluating the merits and risks of an investment in the Shares. The Purchaser
and Malcolm P. Appelbaum have 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. The Purchaser acknowledges that each of
---------------------
the Purchaser and Malcolm P. Appelbaum 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 PURCHASER
- ---------- ------------------------------------------
The obligations of the Purchaser to perform this Agreement are subject
to the satisfaction of the following conditions unless waived by the Purchaser:
-7-
<PAGE>
5.1 Opinion of Counsel. You shall have received a favorable opinion,
------------------
addressed to you, dated the date of Closing and satisfactory in substance and
form to you, from LeBoeuf, Lamb, Greene & MacRae, L.L.P., special counsel for
the Company, substantially in the form set forth in EXHIBIT A and covering such
---------
matters incident to the transactions contemplated by this Agreement as you or
your counsel may reasonably request.
5.2 Representations. The representations made by the Company in
---------------
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,
-------------
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 Purchaser. The form and substance
--------------------------------------
of all legal matters contemplated hereby and of all papers delivered hereunder
shall be acceptable to counsel to the Purchaser.
5.5 Government Consents, Authorizations, Etc. All consents,
----------------------------------------
authorizations, orders or approvals of, and filings or registrations with, any
federal, state, local or foreign 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
----------------------------
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 Purchaser, 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 December 31, 1993.
5.8 Consents and Permits. The Company shall have received all
--------------------
consents, permits and other authorizations as may be
-8-
<PAGE>
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
Purchaser of all such consents, permits and authorizations.
ARTICLE 6. CONDITIONS TO OBLIGATIONS OF THE COMPANY
- ---------- ----------------------------------------
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 Purchaser in
---------------
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 Shares to the
--------
Purchaser shall be legally permitted by all laws and regulations to which the
Purchaser and the Company are subject.
6.3 Acceptance by Counsel to the Company. The form and substance of
------------------------------------
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.
- ---------- ----------------------------------------------------------------
7.1 Survival. All representations and warranties made by any party
--------
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 Purchaser 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
- ---------- ------------------------------
8.1 Restriction; Procedure for Transfer. The Shares shall not be
-----------------------------------
transferable except upon the conditions specified in
-9-
<PAGE>
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
---------------------------
any of the 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 Shares may be effected without
registration under the Securities Act.
ARTICLE 9. REGISTRATION UNDER SECURITIES ACT, ETC.
- ---------- --------------------------------------
9.1 Registration on Request.
-----------------------
(a) Request. At any time or from time to time on the earlier of (x)
-------
December 21, 1995 or (y) the occurrence of an Initial Public Offering, upon the
written request of one or more Initiating Holders, requesting that the Company
effect the registration under the Securities Act of all or part of such
Initiating Holders' Registrable Securities and specifying the intended method of
disposition thereof, the Company will promptly give written notice of such
requested registration to all holders of Registrable Securities, and thereupon
the Company will use its best efforts to effect the registration under the
Securities Act of
(i) the Registrable Securities which the Company has been so
requested to register by such Initiating Holders for disposition in
accordance with the intended method of disposition stated in such
request, and
(ii) all other Registrable Securities the holders of which shall
have made a written request to the Company for registration thereof
within 30 days after the giving of such written notice by the Company
(which request shall specify the intended method of disposition of such
Registrable Securities), and
(iii) subject to the priority provisions of section 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
-10-
<PAGE>
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 the Purchaser,
including the Warrants, shall not exceed two.
(b) Registration Statement Form. Registrations under this Section 9.1
---------------------------
shall be on such appropriate registration form of the Commission (i) as
-
shall be selected by the Company and, as shall be reasonably acceptable to
the holders of more than 50% (by number of shares) of the Registrable
Securities so to be registered and (ii) as shall permit the disposition of
--
such Registrable Securities in accordance with the intended method or
methods of disposition specified in their request for such registration.
The Company agrees to include in any such registration statement all
information which holders of Registrable Securities being registered shall
reasonably request.
(c) Expenses. The Company will pay all Registration Expenses in
--------
connection with 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 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
--------
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
---
-11-
<PAGE>
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
--
securities of the Company included in such registration by the holders thereof.
9.2 Incidental Registration.
-----------------------
(a) Right to Include Registrable Securities. If the Company at any
---------------------------------------
time proposes to register any of its securities under the Securities Act (other
than by a registration on Form S-4 or S-8, or any successor or similar forms and
other than pursuant to Section 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
-12-
<PAGE>
by the holders thereof, to the extent requisite to permit the disposition (in
accordance with the intended methods thereof as aforesaid) of the Registrable
Securities so to be registered, by inclusion of such Registrable Securities in
the registration statement which covers the securities which the Company
proposes to register, provided that if, at any time after giving written notice
--------
of its intention to register any securities and prior to the effective date of
the registration statement filed in connection with such registration, the
Company shall determine for any reason either not to register or to delay
registration of such securities, the Company may, at its election, give written
notice of such determination to each holder of Registrable Securities and,
thereupon, (i) in the case of a determination not to register, shall be relieved
-
of its obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses in
connection therewith), without prejudice, however, to the rights of any holder
or holders of Registrable Securities entitled to do so to request that such
registration be effected as a registration under Section 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 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
-13-
<PAGE>
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 of such counsel;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such
registration statement until the earlier of such time as all of such
securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such registration
statement or (i) in the case of a registration pursuant to Section 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
-14-
<PAGE>
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;
(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
-15-
<PAGE>
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 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
-16-
<PAGE>
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, 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
-17-
<PAGE>
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
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
-18-
<PAGE>
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 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
-19-
<PAGE>
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 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.
-20-
<PAGE>
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 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 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
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 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,
-21-
<PAGE>
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 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
-22-
<PAGE>
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 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
-23-
<PAGE>
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.
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 Mr. Gary R.
Martino, Mr. Andrei Poludnewycz and Mr. Albert R. Subbloie and any Person which
is, directly or indirectly, controlled by any of the foregoing.
-24-
<PAGE>
"Affiliate" shall not include Wand/IMA Investments, L.P. or any of its partners,
affiliates, directors, officers, stockholders, agents or employees, including,
without limitation, David J. Callard and Thomas F. Hill.
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 1.1 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 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.
-25-
<PAGE>
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.
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.
-26-
<PAGE>
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.
Purchaser: Wand/IMA Investments, L.P., a Delaware limited
---------
partnership.
Registrable Securities: (a) the shares of Common 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 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.
-27-
<PAGE>
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.
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 could constitute a "sale" as that
term is defined in section 2(3) of the Securities Act.
Warrants: The Common Stock Purchase Warrants No. W-3, No. W-4 and W-5
--------
issued by the Company to Thomas F. Hill, Wand/IMA Investments, L.P. and Wand
Partners Inc., respectively.
ARTICLE 11. MISCELLANEOUS
- ----------- -------------
11.1 Preemptive Rights.
-----------------
(a) The Company hereby grants to the Purchaser the preemptive rights
to purchase the 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 $9.00 (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 $9.00 (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
-28-
<PAGE>
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 $9.00 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, 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.
-29-
<PAGE>
(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 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
-30-
<PAGE>
telex or telecopier or sent by air courier guaranteeing overnight delivery as
follows:
If to the Company, to:
Information Management Associates, Inc.
One Corporate Drive
Suite 414
Shelton, CT 06484
Attn: Mr. Gary R. Martino
With a copy to:
Thomas L. Fairfield, Esq.
LeBoeuf, Lamb, Greene & MacRae
Goodwin Square
225 Asylum Street
Hartford, CT 06103
If to the Purchaser, to:
Wand/IMA Investments, L.P.
630 Fifth Avenue, Suite 2435
New York, NY 10011
Attn: Mr. David J. Callard
With a copy to:
Nancy L. Henry, Esq.
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, NY 10022
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.
-31-
<PAGE>
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/ Albert R. Subbloie
--------------------------------
Albert R. Subbloie
President
THE PURCHASER:
WAND/IMA Investments, L.P.
By Wand Partners Inc., as General
Partner
By: /s/ David J. Callard
--------------------------------
David J. Callard
President
-32-
<PAGE>
Exhibit 10.35
STOCK PURCHASE AGREEMENT
DATED AS OF MARCH 31, 1995
BETWEEN
INFORMATION MANAGEMENT ASSOCIATES, INC.
AND
WAND/IMA INVESTMENTS, L.P.
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
STOCK PURCHASE AGREEMENT dated as of March 31, 1995 by and between
WAND/IMA INVESTMENTS, L.P. (the "Purchaser") and INFORMATION MANAGEMENT
ASSOCIATES, INC. (the "Company").
WHEREAS, the Purchaser is purchasing pursuant to this Agreement 4,500
newly issued shares of Senior Convertible 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 ("Senior Preferred Stock") and which are convertible
into Common Stock, no par value, of the Company at an initial conversion price
of $11.00 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
- ---------- --------------------------------------
1.1 The Sale. Subject to the terms and conditions of this Agreement,
--------
the Company hereby agrees to issue and sell to the Purchaser, and the Purchaser
hereby agrees to purchase from the Company, on the date of the Closing (as
hereinafter defined), 4,500 newly issued shares (the "Senior Preferred Shares")
of Senior Convertible Preferred Stock 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 defined),
------------------
the Company will deliver to the Purchaser, against payment of the Purchase
Price, certificates representing the Shares.
ARTICLE 2. CLOSING
- ---------- -------
The closing for the consummation of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of LeBoeuf, Lamb,
Greene & MacRae, Hartford, Connecticut, at 10:00 a.m. on March 31, 1995 or at
such other time or place as the parties hereto shall mutually agree (the
"Closing Date").
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
- ---------- ---------------------------------------------
The Company hereby represents and warrants to the Purchaser as
follows:
3.1 Authority and Validity. The execution, delivery and performance of
----------------------
this Agreement and the consummation of all the
-2-
<PAGE>
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
------------------------------------------
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
------------
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 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 for Illinois and Massachusetts. The
jurisdictions identified in Schedule 3.4 are the only jurisdictions in which the
------------
nature of the Company's activities or the character of the properties it owns or
leases makes such qualification 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
--------------
5,000,000 shares of common stock, no par value ("Common Stock") of which
1,891,204 shares are issued and outstanding, and 500,000 shares of preferred
stock, no par value, of which no shares
-3-
<PAGE>
are issued and outstanding, excluding the Senior Preferred Shares being issued
to Purchaser pursuant to this Agreement and any shares issued pursuant to the
Simultaneous Offering (as defined below). 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,
except that the Company has offered up to approximately 100 shares of Senior
Preferred Stock to certain individuals at a price of $11.00 per share, which
shares are not described in Schedule 3.5. Said offering of up to approximately
100 shares of Senior Preferred Stock is referred to herein as the "Simultaneous
Offering".
3.6 Indebtedness of the Company. Schedule 3.6 correctly describes all
--------------------------- ------------
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
----------
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
---------------------
all Intellectual Property Rights used in or necessary to conduct the Company's
business as heretofore conducted 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.
-4-
<PAGE>
3.9 Environmental Matters. The Company is in compliance with the
---------------------
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 audited consolidated balance sheet and
--------------------
related statement of operations of the Company as of December 31, 1993 and the
unaudited consolidated balance sheet and related statement of operations of the
Company as of December 31, 1994 (collectively, the "Financial Statements"),
which have been provided to the Purchaser, 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
------- -------------
December 31, 1993, 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;
(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;
-5-
<PAGE>
(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 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
--------------------------------------
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 the Senior Preferred Shares for general corporate purposes including, without
limitation, repayment of certain loans from officers and affiliates in an
aggregate amount equal to approximately $1,400,000.
3.15 No Violations of Securities Laws. Subject to the accuracy of the
--------------------------------
Purchaser's representations in Section 4 hereof, the offer and sale of the
Shares hereunder and the offer and sale of Senior Preferred Stock in connection
with the Simultaneous Offering 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 Purchaser and certain offerees in
connection with the Simultaneous Offering. 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.
-6-
<PAGE>
3.16 Brokers or Finders Fees, Etc. 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 PURCHASER
- ---------- -----------------------------------------------
The Purchaser hereby represents and warrants to the Company as
follows:
4.1 Investment. The Purchaser is acquiring the Senior Preferred 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
------
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 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
-------------------
ownership interest in the Purchaser, other than Malcolm P. Appelbaum, is an
"accredited investor" as that term is used in Rule 501 promulgated under the
Securities Act. Malcolm P. Appelbaum is a sophisticated investor having such
knowledge and experience in financial and business matters that he is capable of
evaluating the merits and risks of an investment in the Shares. The Purchaser
and Malcolm P. Appelbaum have received and had a
-7-
<PAGE>
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. The Purchaser acknowledges that each of the
---------------------
Purchaser and Malcolm P. Appelbaum 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 PURCHASER
- ---------- ------------------------------------------
The obligations of the Purchaser to perform this Agreement are subject
to the satisfaction of the following conditions unless waived by the Purchaser:
5.1 Opinion of Counsel. You shall have received a favorable opinion,
------------------
addressed to you, dated the date of Closing and satisfactory in substance and
form to you, from LeBoeuf, Lamb, Greene & MacRae, L.L.P., special counsel for
the Company, substantially in the form set forth in EXHIBIT A and covering such
---------
matters incident to the transactions contemplated by this Agreement as you or
your counsel may reasonably request.
5.2 Representations. The representations made by the Company in
---------------
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,
-------------
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 Purchaser. The form and substance of
--------------------------------------
all legal matters contemplated hereby and of all papers delivered hereunder
shall be acceptable to counsel to the Purchaser.
5.5 Government Consents, Authorizations, Etc. All consents,
----------------------------------------
authorizations, orders or approvals of, and filings or registrations with, any
federal, state, local or foreign 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.
-8-
<PAGE>
5.6 No Litigation or Legislation. No federal, state, local or 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 Purchaser, 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 December 31, 1994.
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 Purchaser of all such consents,
permits and authorizations.
ARTICLE 6. CONDITIONS TO OBLIGATIONS OF THE COMPANY
- ---------- ----------------------------------------
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 Purchaser in 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 Preferred
--------
Shares to the Purchaser shall be legally permitted by all laws and regulations
to which the Purchaser and the Company are subject.
6.3 Acceptance by Counsel to the Company. The form and substance of
------------------------------------
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.
- ---------- -----------------------------------------------------------------
7.1 Survival. All representations and warranties made by any party 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
-9-
<PAGE>
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 Purchaser 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
- ---------- ------------------------------
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 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.
- ---------- --------------------------------------
9.1 Registration on Request.
-----------------------
(a) Request. At any time or from time to time on the earlier of (x)
-------
December 21, 1995 or (y) the occurrence of an Initial Public Offering, upon
the written request of one or more Initiating Holders, requesting that the
Company effect the registration under the Securities Act of all or part of
such Initiating Holders' Registrable Securities and specifying the intended
method of disposition thereof, the Company will promptly give written
notice of such requested registration to all holders of Registrable
Securities, and thereupon the Company will use its best efforts to effect
the registration under the Securities Act of
(i) the Registrable Securities which the Company has been so
requested to register by such Initiating
-10-
<PAGE>
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 the Purchaser,
including the Warrants, shall not exceed two.
(b) Registration Statement Form. Registrations under this Section 9.1
---------------------------
shall be on such appropriate registration form of the Commission (i) as
-
shall be selected by the Company and, as shall be reasonably acceptable to
the holders of more than 50% (by number of shares) of the Registrable
Securities so to be registered and (ii) as shall permit the disposition of
--
such Registrable Securities in accordance with the intended method or
methods of disposition specified in their request for such registration.
The Company agrees to include in any such registration statement all
information which holders of Registrable Securities being registered shall
reasonably request.
(c) Expenses. The Company will pay all Registration Expenses in
--------
connection with 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 are
included in such registration, on the basis of the respective amounts of
the securities then being registered on their behalf.
-11-
<PAGE>
(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
--------
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
securities of the Company included in such registration by the holders
thereof.
9.2 Incidental Registration.
-----------------------
-12-
<PAGE>
(a) Right to Include Registrable Securities. If the Company at any
---------------------------------------
time proposes to register any of its securities under the Securities Act
(other than by a registration on Form S-4 or S-8, or any successor or
similar forms and other than pursuant to Section 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
--------
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 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
--
-13-
<PAGE>
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;
(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
-14-
<PAGE>
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;
(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
-15-
<PAGE>
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 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
-16-
<PAGE>
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, 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
-17-
<PAGE>
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 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
-18-
<PAGE>
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
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
-19-
<PAGE>
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 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
-20-
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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 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
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<PAGE>
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 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
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<PAGE>
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
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
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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 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
-24-
<PAGE>
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 Mr. Gary R.
Martino, Mr. Andrei Poludnewycz and Mr. Albert R. Subbloie and any Person which
is, directly or indirectly, controlled by any of the foregoing. "Affiliate"
shall not include Wand/IMA Investments, L.P. or any of its partners or
affiliates, directors, officers, stockholders, agents or employees thereof,
including, without limitation, David J. Callard and Thomas F. Hill.
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 the payment of
dividends and distributions on any shares entitled to preference.
-25-
<PAGE>
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.
Know-How and Technical Information: Computer programs, related
----------------------------------
documentation and databases, data, plans, trade secrets, technologies,
processes, specifications, know-how, operating
-26-
<PAGE>
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.
Purchaser: Wand/IMA Investments, L.P., a Delaware limited partnership.
---------
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-
<PAGE>
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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<PAGE>
could constitute a "sale" as that term is defined in section 2(3) of the
Securities Act.
Warrants: The Common Stock Purchase Warrants No. W-3, No. W-4 and W-5
--------
issued by the Company to Thomas F. Hill, Wand/IMA Investments, L.P. and Wand
Partners Inc., respectively.
ARTICLE 11. MISCELLANEOUS
- ----------- -------------
11.1 Preemptive Rights.
-----------------
(a) The Company hereby grants to the Purchaser the preemptive rights
to purchase the 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 $11.00
(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 $11.00 (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 $11.00 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, 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
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<PAGE>
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 Purchaser 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 hereby shall be borne by the Company. The Company
shall pay all sales, use and excise taxes and all registration, recording or
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<PAGE>
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 Purchaser 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.
One Corporate Drive
Suite 414
Shelton, CT 06484
Attn: Mr. Gary R. Martino
With a copy to:
Thomas L. Fairfield, Esq.
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
Goodwin Square
225 Asylum Street
Hartford, CT 06103
If to the Purchaser, to:
Wand/IMA Investments, L.P.
630 Fifth Avenue, Suite 2435
New York, NY 10111
Attn: Mr. David J. Callard
-31-
<PAGE>
With a copy to:
Nancy L. Henry, Esq.
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, NY 10022
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-
<PAGE>
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/Gary R. Martino
--------------------------------------
Gary R. Martino
Vice President and Chief
Financial Officer
THE PURCHASER:
WAND/IMA Investments, L.P.
By Wand Partners Inc., as General Partner
By: /s/Bruce W. Schnitzer
--------------------------------------
Bruce W. Schnitzer
Chairman
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<PAGE>
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.
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
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/IMA II"), WAND/IMA INVESTMENTS III L.P., a Delaware limited
partnership ("Wand/IMA III", Wand/IMA II 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
---------- --------------------------------------
1.1 The Sale. Subject to the terms and conditions of this Agreement,
--------
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
------------------
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
- ---------- -------
The closing for the consummation of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of LeBoeuf, Lamb,
Greene & MacRae, L.L.P., Hartford, Connecticut, at 10:00 a.m. on November 1,
1996 or at such other
-2-
<PAGE>
time or place as the parties hereto shall mutually agree (the "Closing Date").
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
- ---------- ---------------------------------------------
The Company hereby represents and warrants to the Purchaser as follows:
3.1 Authority and Validity. The execution, delivery and performance of
----------------------
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
------------------------------------------
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
------------
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
------------- ------------
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
------------
the nature of the Company's activities or the character of the properties it
owns or leases makes such qualification
-3-
<PAGE>
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
--------------
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
--------------------------- ------------
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
----------
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
---------------------
all Intellectual Property Rights used in or necessary to conduct the Company's
business as heretofore conducted
-4-
<PAGE>
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
---------------------
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
--------------------
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
------- -------------
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;
-5-
<PAGE>
(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
--------------- -------------
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
--------------------------------------
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
---------------
the Senior Preferred Shares for general corporate purposes.
3.15 No Violations of Securities Laws. Subject to the accuracy of the
--------------------------------
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.
-6-
<PAGE>
3.16 Brokers or Finders Fees, Etc. Except for the financial advisory
----------------------------
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
--------- ------------------------------------------------
Each of the Purchasers hereby severally represents and warrants to
the Company as follows:
4.1 Investment. The Purchaser is acquiring the Senior Preferred
----------
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
------
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
-------------------
ownership interest in the Purchasers, other than Malcolm P. Appelbaum, Michael
S. Lowenberg and Mark Esiri, is an "accredited investor" as that term is used in
Rule 501 promulgated under the Securities Act. Each of Malcolm P. Appelbaum,
Michael S. Lowenberg and Mark Esiri is a sophisticated investor having such
-7-
<PAGE>
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, Malcolm P. Appelbaum, Michael S. Lowenberg and Mark 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
---------------------
such Purchaser, Malcolm P. Appelbaum, Michael S. Lowenberg and Mark 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
- ---------- -------------------------------------------
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
------------------
favorable opinion, addressed to each of them, dated the date of Closing and
satisfactory in substance and form to the Purchasers, from LeBoeuf, Lamb, Greene
& MacRae, 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
---------
contemplated by this Agreement as the Purchasers' counsel may reasonably
request.
5.2 Representations. The representations made by the Company in
---------------
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,
-------------
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
---------------------------------------
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,
----------------------------------------
authorizations, orders or approvals of, and filings or registrations with, any
federal, state, local or foreign
-8-
<PAGE>
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
----------------------------
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
---------- ----------------------------------------
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
---------------
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
--------
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
------------------------------------
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.
---------- ----------------------------------------------------------------
-9-
<PAGE>
7.1 Survival. All representations and warranties made by any party
--------
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
- ---------- ------------------------------
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
---------------------------
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.
- ---------- --------------------------------------
9.1 Registration on Request.
-----------------------
(a) Request. At any time or from time to time upon the written request
-------
of one or more Initiating Holders, requesting that the Company effect the
registration under the Securities Act of all or part of such Initiating
Holders' Registrable Securities and specifying the intended method of
disposition thereof, the Company will promptly give written notice of such
requested registration to all holders of Registrable Securities, and
thereupon the Company will use its best efforts to effect the registration
under the Securities Act of
-10-
<PAGE>
(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/IMA II or Wand/IMA III, including the Warrants, shall not
exceed three.
(b) Registration Statement Form. Registrations under this Section 9.1
---------------------------
shall be on such appropriate registration form of the Commission (i) as
-
shall be selected by the Company and, as shall be reasonably acceptable to
the holders of more than 50% (by number of shares) of the Registrable
Securities so to be registered and (ii) as shall permit the disposition of
--
such Registrable Securities in accordance with the intended method or
methods of disposition specified in their request for such registration.
The Company agrees to include in any such registration statement all
information which holders of Registrable Securities being registered shall
reasonably request.
(c) Expenses. The Company will pay all Registration Expenses in
--------
connection with 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
-11-
<PAGE>
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
--------
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
--
-12-
<PAGE>
securities of the Company included in such registration by the holders
thereof.
9.2 Incidental Registration.
-----------------------
(a) Right to Include Registrable Securities. If the Company at any
---------------------------------------
time proposes to register any of its securities under the Securities Act
(other than by a registration on Form S-4 or S-8, or any successor or
similar forms and other than pursuant to Section 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
--------
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
-13-
<PAGE>
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-
<PAGE>
(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-
<PAGE>
(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-
<PAGE>
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,
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<PAGE>
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
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<PAGE>
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-
<PAGE>
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
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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 Mr. Gary R.
Martino, Mr. Andrei Poludnewycz and Mr. Albert R. Subbloie 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, David J. Callard and Thomas F. Hill.
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
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<PAGE>
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-
<PAGE>
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-
<PAGE>
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
-28-
<PAGE>
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 Thomas F. Hill, 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-
<PAGE>
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-
<PAGE>
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.
One Corporate Drive
Suite 414
Shelton, CT 06484
Attn: Mr. Gary R. Martino
With a copy to:
Thomas L. Fairfield, Esq.
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
Goodwin Square
225 Asylum Street
Hartford, CT 06103
-31-
<PAGE>
If to Wand/IMA II, to:
Wand/IMA Investments II L.P.
630 Fifth Avenue, Suite 2435
New York, NY 10111
Attn: Mr. David J. Callard
With a copy to:
Nancy L. Henry, Esq.
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, NY 10022
If to Wand/IMA III, to:
Wand/IMA Investments III L.P.
630 Fifth Avenue, Suite 2435
New York, NY 10111
Attn: Mr. David J. Callard
With a copy to:
Nancy L. Henry, Esq.
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, NY 10022
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-
<PAGE>
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/ Gary R. Martino
--------------------------------
Gary R. Martino
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/ David J. Callard
---------------------------------
Name: David J. Callard
Title: President
WAND/IMA Investments III L.P.
By Wand Partners Inc., as General
Partner
By: /s/ David J. Callard
---------------------------------
Name: David J. Callard
Title: President
-33-
<PAGE>
Schedule 1.1
------------
<TABLE>
<CAPTION>
Number of Series B Purchase
Name of Purchaser Preferred Shares Price
- ----------------- ---------------- -----
<S> <C> <C>
Wand/IMA Investments II 354 $354,000
L.P.
Wand/IMA Investments III 3,996 $3,996,000
L.P.
</TABLE>
-34-
<PAGE>
Exhibit 10.37
COMMON STOCK PURCHASE AGREEMENT
DATED AS OF DECEMBER 18, 1996
AMONG
INFORMATION MANAGEMENT ASSOCIATES, INC.
AND
THE PURCHASERS LISTED ON SCHEDULE 1.1 ATTACHED HERETO
<PAGE>
Table of Contents
<TABLE>
<S> <C>
ARTICLE 1. TRANSFER OF SHARES AND RELATED MATTERS.......................1
1.1 The Sale..........................................................1
--------
1.2 Delivery of Shares................................................1
------------------
ARTICLE 2. CLOSING......................................................1
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY................1
3.1 Authority and Validity............................................1
----------------------
3.2 Organization and Standing; Corporate Power........................2
------------------------------------------
3.3 Subsidiaries......................................................2
------------
3.4 Qualification.....................................................2
-------------
3.5 Capitalization....................................................2
--------------
3.6 Indebtedness of the Company.......................................3
---------------------------
3.7 Disclosure........................................................3
----------
3.8 Intellectual Property.............................................3
---------------------
3.9 Environmental Matters.............................................3
---------------------
3.10 Financial Statements..............................................3
--------------------
3.11 Changes...........................................................4
-------
3.12 Litigation, Etc...................................................4
---------------
3.13 Compliance with Other Instruments, etc............................4
--------------------------------------
3.14 Use of Proceeds...................................................5
---------------
3.15 No Violations of Securities Laws..................................5
--------------------------------
3.16 Brokers or Finders Fees, Etc......................................5
----------------------------
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.............5
4.1 Investment........................................................5
----------
4.2 Resale............................................................5
------
4.3 Accredited Investor...............................................6
-------------------
4.4 Access to Information.............................................6
---------------------
4.5 Confidentiality...................................................6
---------------
4.6 No Agents.........................................................6
---------
ARTICLE 5. CONDITIONS TO OBLIGATIONS OF THE PURCHASERS..................6
-------------------------------------------
5.1 Representations...................................................6
---------------
5.2 Authorization.....................................................6
-------------
5.3 Acceptance by Counsel to the Purchasers...........................7
---------------------------------------
5.4 Government Consents, Authorizations, Etc..........................7
----------------------------------------
5.5 No Litigation or Legislation......................................7
----------------------------
5.6 No Material Adverse Change........................................7
--------------------------
5.7 Consents and Permits..............................................7
--------------------
ARTICLE 6. CONDITIONS TO OBLIGATIONS OF THE COMPANY.....................8
6.1 Representations...................................................8
---------------
6.2 Legality..........................................................8
--------
6.3 Acceptance by Counsel to the Company..............................8
------------------------------------
</TABLE>
-i-
<PAGE>
ARTICLE 7. SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION, ETC..............................8
7.1 Survival..............................................8
--------
7.2 Company's Agreement to Indemnify......................8
--------------------------------
ARTICLE 8. RESTRICTION ON TRANSFERABILITY....................8
------------------------------
8.1 Restriction; Procedure for Transfer...................8
-----------------------------------
8.2 Notice of Proposed Transfer...........................8
---------------------------
ARTICLE 9. REGISTRATION UNDER SECURITIES ACT, ETC............9
9.1 Incidental Registration...............................9
-----------------------
9.2 Registration Procedures..............................11
-----------------------
9.3 Underwritten Offerings...............................15
----------------------
9.4 Preparation; Reasonable Investigation................18
-------------------------------------
9.5 Indemnification......................................18
---------------
ARTICLE 10. DEFINITIONS......................................22
ARTICLE 11. MISCELLANEOUS....................................24
11.1 Amendment, Modification and Waiver...................24
----------------------------------
11.2 Expenses; Transfer Taxes, Etc........................24
-----------------------------
11.3 Binding Effect; Benefits; Parties in Interest........24
---------------------------------------------
11.4 Entire Agreement.....................................24
----------------
11.5 Headings.............................................25
--------
11.6 Notices..............................................25
-------
11.7 Counterparts.........................................25
------------
11.8 Governing Law........................................25
-------------
11.9 Gender...............................................25
------
-ii-
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
STOCK PURCHASE AGREEMENT dated as of December 18, 1996 by and among
the purchasers listed on Schedule A attached hereto (collectively, the
"Purchasers"), and INFORMATION MANAGEMENT ASSOCIATES, INC. (the "Company").
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. TRANSFER OF SHARES AND RELATED MATTERS
- ---------- --------------------------------------
1.1 The Sale. Subject to the terms and conditions of this Agreement,
--------
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 set forth opposite
such Purchaser's name on Schedule 1.1 attached hereto (collectively, the
------------
"Shares") of the common stock, no par value, of the Company ("Common Stock")
free and clear of all liens, claims, liabilities, restrictions or other
encumbrances at a purchase price of $16.00 per share (the "Purchase Price").
1.2 Delivery of Shares. On the Closing Date (as hereinafter defined),
------------------
the Company will deliver to the Purchasers, against payment of the Purchase
Price, certificates representing the Shares.
ARTICLE 2. CLOSING
- ---------- -------
The closing for the consummation of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of LeBoeuf, Lamb,
Greene & MacRae, L.L.P. Hartford, Connecticut, 10:00 a.m. on December 18, 1996
or at such other time or place as the parties hereto shall mutually agree (the
"Closing Date").
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
- ---------- ---------------------------------------------
The Company hereby represents and warrants to the Purchasers as
follows:
3.1 Authority and Validity. The execution, delivery and performance of
----------------------
this Agreement and the consummation of 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
<PAGE>
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 Charter 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 Company.
3.2 Organization and Standing; Corporate Power. The Company is a
------------------------------------------
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
------------
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 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. Except as set forth in Schedule 3.4, the Company is in good
standing in each such jurisdiction in which it is so qualified. The
jurisdictions identified in Schedule 3.4 are the only jurisdictions in which the
------------
nature of the Company's activities or the character of the properties it owns or
leases makes such qualification 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. Attached as Schedule 3.5 is a true and accurate
-------------- ------------
list of the authorized capital stock of the Company and the issued and
outstanding stock of the Company. Attached as Schedule 3.5 is a true and
------------
accurate list of the issued or outstanding shares of capital stock or securities
convertible or exchangeable into, or outstanding stock purchase warrants or
other options or rights to purchase shares of its capital stock or other equity
securities of the Company. All issued and outstanding shares have been duly
authorized and validly issued, are fully paid and non-assessable. When
authorized and issued, the Shares will not be subject to any pre-emptive rights
or rights of first refusal. The 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;
-2-
<PAGE>
provided, however, that the Shares will be subject to restrictions on transfer
imposed under applicable state and federal securities laws.
3.6 Indebtedness of the Company. Schedule 3.6 correctly describes all
--------------------------- ------------
secured and unsecured Indebtedness of the Company outstanding, or for which the
Company has commitments, on the date of this Agreement. Except as disclosed on
Schedule 3.6 the Company is not in default with respect to any Indebtedness or
- ------------
any instrument or agreement relating thereto.
3.7 Disclosure. Neither this Agreement nor the Schedules hereto
----------
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
---------------------
all Intellectual Property Rights used in or necessary to conduct the Company's
business as heretofore conducted 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
---------------------
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 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 made available to Purchasers, fairly present the Company's
assets, liabilities, financial position and results of operations as of the
respective dates thereof and for the periods then ended, and were prepared in
accordance with generally accepted accounting principles, consistently applied
(subject, in the case of unaudited
-3-
<PAGE>
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
------- -------------
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;
(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 except for shares of Senior Preferred
Convertible Stock issued in November 1996; and
(d) any other event or condition which has materially and adversely
affected the Company's business.
3.12 Litigation, Etc. Except as disclosed in Schedule 3.12, there is
--------------- -------------
no 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
--------------------------------------
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.
-4-
<PAGE>
3.14 Use of Proceeds. The Company will use the proceeds from the sale
---------------
of the Shares for general corporate purposes.
3.15 No Violations of Securities Laws. Subject to the accuracy of the
--------------------------------
Purchasers' representations in Section 4 hereof, the offer and sale of the
---------
Shares hereunder are and will be exempt from the registration and prospectus
delivery requirements of 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 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 Shares under Section 5 of the Securities Act,
including, without limitation, engaging in any form of general solicitation.
3.16 Brokers or Finders Fees, Etc. 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 Shares contemplated hereby.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
- ---------- ------------------------------------------------
Each Purchaser hereby represents and warrants to the Company as
follows:
4.1 Investment. Such Purchaser is acquiring the 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 Shares have not
been registered under the Securities Act or under the securities laws of any
State, by reason of specific exemptions from the registration provisions of the
Securities Act and such state laws which depend upon, among other things, the
accuracy of the Purchaser's representations herein and the bona fide nature of
the Purchaser's investment intent as expressed herein.
4.2 Resale. Such Purchaser acknowledges that the Shares must be held
------
indefinitely unless the Shares are subsequently registered under the Securities
Act and applicable state securities laws or an exemption from such registration
is available. Each certificate representing (i) the Shares, and (ii) any other
securities issued in respect of the Shares 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):
-5-
<PAGE>
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, OR 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. Such Purchaser is an "accredited investor" as
-------------------
that term is used in Rule 501 promulgated under the Securities Act. Each
Purchaser is resident in the state set forth in his address on Schedule 1.1
------------
attached hereto.
4.4 Access to Information. Such Purchaser acknowledges that he has
---------------------
received such information and made such investigation and analysis as 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.
4.5 Confidentiality. Such Purchaser agrees to keep permanently
---------------
confidential any information provided or to be provided to the Purchaser by the
Company in connection with the purchase and sale of the Shares, including
without limitation, this Agreement, the Schedules attached hereto and any and
all information, financial or otherwise, relating to the Company which may
hereafter be provided to such Purchaser.
4.6 No Agents. Such Purchaser acknowledges that the Shares are being
---------
offered by the Company through its directors and executive officers and that no
other person has acted as agent or broker in connection with the offering and
sale of the Shares and no other person has been authorized to give any
information or make any representation concerning the Company or the Shares.
ARTICLE 5. CONDITIONS TO OBLIGATIONS OF THE PURCHASERS
- ---------- -------------------------------------------
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 Representations. The representations made by the Company in
---------------
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.
5.2 Authorization. All action necessary to authorize the execution,
-------------
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
-6-
<PAGE>
have full power and right to consummate the transactions contemplated hereby.
5.3 Acceptance by Counsel to the Purchasers. The form and substance of
---------------------------------------
all legal matters contemplated hereby and of all papers delivered hereunder
shall be acceptable to counsel to the Purchasers.
5.4 Government Consents, Authorizations, Etc. All consents,
----------------------------------------
authorizations, orders or approvals of, and filings or registrations with, any
federal, state, local or foreign 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.
5.5 No Litigation or Legislation. No federal, state, local or 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.
5.6 No Material Adverse Change. In the judgment of the 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, other than (x)
changes which have not been, either in any case or in the aggregate, materially
adverse to the Company, and (y) any matters of a general economic or political
nature which do not affect the Company uniquely.
5.7 Consents and Permits. The Company shall have received all
--------------------
consents, permits and other authorizations, and made all such filings and
declarations, as may be required pursuant to any law, statute, regulation or
rule (federal, state, local or foreign) in connection with the transactions
contemplated by this Agreement, or 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.
-7-
<PAGE>
ARTICLE 6. CONDITIONS TO OBLIGATIONS OF THE COMPANY
- ---------- ----------------------------------------
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 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 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
------------------------------------
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.
----
7.1 Survival. All representations and warranties made by any party 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
- ---------- ------------------------------
8.1 Restriction; Procedure for Transfer. The 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 any
---------------------------
of the Shares (other than a transfer pursuant to
-8-
<PAGE>
registration under the Securities Act), the holder thereof shall give written
notice to the Company of such holder's intention to effect such transfer at
least thirty (30) days prior to the date of transfer and shall specify the
proposed purchase price and the other terms and conditions relating to such
proposed 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 that shall be reasonably satisfactory to the
Company, addressed to the Company, to the effect that the proposed transfer of
the Shares may be effected without registration under the Securities Act and
applicable State securities laws.
ARTICLE 9. REGISTRATION UNDER SECURITIES ACT, ETC.
- ---------- ---------------------------------------
9.1 Incidental Registration.
-----------------------
(a) Right to Include Registrable Securities. If the Company at any
---------------------------------------
time proposes to register any of its securities under the
Securities Act (other than by a registration on Form S-4 or
S-8, or any successor or similar forms), 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 9.1. Upon the written request of any such holder made
-----------
within 30 days after the receipt of any such notice (which
request shall specify the Registrable Securities intended to
be disposed of by such holder and the intended method of
disposition thereof), the Company will use its best efforts to
effect the registration under the Securities Act of all
Registrable Securities which the Company has been so requested
to register by the holders thereof, to the extent requisite to
permit the disposition (in accordance with the intended
methods thereof as aforesaid) of the Registrable Securities so
to be registered, by inclusion of such Registrable Securities
in the registration statement which covers the securities
which the Company proposes to register, provided that if, at
--------
any time after giving written notice of its intention to
register any securities and prior to the effective date of the
registration statement filed in connection with such
registration, the Company shall determine for any reason
either not to register or to delay registration of such
securities, the Company may, at its election, give written
notice of such determination to each holder of Registrable
Securities and, thereupon, (i) in the case of a determination
not to register, shall be relieved of
-9-
<PAGE>
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), 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. The Company will pay all Registration
Expenses in connection with each registration of Registrable
Securities requested pursuant to this Section 9.1.
-----------
(b) Priority in Incidental Registrations. If (i) a registration
------------------------------------
pursuant to this Section 9.1 involves an underwritten offering
-----------
of the securities so being registered, whether or not for sale
for the account of the Company, to be distributed (on a firm
commitment basis) by or through one or more underwriters of
recognized standing under underwriting terms appropriate for
such a transaction, (ii) the Registrable Securities so
requested to be registered for sale for the account of holders
of Registrable Securities are not also to be included in such
underwritten offering (either because the Company has not been
requested so to include such Registrable Securities pursuant
to Section 9.3(b) or, if requested to do so, is not obligated
--------------
to do so under Section 9.3(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 (other than such Registrable
Securities and other shares or securities so requested to be
included) being distributed by such underwriters within a
price range acceptable to the holders of securities other than
the Registrable Securities covered by such registration
requested to be included in such registration (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 and the holders of any
other shares or securities which shall have exercised in
respect of such offering registration rights comparable to the
rights granted under this
-10-
<PAGE>
Section 9.2 (which other shares or securities are not to be
-----------
included in such underwritten offering), 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 and shares or other securities so that
the resultant aggregate number of such Registrable Securities
and other shares or other securities so included in such
registration shall be equal to the number of shares stated in
such managing underwriter's letter. Notwithstanding the
foregoing, with respect to any registration initiated pursuant
to the exercise of "demand" registration rights by any holder
of securities of the Company, other than the holders of the
Registrable Securities, the holders of Registrable Securities
shall have no right to include any Registrable Securities in
such registration unless all of the securities requested to be
registered by the holders exercising such "demand"
registration rights have been included in such registration
and have not been subjected to any reduction by underwriters.
9.2 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 Section 9.1 the Company shall, as
-----------
expeditiously as possible:
(i) prepare and (within 90 days after the end of the period within
which requests for registration may be given to the Company or
in any event as soon thereafter as possible) file with the
Commission the requisite registration statement to effect such
registration (including such audited financial statements as
may be required by the Securities Act or the rules and
regulations promulgated thereunder) and thereafter use its
reasonable best efforts to cause such registration statement
to become and remain effective for the time period required by
this Agreement, provided, that before filing such registration
--------
statement or any amendments thereto the Company will furnish
to the counsel selected by the holders of Registrable
Securities which are to be included in such registration
copies of all such documents proposed to be filed, which
documents will be subject to the review of such counsel;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus
used in connection
-11-
<PAGE>
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 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;
-12-
<PAGE>
(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
(a) 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
(b) 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,
-13-
<PAGE>
as then in effect, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in the light
of the circumstances under which they were made, and at the request of
any such seller promptly prepare and furnish to such seller and each
underwriter, if any, a reasonable number of copies of a supplement to
or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities, such
prospectus shall not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light
of the circumstances under which they were made;
(viii) otherwise use its best efforts to comply with all applicable rules and
regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months, but not more than
eighteen months, beginning with the first full calendar month after
the effective date of such registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the
-------------
Securities Act, and will furnish to each such seller at least five
business days prior to the filing thereof a copy of any amendment or
supplement to such registration statement or prospectus and shall not
file any thereof to which any such seller shall have reasonably
objected on the grounds that such amendment or supplement does not
comply in all material respects with the requirements of the
Securities Act or of the rules or regulations thereunder;
(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
-14-
<PAGE>
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 9.2, 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 9.2 and, if so directed by the Company, will deliver to the Company (at
- -----------
the Company's expense) all copies, other than permanent file copies, then in
such holder's possession of the prospectus relating to such Registrable
Securities current at the time of receipt of such notice. In the event the
Company shall give any such notice, the periods mentioned in paragraph (ii) of
this Section 9.2 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 9.2.
-----------
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.
9.3 Underwritten Offerings.
----------------------
(a) Incidental Underwritten Offerings. If the Company at any time
---------------------------------
proposes to register any of its securities under the
Securities Act as contemplated by Section 9.1 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 9.1 and subject
-----------
to the provisions of Section 9.1(b), use its best efforts to
--------------
arrange for such underwriters to include all the Registrable
Securities to be offered and sold by such holder
-15-
<PAGE>
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 9.1 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) within a price range acceptable to the Company or in the
case of a secondary offering, the holders of securities other than
Registrable Securities requested to be included in such registration
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 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 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
-16-
<PAGE>
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. Notwithstanding the foregoing, with respect to any
registration initiated pursuant to the exercise of "demand" registration
rights by any holder of securities of the Company other than the holders
of Registrable Securities, the holders of Registrable Securities shall
have no right to include any Registrable Securities in such registration
unless all of the securities requested to be registered by the holders
exercising such "demand" registration rights have been included in such
registration and have not been subjected to any reduction by underwriters.
(b) 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 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 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
-17-
<PAGE>
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.
9.4 Preparation; Reasonable Investigation. In connection with the
-------------------------------------
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company will give the holders of Registrable
Securities registered under such registration statement, their underwriters, if
any, and their respective counsel and accountants, the opportunity to
participate in the preparation of such registration statement, each prospectus
included therein or filed with the Commission, and each amendment thereof or
supplement thereto, and will give each of them such access to its books and
records and such opportunities to discuss the business of the Company with its
officers and the independent public accountants who have certified its financial
statements as shall be necessary, in the opinion of such holders' and such
underwriters' respective counsel, to conduct a reasonable investigation within
the meaning of the Securities Act.
9.5 Indemnification.
---------------
(a) Indemnification by the Company. In the event of any registration
------------------------------
of any securities of the Company under the Securities Act pursuant to
this Section 9, the Company will indemnify and hold harmless the
---------
holder of any Registrable Securities covered by such registration
statement, its directors, officers, agents, employees, general
partners, limited partners, each other Person who participates as an
underwriter in the offering or sale of such securities and each other
Person, if any, who controls such holder or any such underwriter
within the meaning of the Securities Act, against any losses, claims,
damages or liabilities, joint or several, to which such holder or
Requesting Holder or any such underwriter within the meaning of the
Securities Act, against any losses, claims, damages or liabilities,
joint or several, to which such holder or Requesting Holder or any
such director, officer, agent, employee, general partner, limited
partner or underwriter or controlling person may become subject under
the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions or proceedings, whether commenced
or threatened, in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such securities
were registered under the Securities Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any omission or alleged omission
to state therein a material fact required to be stated therein or
-18-
<PAGE>
necessary to make the statements therein not misleading, and the
Company will reimburse such holder, and each such director, officer,
agent, employee, general partner, limited partner, underwriter and
controlling person for any reasonable legal or any other expenses
reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceeding;
provided that the Company shall not be liable in any such case to the
--------
extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of or is based
upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement in reliance upon and in conformity with
written information furnished to the Company through an instrument
duly executed by such holder specifically stating that it is for use
in the preparation thereof and, provided further that the Company
----------------
shall not be liable to any Person who participates as an underwriter,
in the offering or sale of Registrable Securities or to any other
Person 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
such Requesting Holder or any such director, officer, agent, employee,
general partner, limited partner, underwriter or controlling person
and shall survive the transfer of such securities by such holder.
(b) Indemnification by the Sellers. In the event of any registration
------------------------------
of Registrable Securities under the Securities Act pursuant to this
Section 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 9.5)
-----------
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
-19-
<PAGE>
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 9.5, such indemnified party will, if a claim in respect
-----------
thereof is to be made against an indemnifying party, give written
notice to the latter of the commencement of such action, provided that
--------
the failure of any indemnified party to give notice as provided herein
shall not relieve the indemnifying party of its obligations under the
preceding subdivisions of this Section 9.5, 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
-20-
<PAGE>
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 9.5 (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 9.5 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 payable by such indemnified
party as a result of such, 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 9.5(f) were
--------------
-21-
<PAGE>
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.
ARTICLE 10. DEFINITIONS
- ----------- -----------
As used herein, unless the context otherwise requires, the following
terms have the following meanings:
Commission: The Securities and Exchange Commission or any other
----------
federal agency at the time administering the Securities Act.
Common Stock: As defined in Section 1.1 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 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.
Intellectual Property Rights: All Trademarks, Patents, Copyrights, and
----------------------------
Know-How and Technical Information.
-22-
<PAGE>
NASD: The National Association of Securities Dealers, Inc.
----
Know-How and Technical Information: Data, plans, trade secrets,
----------------------------------
technologies, processes, specifications, know-how, operating experience and
information (business, economic and technical) relating to the foregoing.
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.
Purchasers: As defined in the introduction to this Agreement.
----------
Registrable Securities: (a) The shares of Common 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 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, premiums and other costs of policies of
insurance (if any) against liabilities arising out of the public offering of the
Registrable Securities
-23-
<PAGE>
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.
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 could constitute a "sale" as that
term is defined in Section 2(3) of the Securities Act.
ARTICLE 11. MISCELLANEOUS
- ----------- -------------
11.1 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.
11.2 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 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.
11.3 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.
11.4 Entire Agreement. This Agreement (including the Schedules
----------------
attached hereto), and the other writings referred to herein or delivered
pursuant hereto contain the entire
-24-
<PAGE>
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings with respect to such subject
matter.
11.5 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.
11.6 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.
One Corporate Drive
Suite 414
Shelton, CT 06484
Attn: Mr. Gary R. Martino
With a copy to:
Thomas L. Fairfield, Esq.
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
225 Asylum Street
Hartford, CT 06103
If to any Purchaser, to such Purchaser at the address set forth in
Schedule A;
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.
11.7 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.
11.8 Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Connecticut.
11.9 Gender. Any reference to the masculine gender shall be deemed to
------
include the feminine and neuter genders unless the context otherwise requires.
-25-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered as of the date first above written.
THE COMPANY:
INFORMATION MANAGEMENT ASSOCIATES, INC.
By: /s/ Albert R. Subbloie
---------------------------------
Albert R. Subbloie
President
THE PURCHASERS:
/s/ Gregory S. Collins
-------------------------------------
Gregory Collins
/s/ Victor Nesi
-------------------------------------
Victor Nesi
-26-
<PAGE>
Schedule 1.1
------------
List of Purchasers
------------------
<TABLE>
Name, Address and Purchase
Social Security Number Number of Shares Price
- ---------------------- ---------------- --------
<S> <C> <C>
Gregory Collins 10,000 $160,000
[ADDRESS APPEARS HERE]
Victor Nesi 4,400 $ 70,400
[ADDRESS APPEARS HERE]
</TABLE>
<PAGE>
Exhibit 10.38
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement") is made as of October
26, 1995, by and among INFORMATION MANAGEMENT ASSOCIATES, INC., a Connecticut
corporation having its chief executive office at One Corporate Drive -- Suite
414, Shelton, Connecticut 06484 ("IMA"), INFORMATION MANAGEMENT ASSOCIATES
LIMITED, a company registered in England and having its principal office at
Suite 4.04, Exchange Tower, One Harbour Exchange Square, London, England E14 9GB
("IMA Limited"), and PEOPLE'S BANK, a Connecticut banking corporation having its
chief executive office at 850 Main Street, Bridgeport, Connecticut 06604-4913
("Secured Party"). Unless defined elsewhere, defined terms have the meanings
ascribed in Paragraph 2 of this Agreement.
WITNESSETH:
WHEREAS, Debtor has requested that Secured Party make available to it the
Term Loan and certain Line of Credit Loans pursuant to the provisions of this
Agreement, and Secured Party is willing to make the Term Loan and, in its sole
discretion, the Line of Credit Loans to Debtor on the terms and conditions and
in reliance upon the representations, warranties and covenants of Debtor
hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and in further
consideration of the mutual covenants herein contained, the parties hereto agree
as follows:
1. Security Interest. Debtor hereby assigns and grants to Secured Party a
-----------------
security interest in all Debtor's tangible and intangible personal properties
(excluding Motor Vehicles) whether now owned or hereafter acquired, including,
without limitation, Equipment, Accounts, Inventory, Chattel Paper, General
Intangibles and Instruments, together with the products and proceeds thereof
(sometimes collectively referred to herein as the "Collateral") to secure
payment to Secured Party of the Obligations.
2. Definitions. As used herein the following terms shall have the following
-----------
meanings:
(a) "Accounts" shall mean any right to payment held by Debtor, whether
in the form of accounts receivable, notes, drafts, acceptances or other forms of
obligations and receivables now or hereafter received by or belonging to Debtor
for Inventory sold, licensed or leased by it or for services rendered, whether
or not earned by performance, together with all guarantees and security therefor
and all proceeds thereof, whether cash proceeds or otherwise, including, but not
limited to, all right, title and interest of Debtor in the Inventory which gave
rise to any such Accounts, including, but not limited to, the right of stoppage
in transit and all returned, rejected, rerouted or repossessed Inventory.
(b) "Affiliate" shall mean any Person that is directly or indirectly
controlling, controlled by, or under common control with Debtor. A Person shall
be conclusively deemed to be in control of or to be controlled by another Person
if it holds 30% or more of the outstanding equity interest in such other Person
or such other Person holds 30% or more of its outstanding equity interest. As
used herein, the term "equity interest" in the case of a corporation shall mean
the outstanding
<PAGE>
shares of such corporation having voting power to elect a majority of its Board
of Directors, whether or not at the time the holders of any other class or
classes of securities of such corporation shall or might have such voting power
by reason of the happening of any contingency.
(c) "Chattel Paper" shall mean a writing or writings which evidence both
a monetary obligation and a security interest in, or a lease of, specific goods,
whether now or hereafter held by Debtor.
(d) "Closing Date" means October 26, 1995.
(e) "Commitment Letter" means that certain Commitment Letter dated
October 6, 1995 from Secured Party to Debtor and the Guarantors.
(f) "Debtor" shall mean IMA and IMA Limited, individually, jointly and
severally or both, as the context may require.
(g) "Deferred Revenue" shall mean amounts paid to Borrower pursuant to
service, training and/or maintenance contracts that has yet to be recognized as
income by Borrower pursuant to generally accepted accounting principles.
(h) "Equipment" shall mean all the machinery, equipment, furniture,
tools, goods and other tangible personal property, excluding Motor Vehicles, now
owned or hereafter acquired by Debtor, including, but not limited to, the
Equipment of IMA referred to in Exhibit A-1 and the Equipment of IMA Limited
-----------
referred to in Exhibit A-2, each annexed hereto and made a part hereof.
-----------
(i) "Event of Default" shall mean the existence of any of the conditions
which constitute a default and give rise to Secured Party's ability to
accelerate repayment of the Term Note (as defined below) and the Line of Credit
Note (as defined below) pursuant to the provisions of Paragraph 12 of this
Agreement.
(j) "General Intangibles" shall mean any intangible personal property
(including, but not limited to, things in action) now or hereafter held by
Debtor, other than Accounts, Chattel Paper and Instruments.
(k) "Guarantors" shall mean Gary R. Martino, Albert R. Subbloie, Jr. and
Andrei Poludnewcyz, jointly and severally, individually or both, as the context
may require.
(l) "Initial Public Offering" shall mean the closing of a public
offering of securities issued by IMA pursuant to a registration statement which
is filed with and declared effective by the U.S. Securities and Exchange
Commission.
(m) "Instruments" shall mean a negotiable instrument or a security, as
defined in the UCC, or any other writing which evidences a right to the payment
of money and is not itself a security agreement or lease and is of a type which,
in the ordinary course of business, is transferred by delivery with any
necessary endorsement or assignment, whether now or hereafter held by Debtor.
(n) "Inventory" shall mean all goods, merchandise, raw materials, work
in process, finished goods and products and other personal property, including,
without limitation, software, now
2
<PAGE>
owned or hereafter acquired by Debtor and held for sale, licensing or lease or
furnished or to be furnished under contracts of service or used or consumed in
Debtor's business.
(o) "Line of Credit Loans" mean the loans referred to in Paragraph 5
hereof.
(p) "Loan Documents" shall mean the Commitment Letter, this Agreement,
the Term Note, the Line of Credit Note and each and every other agreement,
document or instrument required to be executed and delivered by Debtor or
Guarantors in connection with or evidencing the Term Loan and/or the Line of
Credit Loans.
(q) "Motor Vehicles" shall have the same meaning as that contained in
Section 14-1(30) of the General Statutes of Connecticut, as revised to 1993.
(r) "Obligations" shall mean the Term Loan, the Line of Credit Loans and
any and all other advances made hereunder, together with interest thereon, and
any and all other liabilities and obligations of whatever nature of Debtor to
Secured Party, no matter how or when arising and whether under this Agreement,
the agreements, instruments and documents required to be executed and delivered
by Debtor to Secured Party pursuant to the terms hereof, or under any other
agreements, guarantees, instruments or documents, past, present or future, and
the amount due on any notes, or other obligations of Debtor given to, received
by or held by Secured Party (including, but not limited to, overdrafts or any
debt, liability or obligation of Debtor to others which Secured Party may obtain
by assignment or otherwise) for or on account of any of the foregoing, whether,
in each case, direct or indirect, absolute or contingent, due or to become due,
now existing or hereafter arising.
(s) "Person" shall mean a natural person, a corporation, a limited
liability company or partnership, a limited or general partnership, or any other
entity.
(t) "Prime Rate" shall mean the index Secured Party uses to set interest
rates on commercial loans similar to the Term Loan and the Line of Credit Loans,
but is not necessarily the lowest rate Secured Party charges its commercial
customers, as such index is increased or decreased by Secured Party from time to
time in response to changes in money market conditions.
(u) "Qualified Accounts" shall mean all Accounts of Debtor which meet
each the following requirements:
(i) Such Accounts are not subject to offsets, contraclaims,
counterclaims, deductions, disputes or discounts of any nature whatsoever
claimed or which, under the terms of any agreement or otherwise, may be
claimed by the account debtor or account debtors with respect thereto;
(ii) Such Accounts represent indebtedness of account debtors who
are incorporated, qualified to do business or reside in any state of the
United States of America, the District of Columbia, Canada, England or
countries within the European Economic Community;
(iii) Such Accounts represent undisputed, bona fide indebtedness
to Debtor of account debtors who are not Affiliates of Debtor, which
indebtedness relates to Inventory sold and shipped, licensed or leased by
Debtor or for services rendered by Debtor to or for such account debtor or
account debtors in jurisdictions in which Debtor is qualified to do
3
<PAGE>
rendering of services or other activities of Debtor therein would not
require Debtor to qualify to do business therein;
(iv) The assignment of such Account will not violate the
purchase orders or contracts which gave rise thereto, and Secured Party's
security interest therein is perfected under applicable law;
(v) Debtor is the lawful owner and has a good right to pledge,
sell, assign, transfer and to grant a security interest in the Accounts;
(vi) The Accounts have not been pledged, sold, assigned,
transferred or encumbered to any Person other than Secured Party;
(vii) The Inventory sold, licensed or leased to the account
debtor or account debtors or the service rendered to or for the account
debtor or account debtors which gave rise to the Accounts has actually been
shipped or performed, conforms to the contract or purchase order relating
thereto and has not been rejected;
(viii) The Accounts are not owing by an account debtor or account
debtors who, since the date of billing such Accounts, has died, dissolved,
terminated its existence, become insolvent (which term shall include both a
negative tangible net worth and an inability to pay its debts as they
mature), suffered a business failure, been subjected either voluntarily or
involuntarily to the appointment of a receiver of any part of his or its
property, made an assignment for the benefit of his or its creditors,
requested creditors to standby, or has filed or had filed against him or it
a petition in bankruptcy or any other proceeding under any bankruptcy or
insolvency laws; and
(ix) The Accounts have not been outstanding for a period in
excess of 90 days from the earlier of (A) the date of the sale of goods or
the rendering of a service, (B) the issuance of an invoice for the sale of
goods or the rendering of services in accordance with the contract or
purchase order relating thereto, or in the case of Accounts relating to
leased Inventory, no scheduled rental payment is more than 90 days past due
in accordance with the terms of such lease; provided, however, that
-------- -------
Accounts that would constitute Qualified Accounts but for the foregoing
provisions of this subparagraph (ix) shall not be deemed excluded from the
calculation of Qualified Accounts if (1) such Accounts represent payment
obligations of account debtors with whom Debtor has, as part of a sale or
service transaction, agreed to accept either payment (i) in equal monthly
installments extending over a period not to exceed six months from the date
of sale or rendering of a service, or (ii) in a lump sum payment within a
period not to exceed six months from the date of sale or rendering of a
service, (2) no scheduled installment payment under such Accounts (or any
other such Accounts owing by the same account debtor) has been outstanding
for a period in excess of 30 days from the due date of such scheduled
installment payment, and (3) Accounts with such extended payment terms do
not at any time exceed $1,500,000 in the aggregate.
In the event an account debtor owes Accounts to Debtor, some of
which are Qualified Accounts and some of which are not Qualified Accounts
because of the foregoing provisions of this subparagraph (s), Secured Party
shall classify all such Accounts owed by such account debtor as excluded from
the calculation of Qualified Accounts. In the event of any dispute as to whether
or
4
<PAGE>
not any Accounts constitute Qualified Accounts, the reasonable determination of
Secured Party in accordance with the foregoing provisions shall at all times
control.
(v) "Subsidiary" shall mean a corporation (with respect to another
corporation) of which more than 30% of the outstanding stock having voting power
to elect a majority of its Board of Directors (whether or not at the time the
holders of any other class or classes of securities of such corporation shall or
might have such voting power by reason of the happening of any contingency) is
at any time directly or indirectly owned by another corporation or an Affiliate
of any such other corporation.
(w) "Tangible Net Worth" shall mean the aggregate tangible assets of
Debtor, less the aggregate liabilities (including subordinated indebtedness) of
Debtor, as determined in accordance with generally accepted accounting
principles, except that for purposes of this definition, "tangible assets" shall
include developed software (reflected in accordance with generally accepted
accounting principles).
(x) "Term Loan" shall mean the loan referenced in Paragraph 4
hereof.
(y) "UCC" shall mean the Uniform Commercial Code of the State of
Connecticut, as amended form time to time, or, in the case of Equipment,
Accounts, Inventory, Chattel Paper, General Intangibles and Instruments,
together with the products and proceeds thereof, owned by IMA Limited, the laws
of any foreign jurisdiction which control the granting, perfection and
liquidation of a security interest in such items.
3. Representations and Warranties. Debtor hereby represents and
-------------------------------
warrants to Secured Party that:
(a) The consolidated financial statement of Debtor, as of December
31, 1994, including the notes thereto, audited by Arthur Andersen & Co. copies
of which have been provided to Secured Party (the "Audited Financial
Statement"), except as reflected in the unaudited consolidated financial
statements of Debtor for the six months ended June 30, 1995, copies of which
have been provided to Secured Party (the "Unaudited Financial Statement," and
together with the Audited Financial Statement, the "Financial Statements"),
fairly presents the financial condition of Debtor as of the date thereof, there
has not been any material adverse change in the financial condition of Debtor
since the date thereof, and Debtor has no liabilities, fixed or contingent,
which are not fully shown or provided for in the Financial Statements as of the
respective dates thereof, except (i) as otherwise set forth in Exhibit B annexed
---------
hereto and made a part hereof, and (ii) obligations to perform after such dates
under contracts, purchase orders and other commitments incurred in the ordinary
course of business.
(b) Except as otherwise set forth in Exhibit C annexed hereto and
---------
made a part hereof, Debtor has or will have, when acquired, good and marketable
title to the Collateral free from any adverse liens, security interests or
encumbrances, and except for liens or charges in favor of Secured Party, no
financing statements, debentures or other types of charges covering all or any
part of the Collateral are on file in any governmental office, whether or not
properly filed under applicable law, and there are no liens, encumbrances or
charges on any of the other properties of Debtor, except as set forth in said
Exhibit C.
- ---------
5
<PAGE>
(c) IMA is a corporation duly organized, validly existing and in good
standing under the laws of the State of Connecticut, with all the requisite
corporate power and authority to own, operate and lease its properties and to
carry on its business as now being conducted and is duly qualified and in good
standing in every jurisdiction in which the property owned, leased or operated
by it or the nature of the business conducted by it makes such qualification
necessary.
(d) IMA Limited is a corporation duly organized and registered,
validly existing and in good standing under the laws of England, with all
requisite corporate power and authority to own, operate and lease its properties
and to carry on its business as now being conducted and is duly qualified and in
good standing in every jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification necessary.
(e) Except as disclosed on Exhibit D annexed hereto and made a part
---------
hereof, there are no judgements, decrees or orders outstanding or litigation or
governmental proceeding or investigation pending, or to the knowledge of the
officers of Debtor, threatened against Debtor which might have a material,
adverse effect upon Debtor's position, financial, operating or otherwise.
(f) Except for the 1994 income tax returns for which the due dates
have been extended to allow Debtor to finalize transfer pricing between IMA and
IMA Limited, Debtor has filed all tax returns and reports required to be filed
by it with the United States government, the British government, any other
foreign governments and all state, regional and local governments and has paid
in full or made adequate provision for the payment of all taxes, interest,
penalties, assessments or deficiencies shown to be due or claimed to be due on
or in respect of such tax returns and reports.
(g) The execution and delivery of this Agreement and each and every
other Loan Document has been duly authorized, are each valid, legal and binding
upon Debtor and enforceable against Debtor in accordance with their respective
terms.
(h) The execution and delivery of this Agreement and each and every
other Loan Document, the consummation of the transactions herein contemplated,
and the fulfillment of or compliance with the terms and provisions hereof and of
each and every other Loan Document: (i) are within Debtor's corporate powers,
(ii) are not in contravention of any provisions of IMA's Certificate of
Incorporation, IMA Limited's Memorandum and Articles of Association, any
amendments thereto, or of Debtor's respective By-Laws, (iii) will not conflict
with or result in a breach of or default under any of the terms, conditions or
provisions of any agreement, instrument or other undertaking to which Debtor is
a party or by which Debtor is bound, (iv) will not result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of Debtor's property or assets pursuant to the terms of any such agreement,
instrument or other undertaking, (v) do not require the consent or approval of
any governmental body, agency or authority which, if not obtained, will have a
material adverse affect on Debtor, its business or financial condition, and (vi)
will not violate the provisions of any laws or regulations of any governmental
instrumentality applicable to Debtor which, if violated, will have a material
adverse affect on Debtor, its business or financial condition.
(i) Debtor is not in default under any agreement, debenture, mortgage,
deed of trust, or any other agreement or any court order or other order issued
by any governmental regulatory authority to which it is a party or by which it
may be bound.
(j) The Collateral, the records relating thereto and the place of
business and chief executive offices of Debtor are all located at the addresses
of Debtor first hereinabove set forth, except
6
<PAGE>
that (i) certain Inventory is from time to time located at IMA's offices at
18101 Von Karman Avenue, Suite 1100, Irvine, California 92715, and (ii) certain
Equipment is located at the offices listed in Exhibit E annexed hereto and made
---------
a part hereof (provided, however, that the Equipment of Debtor located at
offices other than the addresses of Debtor first hereinabove set forth and the
foregoing California office of IMA does not constitute a material portion of all
Equipment owned by Debtor).
(k) Subject to any limitations stated therein or in connection
therewith, all information furnished or to be furnished by Debtor pursuant to
the terms hereof will not, at the time the same is furnished, contain any untrue
statement of a material fact and will not omit to state a material fact
necessary in order to make the information so furnished, in the light of the
circumstances under which such information is furnished, not misleading.
(l) The indebtedness of Debtor for money borrowed, as of the date
hereof, is as shown on Exhibit F annexed hereto and made a part hereof, and
---------
there does not exist any default with respect thereto, or an event which by the
passage of time, the giving of notice, or both, would constitute such a default,
and which would give rise to a right to accelerate such indebtedness.
(m) To the best of its knowledge, Debtor is in compliance with all
laws, ordinances, rules or regulations of all federal, foreign, state, regional
or local governments or any instrumentality or agency thereof relating to the
business of Debtor, including, but not limited to, the Employee Retirement
Income Security Act ("ERISA"), the United States Occupational Safety and Health
Act ("OSHA") and all federal, foreign, state, regional and municipal laws,
ordinances, rules and regulations relating to the environment.
(n) The executive officers, directors and holders of all the
outstanding stock of IMA are as shown on Exhibit G-1 annexed hereto and made a
-----------
part hereof.
(o) The executive officers, directors and holders of all the
outstanding stock of IMA Limited are as shown on Exhibit G-2 annexed hereto and
-----------
made a part hereof.
(p) IMA has no Subsidiaries and has not invested in the stock, common
or preferred, of any other corporation, other than as shown on said Exhibit G-1.
-----------
(q) IMA Limited has no Subsidiaries and has not invested in the stock,
common or preferred, of any other corporation, other than as shown on said
Exhibit G-2.
- ------------
(r) There are no fixed, contingent or other obligations on the part of
IMA to issue any additional shares of its capital stock, other than as described
in said Exhibit G-1.
-----------
(s) There are no fixed, contingent or other obligations on the part of
IMA Limited to issue any additional shares of its capital stock, other than as
described in said Exhibit G-2.
------------
(t) Exhibit H annexed hereto and made a part hereof sets forth all
---------
leases pursuant to which Debtor leases real or personal property of every nature
or description, the amount of rent payable under each such lease and the terms
thereof.
(u) Debtor is not a party to any agreement or instrument or subject to
any corporate restriction (including any restriction set forth in IMA's
Certificate of Incorporation or IMA
7
<PAGE>
Limited's Memorandum and Articles of Association) that materially and adversely
affects its operations, business, properties or financial condition.
(v) Debtor possesses all the trademarks, trade names, copyrights,
patents, licenses and governmental permits, licenses, orders and approvals, or
rights in any thereof, necessary for the conduct of its business as now
conducted and presently proposed to be conducted, without conflict of the rights
or claimed rights of others, and no action or filing with or consent by, any
Person or any governmental or public body or authority, is required to authorize
or is otherwise required in connection with the conduct of Debtor's business as
now and presently proposed to be conducted.
(w) Exhibit I annexed hereto and made a part hereof sets forth all
---------
trademarks, tradenames, copyrights, patents and licenses owned by Debtor.
(x) Except as set forth in Exhibit J annexed hereto and made a part
---------
hereof, Debtor conducts its business solely in its own name without the use of a
trade name or the intervention of or through any other entity of any kind.
4. Amount and Terms of Term Loan. Pursuant to the terms of this
-----------------------------
Agreement, and upon the satisfaction of the conditions precedent referred to in
Paragraph 13 hereof, Secured Party shall make the Term Loan to Debtor upon the
following terms and conditions:
(a) The Term Loan shall be in the amount of $2,500,000.00, shall be
advanced in full on the Closing Date, and shall be evidenced by Debtor's
promissory note (the "Term Note") in the form annexed hereto as Exhibit K,
----------
with appropriate insertions of names, dates and amounts.
(b) The Term Note shall be jointly, severally and unconditionally
guaranteed by the Guarantors.
(c) The Term Note shall bear interest at a fixed rate per annum equal
to 11.00% (the "Term Loan Contract Rate"). Interest shall be calculated on the
basis of a 360 day year, but shall be computed for the actual number of days in
each period for which interest is charged.
(d) As additional consideration for the extension of the Term Loan,
Debtor shall pay to Secured Party, in addition to scheduled payments of interest
calculated at the Term Loan Contract Rate and principal as described in the Term
Note, additional interest ("Additional Interest") which shall accrue and be
payable pursuant to the terms set forth in the Term Note.
(e) If repayment of the Term Note is accelerated after the occurrence
of an Event of Default, Debtor shall be obligated to pay to Secured Party, in
addition to interest calculated at the Term Loan Contract Rate, interest
calculated at a rate equal to two percent (2%) above the Term Loan Contract
Rate, principal, other charges and costs reserved under the Loan Documents, and
Additional Interest pursuant to the terms set forth in the Term Note.
(f) The outstanding principal balance of the Term Note, any accrued
but unpaid interest thereon and other sums due and payable pursuant to the Loan
Documents, including, without limitation Additional Interest, shall be due and
payable on the date (the "Term Loan Maturity Date") which is the earlier to
occur of (i) the last day of the 84th month following the Closing Date, (ii) the
date of closing of an Initial Public Offering, or (iii) the date repayment of
the Term Loan is accelerated after the occurrence of an Event of Default.
8
<PAGE>
(g) For the period from the Closing Date through the last day of the
24th month following the Closing Date (the "Term Loan Interest Only Period"),
interest only, calculated in arrears at the Term Loan Contract Rate, shall be
due and payable under the Term Note. Payments under the Term Note shall commence
on January 1, 1996, and interest only shall continue to be due and payable on
each April 1, July 1, October 1 and January 1 thereafter through the Term Loan
Interest Only Period.
(h) Commencing on November 1, 1997 and continuing on the first day of
each month thereafter through the Term Loan Maturity Date, monthly payments of
principal in the amount of $41,667.00 each, plus interest calculated in arrears
at Term Loan Contract Rate, shall be due and payable under the Term Note.
(i) The outstanding principal balance of the Term Loan may be prepaid
in whole or in part at any time, without additional cost or premium. If the Term
Note is prepaid in full prior to the scheduled Term Loan Maturity Date, Debtor
shall also pay to Secured Party on the date of such prepayment the amount of
Additional Interest due pursuant to the schedule set forth in the Term Note.
Provided no Event of Default has occurred, Secured Party shall apply all partial
prepayments under the Term Note to accrued but unpaid interest calculated at the
Term Loan Contract Rate, then to principal, and then to Additional Interest.
5. Amount and Terms of Line of Credit Loans. Pursuant to the terms of
-----------------------------------------
this Agreement, and upon the satisfaction of the conditions precedent referred
to in Paragraph 13 hereof, Secured Party shall make Line of Credit Loans to
Debtor, upon its request, which Line of Credit Loans in the aggregate shall not
exceed the lesser of (i) $6,000,000.00, or (ii) an amount equal to 75% of
Qualified Accounts. The Line of Credit Loans shall be made on the following
additional terms and conditions:
(a) The principal amount of the Line of Credit Loans, or such part
thereof as may be from time to time outstanding, shall be evidenced by Debtor's
promissory note (the "Line of Credit Note") in the form of Exhibit L annexed
---------
hereto and made a part hereof, with appropriate insertions of names, dates and
amounts. The Line of Credit Note shall be in the amount of up to $6,000,000.00.
Nothing contained in this subparagraph (a) shall be deemed to (i) prohibit
Secured Party from lending in excess of the stated principal amount of the Line
of Credit Note, (ii) delimit the definition of "Obligations" contained herein,
(iii) constitute a waiver, release or subordination by Secured Party of the
security interest in the Collateral herein granted by Debtor to Secured Party as
security for the Obligations, or (iv) require Secured Party to make a Line of
Credit Loan after the occurrence of an Event of Default.
(b) The Line of Credit Note shall be jointly, severally and
unconditionally guaranteed by the Guarantors.
(c) The aggregate principal amount of the Line of Credit Loans from
time to time outstanding shall bear interest at a fluctuating rate per annum
equal to the sum of (i) the Prime Rate, plus (ii) 1.00%. As of the Closing Date,
the Prime Rate is 8.75%, so that the initial rate of interest payable under the
Line of Credit Note shall be 9.75%. In the event the Prime Rate is either
increased or decreased, the rate of interest payable on the Line of Credit Loans
then outstanding shall be adjusted on the day the Prime Rate is so changed so as
to reflect such increase or decrease in the Prime Rate.
9
<PAGE>
(d) As of the Closing Date, the outstanding principal balance of the
Line of Credit Note is $4,000,000.00.
(e) Interest on the outstanding principal balance of the Line of
Credit Note shall be payable monthly on the first day of each month, commencing
on November 1, 1995, and shall be charged on the daily principal balance of the
Line of Credit Loans from time to time outstanding on the basis of a 360 day
year and shall be computed for the actual number of days for which interest is
being charged.
(f) The outstanding principal balance of the Line of Credit Note, any
accrued but unpaid interest thereon and other sums due and payable pursuant to
the Loan Documents, shall be due and payable on the date (the "Line of Credit
Maturity Date") which is the earlier to occur of (i) August 1, 1996, or (ii) the
date repayment of the Line of Credit Loans is accelerated after the occurrence
of an Event of Default, unless such Line of Credit Maturity Date is extended in
writing from time to time in Secured Party's sole and absolute discretion.
(g) The outstanding principal balance of the Line of Credit Loans may
be prepaid in whole or in part at any time, without additional cost or premium.
(h) Debtor hereby authorizes Secured Party to debit Debtor's operating
account with Secured Party for each scheduled monthly payment of interest and/or
principal owed under the Term Note or the Line of Credit Note.
(i) In the event Debtor desires a Line of Credit Loan, it may request
the same by delivering to Secured Party a request for advance, in the form of
Exhibit M annexed hereto and made a part hereof.
- ---------
(j) The Line of Credit Loans shall be made by Secured Party depositing
the proceeds thereof into Debtor's demand deposit account maintained by Debtor
with Secured Party.
(k) The Line of Credit Loans made by Secured Party to Debtor pursuant
to this Paragraph 5 shall be recorded in an account on the books of Secured
Party bearing Debtors' names ("Debtor's Account"). There shall also be recorded
in Debtor's Account all payments made by Debtor on the Line of Credit Loans,
proceeds of the Collateral received by Secured Party which are, in the exercise
of Secured Party's sole discretion, applied by Secured Party to the Line of
Credit Loans, interest and expenses and other appropriate debits and credits as
herein provided. Secured Party shall from time to time render and send to Debtor
a statement of Debtor's Account showing the outstanding aggregate principal
balance of the Line of Credit Loans, together with interest and other
appropriate debits and credits as of the date of the statement. The statement of
Debtor's account shall be considered correct in all respects and accepted by and
be conclusively binding upon Debtor unless Debtor makes specific written
objections thereto within 15 days after the date the statement of Debtor's
Account is sent by Secured Party.
6. Affirmative Covenants. Debtor covenants and agrees that, from the
----------------------
Closing Date until full payment of the Obligations, unless Secured Party
otherwise agrees in writing, Debtor shall:
(a) Maintain (i) at least a 1.10 to 1.00 ratio of current assets to
current liabilities (excluding from such calculation Deferred Revenue), (ii) a
net working capital (excluding from such
10
<PAGE>
calculation Deferred Revenue) of not less than $700,000.00, and (iii) a Tangible
Net Worth plus subordinated debt of not less than $5,000,000.00.
(b) Pay and discharge all taxes, general and special, charges and
assessments, and other governmental obligations, which may have been or shall be
levied, charged or assessed on or against Debtor, its property, or its income or
profits before they become delinquent, and pay and discharge on or before their
due date any and all other lawful claims and demands whatsoever, including, but
not limited to, trade obligations; provided, however, that the payment of any
-------- -------
such taxes, assessments, governmental obligations or other claims and demands
may be postponed so long as they or any of them are being diligently contested
in good faith and by appropriate proceedings, appropriate reserves have been
provided therefor by Debtor and no lien is placed on any assets of Debtor in
connection with such taxes, assessments, governmental obligations or other
claims or demands so contested by Debtor.
(c) Maintain:
(i) Insurance on its properties against loss by fire and all
available extended coverage risks in such amounts and with such insurers as
may be satisfactory to Secured Party, which insurance shall by the terms of
the policy provide that (x) in the event of loss or damage, if any, the
proceeds thereof shall be payable to Secured Party, as the holder of a
security interest, mortgage or other lien or interest in the personal or
real property of Debtor insured under the policy, as Secured Party's
interest may appear; (y) the insurance, as to the interest of Secured
Party, shall not be invalidated by any act or neglect of Debtor, its
directors, officers, agents or employees, by any foreclosure or other
proceeding, or notice of sale relating to the Collateral or any of it, by
any change in the title or ownership of the Collateral, or any of it, or by
the occupation of the premises where the Collateral, or any of it, is
located for purposes more hazardous than are permitted by the policy; and
(z) the coverage shall not be cancelled, for whatever reason, unless the
insurer has given Secured Party not less than 30 days prior written notice
of cancellation, which notice shall specify the reason for cancellation.
Debtor shall cause the insurer to supply to Secured Party certificates, or
other evidence of insurance satisfactory to Secured Party, indicating
compliance with the foregoing, including evidence of continuation thereof
no later than 30 days prior to the expiration of any policy of insurance.
Secured Party shall have the right to apply the proceeds of any such
insurance in reduction of the Obligations, whether or not then due and
payable, in such manner as Secured Party in its sole discretion may
determine or to pay over, at such times and in such amounts, such proceeds
or part thereof, as Secured Party in its sole discretion may determine, to
Debtor for the purpose of replacing the Collateral affected by any loss
relating thereto;
(ii) General public liability insurance against claims for
personal injury, death or property damage in such amounts as are
satisfactory to Secured Party; and
(iii) Worker's Compensation insurance in statutory amounts.
(d) Maintain and preserve the Collateral in good order and condition
and not permit or suffer the Collateral to be wasted or destroyed (ordinary wear
and tear excepted).
(e) Furnish to Secured Party:
11
<PAGE>
(i) Within 120 days after the end of Debtor's fiscal years
following the Closing Date, audited, consolidated financial statements,
including Debtor's balance sheet, statement of operations, statement of
cash flows and statements of stockholders' equity. Each such financial
statement shall set forth in each case in comparative form the
corresponding figures for the preceding fiscal year, all in reasonable
detail, including all supporting schedules, comments and notes, shall be
audited and prepared by independent certified public accountants of
recognized standing selected by Debtor and satisfactory to Secured Party,
and shall be prepared in accordance with generally accepted accounting
principles consistently applied from year to year;
(ii) Simultaneously with the delivery of the financial
statement required in subparagraph (i) above, a written statement,
addressed to Secured Party, executed by authorized officers of Debtor,
indicating that the audit and preparation of the financial statements have
not revealed any Event of Default, whether or not cured at the time of such
examination, or disclosing all such Events of Default of which Debtor has
obtained knowledge;
(iii) Within 45 days after the end of the first, second and
third fiscal quarters of each year following the Closing Date, management
prepared consolidated balance sheets as of the end of such fiscal quarter
and the end of the corresponding fiscal quarter of the preceding fiscal
year, and a consolidated statement of operations and cash flows for the
period between the end of the last fiscal year and the end of such fiscal
quarter and for the corresponding period of the preceding fiscal year,
certified by authorized officers of Debtor as presenting fairly the
consolidated financial position of Debtor, the results of its operations
and the changes in its financial position as of the end of each such fiscal
quarter, subject only to normal recurring year-end adjustments which will
not, either singly or in the aggregate, have a material adverse effect on
Debtor's financial condition;
(iv) Concurrently with the delivery of any and all financial
statements required by this Agreement, a certificate by the respective
president, secretary or treasurer of IMA and IMA Limited, stating that to
the best of his/her knowledge and belief, all taxes, assessments and
charges levied upon IMA or IMA Limited, as the case may be, which have
become due have been paid, or specifying any such taxes, assessments or
charges which have not been paid and stating why they remain unpaid, and
stating that he/she has reviewed each and every duty and obligation of
Debtor hereunder and under the other Loan Documents and that no Event of
Default has occurred, or specifying each Event of Default of which the
signer has knowledge and setting forth what action has been taken to cure
any such Event of Default;
(v) On or before the 15th day of each month, a detailed
written report, in form satisfactory to Secured Party, showing as of the
end of the immediately preceding calendar month, all the Accounts of
Debtor, including the name and address of each account debtor and an aging
of such Accounts, and, when requested by Secured Party, a copy of each and
every invoice of Debtor giving rise to an Account, and , from time to time
as required by Secured Party, such other reports or other information
relating to the Accounts as Secured Party may request in writing;
(vi) Promptly upon Secured Party's request, a copy of each and
every report required to be filed by Debtor with the Internal Revenue
Service or any other federal, foreign, state, regional or local
governmental unit with repsect to income taxes and payroll
12
<PAGE>
taxes withheld from or required to be paid on account of Debtor's
employees' pay and a copy of every depository receipt evidencing the
deposit of the same;
(vii) Promptly upon the issuance thereof, a copy of all orders
issued by any federal, foreign, state, regional or local regulatory
authority under any laws or regulations adopted thereby, which, if
enforced, would have a material, adverse effect upon the condition of
Debtor, whether financial, operating or otherwise, all reports or other
materials filed with or issued by the Securities and Exchange Commission or
other federal, foreign, state or regional governmental authority having
supervisory power over the securities offered by Debtor, and all reports,
notices or statements sent to Debtor's stockholders by Debtor;
(viii) Promptly upon the filing, issuance or receipt thereof,
copies of (A) all annual reports with respect to all pension or other
employee benefit plans (collectively referred to as the "Plans" and
individually as the "Plan") of Debtor, subject to ERISA or any equivalent
or similar English law, rule or regulation, filed by or on behalf of Debtor
with the Secretary of Labor, the Internal Revenue Service, the Pension
Benefit Guaranty Corporation (the "PBGC") or any other federal or foreign
governmental authority, (B) all notices, reports, determinations or
statements to or from the PBGC or any other federal or foreign governmental
authority with respect to the occurrence of a reportable event, as
determined in subsections (1), (2), (3), (4), (5), (6), (7), (8), or (9) of
section 4043(b) of ERISA and regulations issued thereunder, or as
determined under any equivalent or similar English law, rule or regulation,
(C) all reports submitted to Debtor and/or the Internal Revenue Service or
any other federal or foreign governmental authority by any actuary with
respect to any of the Plans, (D) all notices of Plan termination or
requests for determination letters in connection therewith filed by Debtor,
any Plan Administrator (as such terms as defined in ERISA or under any
equivalent or similar English law, rule or regulation) or trustee or
custodian of any accounts of any Plan with the PBGC, the Internal Revenue
Service and/or any other federal or foreign governmental authority, and (E)
all requests to waive the minimum funding standard or extension of
amortization periods submitted to the Secretary of the Treasury; and
(ix) Promptly upon Secured Party's request therefor, such
other information relating to Debtor and its affairs as Secured Party may
from time to time request.
(f) Maintain its properties in working order and good condition and
make all needed and proper repairs, renewals, replacements, additions or
improvements thereto and immediately notify Secured Party of any event causing a
material loss or depreciation in the value of the Collateral and the amount of
such loss or depreciation.
(g) Allow Secured Party by or through any of its officers, agents,
attorneys or accountants designated by it, for the purpose of ascertaining
whether or not each and every provision hereof and of the other Loan Documents
is being performed and for the purpose of examining the Collateral and the
records relating thereto, and for the purpose of performing an updated audit of
Accounts, after notice to Debtor and without disruption of Debtor's business, to
enter the offices and plants of Debtor to examine or inspect any of the
properties, books and financial records of Debtor, to make copies of such books
and records or extracts therefrom, and to discuss the affairs, finances and
accounts of Debtor with officers or knowledgeable representatives of Debtor, all
at such reasonable times and as often as Secured Party may reasonably request.
Debtor shall reimburse Secured Party for the reasonable costs and out-of-pocket
expenses associated with any updated audit of Accounts performed by or on behalf
of Secured Party up to an amount of $3,500.00 for each audit; provided,
---------
13
<PAGE>
however, that prior to the occurrence of an Event of Default, Debtor shall be
- -------
obligated to reimburse Secured Party for no more than three Accounts audits per
fiscal year plus out-of-pocket expenses relating thereto.
(h) Defend the Collateral against all claims and demands of all
persons at any time claiming the same or any interest therein and, in the event
Secured Party's security interest in the Collateral, or part thereof, would be
impaired by an adverse decision, allow Secured Party to contest or defend any
such claim or demand in Debtor's name and pay to Secured Party, upon demand,
Secured Party's reasonable costs, charges and expenses, including, but not
limited to, attorneys' fees, incurred by Secured Party in connection therewith.
(i) Pay to Secured Party, on demand, any and all reasonable expenses,
including attorneys' fees, incurred or expended by Secured Party in preparation
of this Agreement and all other Loan Documents, in making or processing the Term
Loan and the Line of Credit Loans, in the collection or attempted collection of
the Obligations and in protecting and/or enforcing the rights of Secured Party
against Debtor and sustaining and/or enforcing the security interest and other
liens, if any, granted to Secured Party hereunder and under all other Loan
Documents.
(j) From time to time, at the request of Secured Party, execute,
deliver and file one or more financing statements on Form UCC-1, appropriate
debentures and other arrangements, instruments or documents, and do all other
acts as Secured Party deems necessary or desirable to perfect fully its security
interest in the Collateral and pay, upon demand, all reasonable expenses,
including, but not limited to, attorneys' fees, incurred by Secured Party in
connection therewith.
(k) Keep complete and accurate books and records concerning the
Collateral, and pertaining to the Obligations and Debtor's duties, obligations
and covenants under this Agreement.
(l) Comply with all laws, ordinances and rules and regulations
applicable to Debtor of any federal, foreign, state, regional or local
government or any instrumentality or agency thereof, including, but not limited
to, ERISA, OSHA, and federal, foreign, state, regional and municipal laws,
ordinances, rules and regulations concerning the environment, except to the
extent any such law, ordinance, rule or regulation is being contested in good
faith by appropriate proceedings, provided that said contest or an adverse
decision therein will not have a material adverse effect on the condition,
financial, operating or otherwise of Debtor.
(m) INTENTIONALLY DELETED.
(n) Maintain key-man life insurance covering the lives of each of the
Guarantors in face amount equal to at least $1,000,000.00 each; and
(o) Promptly advise Secured Party of the happening of an Event of
Default or the existence of a state of facts which by the passage of time, the
giving of notice, or both, would constitute an Event of Default.
7. Negative Covenants. Debtor covenants and agrees that, from the Closing
-------------------
Date until full payment of the Obligations, unless Secured Party shall otherwise
consent in writing, Debtor shall not:
14
<PAGE>
(a) Sell, lease, mortgage, pledge or otherwise dispose of or encumber
the Collateral or any of its other properties (other than the disposition of
Inventory permitted by Paragraph 9 hereof and except for liens and encumbrances
required or permitted hereby), except for (i) liens set forth in Exhibit C
---------
annexed hereto and made a part hereof; (ii) liens for taxes not delinquent; and
(iii) attachments or other liens in connection with litigation, provided the
same are removed within 45 days after recordation or filing.
(b) Declare or pay any dividends or make any other distributions on
any shares of its capital stock (other than dividends payable solely in such
shares), or purchase, redeem, retire or otherwise acquire, directly or
indirectly, any such shares.
(c) Create or assume any obligations for money borrowed from any
Person other than Secured Party.
(d) Loan, make advances, endorse, guaranty, or become surety for the
obligations of any Person, except for (i) the making of loans or advances in the
ordinary course of business which at no time in the aggregate exceed
$15,000,000, and (ii) the endorsement of checks in the ordinary course of
business.
(e) Purchase or otherwise acquire any securities, except obligations
of the United States Government or certificates of deposit issued by a
commercial bank having total assets of not less than $50,000,000.00, provided
that securities with an aggregate value when acquired of $50,000.00 or more
(whether acquired in one or a related series of transactions over a 12 month
period) must be pledged to and deposited with Secured Party simultaneously with
their purchase.
(f) Enter into any transactions with any of its Affiliates other than
in the ordinary course of business and on terms no less favorable to Debtor than
are at the time available to it form non-Affiliates.
(g) Enter into any merger or consolidation, or sell all or
substantially all of Debtor's assets, or liquidate, dissolve or otherwise
terminate or alter Debtor's existence, form or method of conducting Debtor's
business.
(h) Change corporate names, adopt any trade names, or conduct business
under any trade name or style other than as hereinabove set forth, without
first providing Secured Party with at least 30 days advance written notice
thereof.
(i) Change its chief executive offices, places of business or the
present locations of the Collateral or the records relating to the Collateral
without (x) first providing Secured Party with at least 30 days advance written
notice thereof, (y) executing and delivering to Secured Party, as soon as
practicable following Secured Party's request but in no event later than the
date of such change, any and all documents reasonably requested by Secured Party
to perfect, continue and effectuate the security interests granted hereby,
including, without limitation, assignments of leases, landlord's consents and
UCC-1 financing statements, and (z) reimbursing Secured Party, within five days
of Secured Party's request, for reasonable expenses incurred by Secured Party in
connection therewith;
(j) Issue shares of capital stock, or permit the transfer of shares of
capital sock, which result in the Guarantors, as a group, owning (on a fully
diluted basis) less than 25% of the outstanding common stock of IMA.
15
<PAGE>
(k) Acquire, form or dispose of any Subsidiaries or acquire all or
substantially all of the assets of any other Person or any portion of the assets
of any other Person which constitutes a division, product line or line of
business.
(l) Pay salaries or other compensation (including bonuses and
benefits) to the Guarantors in any calendar year in an aggregate amount in
excess of $850,000.00
(m) Purchase or otherwise acquire fixed assets including, without
limitation, land, buildings, fixtures, or Equipment in any fiscal year involving
expenditures or commitments, in the aggregate and on a non-cumulative basis, in
excess of $750,000.00 in the fiscal year commencing January 1, 1995 or
$500,000.00 in any fiscal year commencing after January 1, 1996.
8. Payments by Secured Party. At its option, Secured Party may pay for
-------------------------
insurance on the Collateral and taxes, assessments or other charges which Debtor
fails to pay in accordance with the provision hereof or any other Loan Document,
and may discharge any security interest in or lien or charge upon the
Collateral. No such payment or discharge of any such security interest, lien or
charge shall be deemed to constitute a waiver by Secured Party of the violation
of any covenant by Debtor as a result of Debtor's failure to make any such
payment or Debtor's suffering of any such security interest, lien or charge. Any
reasonable payment made or expense incurred by Secured Party pursuant to this or
any other provision of this Agreement shall be added to and become a part of the
Obligations of Debtor to Secured Party, shall bear interest at the "default
rate" defined in the Line of Credit Note and shall be payable on demand.
9. Use of Inventory. Until the happening of an Event of Default, Debtor
----------------
may use the Inventory in any lawful manner not inconsistent with this Agreement
or with the terms or conditions of any policy of insurance thereon and may also
sell, lease or consume the Inventory in the ordinary course of business. A sale
in the ordinary course of business does not include a bulk transfer or a
transfer as security for or in partial or total satisfaction of a debt.
10. Rights of Secured Party; Notices. When the Obligations, or any of them
---------------------------------
become immediately due and payable, whether by reason of the occurrence of an
Event of Default or otherwise, Secured Party may pursue any legal remedy
available to it to collect the Obligations outstanding at said time, to enforce
its rights hereunder, and to enforce any and all other rights or remedies
available to it both under the UCC and otherwise, including, but not limited to,
the right to take possession of the Collateral and dispose of the same on
Debtor's premises, all without judicial process, Debtor hereby waiving any right
Debtor might otherwise have to require Secured Party to resort to judicial
process and further waiving Debtor's right to notice and hearing under the
Constitution of the United States or any state or under any federal, foreign,
state or regional law, and no such action shall operate as a waiver of any other
right or remedy of Secured Party under the terms hereof or any other Loan
Document, or at law or in equity, all rights and remedies of Secured Party being
cumulative and not alternative. In addition, Secured Party may require Debtor to
assemble the Collateral and make it available to Secured Party at a place to be
designated by Secured Party which is reasonably convenient to all parties. In
the event reasonable notice is required to be given by Secured party to Debtor
under the provisions of the UCC, such notice shall be deemed to have been given
if mailed, postage prepaid, certified mail, return receipt requested, at least
seven days prior to the happening of the event for which such notice is being
given, to Debtor at the addresses first hereinabove written. Any notice required
to be given by Secured Party to Debtor or by Debtor to Secured Party, pursuant
to the terms hereof, shall be deemed to have been given (except as otherwise
specifically provided in this Agreement) upon mailing the same, postage prepaid,
certified mail, return
16
<PAGE>
receipt requested, to Debtor or Secured Party, as the case may be, at its
addresses first hereinabove written. Any of the parties hereto may notify the
others that any such notice shall be given to such other address as such party
may so instruct by written notice similarly given.
11. Collection of Accounts. Debtor shall, when requested by Secured Party
----------------------
and after the happening of an Event of Default:
(a) Assign or endorse the Accounts to Secured Party, and notify
account debtors that the Accounts have been assigned and should be paid directly
to Secured Party;
(b) Turn over to Secured Party all Inventory returned in connection
with any of the Accounts;
(c) Mark or stamp each of its individual ledger sheets or cards
pertaining to its Accounts with the legend "Assigned to PEOPLE'S BANK" and stamp
or otherwise mark and keep its books, records, documents and instruments
relating to the Accounts in such manner as Secured party may require; and
(d) Mark or stamp all invoices with a legend satisfactory to Secured
Party so as to indicate that the same should be paid directly to Secured Party.
Notwithstanding the foregoing, Secured Party shall have the right, at
any time, whether before or after the happening of an Event of Default, to
itself so notify such account debtors to make such payments of the Accounts
directly to Secured Party and Secured Party shall have the further right to
notify the post office authorities to change the address for delivery of mail of
Debtor to an address designated by Secured Party and to receive, open and
dispose of all mail addressed to Debtor.
For the purposes of this Paragraph 11, Debtor hereby irrevocably
constitutes Secured Party as Debtor's attorney-in-fact to issue in the name and
execute or endorse on behalf of Debtor each and every notice, instrument and
document necessary to carry out the purposes of the provisions of this Paragraph
11 and to take such action in connection with the collection of the Accounts,
including, but not limited to, suing thereon, compromising or adjusting the
same, as Secured Party, in its sole discretion, deems necessary. The power of
attorney granted hereby shall be self-executing, but Debtor shall promptly
execute and deliver to Secured Party, upon written request of Secured Party such
additional separate powers of attorney, as Secured Party may from time to time
reasonably request.
12. Default Provisions.
-------------------
(a) The Term Note and the Line of Credit Note shall forthwith become
due and payable, without presentment, protest, demand or notice of any kind, if
Debtor or any of the Guarantors (i) becomes insolvent (including in said term an
inability to pay its debts as they mature),(ii) bankrupt, (iii) makes an
assignment for the benefit of its/his creditors, (iv) consents to the
appointment of a trustee or receiver of all or a substantial part of its/his
properties or such appointment is made without its/his consent, or (v) is the
subject of any other voluntary or involuntary bankruptcy, reorganization,
arrangement, receivership or liquidation proceedings;
17
<PAGE>
(b) In addition, Secured Party may at its option declare the Term
Note and Line of Credit Note due and payable whereupon the same shall become due
and payable forthwith, without presentment, protest, demand or notice of any
kind in any of the following cases:
(i) If any payment of principal or interest or any other
payment required by the terms hereof or by the Term Note, the Line of
Credit Note or any other Loan Document shall not be fully paid on the date
payment shall be due;
(ii) If any payment of principal or interest or any other
payment, the amount of which exceeds $25,000.00, required by any of the
obligations of Debtor for money borrowed by it from any third Person shall
not be fully paid when demand is made for the payment of the same (to the
extent payable on demand) or when the same shall be due, or if any of said
obligations shall become or be declared in default;
(iii) If any warranty or representation by Debtor or any of the
Guarantors contained herein, in any other Loan Document or in any statement
furnished by Debtor or any of the Guarantors to Secured Party proves
incorrect in any material respect;
(iv) If IMA issues shares of capital stock, or permits the
transfer of shares of its capital stock, which results in the Guarantors,
as a group, owning (on a fully diluted basis) less than 25% of the
outstanding common stock of IMA;
(v) If default exists in the due observance of any of the
other duties, obligations, covenants or agreements of Debtor or any of the
Guarantors set forth in this Agreement or in any other Loan Document, and
Debtor or the Guarantors, as applicable, fail to cure such default within
15 days following receipt of written notice thereof from Secured Party; and
(vi) If a judgment for an amount in excess of $25,000.00 is
entered against Debtor and remains unsatisfied for a period of 30 days.
13. Conditions Precedent to Making the Term Loan and Initial Line of
----------------------------------------------------------------
Credit Loan.
- -----------
(a) On or prior to the Closing Date, Secured Party shall have actually
received from the party or parties designated below in form and content
satisfactory to Secured Party:
(i) The initial audit of Debtor's Accounts;
(ii) A search (including a Form UCC-11) of the records of all
offices or recording locations showing all financing statements, debentures
or charges against Debtor;
(iii) A currently dated certified copy of the resolutions of
the Boards of Directors of IMA and IMA Limited, authorizing the proper
officers of each to execute and deliver this Agreement and all other Loan
Documents;
(iv) The Term Note and Line of Credit Note, executed by
Debtor;
(v) Guaranty Agreements executed by each of the Guarantors;
18
<PAGE>
(vi) Reimbursement of all of Secured Party's expenses;
(vii) A certificate or other proof of insurance satisfactory to
Secured Party evidencing compliance with the provisions of subparagraph (c)
of Paragraph 6 of this Agreement;
(viii) A certificate of the Secretary of IMA and the Secretary
of IMA Limited which shall certify the names of its officers authorized to
sign and deliver to Secured Party requests for advances, together with the
true signature of each such officer. Secured Party may conclusively rely on
such certificate until it shall receive a further certificate of such
Secretaries canceling or amending the prior certificate and submitting the
name and signature of each officer named in such further certificate as
being authorized to so sign and deliver such requests on behalf of Debtor;
(ix) Such financing statements or debentures executed by
Debtor as Secured Party requests, to be filed in all offices necessary to
perfect the security interest of Secured Party in and to the Collateral;
(x) A waiver executed by Debtor and the Guarantors with
respect to any rights under federal, foreign, state or regional law which
it or they might otherwise have to any hearing prior to the exercise by
Secured Party of its rights against it, any of them, or their respective
properties;
(xi) An agreement by each of the Guarantors subordinating
Debtor's indebtedness to them, whether now existing or hereafter arising,
to the repayment of the Obligations;
(xii) An agreement executed by Wand/IMA Investments, L.P.
subordinating Debtor's indebtedness to it to the repayment of the
Obligations;
(xiii) INTENTIONALLY DELETED;
(xiv) A collateral assignment of Debtor's trademarks, patents
and copyrights;
(xv) A collateral assignment of Debtor's rights, as "lessee,"
under leases relating to the real property located in Shelton, Connecticut,
Irvine, California and any other location where Debtor leases office space,
together with the consent of the owners of such real property;
(xvi) UCC-3 Termination Statements in connection with any
outstanding liens on the Collateral;
(xvii) A collateral assignment of life insurance policies
referred to in subparagraph (n) of Paragraph 6 above;
(xviii) Copies of the Memorandum and Articles of Association of
IMA Limited, certified as current and complete;
19
<PAGE>
(xix) To the extent available, evidence of legal existence and
good standing of IMA Limited under the laws of England;
(xx) An opinion letter addressed to Secured Party from counsel
satisfactory to Secured Party in form and substance satisfactory to Secured
Party; and
(xxi) Any other document or information reasonably required by
Secured Party;
(b) At the time of each request for a Line of Credit Loan:
(i) Secured Party shall have determined in the exercise of
its reasonable discretion that there has been no material, adverse change
in the financial position of Debtor or the Guarantors from that which
existed on the date of the most recent financial statements provided to
Secured Party by Debtor and the Guarantors;
(ii) The other representations and warranties set forth in
Paragraph 3 of this Agreement shall be true and correct on and as of such
time to the same effect as though such representations and warranties had
been made on and as of such time;
(iii) Debtor shall be in compliance with all the terms and
provisions set forth in this Agreement and in any other Loan Document, and
no Event of Default shall be in existence at such time; and
(iv) Debtor shall have actually made a request for such
borrowing by written or telefax notice as provided herein or shall have
actually delivered to Secured Party a written request for advance. Any such
request for a Line of Credit Loan shall constitute an affirmation by Debtor
as to the matters set forth in (i) and (ii) above.
14. Set-Off. Debtor hereby grants to Secured Party a lien on and a right of
-------
set-off against all monies, deposits and securities and the proceeds thereof,
now or hereafter held or received by, or in transit to, Secured Party from or
for Debtor, whether for safekeeping, pledge, custody, transmission, collection
or otherwise, and all deposits (general or special), balances, sums and credits
with and all claims of Debtor against Secured Party at any time existing.
Secured Party may at any time apply the same or any part thereof to the
Obligations, or any part thereof, whether or not matured at the time of such
application.
15. Limitation on Liability of IMA Limited. Debtors and Secured Party
--------------------------------------
hereby agree that the liability of IMA Limited under the Loan Documents shall be
limited to an amount equal to the greater of (i) the aggregate amount of
Qualified Accounts of IMA Limited represented on a request for an advance, and
(ii) the aggregate value of the IMA Limited collateral on the date an Event of
Default occurs, such value to be determined by Secured Party in the exercise of
its reasonable discretion; provided, however, that the foregoing provisions
-------- -------
shall not (i) release or impair the Obligations, (ii) affect or limit the right
of Secured Party to pursue all rights and remedies or otherwise realize on any
Collateral, or (iii) limit the liability of IMA or the Guarantors.
20
<PAGE>
16. General Provisions.
------------------
(a) No delay or failure of Secured Party in exercising any right,
remedy, power or privilege hereunder shall affect such right, remedy, power
or privilege, nor shall any single or partial exercise preclude any further
exercise thereof or the exercise of any other rights, remedies, powers or
privileges;
(b) This Agreement, the security interest hereby granted to Secured
Party by Debtor and every representation, warranty, covenant, promise and
other term herein contained shall survive until the Obligations have been
paid in full;
(c) This Agreement is an integrated document and all terms and
provisions are embodied herein and the other Loan Documents and shall not
be varied by parol;
(d) This Agreement is made, executed and delivered in the State of
Connecticut, and it is the specific desire and intention of the parties
that it shall in all respects be construed under the laws of the State of
Connecticut;
(e) The captions for the paragraphs contained in this Agreement have
been inserted for convenience only and form no part of this Agreement and
shall not be deemed to affect the meaning or construction of any of the
covenants, agreements, conditions or terms hereof;
(f) This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, provided,
however, that Debtor shall not assign, voluntarily, by operation of law or
otherwise, any of its rights or obligations hereunder without the prior
written consent of Secured Party, and any such attempted assignment without
such consent shall be null and void.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and
seals, and to a duplicate instrument of the same tenor at Hartford, Connecticut,
the day and year first above written.
Signed, Sealed, and Delivered
in the Presence of:
/s/[SIGNATURE APPEARS HERE] INFORMATION MANAGEMENT
- --------------------------- ASSOCIATES, INC.
/s/ Noelle Cooper By:/s/ Gary R. Martino
- --------------------------- ------------------------------
Its Chairman & CFO
(signatures continued next page)
21
<PAGE>
INFORMATION MANAGEMENT
ASSOCIATES LIMITED
/s/ Noelle Cooper By: /s/ Gary R. Martino
- ------------------------------ --------------------------------
Its Director
/s/ [SIGNATURE APPEARS HERE]
- ------------------------------
PEOPLE'S BANK
[SIGNATURE APPEARS HERE] By: /s/ David P. Berey
- ------------------------------ ----------------------------
David P. Berey
Its Vice President
/s/ Noelle Cooper
- ------------------------------
STATE OF CONNECTICUT)
) ss. Hartford
COUNTY OF HARTFORD )
On this 26th day of October, 1995, personally appeared Gary R. Martino, as
Chairman of INFORMATION MANAGEMENT ASSOCIATES, INC., signer and sealer of the
foregoing instrument, and acknowledged the same to be his/her free act and deed
and the free act and deed of said corporation, before me.
/s/ Robert W. McKay
----------------------------------
Robert W. McKay
Commissioner of the Superior Court
22
<PAGE>
STATE OF CONNECTICUT)
) ss. Hartford
COUNTY OF HARTFORD )
On this 26th day of October, 1995, personally appeared Gary R. Martino, as
Director of INFORMATION MANAGEMENT ASSOCIATES LIMITED, signer and
- --------
sealer of the foregoing instrument, and acknowledged the same to be his/her free
act and deed and the free act and deed of said corporation, before me.
/s/ [SIGNATURE APPEARS HERE]
----------------------------------
Commissioner of the Superior Court
STATE OF CONNECTICUT)
) ss.
COUNTY OF HARTFORD )
On this 26th day of October, 1995, personally appeared David P. Berey, as
Vice President of PEOPLE'S BANK, signer and sealer of the foregoing instrument,
and acknowledged the same to be his/her free act and deed and the free act and
deed of said state banking corporation, before me.
/s/ [SIGNATURE APPEARS HERE]
----------------------------------
Commissioner of the Superior Court
23
<PAGE>
EXHIBIT 10.39
TERM LOAN PROMISSORY NOTE
$2,500,000.00 Hartford, Connecticut October 26, 1995
- --------------------------------------------------------------------------------
FOR VALUE RECEIVED, INFORMATION MANAGEMENT ASSOCIATES, INC., a Connecticut
corporation ("IMA"), and INFORMATION MANAGEMENT ASSOCIATES LIMITED, a company
registered in England ("IMA Limited" and together with IMA, "Maker"), jointly
and severally (subject to the limitations on the liability of IMA Limited
contained herein) promise to pay to the order of PEOPLE'S BANK, a Connecticut
banking corporation (the "Bank" and together with any subsequent holder of this
Note, "Holder"), at its chief executive office at 850 Main Street, Bridgeport,
Connecticut 06604-4913, or at such other place as may be designated in writing
from time to time by Holder, the principal sum of Two Million, Five Hundred
Thousand and 00/100 Dollars ($2,500,000.00), together with interest accruing on
the unpaid balance of the indebtedness evidenced by this Note at a fixed rate
per annum equal to eleven percentage (11.00%) (the "Contract Rate"). Interest
shall be charged on the principal balance from time to time outstanding on the
basis of the actual number of days elapsed computed on the basis of a three
hundred sixty (360) day year. Upon the occurrence of an Event of Default under
the Loan Agreement (as defined below), all sums outstanding hereunder shall bear
interest at a rate which is two (2) percentage points above the otherwise
applicable rate hereunder. The principal amount of the indebtedness evidenced by
this Note has been advanced by Holder to Maker on the date of this Note (the
"Closing Date") pursuant to the terms of a Loan and Security Agreement dated
October 26, 1995, among Maker and Holder (the "Loan Agreement"), and this Note
is subject in all respects to the terms and conditions of the Loan Agreement.
Defined terms not otherwise defined in this Note shall have the meanings
ascribed to such terms in the Loan Agreement.
For the period from the Closing Date through the last day of the 24th month
following the date of this Note (the "Interest Only Period"), interest only,
calculated in arrears at the Contract Rate, shall be due and payable by Maker to
Holder. Payments hereunder shall commence on January 1, 1996, and interest only
shall continue to be due and payable by Maker to Holder on each April 1, July 1,
October 1 and January 1 thereafter through the Interest Only Period.
Commencing on November 1, 1997 and continuing on the first day of each
month thereafter through the Term Loan Maturity Date (as defined below), monthly
payments of principal in the amount of $41,667.00 each, plus interest calculated
in arrears at Contract Rate, shall be due and payable by Maker to Holder.
As additional consideration for the extension of credit to Maker by Holder
as evidenced by this Note, Maker hereby agrees to pay to Holder, in addition to
scheduled payments of interest calculated at the Contract Rate and principal as
described herein, an additional payment (herein referred to as "Additional
Interest"), which shall be determined as follows:
<PAGE>
<TABLE>
<CAPTION>
Period During which Indebtedness Total Additional Interest
Evidenced by this Note is Paid Accrued and Payable upon
in Full Payment of Indebtedness in
-------------------------------- Full
--------------------------
<S> <C>
November 1, 1995 through
April 30, 1996 $100,000.00
May 1, 1996 through
October 31, 1996 $200,000.00
November 1, 1996 through
April 30, 1997 $325,000.00
May 1, 1997 through
October 31, 1997 $450,000.00
</TABLE>
For the period from and after November 1, 1997 through the date the
indebtedness evidenced by this Note is paid in full, Additional Interest,
calculated on the average outstanding principal balance of this Note for the six
calendar month period immediately preceding the date of determination, shall
accrue at a fixed per annum rate equal to nine percent (9.00%).
If the indebtedness evidenced by this Note is paid in full on or before
October 31, 1998, Maker shall pay to Holder on the date of such repayment in
full, in addition to the outstanding principal balance of the indebtedness
evidenced by this Note and any accrued but unpaid interest thereon calculated at
the Contract Rate, the amount of Additional Interest payable pursuant to the
terms set forth above.
If the indebtedness evidenced by this Note is not paid in full on or before
October 31, 1998, then Maker shall pay to Holder on November 1, 1998 (the
"Scheduled Additional Interest Payment Date"), in addition to the scheduled
monthly payment of principal and interest calculated at the Contract Rate,
Additional Interest in an amount equal to the sum of (i) $450,000.00, plus
(ii) Additional Interest for the period from November 1, 1997 through October
31, 1998 calculated pursuant to the terms set forth above.
Additional Interest shall continue to accrue after the Scheduled Additional
Interest Payment Date pursuant to the terms set forth above, and shall be
payable on the earlier of (i) the date of payment in full of the indebtedness
evidenced by this Note, or (ii) the scheduled Term Loan Maturity Date.
If repayment of the indebtedness evidenced by this Note is accelerated
after the occurrence of an Event of Default, Additional Interest shall continue
to accrue pursuant to the terms set forth above until repayment of said
indebtedness in full.
The outstanding principal balance of the indebtedness evidenced by this
Note, any accrued but unpaid interest thereon and other sums due and payable
pursuant to the Loan Documents, including, without limitation Additional
Interest, shall be due and payable on the date (the "Term Loan Maturity
2
<PAGE>
Date") which is the earlier to occur of (i) the last day of the 84th month
following the Closing Date, (ii) the date of closing of an Initial Public
Offering, or (iii) the date repayment of the indebtedness evidenced by this Note
is accelerated after the occurrence of an Event of Default.
The outstanding principal balance of the indebtedness evidenced by this
Note may be prepaid in whole or in part at any time, without additional cost or
premium. If the indebtedness evidenced by this Note is prepaid in full prior to
the scheduled Term Loan Maturity Date, Maker shall also pay to Holder on the
date of such prepayment the amount of Additional Interest due pursuant to the
terms set forth above. Provided no Event of Default has occurred, Holder shall
apply all partial prepayments under this Note to accrued but unpaid interest
calculated at the Contract Rate, then to principal, and then to Additional
Interest.
Maker further jointly and severally (subject to the limitations on the
liability of IMA Limited contained herein) promises to pay to Holder, on demand,
in addition to said principal sum, interest calculated at the Contract Rate and
Additional Interest, all taxes assessed upon this Note (excluding income taxes)
or on any collateral securing the same, all taxes, assessments and insurance
premiums upon all property securing the payment of this Note, and all reasonable
costs and expenses, including, without limitation, attorneys' fees, incurred by
Holder in the collection of this Note or in foreclosing any security interest
securing the same or in sustaining the lien of any such security interest.
In the event any scheduled installment of principal, interest calculated at
the Contract Rate or Additional Interest is paid more than fifteen (15) days
after its due date, without in any way affecting Holder's right to accelerate
this Note, a late charge equal to five percent (5%) of the late installment
shall be assessed against Maker and shall be payable by Maker to Holder upon
demand.
Notwithstanding any provisions of this Note, it is the understanding and
agreement of Maker and Holder that the Contract Rate to be paid by Maker to
Holder shall not exceed the highest or maximum rate of interest permissible to
be charged by a lender such as Holder to a commercial borrower such as Maker
under the laws of the State of Connecticut. Any amount representing interest
calculated at the Contract Rate paid in excess of such rate shall be considered
to have been payments in reduction of principal.
Maker hereby grants to Holder a lien on and a right of set-off against all
monies, deposits and securities and the proceeds thereof, now or hereafter held
or received by, or in transit to, Holder from or for Maker, whether for
safekeeping, pledge, custody, transmission, collection or otherwise, and all
deposits (general or special), balances, sums and credits with and all claims of
Maker against Holder at any time existing. Holder may at any time apply the same
or any part thereof to the Obligations, or any part thereof, whether or not
matured at the time of such application.
MAKER AND HOLDER HEREBY WAIVE TRIAL BY JURY IN ANY COURT AND IN ANY SUIT,
ACTION OR PROCEEDING ON ANY MATTER ARISING IN CONNECTION WITH OR IN ANY WAY
RELATED TO THE FINANCING TRANSACTIONS OF WHICH THIS NOTE IS A PART AND/OR THE
ENFORCEMENT OF ANY OF HOLDER'S RIGHTS AND REMEDIES. MAKER ACKNOWLEDGES THAT IT
MAKES THIS WAIVER KNOWINGLY, VOLUNTARILY AND ONLY AFTER EXTENSIVE CONSIDERATION
OF THE RAMIFICATIONS OF THIS WAIVER WITH ITS ATTORNEYS.
MAKER AND EACH AND ALL ENDORSERS, GUARANTORS AND SURETIES OF THIS NOTE
ACKNOWLEDGE THAT THE INDEBTEDNESS EVIDENCED BY THIS NOTE IS PART OF A COMMERCIAL
TRANSACTION AND WAIVE THEIR RIGHTS TO NOTICE AND HEARING UNDER CHAPTER 903a OF
THE
3
<PAGE>
CONNECTICUT GENERAL STATUTES, OR AS OTHERWISE ALLOWED BY ANY STATE,
REGIONAL, FEDERAL OF FOREIGN LAW WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH
HOLDER MAY DESIRE TO USE, and further waive diligence, demand, presentment for
payment, notice of nonpayment, protest and notice of protest, and notice of any
renewals or extensions of this Note, and all rights under any statute of
limitations, and all endorsers, guarantors and sureties agree that the time for
payment of this Note may be extended at Holder's sole discretion, without
impairing their liability thereon, and further consent to the release of all or
any part of the security for the payment hereof, at the discretion of Holder, or
the release of any party liable for this obligation without affecting the
liability of the other parties hereto.
The obligations and liabilities of each Maker under this Note shall in all
respects be deemed to be joint and several obligations and liabilities;
provided, however, the liability of IMA Limited for the repayment of the
- -------- -------
Obligations shall be limited to an amount equal to the greater of (i) the
aggregate amount of Qualified Accounts of IMA Limited represented on a request
for an advance, and (ii) the aggregate value of the IMA Limited collateral on
the date an Event of Default occurs, such value to be determined by Holder in
the exercise of its reasonable discretion; provided, however, that the foregoing
-------- -------
provisions shall not (i) release or impair the Obligations, (ii) affect or limit
the right of Holder to pursue all rights and remedies or otherwise realize on
any Collateral, or (iii) limit the liability of IMA or each and all endorsers,
guarantors and sureties of this Note.
This Note shall be governed by and construed in accordance with the laws of
the State of Connecticut.
INFORMATION MANAGEMENT
ASSOCIATES, INC.
By: /s/ Gary R. Martino
-------------------------
Its Chairman & CFO
INFORMATION MANAGEMENT
ASSOCIATES LIMITED
By: /s/ Gary R. Martino
-------------------------
Its Director
4
<PAGE>
STATE OF CONNECTICUT
ss. Hartford
COUNTY OF HARTFORD
On this 26th day of October, 1995, personally appeared Gary R. Martino
---------------
as Chairman of Information Management Associates, Inc., a Connecticut
--------
corporation, signer and sealer of the foregoing instrument, and acknowledged the
same to be his free act and deed and the free act and deed of said corporation,
before me.
[SIGNATURE APPEARS HERE]
----------------------------------
Commissioner of the Superior Court
STATE OF CONNECTICUT
ss. Hartford
COUNTY OF HARTFORD
On this 26th day of October, 1995, personally appeared Gary R. Martino
---------------
as Director of Information Management Associates Limited, a company registered
--------
in England, signer and sealer of the foregoing instrument, and acknowledged the
same to be his free act and deed and the free act and deed of said company,
before me.
[SIGNATURE APPEARS HERE]
----------------------------------
Commissioner of the Superior Court
5
<PAGE>
EXHIBIT 10.40
LINE OF CREDIT PROMISSORY NOTE
$6,000,000.00 Hartford, Connecticut October 26, 1995
- --------------------------------------------------------------------------------
FOR VALUE RECEIVED, INFORMATION MANAGEMENT ASSOCIATES, INC., a Connecticut
corporation ("IMA"), and INFORMATION MANAGEMENT ASSOCIATES LIMITED, a company
registered in England ("IMA Limited" and together with IMA, "Maker"), jointly
and severally (subject to the limitations on the liability of IMA Limited
contained herein) promise to pay to the order of PEOPLE'S BANK, a Connecticut
banking corporation (the "Bank" and together with any subsequent holder of this
Note, "Holder"), at its chief executive office at 850 Main Street, Bridgeport,
Connecticut 06604-4913, or at such other place as may be designated in writing
from time to time by Holder, the maximum aggregate principal sum of up to Six
Million and 00/100 Dollars ($6,000,000.00), together with interest accruing on
the unpaid balance of the indebtedness evidenced by this Note at a floating rate
per annum equal to one (1.0) percentage point above the Prime Rate from time to
time charged by Holder, adjusted as set forth herein. The Prime Rate referred to
herein is the index Holder uses to set interest rates on commercial loans
similar to the indebtedness evidenced by this Note, is not necessarily the
lowest rate Holder charges it commercial customers, and is increased or
decreased by Holder in response to changes in money market conditions. The Prime
Rate at the date hereof is eight and three-quarters percent (8.75%), so that the
initial rate of interest charged hereunder shall be nine and three-quarters
percent (9.75%). In the event that the Prime Rate is increased or decreased, the
interest rate hereunder shall be adjusted accordingly on the day of said
increase or decrease. Interest shall be charged on the principal balance from
time to time outstanding on the basis of the actual number of days elapsed
computed on the basis of a three hundred sixty (360) day year. Upon the
occurrence of an Event of Default under the Loan Agreement (as defined below),
all sums outstanding hereunder shall bear interest at a rate which is two (2)
percentage points above the otherwise applicable rate hereunder.
Interest only shall be due and payable, in arrears, on the first day of
each and every month commencing November 1, 1995. The principal amount of this
Note shall be advanced pursuant to Requests for Advances submitted by Maker
pursuant to the terms of a Loan and Security Agreement dated October 26, 1995,
among Maker and Holder (the "Loan Agreement"), and this Note is subject in all
respects to the terms and conditions of the Loan Agreement. Defined terms not
otherwise defined in this Note shall have the meanings ascribed to such terms in
the Loan Agreement.
The outstanding principal amount of the indebtedness evidenced by this
Note, together with all interest accrued therein and other sums due and payable
pursuant to the Loan Documents, shall be due and payable in full on the date
(the "Line of Credit Maturity Date") which is the earlier to occur of (i) August
1, 1996, or (ii) the date repayment of this indebtedness evidenced by this Note
is accelerated after the occurrence of an Event of Default, unless such a Line
of Credit Maturity Date is extended in writing from time to time in Holder's
sole and absolute discretion.
Advances and payments on this Note shall be evidenced by an internal ledger
account of Holder as described in the Loan Agreement. Maker hereby authorizes
Holder to debit Maker's operating account with Holder for each monthly payment
of principal and interest owned pursuant to the terms of this Note.
<PAGE>
The outstanding principal balance of the indebtedness evidenced by this
Note may be prepaid in whole or in part at any time, without additional cost or
premium.
Maker further jointly and severally (subject to the limitations of the
liability of IMA Limited contained herein) promises to pay Holder, on demand, in
addition to said principal sum and interest, all taxes assessed upon this Note
(excluding income taxes) or on any collateral securing the same, all taxes,
assessments and insurance premiums upon all property securing the payment of
this Note, and all reasonable costs and expenses, including, without limitation,
attorneys' fees, incurred by Holder in the collection of this Note or in
foreclosing any security interest securing the same or in sustaining the lien of
any such security interest.
In the event any installment of interest owed hereunder is paid more than
fifteen (15) days after its due date, without in any way affecting Holder's
right to accelerate this Note, a late charge equal to five percent (5%) of the
late installment shall be assessed against Maker and shall be payable by Maker
to Holder upon demand.
Notwithstanding any provisions of this Note, it is the understanding and
agreement of Maker and Holder that the rate of interest to be paid by Maker to
Holder shall not exceed the highest or maximum rate of interest permissible to
be charged by a lender such as Holder to a commercial borrower such as Maker
under the laws of the State of Connecticut. Any amount paid in excess of such
rate shall be considered to have been payments in reduction of principal.
Maker hereby grants to Holder a lien on and a right of set-off against all
monies, deposits and securities and the proceeds thereof, now or hereafter held
or received by, or in transit to, Holder from or for Maker, whether for
safekeeping, pledge, custody, transmission, collection or otherwise, and all
deposits (general or special), balances, sums and credits with and all claims of
Maker against Holder at any time existing. Holder may at any time apply the same
or any part thereof to the Obligations, or any part thereof, whether or not
matured at the time of such application.
MAKER AND HOLDER HEREBY WAIVE TRIAL BY JURY IN ANY COURT AND IN ANY SUIT,
ACTION OR PROCEEDING ON ANY MATTER ARISING IN CONNECTION WITH OR IN ANY WAY
RELATED TO THE FINANCING TRANSACTIONS OF WHICH THIS NOTE IS A PART AND/OR THE
ENFORCEMENT OF ANY OF HOLDER'S RIGHTS AND REMEDIES. MAKER ACKNOWLEDGES THAT IT
MAKES THIS WAIVER KNOWINGLY, VOLUNTARILY AND ONLY AFTER EXTENSIVE CONSIDERATION
OF THE RAMIFICATIONS OF THIS WAIVER WITH ITS ATTORNEYS.
MAKER AND EACH AND ALL ENDORSERS, GUARANTORS AND SURETIES OF THIS NOTE
ACKNOWLEDGE THAT THE INDEBTEDNESS EVIDENCED BY THIS NOTE IS PART OF A COMMERCIAL
TRANSACTION AND WAIVE THEIR RIGHTS TO NOTICE AND HEARING UNDER CHAPTER 903a OF
THE CONNECTICUT GENERAL STATUTES, OR AS OTHERWISE ALLOWED BY ANY STATE,
REGIONAL, FEDERAL OR FOREIGN LAW WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH
HOLDER MAY DESIRE TO USE, and further waive diligence, demand, presentment for
payment, notice of nonpayment, protest and notice of protest, and notice of any
renewals or extensions of this Note, and all rights under any statute of
limitations, and all endorsers, guarantors and sureties agree that the time for
payment of this Note may be extended at Holder's sole discretion, without
impairing their liability thereon, and further consent to the release of all or
any part of the security for the payment hereof, at the discretion of Holder, or
the release of any party liable for this obligation without affecting the
liability of the other parties hereto.
2
<PAGE>
The obligations and liabilities of each Maker under this Note shall in all
respects be deemed to be joint and several obligations and liabilities;
provided, however, the liability of IMA Limited for the repayment of the
- -------- -------
Obligations shall be limited to an amount equal to the greater of (i) the
aggregate amount of Qualified Accounts of IMA Limited represented on a request
for an advance, and (ii) the aggregate value of the IMA Limited collateral on
the date an Event of Default occurs, such value to be determined by Holder in
the exercise of its reasonable discretion; provided, however, that the foregoing
-------- -------
provisions shall not (i) release or impair the Obligations, (ii) affect or limit
the right of Holder to pursue all rights and remedies or otherwise realize on
any Collateral, or (iii) limit the liability of IMA or each and all endorsers,
guarantors and sureties of this Note.
This Note shall be governed by and construed in accordance with the laws of
the State of Connecticut.
INFORMATION MANAGEMENT
ASSOCIATES, INC.
By: /s/ Gary R. Martino
----------------------------------
Its Chairman & CFO
INFORMATION MANAGEMENT
ASSOCIATES LIMITED
By: /s/ Gary R. Martino
----------------------------------
Its Director
STATE OF CONNECTICUT
ss. Hartford
COUNTY OF HARTFORD
On this 26th day of October, 1995, personally appeared Gary R. Martino,
as Chairman of Information Management Associates, Inc., a Connecticut
corporation, signer and sealer of the foregoing instrument, and acknowledged the
same to be his free act and deed and the free act and deed of said corporation,
before me.
[SIGNATURE APPEARS HERE]
--------------------------------
Commission of the Superior Court
3
<PAGE>
STATE OF CONNECTICUT
ss. Hartford
COUNTY OF HARTFORD
On this 26th day of October, 1995, personally appeared Gary R. Martino,
---------------
as Director of Information Management Associates Limited, a company
--------
registered in England, signer and sealer of the foregoing instrument, and
acknowledged the same to be his free act and deed and the free act and deed of
said company, before me.
[SIGNATURE APPEARS HERE]
--------------------------------
Commission of the Superior Court
4
<PAGE>
Exhibit 10.41
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT is dated as of October 26, 1995, and is
entered into by and among INFORMATION MANAGEMENT ASSOCIATES, INC., a Connecticut
corporation (the "Company"), PEOPLE'S BANK, a Connecticut chartered bank (the
"Bank"), and WAND/IMA INVESTMENTS, L.P., a limited partnership organized under
the laws of the State of Delaware (the "Noteholder").
W I T N E S S E T H:
WHEREAS, the Company and the Noteholder have heretofore entered into
that certain Note and Warrant Purchase Agreement, dated as of December 21, 1990,
as amended by an Exchange and Note Modification Agreement and Amendment to Note
and Warrant Purchase Agreement, dated as of October 29, 1991, as further amended
by an Amendment to Note and Warrant Purchase Agreement, dated as of March 1,
1993 and, as further amended by Amendment No. 2 to Note and Warrant Purchase
Agreement, dated as of June 1, 1994, all in the form attached hereto as Exhibit
-------
A (the "Purchase Agreement"), pursuant to which the Noteholder presently holds
- -
$1,000,000 in aggregate principal amount of the Company's 12% Senior
Subordinated Notes due 1997 (the "Notes") and warrants to purchase the Company's
common stock; and
WHEREAS, in order to induce the Bank to enter into the Loan Agreement
(as hereinafter defined), the Company has requested that the Noteholder enter
into this Subordination Agreement in order to amend and to supplement certain of
the terms contained in the Purchase Agreement pertaining to the subordination of
the Notes; and
WHEREAS, the Bank is willing to enter into a Loan and Security
Agreement of even date herewith (the "Loan Agreement") among the Company,
Information Management Associates Limited, a corporation registered under the
laws of England ("IMA Limited") and the Bank, pursuant to which the Bank has
agreed to (i) extend to the Company and IMA Limited (together, "Borrowers") a
term loan in the amount of $2,500,000 (the "Term Loan"), and (ii) make advances
to Borrowers in principal amount not to exceed $6,000,000 ("Line of Credit
Loans"), on the condition, inter alia, that the Notes and the indebtedness
----- ----
evidenced thereby be subordinated to the Term Loan and the Line of Credit Loans
pursuant to the terms of the Purchase Agreement, as modified and supplemented by
this Subordination Agreement;
NOW, THEREFORE, in consideration of the premises, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound hereby, agree as
follows:
Section 1. Effective Date; Termination
---------------------------
(a) The Purchase Agreement, as amended and supplemented by
this Subordination Agreement, shall govern in all respects the subordination of
the Notes to all Senior Indebtedness (as hereinafter defined) outstanding under
and pursuant to the Loan Agreement.
<PAGE>
(b) This Subordination Agreement shall take effect as of the
date hereof and shall remain in full force and effect while the Loan Agreement,
or any extensions, renewals, refinancings or modifications thereof or any part
thereof, or any amount payable thereunder is outstanding. After termination of
the Loan Agreement and full payment of all Obligations (as defined in the Loan
Agreement) to the Bank, this Agreement shall terminate. This Subordination
Agreement shall not amend or otherwise affect the terms of the Purchase
Agreement as the same may apply to lenders other than the Bank.
Section 2. Definitions. All capitalized terms used herein without
-----------
definition shall have the meanings prescribed therefor in the Purchase
Agreement, except as modified herein.
(a) Definition of Senior Indebtedness. The first sentence of
---------------------------------
the definition of "Senior Indebtedness" in Section 15 of the Purchase Agreement
is hereby amended and restated to read in its entirety as follows:
"Senior Indebtedness: The principal of and interest on
-------------------
(including post bankruptcy petition interest, whether or
not allowed), and penalties, indemnities, reimbursement
obligations, costs, fees and expenses (including reasonable
attorneys' fees and expenses), and any other amounts in
respect of, any secured Indebtedness of the Company for
borrowed money owed to any financial institution, whether
outstanding on the date of this Agreement or hereafter
created, incurred or assumed, unless, in the case of any
particular Indebtedness, the instrument creating or
evidencing the same or pursuant to which the same is
outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Notes or shall be
junior or subordinate to any other Indebtedness or
obligation of the Company."
(b) The Noteholder hereby acknowledges that the Term Loan,
Additional Interest (as defined in that certain Term Loan Promissory Note dated
October 26, 1995 evidencing the Term Loan), and any and all Line of Credit Loans
made by the Bank pursuant to the Loan Agreement constitute Senior Indebtedness
under the Purchase Agreement.
Section 3. Subordination of the Notes.
--------------------------
(a) The first paragraph of Section 10 of the Purchase Agreement
is amended and restated in its entirety to read as follows:
"The Company covenants and agrees and the holders of Notes,
by their acceptance of the Notes likewise covenant and
agree, that, to the extent and in the manner hereinafter
set forth in this Section 10, the payment of the principal
of and interest on (including post bankruptcy petition
interest, whether or not allowed), and penalties,
indemnities, reimbursement obligations, costs, fees and
expenses (including attorneys' fees and expenses), and any
other amounts in respect of, the Notes is hereby expressly
made subordinate and subject in right of payment as
provided in this Section 10 to the prior payment in full,
in cash, cash equivalents or in any other manner
acceptable to the holders of Senior Indebtedness, of all
Senior Indebtedness; provided, however that the Notes, the
-------- -------
Indebtedness represented hereby and the payment of the
principal of and interest on the Notes and of all other
amounts payable
2
<PAGE>
under this Agreement in all respects shall rank prior to
all existing and future unsecured Indebtedness of the
Company that is not Senior Indebtedness."
(b) Section 10.1 of the Purchase Agreement is
amended by:
(i) in the first sentence, deleting the words, "principal
of or interest on" where they appear at the bottom of page 37;
(ii) in the sixth and seventh lines of the second
paragraph, deleting the words, "or payment thereof provided for."
(c) Section l0.2(a) of the Purchase Agreement is amended and
restated in its entirety to read as follows:
"(a) Unless Section 10.l shall be applicable, in the
event that a Payment Event of Default has occurred and is
continuing, then no payment or distribution of any assets
of the Company of any kind or character (excluding
Permitted Junior Securities) shall be made by the Company
on account of the Notes or on account of the purchase,
redemption or acquisition of the Notes, unless and until
such Payment Event of Default shall have been waived or
such Senior Indebtedness shall have been discharged in full
or, within ten (10) business days of the date that a
Payment Event of Default occurred, such Payment Event of
Default shall have been cured, after which the Company
shall resume making any and all required payments in
respect of the Notes, including any missed payments; the
holder of the Senior Indebtedness shall give notice to the
Noteholder or other holder of the Notes whose name and
address the holder of the Senior Indebtedness has received
written notice of stating the date of the occurrence of
such Payment Event of Default within ten (10) business
days after its occurrence, provided that failure to give
such notice shall not affect the covenants and obligations
of the Company hereunder;"
(d) The first sentence of Section 10.2(b) of the Purchase
Agreement is amended and restated in its entirety to read as follows:
"(b) Unless Section 10.1 shall be applicable, in the
event that written notice is given by the Company or any
holder of Senior Indebtedness to the Noteholder or other
holder of the Notes whose name and address the holder of
the Senior Indebtedness has received written notice of that
a Non-Payment Event of Default has occurred and is
continuing, then no payment or distribution of any assets
of the Company of any kind or character (excluding
Permitted Junior Securities), shall be made by the Company
on account of the Notes or on account of the purchase,
redemption or acquisition of the Notes for a period
("Payment Blockage Period") commencing on the effective
date of such notice until (subject to any blockage of
payments that may then be in effect under subsection (a) of
this Section 10.2) the earlier of the time when (x) more
than 269 days shall have elapsed since the effective date
of such notice, (y) such Non-Payment Event of Default
shall have been cured or waived or shall have ceased to
exist or such Senior Indebtedness shall
3
<PAGE>
have been discharged, or (z) such Payment Blockage Period
shall have been terminated by notice to the Company and the
holders of the Notes from the holder of the Senior
Indebtedness as to which the Non-Payment Event of Default
shall have occurred, after which, in the case of clause
(x), (y) or (z), the Company shall resume making any and
all required payments in respect of the Notes, including
any missed payments."
(e) Section 10.2(c) of the Purchase Agreement is amended and
restated in its entirety to read as follows:
"(c) Unless Section 10.1 shall be applicable, upon the
occurrence of a Payment Event of Default or a Non-Payment
Event of Default and continuing for a period which shall
terminate upon the earlier to occur of (i) the date on
which such Payment Event of Default has been cured, waived
or shall have ceased to exist in accordance with Section
10.2(a) and/or such Non-Payment Event of Default has been
cured, waived or shall have ceased to exist in accordance
with Section 10.2(b), or (ii) the 270th day after the
occurrence of a Payment Event of Default or the effective
date of written notice of a Non-Payment Event of Default in
accordance with Section 10.2(b) (the "Enforcement
Suspension Period"), no holder of the Notes shall, without
the prior written consent of all the holders of Senior
Indebtedness, engage in any of the following activities
("Restricted Enforcement Activities"): (x) accelerate the
maturity of any of the Notes; (y) commence or join in the
commencement of any bankruptcy or insolvency proceeding
against the Company; or (z) subject to the provisions set
forth in the following two sentences of this Section
10.2(c), institute any legal or other similar proceeding
(whether at law, in equity, by arbitration or otherwise) to
enforce all or any portion of the provisions of this
Agreement or the Notes. In the event the Bank accelerates
prior to the expiration of any Enforcement Suspension
Period the maturity of the Senior Indebtedness outstanding
under the Loan Agreement, the Noteholder may accelerate the
maturity of the Notes (but may until expiration of the then
applicable Enforcement Suspension Period take no other
enforcement action except for sending the Company written
notice of such acceleration); provided, however, if the
-------- -------
Bank rescinds any such acceleration prior to the expiration
of the then applicable Enforcement Suspension Period, the
Noteholder agrees to similarly rescind its acceleration of
the Notes. In the event the Bank institutes prior to the
expiration of an applicable Enforcement Suspension Period
any proceedings or takes any other action beyond
accelerating the Senior Indebtedness outstanding under the
Loan Agreement in order to enforce all or a portion of the
provisions of the Loan Agreement or such Senior
Indebtedness, the Noteholder may institute any proceedings
or take any other action beyond accelerating the maturity
of the Notes in order to enforce all or a portion of the
provisions of this Agreement or the Notes, provided,
--------
however, that the Noteholder does so in a manner that does
-------
not unduly delay or interfere with any action taken by the
holders of such Senior Indebtedness or the payment in full
of such Senior Indebtedness.
4
<PAGE>
Notwithstanding any other provision of this Agreement,
upon the termination of any Enforcement Suspension Period,
a subsequent Enforcement Suspension Period may not commence
for at least ninety (90) consecutive days after the date of
such termination and no Non-Payment Event of Default or
Payment Event of Default with respect to the Senior
Indebtedness which existed or was continuing on the date of
commencement of any Enforcement Suspension Period shall be,
or be made, the basis for the commencement of a subsequent
Enforcement Suspension Period unless such event of default
shall have been cured or waived for a period of not less
than ninety (90) consecutive days. Following the expiration
of any Enforcement Suspension Period and prior to the
commencement of any subsequent Enforcement Suspension
Period, the Noteholder, subject to the provisions of the
following paragraph, may engage in any Restricted
Enforcement Activity.
In any event, no Noteholder shall engage in any
Restricted Enforcement Activity unless such holder shall
have given to the holder of Senior Indebtedness not less
than seven (7) days prior written notice of the intention
of such holder to take such action."
(f) The second sentence of Section 10.2(d) of the Purchase
Agreement is amended and restated in its entirety to read as follows:
"No holder of Notes shall at any time be charged with
knowledge of the existence of any facts other than a
voluntary prepayment which is expressly prohibited by
Section 7.3 as amended hereby which would require such
holder to deliver any payment to such agent for the holders
of Senior Indebtedness unless such holder shall have been
given written notice thereof by the Company or such agent
and, prior to the effective date of such written notice,
such holder shall be entitled in all respects to
conclusively assume that no such facts exist."
(g) Section 10.3 of the Purchase Agreement is hereby deleted in
its entirety.
(h) Section 10.8 of the Purchase Agreement is amended and
restated in its entirety as follows:
"10.8 Notice to Holders of Notes. No holder of Notes
--------------------------
shall be charged with knowledge of the existence of any
fact that would prohibit the making of any payment to such
holder under this Agreement or the Notes other than a
voluntary prepayment which is expressly prohibited by
Section 7.3 as amended hereby unless such holder shall have
been given written notice thereof as contemplated hereby;
and, prior to the effective date of any such written
notice, such holder of Notes shall be entitled in all
respects to assume that no such fact exists."
(i) Section 10 of the Purchase Agreement is amended by adding
the following Section 10.11 immediately following Section 10.10:
5
<PAGE>
"10.11 Covenant to Cooperate. In the event of any
---------------------
insolvency or bankruptcy proceedings, and any receivership,
liquidation, reorganization or other similar proceedings in
connection therewith, relative to the Company, its
creditors, or its property (whether voluntary or
involuntary), and, in the event of any proceedings for
voluntary liquidation, dissolution or other winding up of
the Company or distribution or marshalling of its assets or
any composition with creditors of the Company, whether or
not involving insolvency or bankruptcy, the Noteholder
hereby agrees to file all proofs of claims on account of
the Notes, and to vote such claims, in a timely manner. The
Noteholder shall in no event vote such claims in a manner
that will unduly delay or interfere with the payment in
full of the Senior Indebtedness. In order that the Bank may
recover for its own account dividends, payments and
distributions in respect of the Notes, the Noteholder
hereby agrees to cooperate with the Bank in filing such
proofs of claims on account of the Notes as the Bank
reasonably request and in receiving and collecting any and
all dividends, payments or other distributions made thereon
in whatever form the same may be paid or issued and in
applying the same on account of the Senior Indebtedness.
The Noteholder further agrees to supply such information
and evidence, provide access to and copies of such of
Noteholder's records as may pertain to the Notes as may be
reasonably requested by the Bank."
Section 4. Optional Prepayments. Section 7.3 of the Purchase Agreement
--------------------
is hereby amended by adding at the end of such section thereto the following:
"Notwithstanding the foregoing, as long as the Loan
Agreement is in effect and as long as there is any Senior
Indebtedness owed by the Company to the Bank, no such
prepayment may be made without the prior written consent of
the Bank."
Section 5. Notices under this Subordination Agreement. Section 20 of
------------------------------------------
the Purchase Agreement is amended by adding the following sentence at the end of
such Section:
"All such notices and other communications shall be
effective (i) when hand delivered, upon receipt, (ii) when
mailed, five (5) days after the date of deposit in the
mails, (iii) when delivered by air courier guaranteeing
overnight delivery, the next business day after delivery to
the air courier, and (iv) when transmitted by telex or
telecopier, when received by the party to whom the telex or
telecopy was transmitted. Any notice or other communication
sent by telex or telecopy shall be accompanied by a request
for confirmation of receipt."
Section 6. Representations and Warranties of the Noteholder. The
------------------------------------------------
Noteholder represents and warrants to Borrowers and the Bank as follows:
6
<PAGE>
(a) Organization and Power. The Noteholder is a limited
----------------------
partnership duly organized, validly existing and in good standing under the laws
of the State of Delaware, with full power and authority to execute and deliver
this Subordination Agreement.
(b) Due Authorization; Effect of Transaction. All requisite
----------------------------------------
partnership and other authorizations for the execution, delivery, performance
and satisfaction by the Noteholder of this Subordination Agreement have been
duly obtained. This Subordination Agreement will, upon execution and delivery,
be a legal, valid and binding obligation of the Noteholder, enforceable in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and except as enforceability may be
subject to general principles of equity, whether such principles are applied in
a court of equity or at law. No authorization or approval of, or filing with,
any governmental agency, authority or other body or any other third persons will
be required in connection with the execution and delivery of this Subordination
Agreement.
(c) Purchase Agreement and Notes. True, accurate and complete
----------------------------
copies of the Purchase Agreement and the 12% Senior Subordinated Note due
December 21, 1997 dated October 29, 1991 made by the Company to the Noteholder
in the principal amount of $1,000,000 (the "Note") have been attached hereto as
Exhibits A and B, respectively. Neither the Purchase Agreement nor the Note has
- ---------- -
been amended or modified since June l, 1994 and no such amendment is currently
contemplated except for the amendments contained in this Subordination
Agreement. The Noteholder is the holder of record of all the issued and
currently outstanding Notes issued pursuant to the Purchase Agreement.
Section 7. Amendment of the Purchase Agreement. No amendment to,
-----------------------------------
modification of or supplement to the Note or the Purchase Agreement which would
have the effect of advancing to an earlier date the time when the Note (or any
Note issued pursuant to the Purchase Agreement) would otherwise be payable or
prepayable, or increasing the principal amount thereof or the rate of interest
on principal sums outstanding thereunder, or adding any defaults or covenants,
or making any existing defaults or covenants materially more restrictive, or
amending Section 10 thereof or other provisions thereof amended hereby, shall
become effective without the prior written consent of the Bank.
Section 8. Survival of Rights. The right of the Bank to enforce the
------------------
provisions of this Subordination Agreement shall not be prejudiced or impaired
by any act or omitted act of Borrowers or the Bank, including forbearance,
waiver, consent, compromise, amendment, extension, renewal, or taking or release
of security in respect of any part of the Senior Indebtedness or noncompliance
by Borrowers with such provisions, regardless of the Bank's actual or imputed
knowledge.
Section 9. Specific Performance. The Bank is hereby authorized to
--------------------
demand specific performance by the Noteholder and Borrowers of the subordination
provisions of this Subordination Agreement when the Noteholder shall have failed
to comply with any such provisions hereof, and the Noteholder hereby irrevocably
waives any defense based on the adequacy of a remedy at law which might be
asserted as a bar to the remedy of the Bank.
Section 10. Waivers by the Noteholder. Except as required by the Loan
-------------------------
Agreement and this Subordination Agreement, the Noteholder hereby waives
presentment, demand, protest and all other notices under the Loan Agreement. The
Noteholder acknowledges and agrees that the Bank has relied upon and will
continue to rely upon this Subordination Agreement in entering into the Loan
7
<PAGE>
Agreement and making the extensions of credit provided for therein. The
Noteholder hereby waives notice of or proof of reliance thereon.
Section 11. Transfers. The Noteholder and Borrowers further agree to
---------
attach to the Note (or any Note issued pursuant to the Purchase Agreement) an
allonge bearing a legend indicating that it is subject to the terms of this
Subordination Agreement and will provide the Bank with evidence thereof.
Section 12. Miscellaneous.
-------------
(a) Notices. Notices and other communications hereunder shall
-------
be in writing and shall be delivered by hand, mailed by first class mail
(postage prepaid), transmitted by telex or telecopier or sent by air courier
guaranteeing overnight delivery to the Company, the Bank or the Noteholder at
the address set forth below the signature of each such party. Any party may
designate a different address by written notice to the other parties. All such
notices and other communications shall be effective (i) when hand delivered,
upon receipt, (ii) when mailed, five (5) days after the date of deposit in the
mails, (iii) when delivered by air courier guaranteeing overnight delivery, the
next business day after delivery to the air courier, and (iv) when transmitted
by telex or telecopier, when received by the party to whom the telex or telecopy
was transmitted. Any notice or other communication sent by telex or telecopy
shall be accompanied by a request for confirmation of receipt.
(b) Severability. Any provision of this Subordination Agreement
------------
which is prohibited, unenforceable or not authorized in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or non-authorization without invalidating the remaining
provisions hereof or affecting the validity, enforceability or legality or such
provision in any other jurisdiction.
(c) Successors and Assigns. The provisions of this
----------------------
Subordination Agreement shall inure to the benefit of and shall be binding upon
each of Borrowers, the Bank and the Noteholder and their respective successors
and assigns.
(d) Amendments. This Subordination Agreement (together with the
----------
relevant sections of the Purchase Agreement) amends and restates the
Subordination Agreement dated as of June 3, 1994 among the Company, the Bank and
the Noteholder. The Subordination Agreement sets forth the entire agreement of
the parties with respect to the subject matter hereof and may not be amended or
waived in any manner except in a writing signed by the Company, the Bank and the
Noteholder.
(e) Governing Law. This Subordination Agreement shall be
-------------
governed by, and construed in accordance with, the law of the State of
Connecticut.
(f) Headings. Section headings in this Subordination Agreement
--------
are included herein for convenience or reference only and shall not constitute a
part of this Subordination Agreement for any other purpose.
(g) Counterparts. This Subordination Agreement may be executed
------------
in several counterparts, each of which shall be regarded as the original and all
of which shall constitute one and the same Subordination Agreement.
8
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has caused this
Subordination Agreement to be executed under seal and delivered by its duly
authorized representative or officer as of the date first written above.
INFORMATION MANAGEMENT
ASSOCIATES, INC.
By /S/Gary R. Martino
___________________________
Gary R. Martino
Its Chief Financial Officer
Address:
One Corporate Drive - Suite 414
Shelton, Connecticut 06484
Facsimile (203) 261-2516
PEOPLE'S BANK
By /s/David P. Berey
___________________________
David P. Berey
Its Vice President
Address:
One Financial Plaza
Hartford, Connecticut 06103-2613
Facsimile (203) 280-2737
9
<PAGE>
WAND/IMA INVESTMENTS, L.P.
By WAND PARTNERS, INC.
Its General Partner
By /s/ David J. Callard
--------------------------
Its President
Address:
630 5th Ave. - Suite 2435
New York, New York 10111
Facsimile (212) 307-5599
10
<PAGE>
Exhibit 10.42
SUBORDINATION AGREEMENT
THIS AGREEMENT OF SUBORDINATION is made and entered into this 26th day of
October, 1995, by and among ALBERT R. SUBBLOIE, JR., of Woodbridge, Connecticut
("Subordinating Creditor"), INFORMATION MANAGEMENT ASSOCIATES, INC., a
Connecticut corporation, INFORMATION MANAGEMENT ASSOCIATES LIMITED, a
corporation registered under the laws of England (together, "Borrower"), and
PEOPLE'S BANK, a Connecticut banking corporation with an office located at One
Financial Plaza, Hartford, Connecticut 06103-2613 (the "Bank").
WITNESSETH:
WHEREAS, Borrower has requested that the Bank extend to Borrower (i) a
commercial line of credit (the "Line of Credit Loans") in the maximum aggregate
principal amount of up to $6,000,000.00 as evidenced a Line of Credit
Promissory Note in said amount and of even date herewith, a copy of which is
annexed hereto as Exhibit A (the "Line of Credit Note"), and (ii) a term loan
---------
(the "Term Loan"), in the amount of $2,500,000.00, as evidenced by a Term Loan
Promissory Note in said amount and of even date herewith, a copy of which is
annexed hereto as Exhibit B (the "Term Note"); and
---------
WHEREAS, to further evidence its obligations to repay the Term Loan and the
Line of Credit Loans (collectively, the "Loans"), Borrower has or shall cause to
be executed, inter alia, a Loan and Security Agreement of even date herewith
----- ----
(such agreements, together with the Line of Credit Note, the Term Note and any
and all documents, instruments, and agreements executed in connection with or
evidencing the Loans are herein referred to herein as the "Loan Documents"); and
WHEREAS, the Bank has agreed to fund the Loans on the condition, among
others, that Subordinating Creditor agrees to subordinate any and all
indebtedness of Borrower to it to any and all direct and indirect indebtedness
of Borrower to the Bank, pursuant to the terms and conditions set forth herein.
NOW, THEREFORE, for value received and in consideration of the mutual
covenants hereinafter contained, the parties hereto, intending to be legally
bound hereby, do agree as follows:
1. Definitions.
-----------
(a) "Senior Debt" means all indebtedness, liabilities, and obligations
whatsoever, of every kind and description, whenever and however arising,
absolute or contingent, due or to become due, now existing or hereafter arising
from, or in any way connected with, any direct or indirect indebtedness of
Borrower to the Bank, including, but not limited to, all principal and interest
due and owing under the Term Note and the Line of Credit Note, together with all
costs, expenses, and attorneys' and other professional fees incurred or any
action to collect the Loans or to enforce or foreclose any of the Loan
Documents.
<PAGE>
(b) "Subordinated Debt" means all indebtedness, liabilities, and
obligations whatsoever, of every kind and description, whenever and however
arising, absolute or contingent, due or to become due, from Borrower to
Subordinating Creditor.
2. Subordination. Subordinating Creditor and Borrower do each agree that
-------------
the Subordinated Debt is fully subordinated to the full and complete payment and
satisfaction in full of the Senior Debt, and that no payments may be made on the
Subordinated Debt without the prior written consent of the Bank until such time
as the Senior Debt has been paid in full. Borrower's and Subordinating
Creditor's books shall be marked to evidence the foregoing subordination of all
the Subordinated Debt to the Bank. The Bank is authorized to examine such books
from time to time and to make any notations required by this Agreement.
3. Warranties and Representations. Borrower and Subordinating Creditor do
------------------------------
each hereby represent and warrant that:
(a) As of the date hereof, Borrower is indebted to Subordinating
Creditor in a total amount which, when combined with amounts owed by Borrower to
other executive officers of Borrower, does not exceed One Hundred Fifty Thousand
and 00/100 Dollars ($150,000.00);
(b) Subordinating Creditor has not assigned nor will he assign any of
the Subordinated Debt or any interest therein; and
(c) Borrower has not and will not grant, directly or indirectly, to
Subordinating Creditor any security for the repayment of the Subordinated Debt.
4. Negative Covenants. Until all of the Senior Debt has been fully and
------------------
finally paid:
(a) Subordinating Creditor shall take no legal action whatsoever to
collect the Subordinated Debt;
(b) Neither Borrower nor Subordinating Creditor shall take or permit
any action prejudicial to or inconsistent with the Bank's priority position over
Subordinating Creditor that is created by this Agreement; and
(c) Subordinating Creditor shall not ask for, demand, sue for, take or
receive security for all or any part of the Subordinated Debt.
5. Bankruptcy; Rights of the Bank. Upon any distribution of any assets
------------------------------
of Borrower, whether by reason of sale, reorganization, liquidation,
dissolution, arrangement, bankruptcy, receivership, assignment for the benefit
of creditors, foreclosure, or otherwise, the Bank shall be entitled to receive
payment in full of the Senior Debt prior to the payment of all or any part of
the Subordinated Debt. To enable the Bank to assert and enforce its rights
hereunder in any such proceeding or upon the happening of any such event, the
Bank or any person whom the Bank may designate are hereby irrevocably appointed
attorney-in-fact for Subordinating Creditor with full power to act in the place
and stead of Subordinating Creditor, including the right to make, present, file,
and vote such proofs of claim against Borrower on account of all or any part of
the Subordinated Debt as you may deem advisable and to receive and collect any
and all dividends or other payments made thereon and to apply the same on
account of the Senior Debt. Subordinating Creditor will execute and deliver to
the Bank such instruments as may be required by the Bank to enforce any and all
of the
2
<PAGE>
Senior Debt, to effectuate the aforesaid power of attorney, and to effect
collection of any and all dividends or other payments which may be made at any
time on account thereof.
While this instrument remains in effect, Subordinating Creditor will not,
without the Bank's prior written consent, assign to or subordinate in favor of
any other person, firm, or corporation, any right, claim, or interest of any
kind in or to all or any part of the Subordinated Debt, or commence or join with
any other creditor in commencing any bankruptcy, reorganization, or insolvency
proceeding against Borrower.
In furtherance of the foregoing and as collateral security for the payment
and discharge in full of any and all of the Senior Debt, Subordinating Creditor
hereby transfers and assigns to the Bank the Subordinated Debt and all
collateral security therefor to which Subordinating Creditor may at any time be
entitled and all rights under all guarantees thereof and agrees to deliver to
the Bank endorsed in blank all notes or other instruments now or hereafter
evidencing the Subordinated Debt. The Bank may file one or more financing
statements concerning any security interest hereby created without the signature
of Subordinating Creditor appearing thereon.
6. Turnover of Prohibited Transfers. If any payment not permitted hereby
--------------------------------
on account of the Subordinated Debt is received by Subordinating Creditor, such
payment shall be delivered forthwith by Subordinating Creditor to the Bank for
application to the Senior Debt, in the form received except for the addition of
any endorsement or assignment necessary to effect a transfer of all rights
therein to the Bank. The Bank is irrevocably authorized to supply any required
endorsement or assignment which may have been omitted. Until so delivered, any
such payment shall be held by Subordinating Creditor in trust for the Bank and
shall not be commingled with other funds or property of Subordinating Creditor.
7. Waivers. Borrower and Subordinating Creditor each hereby waive any
-------
defense based on the adequacy of a remedy at law which might be asserted as a
bar to the remedy of specific performance of this Agreement in any action
brought therefor by the Bank. To the fullest extent permitted by law, Borrower
and Subordinating Creditor each hereby further waive presentment, demand,
protest, notice of protest, notice of default of dishonor, notice of payment or
nonpayment, and any and all other notices and demands of any kind by the Bank in
connection with all negotiable instruments evidencing all or any portion of the
Senior Debt or the Subordinated Debt to which Borrower or Subordinating Creditor
may be a party; notice of the acceptance of this Agreement by the Bank, notice
of any loans made, extensions granted or other action taken in reliance hereon
by the Bank, as this is a commercial transaction, notice of any hearing required
under any federal or state law with respect to any prejudgment remedy which the
Bank may desire to use; and all other demands and notices of every kind by the
Bank in connection with this Agreement, the Senior Debt, or the Subordinated
Debt. Subordinating Creditor assents to any release, renewal, extension,
compromise, or postponement of the time of payment of the Senior Debt, to any
substitution, exchange or release of collateral therefor and to the addition or
release of any person primarily or secondarily liable thereon.
8. Indulgences Not Waivers. Neither the failure nor any delay on the part
-----------------------
of the Bank to exercise any right, remedy, power, or privilege hereunder shall
operate as a waiver thereof or give rise to an estoppel, nor be construed as an
agreement to modify the terms of this Agreement, nor shall any single or
partial exercise of any right, remedy, power, or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or privilege
with respect to any other occurrence. No waiver by a party hereunder shall be
effective unless it is in writing and signed by the party making such waiver,
and then only to the extent specifically stated in such writing.
3
<PAGE>
9. Duration and Termination. This Agreement shall constitute a continuing
------------------------
agreement of subordination and shall remain in effect so long as Borrower is
indebted, liable or obligated to the Bank under the Loan Documents.
10. Entire Agreement. This Agreement constitutes and expresses the entire
----------------
understanding between the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements and
understandings, inducements, or conditions, whether express or implied, oral or
written. Neither this Agreement nor any portion or provision hereof may be
changed, waived, or amended orally or in any manner other than by an agreement
in writing signed by the Bank, Borrower and Subordinating Creditor.
11. Expenses. Borrower and Subordinating Creditor jointly and severally
--------
agree to pay the Bank on demand all expenses of every kind, including reasonable
attorneys' and other professional fees, that the Bank may incur in enforcing any
of its rights under this Agreement.
12. Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
the Bank, its successors and assigns, and shall be binding upon Borrower, its
successors and assigns, and Subordinating Creditor, and his respective heirs and
administrators.
13. Governing Law. The validity, construction, and enforcement of this
-------------
Agreement shall be governed by the laws of the State of Connecticut and the
parties consent irrevocably to the jurisdiction of the courts of the State of
Connecticut in resolving any dispute arising from this Agreement.
14. Severability. The provisions of the Agreement are independent of and
------------
separable from each other. If any provision hereof shall for any reason be held
invalid or unenforceable, it is the intent of the parties that such invalidity
or unenforceability shall not affect the validity or enforceability of any
other provision hereof, and that this Agreement shall be construed as if such
invalid or unenforceable provision had never been contained herein.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
signed, sealed, and delivered, as of this 26th day of October, 1995.
/s/ Albert R. Subbloie, Jr.
------------------------------------
Albert R. Subbloie, Jr.
INFORMATION MANAGEMENT
ASSOCIATES, INC.
By /s/ Albert R. Subbloie, Jr.
--------------------------------
Its President
4
<PAGE>
INFORMATION MANAGEMENT
ASSOCIATES LIMITED
By [SIGNATURE APPEARS HERE]
--------------------------------
Its Secretary & Director
PEOPLE'S BANK
By /s/ David P. Berey
--------------------------------
David P. Berey
Its Vice President
STATE OF CONNECTICUT
ss.
COUNTY OF New Haven
On this 25 day of October, 1995, personally appeared ALBERT R. SUBBLOIE,
JR, signer and sealer of the foregoing instrument, and acknowledged the same to
be his free act and deed, before me.
/s/ Melanie A. Burns
--------------------
Notary Public
My Commission Expires:
[STAMP OF MELANIE A. BURNS NOTARY PUBLIC
MY COMMISSION EXPIRES APR 30, 1996 APPEARS HERE]
5
<PAGE>
Exhibit 10.43
SUBORDINATION AGREEMENT
THIS AGREEMENT OF SUBORDINATION is made and entered into this 26th day of
----
October, 1995, by and among GARY R. MARTINO, of Woodbridge, Connecticut
("Subordinating Creditor"), INFORMATION MANAGEMENT ASSOCIATES, INC., a
Connecticut corporation, INFORMATION MANAGEMENT ASSOCIATES LIMITED, a
corporation registered under the laws of England (together, "Borrower"), and
PEOPLE'S BANK, a Connecticut banking corporation with an office located at One
Financial Plaza, Hartford, Connecticut 06103-2613 (the "Bank").
WITNESSETH:
WHEREAS, Borrower has requested that the Bank extend to Borrower (i) a
commercial line of credit (the "Line of Credit Loans") in the maximum aggregate
principal amount of up to $6,000,000.00, as evidenced by a Line of Credit
Promissory Note in said amount and of even date herewith, a copy of which is
annexed hereto as Exhibit A (the "Line of Credit Note"), and (ii) a term loan
---------
(the "Term Loan") in the amount of $2,500,000.00, as evidenced by a Term Loan
Promissory Note in said amount and of even date herewith, a copy of which is
annexed hereto as Exhibit B (the "Term Note"); and
---------
WHEREAS, to further evidence its obligations to repay the Term Loan and the
Line of Credit Loans (collectively, the "Loans"), Borrower has or shall cause to
be executed, inter alia, a Loan and Security Agreement of even date herewith
(such agreements, together with the Line of Credit Note, the Term Note and any
and all documents, instruments, and agreements executed in connection with or
evidencing the Loans are herein referred to herein as the "Loan Documents"); and
WHEREAS, the Bank has agreed to fund the Loans on the condition, among
others, that Subordinating Creditor agrees to subordinate any and all
indebtedness of Borrower to it to any and all direct and indirect indebtedness
of Borrower to the Bank, pursuant to the terms and conditions set forth herein.
NOW, THEREFORE, for value received and in consideration of the mutual
covenants hereinafter contained, the parties hereto, intending to be legally
bound hereby, do agree as follows:
1. Definitions
-----------
(a) "Senior Debt" means all indebtedness, liabilities, and obligations
whatsoever, of every kind and description, whenever and however arising,
absolute or contingent, due or to become due, now existing or hereafter arising
from, or in any way connected with, any direct or indirect indebtedness of
Borrower to the Bank, including, but not limited to, all principal and interest
due and owing under the Term Note and the Line of Credit Note, together with all
costs, expenses, and attorneys' and other professional fees incurred or any
action to collect the Loans or to enforce or foreclose any of the Loan
Documents.
<PAGE>
(b) "Subordinated Debt" means all indebtedness, liabilities, and
obligations whatsoever, of every kind and description, whenever and however
arising, absolute or contingent, due or to become due, from Borrower to
Subordinating Creditor.
2. Subordination. Subordinating Creditor and Borrower do each agree that
-------------
the Subordinated Debt is fully subordinated to the full and complete payment and
satisfaction in full of the Senior Debt, and that no payments may be made on the
Subordinated Debt without the prior written consent of the Bank until such time
as the Senior Debt has been paid in full. Borrower's and Subordinating
Creditor's books shall be marked to evidence the foregoing subordination of all
the Subordinated Debt to the Bank. The Bank is authorized to examine such books
from time to time and to make any notations required by this Agreement.
3. Warranties and Representations. Borrower and Subordinating Creditor do
------------------------------
each hereby represent and warrant that:
(a) As of the date hereof, Borrower is indebted to Subordinating
Creditor in a total amount which, when combined with amounts owed by Borrower to
other executive officers of Borrower, does not exceed One Hundred Fifty Thousand
and 00/100 Dollars ($l50,000.00);
(b) Subordinating Creditor has not assigned nor will he assign any of
the Subordinated Debt or any interest therein; and
(c) Borrower has not and will not grant, directly or indirectly, to
Subordinating Creditor any security for the repayment of the Subordinated Debt.
4. Negative Covenants. Until all of the Senior Debt has been fully and
------------------
finally paid:
(a) Subordinating Creditor shall take no legal action whatsoever to
collect the Subordinated Debt;
(b) Neither Borrower nor Subordinating Creditor shall take or permit
any action prejudicial to or inconsistent with the Bank's priority position over
Subordinating Creditor that is created by this Agreement; and
(c) Subordinating Creditor shall not ask for, demand, sue for, take or
receive security for all or any part of the Subordinated Debt.
5. Bankruptcy; Rights of the Bank. Upon any distribution of any assets
------------------------------
of Borrower, whether by reason of sale, reorganization, liquidation,
dissolution, arrangement, bankruptcy, receivership, assignment for the benefit
of creditors, foreclosure, or otherwise, the Bank shall be entitled to receive
payment in full of the Senior Debt prior to the payment of all or any part of
the Subordinated Debt. To enable the Bank to assert and enforce its rights
hereunder in any such proceeding or upon the happening of any such event, the
Bank or any person whom the Bank may designate are hereby irrevocably appointed
attorney-in-fact for Subordinating Creditor with full power to act in the place
and stead of Subordinating Creditor, including the right to make, present, file,
and vote such proofs of claim against Borrower on account of all or any part of
the Subordinated Debt as you may deem advisable and to receive and collect any
and all dividends or other payments made thereon and to apply the same on
account of the Senior Debt. Subordinating Creditor will execute and deliver to
the Bank such instruments as may be required by the Bank to enforce any and all
of the Senior Debt, to effectuate the aforesaid
2
<PAGE>
power of attorney, and to effect collection of any and all dividends or other
payments which may be made at any time on account thereof.
While this instrument remains in effect, Subordinating Creditor will not,
without the Bank's prior written consent, assign to or subordinate in favor of
any other person, firm, or corporation, any right, claim, or interest of any
kind in or to all or any part of the Subordinated Debt, or commence or join with
any other creditor in commencing any bankruptcy, reorganization, or insolvency
proceeding against Borrower.
In furtherance of the foregoing and as collateral security for the payment
and discharge in full of any and all of the Senior Debt, Subordinating Creditor
hereby transfers and assigns to the Bank the Subordinated Debt and all
collateral security therefor to which Subordinating Creditor may at any time be
entitled and all rights under all guarantees thereof and agrees to deliver to
the Bank endorsed in blank all notes or other instruments now or hereafter
evidencing the Subordinated Debt. the Bank may file one or more financing
statements concerning any security interest hereby created without the
signature of Subordinating Creditor appearing thereon.
6. Turnover of Prohibited Transfers. If any payment not permitted hereby
--------------------------------
on account of the Subordinated Debt is received by Subordinating Creditor, such
payment shall be delivered forthwith by Subordinating Creditor to the Bank for
application to the Senior Debt, in the form received except for the addition of
any endorsement or assignment necessary to effect a transfer of all rights
therein to the Bank. The Bank is irrevocably authorized to supply any required
endorsement or assignment which may have been omitted. Until so delivered, any
such payment shall be held by Subordinating Creditor in trust for the Bank and
shall not be commingled with other funds or property of Subordinating Creditor.
7. Waivers. Borrower and Subordinating Creditor each hereby waive any
-------
defense based on the adequacy of a remedy at law which might be asserted as a
bar to the remedy of specific performance of this Agreement in any action
brought therefor by the Bank. To the fullest extent permitted by law, Borrower
and Subordinating Creditor each hereby further waive presentment, demand,
protest, notice of protest, notice of default of dishonor, notice of payment or
nonpayment, and any and all other notices and demands of any kind by the Bank in
connection with all negotiable instruments evidencing all or any portion of the
Senior Debt or the Subordinated Debt to which Borrower or Subordinating Creditor
may be a party; notice of the acceptance of this Agreement by the Bank; notice
of any loans made, extensions granted or other action taken in reliance hereon
by the Bank; as this is a commercial transaction, notice of any hearing required
under any federal or state law with respect to any prejudgment remedy which the
Bank may desire to use; and all other demands and notices of every kind by the
Bank in connection with this Agreement, the Senior Debt, or the Subordinated
Debt. Subordinating Creditor assents to any release, renewal, extension,
compromise, or postponement of the time of payment of the Senior Debt, to any
substitution, exchange or release of collateral therefor and to the addition or
release of any person primarily or secondarily liable thereon.
8. Indulgences Not Waivers. Neither the failure nor any delay on the part
-----------------------
of the Bank to exercise any right, remedy, power, or privilege hereunder shall
operate as a waiver thereof or give rise to an estoppel, nor be construed as an
agreement to modify the terms of this Agreement, nor shall any single or partial
exercise of any right, remedy, power, or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or privilege
with respect to any other occurrence. No waiver by a party hereunder shall be
effective unless it is in writing and signed by the party making such waiver,
and then only to the extent specifically stated in such writing.
3
<PAGE>
9. Duration and Termination. This Agreement shall constitute a continuing
------------------------
agreement of subordination and shall remain in effect so long as Borrower is
indebted, liable or obligated to the Bank under the Loan Documents.
10. Entire Agreement. This Agreement constitutes and expresses the entire
----------------
understanding between the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements and
understandings, inducements, or conditions, whether express or implied, oral or
written. Neither this Agreement nor any portion or provision hereof may be
changed, waived, or amended orally or in any manner other than by an agreement
in writing signed by the Bank, Borrower and Subordinating Creditor.
11. Expenses. Borrower and Subordinating Creditor jointly and severally
--------
agree to pay the Bank on demand all expenses of every kind, including reasonable
attorneys' and other professional fees, that the Bank may incur in enforcing any
of its rights under this Agreement.
12. Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
the Bank, its successors and assigns, and shall be binding upon Borrower, its
successors and assigns, and Subordinating Creditor, and his respective heirs and
administrators.
13. Governing Law. The validity, construction, and enforcement of this
-------------
Agreement shall be governed by the laws of the State of Connecticut and the
parties consent irrevocably to the jurisdiction of the courts of the State of
Connecticut in resolving any dispute arising from this Agreement.
14. Severability. The provisions of the Agreement are independent of and
------------
separable from each other. If any provision hereof shall for any reason be held
invalid or unenforceable, it is the intent of the parties that such invalidity
or unenforceability shall not affect the validity or enforceability of any other
provision hereof, and that this Agreement shall be construed as if such invalid
or unenforceable provision had never been contained herein.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed, sealed, and delivered, as of this 26th day of October, 1995.
----
/s/ Gary R. Martino
-----------------------------------------
Gary R. Martino
INFORMATION MANAGEMENT ASSOCIATES, INC.
By /s/ Gary R. Martino
--------------------------------------
Its Chairman & CFO
(signatures continued next page)
4
<PAGE>
INFORMATION MANAGEMENT ASSOCIATES LIMITED
By
--------------------------------------
Its President
By /s/ Gary R. Martino
--------------------------------------
Its Director
(SEAL)
PEOPLE'S BANK
By /s/ David P. Berey
--------------------------------------
David P. Berey
Its Vice President
STATE OF CONNECTICUT
ss.
COUNTY OF
On this 26th day of October, 1995, personally appeared GARY R. MARTINO,
----
signer and sealer of the foregoing instrument, and acknowledged the same to be
his free act and deed, before me.
/s/ SIGNATURE APPEARS HERE
--------------------------
Notary Public
My Commission Expires:
5
<PAGE>
Exhibit 10.44
SUBORDINATION AGREEMENT
THIS AGREEMENT OF SUBORDINATION is made and entered into this 26th day of
October, 1995, by and among ANDREI POLUDNEWYCZ, of Newport Beach, California
("Subordinating Creditor"), INFORMATION MANAGEMENT ASSOCIATES, INC., a
Connecticut corporation, INFORMATION MANAGEMENT ASSOCIATES LIMITED, a
corporation registered under the laws of England (together, "Borrower"), and
PEOPLE'S BANK, a Connecticut banking corporation with an office located at One
Financial Plaza, Hartford, Connecticut 06103-2613 (the "Bank").
WITNESSETH:
WHEREAS, Borrower has requested that the Bank extend to Borrower (i) a
commercial line of credit (the "Line of Credit Loans") in the maximum aggregate
principal amount of up to $6,000,000.00 as evidenced a Line of Credit
Promissory Note in said amount and of even date herewith, a copy of which is
annexed hereto as Exhibit A (the "Line of Credit Note"), and (ii) a term loan
---------
(the "Term Loan"), in the amount of $2,500,000.00, as evidenced by a Term Loan
Promissory Note in said amount and of even date herewith, a copy of which is
annexed hereto as Exhibit B (the "Term Note"); and
---------
WHEREAS, to further evidence its obligations to repay the Term Loan and the
Line of Credit Loans (collectively, the "Loans"), Borrower has or shall cause to
be executed, inter alia, a Loan and Security Agreement of even date herewith
----- ----
(such agreements, together with the Line of Credit Note, the Term Note and any
and all documents, instruments, and agreements executed in connection with or
evidencing the Loans are herein referred to herein as the "Loan Documents"); and
WHEREAS, the Bank has agreed to fund the Loans on the condition, among
others, that Subordinating Creditor agrees to subordinate any and all
indebtedness of Borrower to it to any and all direct and indirect indebtedness
of Borrower to the Bank, pursuant to the terms and conditions set forth herein.
NOW, THEREFORE, for value received and in consideration of the mutual
covenants hereinafter contained, the parties hereto, intending to be legally
bound hereby, do agree as follows:
1. Definitions.
-----------
(a) "Senior Debt" means all indebtedness, liabilities, and obligations
whatsoever, of every kind and description, whenever and however arising,
absolute or contingent, due or to become due, now existing or hereafter arising
from, or in any way connected with, any direct or indirect indebtedness of
Borrower to the Bank, including, but not limited to, all principal and interest
due and owing under the Term Note and the Line of Credit Note, together with all
costs, expenses, and attorneys' and other professional fees incurred or any
action to collect the Loans or to enforce or foreclose any of the Loan
Documents.
<PAGE>
(b) "Subordinated Debt" means all indebtedness, liabilities, and
obligations whatsoever, of every kind and description, whenever and however
arising, absolute or contingent, due or to become due, from Borrower to
Subordinating Creditor.
2. Subordination. Subordinating Creditor and Borrower do each agree that
-------------
the Subordinated Debt is fully subordinated to the full and complete payment and
satisfaction in full of the Senior Debt, and that no payments may be made on the
Subordinated Debt without the prior written consent of the Bank until such time
as the Senior Debt has been paid in full. Borrower's and Subordinating
Creditor's books shall be marked to evidence the foregoing subordination of all
the Subordinated Debt to the Bank. The Bank is authorized to examine such books
from time to time and to make any notations required by this Agreement.
3. Warranties and Representations. Borrower and Subordinating Creditor do
------------------------------
each hereby represent and warrant that:
(a) As of the date hereof, Borrower is indebted to Subordinating
Creditor in a total amount which, when combined with amounts owed by Borrower to
other executive officers of Borrower, does not exceed One Hundred Fifty Thousand
and 00/100 Dollars ($150,000.00);
(b) Subordinating Creditor has not assigned nor will he assign any of
the Subordinated Debt or any interest therein; and
(c) Borrower has not and will not grant, directly or indirectly, to
Subordinating Creditor any security for the repayment of the Subordinated Debt.
4. Negative Covenants. Until all of the Senior Debt has been fully and
------------------
finally paid:
(a) Subordinating Creditor shall take no legal action whatsoever to
collect the Subordinated Debt;
(b) Neither Borrower nor Subordinating Creditor shall take or permit
any action prejudicial to or inconsistent with the Bank's priority position over
Subordinating Creditor that is created by this Agreement; and
(c) Subordinating Creditor shall not ask for, demand, sue for, take or
receive security for all or any part of the Subordinated Debt.
5. Bankruptcy; Rights of the Bank. Upon any distribution of any assets
------------------------------
of Borrower, whether by reason of sale, reorganization, liquidation,
dissolution, arrangement, bankruptcy, receivership, assignment for the benefit
of creditors, foreclosure, or otherwise, the Bank shall be entitled to receive
payment in full of the Senior Debt prior to the payment of all or any part of
the Subordinated Debt. To enable the Bank to assert and enforce its rights
hereunder in any such proceeding or upon the happening of any such event, the
Bank or any person whom the Bank may designate are hereby irrevocably appointed
attorney-in-fact for Subordinating Creditor with full power to act in the place
and stead of Subordinating Creditor, including the right to make, present, file,
and vote such proofs of claim against Borrower on account of all or any part of
the Subordinated Debt as you may deem advisable and to receive and collect any
and all dividends or other payments made thereon and to apply the same on
account of the Senior Debt. Subordinating Creditor will execute and deliver to
the Bank such instruments as may be required by the Bank to enforce any and all
of the
2
<PAGE>
Senior Debt, to effectuate the aforesaid power of attorney, and to effect
collection of any and all dividends or other payments which may be made at any
time on account thereof.
While this instrument remains in effect, Subordinating Creditor will not,
without the Bank's prior written consent, assign to or subordinate in favor of
any other person, firm, or corporation, any right, claim, or interest of any
kind in or to all or any part of the Subordinated Debt, or commence or join with
any other creditor in commencing any bankruptcy, reorganization, or insolvency
proceeding against Borrower.
In furtherance of the foregoing and as collateral security for the payment
and discharge in full of any and all of the Senior Debt, Subordinating Creditor
hereby transfers and assigns to the Bank the Subordinated Debt and all
collateral security therefor to which Subordinating Creditor may at any time be
entitled and all rights under all guarantees thereof and agrees to deliver to
the Bank endorsed in blank all notes or other instruments now or hereafter
evidencing the Subordinated Debt. The Bank may file one or more financing
statements concerning any security interest hereby created without the signature
of Subordinating Creditor appearing thereon.
6. Turnover of Prohibited Transfers. If any payment not permitted hereby
--------------------------------
on account of the Subordinated Debt is received by Subordinating Creditor, such
payment shall be delivered forthwith by Subordinating Creditor to the Bank for
application to the Senior Debt, in the form received except for the addition of
any endorsement or assignment necessary to effect a transfer of all rights
therein to the Bank. The Bank is irrevocably authorized to supply any required
endorsement or assignment which may have been omitted. Until so delivered, any
such payment shall be held by Subordinating Creditor in trust for the Bank and
shall not be commingled with other funds or property of Subordinating Creditor.
7. Waivers. Borrower and Subordinating Creditor each hereby waive any
-------
defense based on the adequacy of a remedy at law which might be asserted as a
bar to the remedy of specific performance of this Agreement in any action
brought therefor by the Bank. To the fullest extent permitted by law, Borrower
and Subordinating Creditor each hereby further waive presentment, demand,
protest, notice of protest, notice of default of dishonor, notice of payment or
nonpayment, and any and all other notices and demands of any kind by the Bank in
connection with all negotiable instruments evidencing all or any portion of the
Senior Debt or the Subordinated Debt to which Borrower or Subordinating Creditor
may be a party; notice of the acceptance of this Agreement by the Bank, notice
of any loans made, extensions granted or other action taken in reliance hereon
by the Bank, as this is a commercial transaction, notice of any hearing required
under any federal or state law with respect to any prejudgment remedy which the
Bank may desire to use; and all other demands and notices of every kind by the
Bank in connection with this Agreement, the Senior Debt, or the Subordinated
Debt. Subordinating Creditor assents to any release, renewal, extension,
compromise, or postponement of the time of payment of the Senior Debt, to any
substitution, exchange or release of collateral therefor and to the addition or
release of any person primarily or secondarily liable thereon.
8. Indulgences Not Waivers. Neither the failure nor any delay on the part
-----------------------
of the Bank to exercise any right, remedy, power, or privilege hereunder shall
operate as a waiver thereof or give rise to an estoppel, nor be construed as an
agreement to modify the terms of this Agreement, nor shall any single or
partial exercise of any right, remedy, power, or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or privilege
with respect to any other occurrence. No waiver by a party hereunder shall be
effective unless it is in writing and signed by the party making such waiver,
and then only to the extent specifically stated in such writing.
3
<PAGE>
9. Duration and Termination. This Agreement shall constitute a continuing
------------------------
agreement of subordination and shall remain in effect so long as Borrower is
indebted, liable or obligated to the Bank under the Loan Documents.
10. Entire Agreement. This Agreement constitutes and expresses the entire
----------------
understanding between the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements and
understandings, inducements, or conditions, whether express or implied, oral or
written. Neither this Agreement nor any portion or provision hereof may be
changed, waived, or amended orally or in any manner other than by an agreement
in writing signed by the Bank, Borrower and Subordinating Creditor.
11. Expenses. Borrower and Subordinating Creditor jointly and severally
--------
agree to pay the Bank on demand all expenses of every kind, including reasonable
attorneys' and other professional fees, that the Bank may incur in enforcing any
of its rights under this Agreement.
12. Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
the Bank, its successors and assigns, and shall be binding upon Borrower, its
successors and assigns, and Subordinating Creditor, and his respective heirs and
administrators.
13. Governing Law. The validity, construction, and enforcement of this
-------------
Agreement shall be governed by the laws of the State of Connecticut and the
parties consent irrevocably to the jurisdiction of the courts of the State of
Connecticut in resolving any dispute arising from this Agreement.
14. Severability. The provisions of the Agreement are independent of and
------------
separable from each other. If any provision hereof shall for any reason be held
invalid or unenforceable, it is the intent of the parties that such invalidity
or unenforceability shall not affect the validity or enforceability of any
other provision hereof, and that this Agreement shall be construed as if such
invalid or unenforceable provision had never been contained herein.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
signed, sealed, and delivered, as of this 26th day of October, 1995.
/s/ Andrei Poludnewycz
------------------------------------
Andrei Poludnewycz
INFORMATION MANAGEMENT
ASSOCIATES, INC.
By /s/ Gary R. Martino
--------------------------------
Its President
4
<PAGE>
INFORMATION MANAGEMENT
ASSOCIATES LIMITED
By /s/ Gary R. Martino
--------------------------------
Its Secretary & Director
PEOPLE'S BANK
By /s/ David P. Berey
--------------------------------
David P. Berey
Its Vice President
STATE OF CALIFORNIA
ss.
COUNTY OF ORANGE
On Oct. 26, 1995 before me, Steven P. Dunn, personally appeared Andrei
Poludnewycz (or proved to me on the basis of satisfactory evidence to be the
person(s) whose name(s) is subscribed to the within instrument and acknowledged
to me that he executed the same in his authorized capacity(ies), and that by his
signature(s) of the instrument the person(s), or the entity upon behalf of which
the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature /s/ Steven P. Dunn
-------------------------
[STAMP OF STEVEN P. DUNN NOTARY PUBLIC.
MY COMM. EXPIRES FEB 28,1997 APPEARS HERE]
<PAGE>
Exhibit 10.45
AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT
----------------------------------------------
This Amendment No. 1, dated as of December 31, 1996, to the Loan and
Security Agreement, dated October 26, 1995 (the "Loan and Security Agreement")
is by and among People's Bank, a Connecticut banking corporation having its
chief executive office at 850 Main Street, Bridgeport, Connecticut 06604
("Secured Party"), Information Management Associates, Inc., a Connecticut
corporation having its chief executive office located at One Corporate Drive,
Shelton, Connecticut 06484 ("IMA"), and Information Management Associates
Limited, a company registered in England and having its principal office at
Suite 404, Exchange Tower, One Harbour Exchange Square, London, England E14 9GB
("IMA Limited"). Capitalized terms used herein and not defined herein shall
have the meanings assigned to them in the Loan and Security Agreement.
WHEREAS, the parties named above have heretofore entered into the Loan and
Security Agreement; and
WHEREAS, the parties named above acknowledge that they desire to make
certain amendments to the Loan and Security Agreement pursuant to the terms and
conditions set forth herein.
NOW THEREFORE, in consideration of the foregoing and in further
consideration of the mutual covenants contained herein, the parties hereto agree
as follows:
Section 1. Amendments.
-----------
A. Paragraph 2(w) of the Loan and Security Agreement is hereby deleted in
its entirety and the following shall be substituted in lieu thereof:
(w) "Tangible Net Worth" shall mean the aggregate tangible assets of
Debtor, less the aggregate liabilities, including subordinated indebtedness, as
determined in accordance with generally accepted accounting principles, provided
--------
that, for purposes of this calculation, redeemable convertible preferred stock
- ----
and redeemable common stock warrants shall be excluded from the liabilities of
Debtor.
B. Paragraph 5(f) of the Loan and Security Agreement is hereby deleted in
its entirety and the following shall be substituted in lieu thereof:
(f) The outstanding principal balance of the Line of Credit Note, any
accrued but unpaid interest thereon and other sums due and payable pursuant to
the Loan Documents, shall be due and payable on the date (the "Line of Credit
Maturity Date") which is the earlier to occur
<PAGE>
of (i) June 1, 1997, (ii) the closing of an Initial Public Offering or (iii) the
date repayment of the Line of Credit Loans is accelerated after the occurrence
of an Event of Default, unless such Line of Credit Maturity Date is extended in
writing from time to time in Secured Party's sole and absolute discretion.
C. Paragraph 6(a) of the Loan and Security Agreement is hereby deleted in
its entirety and the following shall be substituted in lieu thereof:
(a) Maintain (i) at least a 1.10 to 1.00 ratio of current assets to
current liabilities (excluding from such calculation Deferred Revenue), (ii) a
net working capital (excluding from such calculation Deferred Revenue) of not
less than $700,000.00, and (iii) a Tangible Net Worth plus subordinated debt of
not less than $1,500,000.
D. Paragraph 7(f) of the Loan and Security Agreement is hereby deleted in
its entirety and the following shall be substituted therefor:
(f) Enter into any transactions with any of its Affiliates other than
in the ordinary course of business and on terms no less favorable to Debtor than
are at the time available to it from non-Affiliates, provided that, Debtor shall
-------------
be permitted to make loans to officers in an aggregate amount not to exceed
$150,000 during 1997.
E. Paragraph 7(m) of the Loan and Security Agreement is hereby deleted in
its entirety and the following shall be substituted in lieu thereof:
(m) Purchase or otherwise acquire fixed assets including, without
limitation, land, buildings, fixtures, or Equipment in any fiscal year involving
expenditures or commitments, in the aggregate and on a non-cumulative basis, in
excess of $750,000.00 in the fiscal year commencing January 1, 1995 or
$1,000,000.00 in any fiscal year commencing after January 1, 1996.
Section 2. Miscellaneous
-------------
A. Secured Party hereby waives all covenant violations of the Loan and
Security Agreement occurring prior to the effectiveness of this Amendment No. 1
to the Loan and Security Agreement, provided, however, that no provision
--------
contained herein shall be construed as a waiver of any violation of any such
covenants occurring subsequent to the effectiveness of this Amendment No. 1 to
the Loan and Security Agreement.
B. Except as expressly modified herein, the Loan and Security Agreement
shall otherwise remain unmodified and in full force and effect. IMA and IMA
Limited acknowledge that they are validly indebted to Secured Party under the
Loan and Security Agreement, as amended hereby, without defense, counterclaim or
offset and that all obligations of IMA and IMA Limited
2
<PAGE>
thereunder and under the Notes continue to be secured by a valid, perfected
First Lien Security Interest in the collateral.
C. IMA and IMA Limited hereby represent and warrant to the Secured Party
that each of IMA and IMA Limited has duly authorized the execution, delivery and
performance of this Amendment No. 1 to the Loan and Security Agreement and this
Amendment No. 1 to the Loan and Security Agreement has been duly executed and
delivered by each of IMA and IMA Limited and constitutes a legal, valid and
binding obligation of each of IMA and IMA Limited, enforceable in accordance
with their respective terms.
D. This Amendment No. 1 to the Loan and Security Agreement may be executed
in several original counterparts. Each such counterpart shall, for all
purposes, be deemed to be an original, and all counterparts shall together
constitute one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
3
<PAGE>
The parties have executed this Amendment No. 1 to the Loan and Security
Agreement effective as of the date first above written.
PEOPLE'S BANK
By: [SIGNATURE APPEARS HERE]
------------------------------
Name:
Title:
INFORMATION MANAGEMENT ASSOCIATES, INC.
By: [SIGNATURE APPEARS HERE]
------------------------------
Name:
Title:
INFORMATION MANAGEMENT ASSOCIATES
LIMITED
By: [SIGNATURE APPEARS HERE]
------------------------------
Name:
Title:
4
<PAGE>
EXHIBIT 10.46
ASSET PURCHASE AGREEMENT
------------------------
Asset Purchase Agreement dated as of July 31, 1996, between INFORMATION
MANAGEMENT ASSOCIATES, INC., a Connecticut corporation (the "Seller"), and
TELEMAR SOFTWARE INTERNATIONAL, LLC, a Delaware limited liability company (the
"Buyer").
WHEREAS, the Buyer desires to purchase from the Seller certain of the
Seller's assets and properties relating to Seller's Telemar business (the
"Business") as hereinafter specified;
WHEREAS, it is the intent of the Buyer and Seller to have the effect of the
sale and transfer of the Business be treated for bookkeeping, tax and accounting
purposes as if such sale and transfer occurred on September 1, 1996 (the
"Effective Date"); and
WHEREAS, the Seller is willing to sell, transfer, convey and assign the
same to the Buyer upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and representations hereinafter stated, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE 1
---------
Definitions
-----------
The following capitalized terms shall have the following meaning in this
Agreement:
1.1 "Accounts Receivable" has the meaning set forth in Section 2.1(a)
hereof.
1.2 "Administrative Services Agreement" has the meaning set forth in
Section 11.5 hereof.
1.3 "Assigned Contracts" has the meaning set forth in Section 2.1(b)
hereof.
1.4 "Assumption Agreement" has the meaning set forth in Section 12.3
hereof.
1.5 "Bill of Sale" has the meaning set forth in Section 11.3 hereof.
1.6 "Code" means computer programming code. Except as otherwise specified,
Code shall include both Object Code and Source Code.
(a) "Object Code" means the machine-readable form of the Code.
<PAGE>
(b) "Source Code" means the human-readable form of the Code,
including all comments and any procedural code such as job control language.
1.7 "Copyright Interests" means all the interests that Seller or any
Subsidiary of Seller may own, or have the right to sublicense hereunder, in
registered or unregistered copyrights and copyright registrations in the United
States in and to the Products (other than the Generic Code) currently held by
Seller or any such Subsidiary, and any renewal or extension thereof, together
with all other copyright interests accruing by reason of international copyright
conventions and any moral rights pertaining thereto, including the right to sue
for, settle or release any past, present or future infringement thereof.
1.8 "Derivative Product" means a computer program product in Source Code
or Object Code form, together with related Documentation, which is either a
Derivative Work or a copy of any Product, and which is offered to end-user
customers as a modification, addition, or replacement of or to any Product,
whether in the form of a fix, new release, enhancement, upgrade, new product, or
otherwise; provided, however, that any product that, when its Code is fully
combined with other Code to render it operational, contains less than twenty-
five percent (25%) of the Code of the module or modules of the Product from
which it may have been derived shall not be deemed a copy or Derivative Work of
the Product for this purpose.
1.9 "Derivative Work" means a work that is based upon one or more
preexisting works, such as a revision, modification, translation, abridgement,
condensation, expansion, or any other form in which such preexisting works may
be recast, transformed, or adapted, and which, if prepared without authorization
of the owner of the copyright in such preexisting work, would constitute a
copyright infringement. For purposes of this Agreement, a Derivative Work shall
also include any compilation that incorporates such a preexisting work.
1.10 "Documentation" means all written materials (and machine-readable text
subject to display and printout) that relate to and/or describe particular Code.
Except as otherwise specified, Documentation shall include Development
Documentation and User Documentation.
(a) "Development Documentation" means all Documentation used in
conjunction with Source Code in the development process.
(b) "User Documentation" means all Documentation in the form of
instructions and manuals provided to end-user customers.
1.11 "Effective Date" shall have the meaning given such term in the
Recitals hereof.
-2-
<PAGE>
1.12 "Existing Licenses" means the end-user license agreements between
Seller and its end-user customers identified in Schedule 1.12 attached hereto,
which relate solely to Products that have already been fully delivered and
installed.
1.13 "Generic Code" means the Code identified in Schedule 1.13 attached
hereto, consisting of subroutines that are currently part of the Products and
used by Seller or its Subsidiaries in other products or for other purposes.
1.14 "Note" has the meaning set forth in Article 7 hereof.
1.15 "Other Interests" means the interests, other than the Copyright
Interests and the Trademark Interests, that Seller or any Subsidiary of Seller
may own or have the right to sublicense hereunder in (1) any idea, design,
concept, technique, invention, discovery, or improvement, whether or not
patentable, but including, without limitation, patents, patent applications,
trade secrets, and know-how, that are embodied in or evidenced by the Products,
or required to be used or practiced in order to exercise the rights and licenses
granted hereunder; and (2) pictorial, graphic, or audio/visual works, including,
without limitation, icons, screens, characters, data formats, and reports
created as a result of execution of the Products, whether such pictorial,
graphic, or audio/visual works are created by use of the Products alone or with
other programming or through other means.
1.16 "Products" means the forms of Code and Documentation listed in
Schedule 1.16 attached hereto.
1.17 "Related Documents" means the Bill of Sale, the Assumption Agreement,
the Note, the Security Agreement, the Sublease and the Administrative Services
Agreement.
1.18 "Security Agreement" has the meaning set forth in Article 7 hereof.
1.19 "Sublease" has the meaning set forth in Section 11.4 hereof.
1.20 "Subsidiary" means a corporation, company, or other entity (1) more
than fifty percent (50%) of whose outstanding shares or securities (representing
the right to vote for the election of directors or other managing authority) are
owned or controlled, directly or indirectly, by a party hereto, or (2) that does
not have outstanding shares of securities, as may be the case in a partnership,
joint venture, or unincorporated association, but more than fifty percent (50%)
of the ownership interest representing the right to make the decisions for such
corporation, company, or other entity is, now or hereafter, owned or controlled,
directly or indirectly, by a party hereto. Such corporation, company, or other
entity shall be deemed to be a Subsidiary only so long as such ownership or
control exists.
-3-
<PAGE>
1.21 "Trademark Interests" means the interests Seller or any Subsidiary of
Seller may own, or have the right to sublicense hereunder, in the United States
and foreign common law trademarks, service marks, logos, designs, product and
business identifiers and tradedress set forth in Schedule 1.21 attached hereto
and all registrations and applications for registration thereof, including the
right to sue for, settle, or release any past, present, or future infringement
thereof or unfair competition involving the same.
ARTICLE 2
---------
Transfer of Assets and Grant of Licenses
----------------------------------------
2.1 Transfer of Assets. On the terms and subject to the conditions of
------------------
this Agreement, at the closing referred to in Article 8 hereof (the "Closing"),
the Seller shall transfer, convey and assign or cause to be transferred,
conveyed and assigned to the Buyer all of the right, title and interest of the
Seller in and to the following assets and properties which Seller represents and
warrants are all of the assets and properties which are essential to or
necessary in order to operate the Business as of the Closing:
(a) the accounts receivable described in EXHIBIT 2.1(a) attached hereto
--------------
("Accounts Receivable").
(b) all rights, privileges and claims of the Seller (including, without
limitation, rights and claims to refunds and adjustments) in, to and under the
license agreements, maintenance agreements and other agreements and contracts
which are set forth on EXHIBIT 2.1(b) (the "Assigned Contracts") provided,
-------------- --------
however, Buyer shall not be entitled to any accounts receivable, consulting
- -------
service fees or other similar fees or revenues that have accrued for any period
prior to September 1, 1996 but are paid on or after September 1, 1996;
(c) the Trademark Interests and Copyright Interests;
(d) copies of the Products; and
(e) copies of all books, records, sales brochures and marketing
information directly relating to the Business.
To the extent either party collects or is in receipt of any monies, credits
or other property or funds or payments (including securities) relating to
accounts receivable, refunds, prepayments or otherwise that the other party
hereto is entitled to receive pursuant to the terms of this Agreement, and that
are or should have been paid or delivered to the other party hereto, such party
receiving those monies, credits, or other property or funds shall immediately
notify the other party and forward same to such other party within five (5) days
of its receipt thereto.
-4-
<PAGE>
For convenience of reference, all the assets, properties and rights to be
transferred, conveyed and assigned to the Buyer in accordance with the
provisions of this Article 2 are hereinafter collectively called the "Purchased
Assets".
2.2 Reserved Rights. The assignment effected under Article 2 hereof is
---------------
subject to (i) the rights and licenses granted in the Products by Seller to
other end-user customers pursuant to the Existing Licenses and (ii) the rights
and licenses reserved and retained by Seller under Section 3.2 hereof.
2.3 License to Other Interests. As of the Closing Date, Seller grants
---------------------------
Buyer a worldwide, nonexclusive, irrevocable, royalty-free, and assignable right
and license, together with the right to grant sublicenses, in and to the Other
Interests, as necessary for Buyer (or any person or entity acting with Buyer or
under its authority) to use, execute, copy, display, and perform and to
distribute, license, and sublicense internally and externally the Products
(including Derivative Works thereof) and to make Derivative Works thereof.
2.4 License to Generic Code. As of the Effective Date, Seller grants
------------------------
Buyer a worldwide, nonexclusive, irrevocable, royalty-free, and assignable right
and license, together with the right to grant sublicenses, to use, execute,
copy, display, and perform and to distribute, license, and sublicense internally
and externally the Generic Code (including Derivative Works thereof) and to make
Derivative Works thereof.
ARTICLE 3
---------
Assets Not Being Transferred;
-----------------------------
Reservation of Rights and Licenses by Seller
--------------------------------------------
3.1 Assets Not Being Transferred. Anything contained in Article 2 hereof
-----------------------------
to the contrary notwithstanding, there are expressly excluded from the assets,
properties and rights to be transferred, conveyed and assigned to the Buyer the
following:
(a) the Generic Code and the Other Interests; and
(b) those certain other agreements, assets and properties of the Seller,
if any, which are specifically listed, described and identified in EXHIBIT 3.1
-----------
attached hereto.
For convenience of reference, the assets, properties and rights referred to
in this Article 3 which are being retained by the Seller are hereinafter
collectively called the "Excluded Assets".
-5-
<PAGE>
3.2 Reservation of Rights and Licenses by Seller.
---------------------------------------------
(a) Seller hereby reserves and retains for itself and its
Subsidiaries' own benefit, and Buyer confirms to Seller, the nonexclusive,
irrevocable, royalty-free, nonassignable right and license under the Copyright
Interests to make and use (for internal purposes only) copies of the Products.
Seller or its Subsidiaries may sublicense solely for the purpose of conversion
of the Products from one operating system to a different operating system up to
25 of such copies of the Products, in Object Code form only, to end users under
Seller's current form of standard end-user license agreement applicable to
program materials of such nature. Such rights and licenses shall be perpetual
(or shall last for as long as applicable law otherwise permits). To the extent
Seller derives any revenue as a result of the sublicensing of the Products, the
Note shall be reduced by an amount equal to such revenue.
(b) For a period of five (5) years after the Closing Date, Buyer
shall provide Seller with ten (10) copies of any Derivative Products, when and
as they are produced and offered generally by Buyer to end-user customers who
have licensed the Product. Each Derivative Product may be copied and used (in
the quantity and subject to the limitations set forth in Section 3.2(a) and
3.2(c) hereof) solely in combination with, or in substitution for, the Products.
(c) Seller may make and retain no more than ten (10) additional
copies of the Products and Derivative Products for nonproductive archival
purposes. Seller shall protect the Source Code version of any Products or
Derivative Products with the same degree of care as it provides for its own
similar products.
(d) Notwithstanding any other provision of this Agreement, Seller
reserves and retains for its own benefit the right to use and disclose, for any
purpose whatsoever, the ideas, concepts, know-how, and techniques embodied in or
disclosed by the Products or any Derivative Products.
ARTICLE 4
---------
Instruments of Conveyance and
Transfer, Records, Access, Etc.
-------------------------------
4.1 At the Closing, the Seller shall deliver to the Buyer the Bill of Sale
with respect to the Purchased Assets.
4.2 The Buyer shall, following the Closing, give to the Seller and its
authorized representatives such access, during normal business hours and upon
prior notice, to such books and records constituting part of the Purchased
Assets as shall be reasonably necessary for the Seller to review and utilize in
connection with its preparation and filing of tax returns regarding the Business
for periods prior to the Closing Date, and the
-6-
<PAGE>
opportunity to make extracts and copies of such books and records at the expense
of the Seller. The Buyer agrees that it shall not, for a period of six (6) years
following the Closing, destroy or cause to be destroyed any such books or
records without first obtaining the consent of the Seller.
ARTICLE 5
---------
Assumption of Liabilities
-------------------------
5.1 Assumption of Liabilities. Subject to the terms and conditions of
--------------------------
this Agreement, the Buyer shall assume only the following liabilities and
obligations of the Seller relating to the Business:
(a) those liabilities listed on Exhibit 5.1(a) attached hereto;
(b) all obligations arising on or after the Effective Date relating to the
Purchased Assets; and
(c) the Buyer will give credit for accrued vacation as of the Closing Date
to all employees of Seller who become employees of Buyer; provided, however, to
-------- -------
the extent it is determined by judicial, administrative or other final and non
appealable order that Seller shall be responsible for the payment of accrued
vacation to its former employees prior to the Closing Date, Buyer shall then
agree to increase the Purchase Price (as set forth in Article 7 hereof) by such
amount as is determined by such order. Buyer agrees to execute and deliver to
Seller an additional note in the form of Exhibit 7A attached hereto for such
----------
amount.
For convenience of reference, the liabilities and obligations of the Seller
being assumed by the Buyer as aforesaid are hereinafter collectively called the
"Assumed Liabilities."
ARTICLE 6
---------
Obligations Not Being Assumed
-----------------------------
There are expressly excluded from the obligations and liabilities to be
assumed by Buyer hereunder, and Buyer shall not be responsible to pay, perform
or discharge, any and all obligations and liabilities of any kind or nature
whatsoever of or relating to Seller, any of Seller's Subsidiaries, the Purchased
Assets, the Business or any other business of Seller or any of Seller's
Subsidiaries, whether arising on or before the date hereof other than those
specifically described in Article 5 hereof (the "Excluded Liabilities").
-7-
<PAGE>
ARTICLE 7
---------
Purchase Price and Payment
--------------------------
The consideration for the Purchased Assets (the "Purchase Price"),
shall consist of the following: (a) a promissory note in the principal amount of
$650,000 in the form of EXHIBIT 7A attached hereto (the "Note"), which shall be
----------
secured by all of assets of Buyer pursuant to a security agreement in the form
of EXHIBIT 7B attached hereto (the "Security Agreement") and (b) assumption by
----------
Buyer of the Assumed Liabilities. The Note and Security Agreement to be issued
to Seller in payment for the transfer of the Purchased Assets shall be delivered
to Seller at Closing.
ARTICLE 8
---------
Closing
-------
The Closing shall, unless another date or place is agreed to in writing by
the parties hereto, take place at the offices of LeBoeuf, Lamb, Greene & MacRae,
L.L.P., 225 Asylum Street, Hartford, Connecticut 06103 at 10:00 a.m. local time
on September 26, 1996 (the "Closing Date").
ARTICLE 9
---------
Representations and Warranties of the Seller
--------------------------------------------
The Seller represents and warrants to the Buyer as follows:
9.1 Corporate Organization; Good Standing; Qualification and Power. The
--------------------------------------------------------------
Seller is a corporation validly existing and in good standing under the laws of
the State of Connecticut, and the Seller has all requisite power and authority,
to execute and deliver, and to perform all of its obligations under this
Agreement and the Related Documents.
9.2 Authority. The execution, delivery and performance by the Seller of
---------
this Agreement and the Related Documents is (i) within the Seller's corporate
powers, (ii) has been duly authorized by all necessary corporate action, and
(iii) does not contravene Seller's charter or by-laws or any law or contractual
restriction binding on Seller except for violations which would not have a
material adverse effect on the ability of the Seller to consummate the
transactions contemplated hereby. Each of this Agreement and the Related
Documents constitutes the legal, valid and binding obligation of Seller
enforceable against the Seller in accordance with its terms.
9.3 Consents. Except as set forth on Schedule 9.3, no consent or approval
--------
or other action by, and no notice to or filing with, any governmental authority,
regulatory body or any other third-party is required for the due execution,
delivery and
-8-
<PAGE>
performance by the Seller of this Agreement or the Related Documents.
To the extent that any Purchased Asset may not be sold, assigned,
transferred, delivered, subleased or sublicensed (each such term being
hereinafter referred to as a "Transfer") without the consent of a third party,
which consent Seller is unable to obtain for any reason whatsoever, or if the
transfer or attempted Transfer of any such Purchased Asset would constitute a
breach of contract or a violation of any law, writ, injunction, decree,
judgement, order or arbitration award, this Agreement shall not constitute a
Transfer or attempted Transfer of such Purchased Asset (any such Purchased Asset
shall hereinafter be referred to as a "Restricted Asset"). Seller shall use all
reasonable efforts, and Buyer shall cooperate with Seller, to obtain such
consents. To the extent that any consent necessary to Transfer any Restricted
Asset is not obtained prior to the Closing Date, Seller shall use all reasonable
efforts to (i) provide to Buyer, at Buyer's request, the benefit of such
Restricted Asset, (ii) cooperate in any reasonable and lawful arrangement
designed to provide such benefits to Buyer, and (iii) enforce, at the request
and for the account of Buyer, any rights of Seller arising in respect of any
Restricted Asset against any third party.
9.4 Title to Property. The Seller holds title to all of the Purchased
-----------------
Assets free and clear of liens, claims or encumbrances, except those set forth
in SCHEDULE 9.4 attached hereto, and liens for taxes not yet due and payable.
------------
9.5 Financial Statements. Seller has delivered to Buyer copies of
---------------------
unaudited statements of income and earnings and the balance sheet for the
Business as of July 31, 1996 and as of August 31, 1996, (the "Financial
Statements"), which contain Seller's best estimate of the break-out of the
Business from Seller's consolidated financial statements for such periods,
respectively. Buyer agrees that to the extent it suffers or incurs any damages,
losses or liabilities as a result of a breach of this representation, then at
such time as the amount of such damages, losses or liabilities are determined
and such determination is final and non-appealable, the principal amount of the
Note shall be reduced by the amount of such damages, losses or liabilities. If
the damages, losses and liabilities paid under this Section 9.5 exceed the
principal amount of the Note the such damages, losses or liabilities shall be
limited to the principal amount of the Note.
9.6 Employees.
----------
(a) Schedule 9.6(a) hereto contains a true and correct statement of
the names of employees related to the Business, their titles, present rates of
compensation (whether in the form of salary, bonuses, commissions, or other
supplemental compensation now or hereafter payable), and the amount of vacation
time each has accrued as of August 31, 1996.
-9-
<PAGE>
(b) Except as set forth on Schedule 9.6(b) hereto, Seller has complied
---------------
in all material respects with all laws relating to the employment of labor,
including, without limitation, provisions thereof relating to wages, hours,
equal opportunity, collective bargaining, the Employee Retirement Income
Security Act of 1974 ("ERISA") and the payment of social security and other
taxes, and to its knowledge Seller is not aware of any material labor relations
problems.
(c) Seller does not maintain or sponsor any defined benefit plan for
its employees under the provisions or subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") nor does Seller contribute to any
multi-employer plan covered by Title IV of ERISA.
9.7 Litigation. Except as set forth on Exhibit 9.7, there is no suit,
-----------
action, administrative proceeding, arbitration or other proceeding or
governmental investigation pending or, to the knowledge of Seller, threatened,
relating to the Business.
ARTICLE 10
----------
Representations and Warranties of the Buyer
-------------------------------------------
10.1 Organization, Standing and Power. The Buyer is a limited
---------------------------------
liability company duly organized and validly existing and in good standing under
the laws of the State of Delaware, has all requisite corporate power and
authority to execute and deliver, and to perform all of its obligations under
this Agreement and the Related Documents.
10.2 Authority. The execution, delivery and performance by the Buyer
----------
of this Agreement and the Related Documents is (i) within the Buyer's corporate
powers; (ii) has been duly authorized by all necessary corporate action; and
(iii) does not contravene Buyer's charter or by-laws or any law or contractual
restriction binding on Buyer. Each of this Agreement and the Related Documents
constitutes the legal, valid, binding obligation of Buyer enforceable against
the Buyer in accordance with its terms.
10.3 Governmental Authorization. No consent or approval or other
---------------------------
action by, and no notice to or filing with any governmental authority or
regulatory body is required for the due execution, delivery and performance by
the Buyer of this Agreement or the Related Documents.
10.4 Condition of Assets. Except as expressly provided in Section 9.4,
--------------------
the Buyer acknowledges that the Seller makes no representation or warranty as to
the condition of the Purchased Assets, and that such assets are being acquired
"as is" and "where is."
-10-
<PAGE>
ARTICLE 11
----------
Conditions to Obligations of the Buyer
--------------------------------------
The obligations of the Buyer to perform this Agreement are subject to
the satisfaction of the following conditions unless waived by the Buyer in
writing:
11.1 Representations and Warranties. The representations and
-------------------------------
warranties of the Seller set forth in Article 9 hereof shall be true and correct
in all material respects as of the date of this Agreement and as of the Closing
as though made on and as of the Closing, and the Buyer shall have received a
certificate signed by an officer of the Seller to that effect at the Closing.
11.2 Performance of Obligations of the Seller. The Seller shall have
----------------------------------------
performed all obligations required to be performed by it prior to or on the
Closing under this Agreement, and the Buyer shall have received a certificate
signed by an officer of the Seller to that effect at the Closing.
11.3 Bill of Sale. The Buyer shall have received a duly executed bill
------------
of sale and assignment (the "Bill of Sale") in substantially the form of EXHIBIT
-------
11.3 attached hereto which shall transfer, convey and assign to the Buyer the
- ----
Purchased Assets referred to in Article 2.
11.4 Sublease. Seller shall have executed a Sublease Agreement in
--------
substantially the form of EXHIBIT 11.4 attached hereto (the "Sublease")
------------
providing for the sublease to Buyer of approximately 4,718 square feet of space
at the premises leased by Seller, as Tenant, at One Corporate Drive, Shelton,
Connecticut (the "Leased Premises").
11.5 Administrative Services Agreement. Seller shall have executed an
----------------------------------
administrative services agreement in substantially the form of EXHIBIT 11.5
------------
attached hereto providing that Seller shall provide certain administrative
services and sublease certain equipment to Buyer (the "Administrative Services
Agreement").
ARTICLE 12
----------
Conditions of Obligations of the Seller
---------------------------------------
The obligations of the Seller to perform this Agreement are subject to
the satisfaction of the following conditions unless waived by the Seller in
writing:
12.1 Representations and Warranties. The representations and
-------------------------------
warranties of the Buyer set forth in Article 10 hereof shall be true and correct
in all material respects as of the date of this Agreement and as of the Closing
as though made on and as of the Closing, and the Seller shall have received a
certificate signed by an officer of the Buyer to that effect at the Closing.
-11-
<PAGE>
12.2 Performance of Obligations of the Buyer. The Buyer shall have
----------------------------------------
performed all obligations required to be performed by it prior to or on the
Closing under this Agreement and the Seller shall have received a certificate
signed by an officer of the Buyer to that effect at the Closing.
12.3 Assumption Agreement. The Seller shall have received a duly
--------------------
executed instrument of assumption in substantially the form of EXHIBIT 12.3
attached hereto whereby the Buyer shall assume the Assumed Liabilities specified
in Article 5 (the "Assumption Agreement").
12.4 Sublease. Buyer shall have executed the Sublease.
---------
12.5 Administrative Services Agreement. Buyer shall have executed the
---------------------------------
Administrative Services Agreement.
ARTICLE 13
----------
Survival of Representations and Warranties;
Indemnification, Etc.
---------------------
13.1 Survival. All representations and warranties made by Buyer or Seller
--------
in this Agreement or pursuant to this Agreement, made on any Exhibit or Schedule
hereto or document delivered hereunder, shall survive the Closing until the
first anniversary of the Closing (the "Survival Date").
13.2 Indemnification by Seller. Subject to Section 9.5 above, Seller
-------------------------
hereby agrees to indemnify and to hold Buyer harmless from, against and in
respect of:
(a) any and all losses, liabilities or damages suffered or incurred by
Buyer by reason of (i) any untrue representation, breach of warranty or
non-fulfillment of any covenant or agreement by Seller contained in this
Agreement or in any certificate, document or instrument delivered to Buyer
pursuant hereto or in connection herewith and (ii) any liability or obligation
of Seller not expressly assumed by Buyer pursuant to this Agreement; and
(b) any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and out-of-pocket expenses, including, without
limitation, reasonable legal fees and expenses, incident to any of the foregoing
or incurred in enforcing this indemnity.
13.3 Indemnification by Buyer. Buyer hereby agrees to indemnify and
-------------------------
hold Seller harmless from, against and in respect of:
(a) any and all losses, liabilities or damages suffered or incurred by
Seller resulting from any untrue representation, breach of warranty or
non-fulfillment of any covenant or agreement by Buyer contained in this
Agreement or in any certificate,
-12-
<PAGE>
document or instrument delivered to Seller pursuant hereto or in connection
herewith; and
(b) any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and out-of-pocket expenses, including, without
limitation, reasonable legal fees and expenses, incident to any of the foregoing
or incurred in enforcing this indemnity.
13.4 Third Party Claims.
-------------------
(a) In order for Buyer or Seller, as the case may be, to be entitled
to any indemnification provided for under this Agreement in respect of, arising
out of or involving a claim made by any person, firm, governmental authority or
corporation other than the Buyer or Seller, or their respective successors,
assigns or affiliates (a "Third Party Claim") against the indemnified party,
such indemnified party must notify the indemnifying party in writing of the
Third Party Claim promptly after receipt by such indemnified party of written
notice of the Third Party Claim. Thereafter, the indemnified party shall
promptly deliver to the indemnifying party copies of all notices relating to the
Third Party Claim.
(b) If a Third Party Claim is made against an indemnified party, the
indemnifying party will be entitled to participate in the defense thereof and,
if it so chooses, to assume the defense thereof with counsel selected by the
indemnifying party (provided such counsel is not reasonably objected to by the
indemnified party). Should the indemnifying party elect to assume the defense of
a Third Party Claim, the indemnifying party will not be liable to the
indemnified party for any legal expenses subsequently incurred by the
indemnified party in connection with the defense thereof. If the indemnifying
party elects to so participate in or assume the defense of a Third Party Claim,
the indemnified party will fully cooperate with the indemnifying party in
connection with such defense.
ARTICLE 14
----------
Non-Competition; Employees, etc.
--------------------------------
14.1 Non-Competition. In consideration of the agreements of Seller
----------------
contained herein, Buyer hereby covenants that, for a period of five years from
and after the Closing, Buyer and its affiliates will not (i) solicit any present
customers of Seller that utilize Seller's EDGE(R) software; (ii) solicit any
lead or prospect that has been developed by Seller in connection with the
licensing of Seller's EDGE(R) software; (iii) develop or engage in any
consulting business that competes in any manner with the consulting business of
Seller relating to Seller's EDGE(R) software; (iv) solicit any employees of
Seller or Seller's affiliates for employment with Buyer or Buyer's affiliates;
or (v) engage in the licensing or sale of software products that are designed
for a Unix-based platform,
-13-
<PAGE>
whether such products are developed internally or acquired from third parties.
14.2 Employees. Buyer hereby covenants and agrees that it will make an
----------
offer of employment to all of the persons listed in SCHEDULE 14.2 attached
hereto at the salary levels set forth therein.
14.3 Additional Expenses. All taxes, expenses, charges and payments
--------------------
("Additional Expenses") invoiced to, accrued or actually paid, or incurred by
Seller with respect to the Business on and after September 1, 1996 shall be paid
by Buyer.
Within 60 days of the date hereof Seller shall determine the actual
amount of such Additional Expenses described above and shall notify Buyer of
such amount. Buyer shall pay Seller in cash such amount not to exceed $25,000 in
the aggregate or, at Seller's sole discretion, increase the principal amount of
Buyer's Note by such amount, unless within 15 days it shall have notified Seller
of its disagreement with Seller's calculations. During such 15 day period, Buyer
shall have reasonable access to the books and records of Seller in order to
review Seller's calculations. If within 15 days after notice by Buyer of its
disagreement with Seller's expense calculations Seller and Buyer are unable to
agree as to the amount of expenses to be paid by Buyer, then each party shall
submit its own calculation to Seller's independent auditors who shall then
determine, based solely on the calculations presented to it, as to which
calculation shall be final and binding.
The Seller agrees that all fees and expenses incurred by it in
connection with this Agreement and the transactions as contemplated herein shall
be borne by it, and the Buyer agrees that all fees and expenses incurred by it
in connection with this Agreement and the transactions as contemplated herein
shall be borne by it.
14.4 Accounts Receivable Set-Off. The Buyer shall have the right to
----------------------------
set off and apply against the principal amounts payable under the Note the
amount of any Accounts Receivable which Buyer is unable to collect within six
months from the Closing Date. Such set-off shall be the exclusive remedy of
Buyer with respect to Accounts Receivable.
14.5 Seller's Right to Collect Uncollected Accounts Receivable. Any
----------------------------------------------------------
Accounts Receivable which are not collected within six months of the Closing
Date shall be assigned to Seller and Seller shall be entitled to collect all
such Accounts Receivable for its own account.
14.6 Disclaimer. Except as expressly provided in this Agreement,
-----------
Seller makes no representation or warranty, express or implied, with respect to
the Purchased Assets, including, but not limited to, any implied warranty of
merchantability or fitness for a particular purpose.
-14-
<PAGE>
ARTICLE 15
----------
Miscellaneous
-------------
15.1 Parties in Interest. This Agreement will be binding upon, inure
-------------------
to the benefit of, and be enforceable by, the respective successors and assigns
of the parties hereto. This Agreement is not intended and shall not be construed
to create rights on behalf of any third parties.
15.2 Entire Agreement; Amendments. This Agreement and the other
-----------------------------
writings referred to herein or delivered pursuant hereto contain the entire
understanding of the parties with respect to its subject matter. There are no
representations, promises, warranties, covenants or undertakings other than as
expressly set forth herein or therein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to its subject
matter. This Agreement may be amended only by a written instrument duly executed
by the parties, and any condition to a party's obligations hereunder may only be
waived by such party. Any waiver must be in writing.
15.3 Headings. The Article and Section headings contained in the
---------
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
15.4 Notices. All notices, claims, certificates, requests, demands and
--------
other communications hereunder will be given in writing and will be deemed to
have been duly given if delivered personally or mailed (by registered or
certified mail, postage prepaid) or delivered by guaranteed overnight delivery
service as follows:
If to the Seller, to:
Information Management Associates, Inc.
One Corporate Drive, Suite 414
Shelton, Connecticut 06484
Attention: Gary R. Martino
With a copy to:
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
Goodwin Square, 13th Floor
225 Asylum Street
Hartford, Connecticut 06103
Attention: Thomas L. Fairfield
-15-
<PAGE>
If to the Buyer to:
Telemar Software International, LLC
One Corporate Drive, Suite 404
Shelton, Connecticut 06484
Attention: Joseph LeMay
With a copy to:
Squadron, Ellenoff, Plesent & Sheinfeld, L.L.P.
551 Fifth Avenue
New York, New York 10176-0001
Attention: Stephen J. Gulotta, Jr.
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 notice shall
be deemed delivered (i) at the time of delivery, if delivered by hand, (ii) on
the first business day after sending, if sent by overnight delivery service, or
(iii) two business days after sending, if sent by registered or certified mail.
15.5 Bulk Sales Laws. The parties hereto hereby waive compliance with
----------------
the provisions of the "bulk sales laws" of any state which may be applicable to
the transactions contemplated hereby.
15.6 Publicity. The parties hereto agree that all public announcements
----------
relating to this Agreement or the transactions contemplated hereby, including
announcements to employees, will be made only as may be agreed upon by the
parties hereto.
15.7 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.
15.8 Governing Law. This Agreement shall be governed by and construed
--------------
in accordance with the internal laws of the State of Connecticut.
-16-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day, month and year first written above.
SELLER:
INFORMATION MANAGEMENT
ASSOCIATES, INC.
By /s/ Gary R. Martino
------------------------------
Name: Gary R. Martino
Title: Chairman and Chief
Financial Officer
BUYER:
TELEMAR SOFTWARE
INTERNATIONAL, LLC
By /s/ Joseph R. LeMay, Jr.
-------------------------------
Name: Joseph R. LeMay, Jr.
Title: President and Chief
Executive Officer
-17-
<PAGE>
EXHIBIT 10.47
SUBLEASE
--------
AGREEMENT OF SUBLEASE (this "Sublease") made as of the 1st day of
September, 1996 between INFORMATION MANAGEMENT ASSOCIATES, INC., a Connecticut
corporation ("Sublandlord"), and TELEMAR SOFTWARE INTERNATIONAL, LLC, a Delaware
limited liability company ("Subtenant").
W I T N E S S E T H:
-------------------
WHEREAS, pursuant to an Agreement of Lease (the "Lease"), dated as of
October 6, 1993, by and between Robert D. Scinto ("Prime Landlord"), as
landlord, and Sublandlord, as tenant, entered into a lease, annexed hereto as
Exhibit A, affecting the fourth (4th) floor (the "Prime Lease Premises") in the
- ----------
building known as One Corporate Drive, Shelton, Connecticut (the "Building"), as
amended on January 30, 1996, which such amendment is annexed hereto as Exhibit
-------
B. Hereinafter, the "Lease" as amended will be referred to as the "Prime Lease";
- -
and
WHEREAS, Sublandlord desires to sublease to Subtenant, and Subtenant
desires to sublease from Sublandlord, upon the terms and conditions set forth
herein, a portion of the Prime Lease Premises measuring approximately 4,718
square feet of rentable area, situated on the fourth (4th) floor of the Building
and substantially as shown hatched in Exhibit C annexed hereto (the "Subleased
---------
Premises").
NOW, THEREFORE, the parties hereto hereby covenant and agree as follows:
1. Subleased Premises. Sublandlord hereby subleases to Subtenant, and
-------------------
Subtenant hereby subleases and hires from Sublandlord, the Subleased Premises
upon the terms and conditions set forth herein.
2. Term.
-----
a. The term (the "Term") of this Sublease shall commence on September
1, 1996 (the "Commencement Date").
b. The Term, unless sooner terminated, or unless extended pursuant to
the extension option provided herein, shall expire on March 31, 2004.
3. Rent. The rent ("Rent") reserved for the Term under this Sublease
-----
shall consist of the following:
a. annual minimum rent ("Base Rent") of Fifty One Thousand Eight
Hundred and Four Dollars ($51,804), payable in equal monthly installments of
Four Thousand Three Hundred and Seventeen Dollars ($4,317), in advance, on the
first day of each and every month for the period of September 1, 1996 through
March 31, 1999; and
<PAGE>
b. Base Rent of $76,290, payable in equal monthly installments of
$6,357 in advance, on the first day of each and every month for the period of
April 1, 1999 through March 31, 2004.
c. additional rent equal to 19% (representing the rentable area of the
Subleased Premises divided by the rentable area of the Prime Lease Premises)
("Subtenant's Proportionate Share") of that amount which is payable by
Sublandlord for additional rent under Article IV, Paragraphs 4.02 and 4.03 and
Article VIII, Paragraph 8.01 of the Prime Lease ("Additional Rent"); provided,
--------
however, Subtenant's Proportionate Share shall be reduced pro-rata in the event
- -------
that Sublandlord exercises its option under the Prime Lease to rent expansion
space or otherwise rents additional space under the Prime Lease.
d. If Subtenant shall procure any additional services (other than
those referred to in Article IV of the Prime Lease in connection with Operating
Expenses) from Prime Landlord, Subtenant shall pay for such services at the
rates charged therefor by Prime Landlord and shall make such payment to
Sublandlord or Prime Landlord as Sublandlord shall direct; provided, however,
that with respect to any such charges that are reasonably attributable to both
Subtenant and tenants or occupants other than Subtenant, or to both the
Subleased Premises and premises other than the Subleased Premises, Subtenant
shall only be responsible for that portion reasonably attributable to Subtenant
or the Subleased Premises.
e. Additional Rent shall be payable by Subtenant within seven (7) days
after receipt of Notice from Sublandlord, provided that, notwithstanding the
foregoing, Subtenant shall not be obligated to pay Additional Rent to
Sublandlord earlier than ten (10) days before the date on which the same is
payable to Prime Landlord under the Prime Lease. The Parties agree that, subject
to the preceding Notice requirements, Subtenant's obligation hereunder to pay
Subtenant's Proportionate Share of Additional Rent payable by Sublandlord under
the Prime Lease, arises as and when Sublandlord is obligated to pay Additional
Rent under the Prime Lease, including when Sublandlord is obligated to pay
Additional Rent based on Prime Landlord's estimates of Additional Rent in
accordance with the terms of the Prime Lease; provided that if any Additional
Rent is finally determined under the Prime Lease to be greater or less than such
estimates, Subtenant shall be obligated to pay or entitled to receive, as the
case may be, Subtenant's Proportionate Share of such greater or lesser
difference, as and when Sublandlord is obligated to pay or entitled to receive
the same under the Prime Lease.
f. Except as otherwise specifically provided for herein, Rent shall be
paid by Subtenant to Sublandlord at the office of Sublandlord set forth above,
or such other place as Sublandlord may designate in writing, without prior
notice or demand therefor and without any abatement, deduction or setoff.
Sublandlord may at any time and from time to time direct Subtenant to pay all or
any portion of the Rent on Sublandlord's behalf
2
<PAGE>
directly to Prime Landlord at such address as Sublandlord may at any time and
from time to time direct.
4. Use. The Subleased Premises shall be used for the purpose of
---
operating a general administrative business office as is described in paragraph
1.07 of the Prime Lease.
5. Services. Except as otherwise specifically provided in this
---------
Sublease, Subtenant shall be entitled during the Term to receive all services,
utilities, repairs and facilities which Prime Landlord is required to provide
pursuant to the Prime Lease, insofar as such services, utilities, repairs and
facilities pertain to the Subleased Premises ("Prime Landlord Services"),
provided that Sublandlord's sole obligation with respect to Prime Landlord's
default in its obligation to provide Prime Landlord Services, shall be to
request the same, upon written request by Subtenant, and to use its best efforts
to obtain the same from Prime Landlord. Subtenant shall have the right to
request the same directly from Prime Landlord, and to conduct such proceedings
(in court or elsewhere), as may be required, to obtain Prime Landlord Services.
Such proceedings may be, at Subtenant's option, in Subtenant's own name or in
Sublandlord's name, and Sublandlord agrees to cooperate with Subtenant in
connection therewith and to execute such documents as may be required in
connection therewith, all at no additional cost to Subtenant. Subtenant agrees
to reimburse Sublandlord for any reasonable legal or other expenses incurred by
Sublandlord in any such court or other proceeding, provided, however, that
Sublandlord shall bear its fair share of such costs and expenses to the extent
such action or proceeding does not relate to the Subleased Premises.
6. Prime Lease. The terms, provisions, covenants and conditions
------------
contained in the Prime Lease are hereby incorporated by reference into this
Sublease, except to the extent that the same are reasonably applicable only to
the original parties to or the landlord and tenant under the Prime Lease, or are
inconsistent with or modified by the agreements and understandings expressed in
this Sublease, and also subject, without limiting such general exceptions, to
the following specific exceptions, modifications and/or understandings:
a. As the context shall reasonably require, wherever used in the
Prime Lease, the words "Landlord" and "Tenant", or words of similar import,
shall be construed to mean, respectively, "Sublandlord" and "Subtenant" under
this Sublease; the word "Premises", or words of similar import, shall be
construed to mean the "Subleased Premises" under this Sublease; the word
"Lease", or the words "Rent", "Base Rent" and Additional Rent" under this
Sublease; and the words "Term", "Commencement Date" and "Initial Termination
Date", or words of similar import, shall be construed to mean, respectively,
"Term", "Commencement Date" and the date(s) set for the expiration of the Term
of this Sublease.
3
<PAGE>
b. To the extent reasonably possible, the provisions of the Prime
Lease incorporated by reference into this Sublease shall be construed as
consistent with and complementary to the other provisions of this Sublease, but
in the event of any inconsistency, said other provisions of this Sublease (i.e.,
those not incorporated by reference from the Prime Lease) shall control.
c. The portions of the Prime Lease described in Exhibit D annexed
---------
hereto shall not be deemed to be contained in this Sublease pursuant to
subparagraph 6.a. above, as between Sublandlord and Subtenant.
d. Each party hereto agrees to perform and comply with the terms,
provisions, covenants, and conditions of the Prime Lease and not to do or suffer
or permit anything to be done that would result in a default under or cause the
Prime Lease to be terminated or forfeited. Each party shall indemnify and hold
the other party harmless from and against all claims of any kind whatsoever by
reason of any breach or default on the part of the indemnifying party by reason
of which the Prime Lease may be terminated or forfeited. Sublandlord may not
terminate the Prime Lease without the prior written consent of Subtenant unless
Subtenant is in default under the Sublease. If Sublandlord fails to timely pay
any amount payable to the Prime Landlord or to timely perform any obligation as
required under the Prime Lease and as a result thereof Sublandlord or Subtenant
receives notice of default under the Prime Lease (unless such payment or
obligation is being contested or subject to a dispute between the Prime Landlord
and the Sublandlord), Subtenant shall have the right, but not the obligation,
upon prior notice to Sublandlord, to pay the amount claimed to be due or perform
such obligation set forth in such default notice. To the extent Subtenant makes
the payment described in the preceeding sentence, then Subtenant shall, at its
option, either (i) be credited as to its next succeeding payments due
Sublandlord under this Agreement with amount ultimately determined to be due the
Prime Landlord by Sublandlord or (ii) be entitled to a refund of the amount
determined to be due by Sublandlord to Prime Landlord immediately upon demand.
e. If Subtenant shall default in fulfilling any of the terms,
covenants, or agreements hereof, or of the Prime Lease as herein incorporated,
Sublandlord shall have all the rights against Subtenant as would be available to
Prime Landlord against the Tenant under the Prime Lease if such breach were by
the tenant thereunder.
f. Subtenant represents that it has read and is familiar with the
terms of the Lease and the amendment thereto, each of which are as annexed
hereto as Exhibits "A" and "B".
g. Sublandlord shall provide or cause Prime Landlord to provide, a
copy of any notice, consent, demand or other communication given under the
Prime Lease in connection with any claimed default under the Prime Lease by
either Sublandlord or
4
<PAGE>
Prime Landlord, concurrently with the giving of the same from Prime Landlord to
Sublandlord or from Sublandlord to Prime Landlord, as the case may be.
7. Assignment and Subletting.
--------------------------
a. Subtenant shall not assign this Sublease or sub-sublet all or any
portion of the Subleased Premises (a "Transfer"), other than to an affiliate
without Sublandlord's prior written consent, which consent Sublandlord may
withhold in its sole discretion.
b. If the Subleased Premises is further sublet, assigned or occupied
by anybody other than Subtenant, Sublandlord may, after default by Subtenant,
collect rent from the subtenant, assignee or occupant, and apply the net amount
collected to the Rent herein reserved, but no such subletting, assignment,
occupancy or collection shall be deemed a waiver of Subtenant's covenants under
this Paragraph 7 or acceptance by Sublandlord or the subtenant, assignee or
occupant as subtenant hereunder, or a release of Subtenant from the performance
by Subtenant of any of the terms, covenants and conditions of this Sublease.
8. "As-Is" Condition. Subtenant accepts the Subleased Premises in its
------------------
"as-is" condition as of the date hereof (except for latent defects) and
acknowledges that Sublandlord has made no representations with respect to the
condition thereof to Subtenant (except as may otherwise expressly provided
herein).
9. Quiet Enjoyment. Sublandlord covenants that, as long as Subtenant
----------------
shall pay the Rent required to be paid hereunder and shall duly observe, perform
and comply with all of the terms, covenants and conditions of this Sublease on
its part to be observed, performed or complied with (subject to any applicable
notice and grace periods), Subtenant shall, subject to all of the terms of the
Prime Lease and this Sublease, peaceably have, hold and enjoy the Subleased
Premises during the Term without hindrance by Sublandlord.
10. Estoppel Certificates. At any time and from time to time, within
----------------------
ten (10) days after a written request from either Subtenant or Sublandlord,
Sublandlord or Subtenant (as the case may be) shall execute, acknowledge and
deliver to the other a written statement certifying (i) that this Sublease has
not been modified and is in full force and effect or, if there has been a
modification of this Sublease, that this Sublease is in full force and effect as
modified, and stating such modifications, (ii) the dates to which the Rent has
been paid, (iii) that to the best of such party's knowledge, no defaults exist
under this Sublease and the Prime Lease, if applicable, or, if any defaults do
exist, specifying the nature of each such default and (iv) as to such other
matters as either party may reasonably request.
5
<PAGE>
11. Building Directory. Sublandlord shall cause Prime Landlord to make
-------------------
available to Subtenant, space on the directory in the lobby of the Building, for
the listing of Subtenant's name.
12. Notices. Any notice, consent, demand or other communication (each
--------
a "Notice") which either party may or must give to the other hereunder shall be
in writing and delivered either by hand, by overnight courier, or registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
(i) if to Sublandlord:
Information Management Associates, Inc.
One Corporate Drive
Suite 414
Shelton, CT
Attention: Mr. Gary Martino
(ii) if to Subtenant:
Telemar Software International, LLC
One Corporate Drive
Suite 404
Shelton, CT
Attention: Mr. Joseph LeMay
Any Notice shall be deemed delivered (i) at the time of delivery, if
delivered by hand, (ii) on the first business day after sending, if sent by
overnight courier, or (iii) two business days after sending, if sent by
registered or certified mail. Either party may, by Notice to the other, direct
that future Notices or copies thereof be sent to a different address(es) or
addressee(s).
13. Broker. Sublandlord and Subtenant each represents and warrants to
-------
the other that it has dealt with no brokers in connection with this Sublease.
14. Inability to Use Subleased Premises. In the event (i) 10% or more
------------------------------------
of the rentable area of the Subleased Premises shall be lawfully condemned, or
(ii) 25% or more of the rentable area of the Subleased Premises shall be
rendered untenantable by fire or other casualty for a period of ninety (90)
days, or (iii) access to the Subleased Premises shall be substantially impaired
for a period of ninety (90) days, then Subtenant shall have the right to
terminate this Sublease by giving to Sublandlord, within sixty (60) days after
the vesting of title in such condemnation or the expiration or either said
ninety (90) day period, a written notice specifying a date, not later than sixty
(60) days after the giving of such notice, for such termination.
15. Successors and Assigns. The covenants and agreements herein
-----------------------
contained shall bind and inure to the benefit of Sublandlord, Subtenant, and
their respective successors and assigns.
6
<PAGE>
16. Complete Agreement. All prior understandings and agreements
-------------------
between the parties are merged within this Sublease, which alone fully and
completely sets forth the understanding of the parties.
17. Amendment, Waiver. This Sublease may not be amended or terminated,
------------------
in whole or in part, nor may any of the provisions be waived, except by a
written instrument executed by the party against whom enforcement of such
amendment, termination or waiver is sought.
18. Captions. The captions and headings in this Sublease are inserted
--------
only as a matter of convenience for reference and are not to be given any effect
in construing this Sublease.
19. Partial Invalidity. If any of the provisions of this Sublease or
------------------
the application thereof to any person or circumstances shall, to any extent, be
invalid or unenforceable, the remainder of this Sublease, or the application of
such provision or provisions to persons or circumstances other than those as to
whom or which it is held invalid or unenforceable, shall not be affected
thereby, and every provision of this Sublease shall be valid and enforceable to
the fullest extent permitted by law.
20. Governing Law. This Sublease shall be governed by the laws of
-------------
Connecticut.
21. Prime Landlord's Consent. This Sublease shall not be effective
------------------------
until Prime Landlord shall have consented in writing to this Sublease as
required under Article XII of the Prime Lease; provided, however, that Subtenant
shall be responsible for the payment of rent and any other amounts due hereunder
as if this Sublease were effective as of September 1, 1996.
22. Alterations. Sublandlord hereby agrees not to unreasonably
------------
withhold or delay its consent to any alterations or improvements requested by
Subtenant provided such alterations or improvements have been approved by the
Prime Landlord.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused these presents to
be executed as of the day and year first above written.
SUBLANDLORD:
INFORMATION MANAGEMENT ASSOCIATES, INC.
By: /s/ Gary R. Martino
-----------------------------------
Name: Gary R. Martino
Title: Chairman and Chief
Financial Officer
SUBTENANT:
TELEMAR SOFTWARE INTERNATIONAL, LLC
By: /s/ Joseph R. LeMay, Jr.
------------------------------------
Name: Joseph R. LeMay, Jr.
Title: President and Chief
Executive Officer
8
<PAGE>
EXHIBIT 10.48
8.0% Promissory Note due 2002
Shelton, Connecticut
$650,000.00 September 1, 1996
TELEMAR SOFTWARE INTERNATIONAL, LLC, a Delaware limited liability
company (the "Company"), for value received, hereby promises to pay to
INFORMATION MANAGEMENT ASSOCIATES, INC., a Connecticut corporation ("IMA") or
registered assigns, the principal amount of $650,000.00 as follows: $130,000 on
March 1, 1998, $130,000 on March 1, 1999, $130,000 on March 1, 2000, $130,000 on
March 1, 2001 and the remaining unpaid principal hereof on March 1, 2002. The
unpaid balance of such principal amount shall be at the rate of 8.0% per annum
from September 1, 1996. Interest shall be payable quarterly on December 1, March
1, June 1 and September 1 in each year commencing December 1, 1996. Interest
shall be charged on the principal balance from time to time outstanding on the
basis of the actual number of days elapsed computed on the basis of a three
hundred sixty (360) day year. Payments of principal and interest on this Note
shall be made in lawful money of the United States of America at the principal
office of the Company, or at such other office or agency in the State of
Connecticut as the Holder shall have designated by written notice to the
Company.
This Note is the Company's 8.0% Promissory Note due 2002 (the "Note"),
originally issued in the aggregate principal amount of $650,000 pursuant to the
Asset Purchase Agreement, dated September 1, 1996, between the Company and IMA
(the "Purchase Agreement"). This Note is secured by, is entitled to the benefits
of and is subject to the terms of a Security Agreement, dated September 1, 1996
(the "Security Agreement"), between the Company and IMA. The Security Agreement,
among other things, contains provisions for acceleration of the due date for
repayment of the principal hereof upon the happening of certain stated events. A
complete and correct copy of the Security Agreement is available for inspection
at the principal office of the Company and will be furnished to the holder of
this Note upon written request and without charge.
IMA's sole remedy in the event of a default under this Note shall be
to exercise its rights under the Security Agreement. Without limiting the
generality of the foregoing, no recourse or remedy shall be had for the payment
of the principal of, or interest on, or any other amount which may be payable
under this Note, or for any claim based hereon or otherwise in respect hereof,
against any member, manager, shareholder, officer, director, employee, agent or
representative, past, present or future, of the Company.
1
<PAGE>
The Note is subject to optional prepayment, in whole or in part, at
any time, or from time to time, without premium or penalty. Any amount of
principal hereof which is not paid when due, whether at stated maturity, by
acceleration, or otherwise, shall bear interest from the day when due until said
principal amount is paid in full, payable on demand at a rate per annum equal to
10.5%.
Notwithstanding any provisions of this Note, it is the understanding
and agreement of the Company and the holder that the interest rate to be paid by
the Company to the holder shall not exceed the highest or maximum rate of
interest permissible to be charged by a lender such as the holder to a
commercial borrower such as the Company under the laws of the State of
Connecticut. Any amount representing interest calculated at the interest rate
paid in excess of such rate shall be considered to have been payments in
reduction of principal.
The Company agrees to pay all costs and expenses, including reasonable
attorneys' fees, incurred in connection with the collection of any of the
indebtedness evidenced hereby. The Company hereby grants to the holder a lien on
and a right of set-off against all monies, deposits and securities and the
proceeds thereof, now or hereafter held or received by, or in transit to, holder
from or for the Company, whether for safekeeping, pledge, custody, transmission,
collection or otherwise, and all deposits (general or special), balances, sums
and credits with and all claims of the Company against holder at any time
existing. The holder may at any time apply the same or any part thereof to the
Obligations (as defined in the Security Agreement), or any part thereof, whether
or not matured at the time of such application.
THE COMPANY AND HOLDER HEREBY WAIVE TRIAL BY JURY IN ANY COURT AND IN
ANY SUIT, ACTION OR PROCEEDING ON ANY MATTER ARISING IN CONNECTION WITH OR IN
ANY WAY RELATED TO THE TRANSACTIONS OF WHICH THIS NOTE IS A PART AND/OR THE
ENFORCEMENT OF ANY OF HOLDER'S RIGHTS AND REMEDIES. THE COMPANY ACKNOWLEDGES
THAT IT MAKES THIS WAIVER KNOWINGLY, VOLUNTARILY AND ONLY AFTER EXTENSIVE
CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER WITH ITS ATTORNEYS.
THE COMPANY ACKNOWLEDGES THAT THE INDEBTEDNESS EVIDENCED BY THIS NOTE
IS PART OF A COMMERCIAL TRANSACTION AND FOR SO LONG AS ONE OR BOTH OF ALBERT R.
SUBBLOIE, JR. AND GARY R. MARTINO REMAIN THE PRESIDENT AND CHIEF EXECUTIVE
OFFICER AND CHAIRMAN AND CHIEF FINANCIAL OFFICER, AND DIRECTORS, RESPECTIVELY,
OR MESSRS. SUBBLOIE AND MARTINO REMAIN IN SUCH POSITIONS AS ARE SIMILAR TO THE
FOREGOING, THEN THE COMPANY WAIVES ITS RIGHTS TO NOTICE AND HEARING UNDER
CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES, OR AS OTHERWISE ALLOWED BY ANY
STATE, REGIONAL, FEDERAL OR FOREIGN LAW WITH RESPECT TO ANY PREJUDGMENT REMEDY
WHICH HOLDER MAY DESIRE TO
2
<PAGE>
USE, and further waives diligence, demand, presentment for payment, notice of
nonpayment, protest and notice of protest, and notice of any renewals or
extensions of this Note, and all rights under any statute of limitations.
This Note is made and delivered in Shelton, Connecticut, and shall be
governed by the internal laws of the State of Connecticut without regard to
conflicts of laws principles.
TELEMAR SOFTWARE INTERNATIONAL, LLC
By /s/ Joseph R. LeMay, Jr.
------------------------------
Name: Joseph R. LeMay, Jr.
Title: President and Chief
Executive Officer
3
<PAGE>
Exhibit 10.49
SECURITY AGREEMENT
------------------
THIS SECURITY AGREEMENT, made this 16th day of September, 1996, among
INFORMATION MANAGEMENT ASSOCIATES, INC., having a place of business at One
Corporate Drive, Suite 414, Shelton, Connecticut 06484 (hereinafter called the
"Secured Party") and TELEMAR SOFTWARE INTERNATIONAL, LLC, a Delaware limited
liability company having its principal place of business at One Corporate Drive,
Shelton, Connecticut 06484 ("Debtor").
W I T N E S E T H :
WHEREAS, the Secured Party and the Debtor are parties to an Asset Purchase
Agreement, dated as of July 31, 1996 (the "Asset Purchase Agreement"), pursuant
to which the Debtor has issued its promissory note to Secured Party in the
principal amount of $650,000 (the "Note").
NOW THEREFORE, for consideration, receipt whereof is hereby acknowledged,
the parties agree as follows:
1. Definitions and Construction.
----------------------------
The following words and terms shall be defined and construed as set
forth below in connection with their use in this Security Agreement and all
exhibits hereto:
1.1 "Collateral" shall mean the property in which the Debtor has granted
the Secured Party a security interest. Such property is more fully set forth in
EXHIBIT A attached hereto.
1.2 "Obligations" shall mean the Note executed by the Debtor as referenced
above and any obligations of Debtor to Secured Party arising now or subsequently
hereunder or under the Note.
1.3 This Security Agreement shall be interpreted and construed in light of
the sections, the definitions, the "official comments", and the definitional and
substantive cross references of the Uniform Commercial Code as the Code is
adopted in the State of Connecticut. However, where terms are defined by this
Security Agreement, the definitions of such terms in the Uniform Commercial Code
shall be deemed supplementary to those herein contained.
1.4 All headings contained in this Agreement are for reference purposes
only and shall not in any way whatsoever effect the meaning or interpretation of
this Agreement.
1.5 Wherever the singular number is used for any noun, pronoun or verb in
this Agreement, such noun, pronoun or verb shall be deemed to include the plural
number, and the plural number shall likewise be deemed to include the singular,
as the context may require.
<PAGE>
2. Grant of Security Interest.
--------------------------
The Debtor hereby pledges, assigns and grants to the Secured Party a
security interest in the Collateral described on Exhibit A annexed hereto to
secure the payment of all Obligations of the Debtor to the Secured Party.
3. Software Licenses.
-----------------
The Debtor may license its software products for use by its customers
as long as the license is made in the ordinary course of business and upon terms
and conditions which are customary or normal in the Debtor's business (a license
in the ordinary course of business shall not include a transfer in total or
partial satisfaction of a debt); provided, however, that the security interest
created under the terms of this Security Agreement shall continue in the
proceeds and products of such licenses.
4. Representations and Warranties of Debtor.
----------------------------------------
The Debtor hereby warrants, covenants and agrees that:
4.1 The Debtor is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware.
4.2 The Debtor has the corporate power to execute, deliver and carry out
this Security Agreement and to incur the Obligations, and has taken all
necessary corporate action to authorize the execution, delivery and performance
of this Security Agreement and the incurring of the Obligations.
4.3 The execution and delivery of this Security Agreement and compliance
by the Debtor with any of the terms and provisions hereof or of any of the other
agreements or instruments referred to herein or therein, will not, on the date
hereof, violate any provision of any existing law or regulation or any writ or
decree of any court or governmental instrumentality or of the Certificate of
Formation or Operating Agreement of the Debtor or any agreement, trust,
indenture, covenant, lease, license, permit, instrument or other obligation to
which the Debtor is a party or which is binding upon it or its assets.
4.4 The Debtor will maintain such title to all of the Collateral as was
delivered to Debtor by the Secured Party pursuant to the Asset Purchase
Agreement. Debtor shall not subject the Collateral to any mortgage, pledge,
lease, trust, bailment, lien, security interest, encumbrance, charge or title
retention or other security agreement or arrangement (each a "Lien" and
collectively "Liens") beyond those to which the Collateral was subject when it
was delivered to Debtor by the Secured Party pursuant to the Asset Purchase
Agreement. Without the prior written consent of Secured Party, Debtor shall not
enter into any agreement with a bank or
2
<PAGE>
other financial institution or other person (a "Lender") with respect to a
financing which would require the Debtor to grant a Lien to such Lender that is
prior to, or pari passu with, the Lien granted hereunder to the Secured Party.
---- -----
The Debtor will defend the Collateral against all claims and demands of all
persons other than Secured Party at any time claiming the same or any interest
therein which interest arises on or after the date hereof.
4.5 The Collateral will be kept at the Debtor's principal place of
business in Shelton, Connecticut. The Debtor will not remove the Collateral
from said location without written consent of the Secured Party. The Debtor
agrees to notify the Secured Party in advance of any change of its mailing
address or principal place of business in order that a prompt refiling of any
outstanding financing statements or other notices may be made, if necessary
prior to the change.
4.6 At the request of the Secured Party, the Debtor will, now and in the
future, join with the Secured Party in executing one or more financing
statements pursuant to the Uniform Commercial Code in form satisfactory to the
Secured Party and will pay the cost of filing and recording the same in all
public offices wherever filing and/or recording is deemed by the Secured Party
to be necessary or desirable.
4.7 Other than the licensing or use of its software products in the
ordinary course of business, the Debtor will not sell, exchange, license or
otherwise dispose of the Collateral, or any interest therein, without the
express written authorization of the Secured Party.
4.8 The Note and this Security Agreement securing the Note have all been
duly authorized, executed and delivered by Debtor and constitute valid and
legally binding obligations of Debtor enforceable against Debtor in accordance
with their terms, subject to the provisions of any applicable bankruptcy,
insolvency or other laws generally affecting creditors' rights.
5. Covenants of Debtor.
-------------------
The Debtor covenants that until the Obligations are fully paid and
discharged, it shall comply with the following requirements:
5.1 Commencing with the quarter ending December 31, 1996, Debtor will
furnish Secured Party within forty-five days after the close of each quarterly
period of Debtor's fiscal year: (i) a balance sheet; (ii) statement of profit
and loss reflecting the financial condition of Debtor at the end of such period
and the results of its operation during such period; and (iii) a Quarterly
Recapitulation Report setting forth Debtor's outstanding accounts receivable
balance as of the start of the quarter and as of the end of the quarter. Such
balance sheet, statement of profit and loss, and Quarterly Recapitulation Report
shall be certified on behalf of
3
<PAGE>
the Debtor by an authorized officer of the Debtor to fairly present the
financial condition at the end of such period and the results of its operation
during such period in accordance with generally accepted accounting principles,
consistently applied.
5.2 Debtor shall give any representative of the Secured Party, upon at
least five business days' advanced written notice, access during normal business
hours to permit him to examine, copy, and make extracts from any and all books,
records, correspondence, documents, vouchers and other data pertaining to the
Debtor's assets and otherwise to inspect any of the Collateral.
5.3 So long as an event of default has occurred and is continuing, Debtor
shall pay all reasonable fees and expenses incurred by the Secured Party in
pursuing, protecting, enforcing or releasing any of its rights under this
Security Agreement, including, but not limited to, recording, filing and counsel
fees and travel expenses.
5.4 Debtor shall execute and deliver such further documents and do such
other acts and things as the Secured Party may reasonably request in order to
fully effect the purpose of this Security Agreement, including, without
limitation, executing and filing such financing statements, assignments or other
documents or instruments which may be necessary or appropriate to perfect the
security interest of the Secured Party in the Collateral including, without
limitation, all documents requested by Secured Party for the recordation of the
security interests granted herein with any governmental agency, including,
without limitation, the United States Copyright Office and the United States
Patent and Trademark Office.
5.5 Debtor shall have and maintain insurance at all times with respect to
the Collateral against risks of fire (including so called extended coverage),
theft and such risks as the Secured Party may require, containing such terms, in
such form, and for such periods, and written by such companies and in reasonable
amounts of coverage as may be reasonably satisfactory to the Secured Party.
Such insurance is to be payable to the Secured Party and the Debtor as their
interests may appear. Each policy of insurance shall have endorsements
providing: (i) that so long as an event of default has occurred and is
continuing, loss or damage, if any, under the policy, shall be payable to the
Secured Party, as secured party, as its interest may appear; (ii) that the
insurance as to the interest of the Secured Party shall not be invalidated by
any act or neglect of the insured or owner of the property described in said
policy, nor by any foreclosure, or other proceeding, or notice or sale relating
to said property, nor by any change in the title of ownership of said property,
nor by the occupation of the premises where the property is located for purposes
more hazardous than are permitted by said policy; (iii) that, if the policy is
canceled at any time by the insurance carrier, in such case the policy shall
continue in force for the benefit of the Secured Party for not less than ten
(10) days after
4
<PAGE>
written notice of cancellation is received by the Secured Party from the
insurance carrier; and (iv) that the policy will not be reduced or canceled at
the request of the insured nor will these endorsements be amended or deleted
without ten days' prior written notice to the Secured Party from the insurance
carrier. The Debtor shall furnish the Secured Party with certificates or other
evidence satisfactory to the Secured Party of compliance with the foregoing
insurance provisions upon the execution of this Security Agreement and with
regard to renewals thereof, at least 30 thirty days prior to the renewal date of
each policy involved.
5.6 Debtor shall keep the Collateral free from any lien, security interest
or encumbrance and in good order and repair, and will not waste or destroy the
Collateral or any part thereof. The Debtor will not use the Collateral in
violation of any statute or ordinance. The Debtor will notify the Secured Party
in the event of loss, theft, damage, destruction, sale or encumbrance to or of
any of the Collateral or the making of any levy, seizure or attachment thereof
or thereon, or the placing of any lien or liens thereon or generally on the
property of the Debtor.
5.7 Debtor shall maintain its corporate existence in good standing and
comply with all laws and regulations of the United States or of any state or
states thereof or of any political subdivision thereof, or of any governmental
authority which may be applicable to it or its business.
5.8 For so long as a default in the payment of principal or interest
under the Note has occurred and is continuing (giving effect to all applicable
grace periods), Debtor shall not declare nor pay any dividend or make any
distribution upon its capital stock, or purchase or retire any of its capital
stock, invest in or purchase any stock or securities of any individual, firm or
corporation, merge or consolidate or be merged or consolidated with or into any
other corporation, otherwise alter or amend its capital structure or sell or
dispose of any of its assets except in the ordinary and usual course of its
business.
6. Rights of Secured Party to Preserve Collateral.
----------------------------------------------
At its option and in its sole and absolute discretion, to the extent
Debtor fails to do so, the Secured Party may discharge taxes, liens, or security
interests or other encumbrances at any time levied or placed on the Collateral,
may pay for insurance on the Collateral and may pay for the repair, maintenance
and preservation of the Collateral, including, but not limited to, mortgage or
lease payments on any of the Debtor's business premises. Except with respect to
payments made or expenses incurred in discharging taxes, liens, security
interests or other encumbrances in place on the date hereof (which shall be the
responsibility of Seller), the Debtor agrees to reimburse the Secured Party on
demand for any payment made or any expense, including reasonable attorneys'
fees, incurred by the Secured Party pursuant to the foregoing authorization with
interest at the rate
5
<PAGE>
provided in the Note. Each amount so paid by the Secured Party shall be secured
by the Collateral. Nothing herein contained shall obligate the Secured Party to
make any such payment nor shall the making of one or more of such payments
constitute: (i) an agreement on the Secured Party's part to take any further or
similar action, or (ii) a waiver of any default by the Debtor under the terms of
this Security Agreement. In addition to the foregoing rights, so long as an
event of default has occurred and is continuing, Secured Party shall have the
right to give notice of the Secured Party's security interest in the Collateral,
to communicate in its own name or in the name of others with account debtors in
order to verify with them, to Secured Party's satisfaction, the existence,
amount and terms of any accounts or contract rights, to execute and file in the
Debtor's name any financing statements, certificates of title and amendments
thereto required to perfect the Secured Party's security interest under this
Agreement; and to protect and preserve the Collateral and the Secured Party's
rights hereunder.
7. Power of Attorney.
-----------------
Debtor does hereby make, constitute and appoint any officer or agent
of the Secured Party as Debtor's true and lawful attorney-in-fact, effective
upon and during the continuance of an event of default, with power to endorse
Debtor's name or the names of Debtor's agents or Debtor's business name or
tradename upon any notes, checks, drafts, money orders, or other instruments of
payment (including payments payable under any required policies of insurance) or
other Collateral that may be in or come into Secured Party's possession pursuant
to the terms of the Security Agreement; to sign and endorse any of such names
upon any invoice, freight or express bill, bill of lading, store or warehouse
receipt, draft against debtors, assignment, verification, and notice in
connection with accounts, and any instrument or documents relating thereto or to
Debtor's rights therein. This power of attorney shall be irrevocable as long as
any of the Obligations remain outstanding.
8. Default.
-------
The Debtor shall be in default under this Security Agreement upon the
happening of any one of the following events or conditions:
(a) The existence of a default in the payment of any monies required
to be paid hereunder or under the Note (which default shall continue for a
period of ten (10) days or more after notice thereof from Secured Party to
Debtor) or in the keeping or performance of any of the terms, conditions,
covenants, or agreements to be performed by the Debtor hereunder or under the
Note (which default shall not be cured within 15 days after notice thereof from
Secured Party to Debtor); or a default in the payment of monies or in the
keeping or performance of any of the terms, conditions, covenants and agreements
on the Debtor's part to be paid, kept or performed by Debtor as mortgagor or
lessee.
6
<PAGE>
(b) Any representation, warranty or statement made by Debtor herein or
in the Asset Purchase Agreement to the Secured Party proves to have been false
in any material respects when made or furnished.
(c) Dissolution of, termination of the existence of, insolvency of,
business failure of, appointment of a receiver of any part of the property of,
execution of a plan of composition or compromise agreement with creditors by,
assignment for the benefit of creditors by, or the commencement of any
proceedings under any bankruptcy or insolvency laws by or against the Debtor.
(d) Loss, theft, substantial damage, destruction, unauthorized sale or
encumbrance of a substantial portion of the Collateral, or the making of any
levy, seizure, attachment or other judicial process against a substantial
portion of the Collateral, or the placing of any lien or liens thereon or
generally on the property of the Debtor by anyone including the United States of
America or any federal, state or local governmental agency or authority.
9. Acceleration.
------------
Upon the happening of any event of default specified above, the entire
unpaid balance owed under the Note shall at the option of the Secured Party
automatically become, and shall thereafter be, immediately due and payable.
10. Rights and Obligations of Parties upon Debtor's Default.
-------------------------------------------------------
Upon Debtor's default, the parties shall have the following rights and
remedies:
(a) The Secured Party shall have the remedies of a secured party under
the Uniform Commercial Code as now in effect in the State of Connecticut and the
rights and such further remedies as may from time to time be provided by the
laws of the State of Connecticut.
(b) The Secured Party will have the right to possession of the
Collateral and to maintain such possession on the Debtor's business premises or
to remove the Collateral or any part thereof to such places as it may desire.
If the Secured Party exercises its right to take possession of the Collateral,
the Debtor will, upon the Secured Party's demand, assemble the Collateral and
make it available to the Secured Party at a place reasonably convenient to both
parties, including, without limitation, all listings, codes, manuals, programs,
designs and other documentation pertaining to the Collateral.
(c) The Secured Party will have the right to use, in connection with
any assembly or disposition of the Collateral, any trademark, tradename, trade
style, copyright, patent right, or technical process used or utilized by Debtor.
7
<PAGE>
(d) The Secured Party will have the right to enter into any license
or sublicense with any third party, with Secured Party as licensor, pertaining
to all or part of the software systems products of the Debtor and any other
portion of the Collateral, upon terms acceptable to Secured Party in its
reasonable discretion.
(e) Unless the Collateral is perishable or threatens to decline
speedily in value or is of the type customarily sold on a recognized market,
Secured Party will give the Debtor reasonable notification of the time and place
of any public sale of Collateral, or of the time after which any private sale or
any other intended disposition of the same is to be made. Expenses of retaking,
holding, preparing for sale, selling or the like shall include, but are not
limited to, the Secured Party's reasonable attorneys' fees and legal expenses.
Secured Party may be the purchaser of any or all Collateral or other property
and security so sold, and may hold such Collateral, property or security
thereafter in its own right absolutely free from any claims of Debtor or right
of redemption.
(f) The net proceeds of any sale or sales with respect to Collateral
subject to this Security Agreement, after deducting all costs of collection
(including reasonable attorneys' fees), shall be applied against the amount owed
to Secured Party by Debtor pursuant to the Obligations in whatever order the
Secured Party shall elect. Debtor shall forthwith pay to Secured Party any
deficiency on demand of Secured Party or be liable for interest and/or
attorneys' fees should Secured Party have to pursue Debtor for same. Debtor
shall be entitled to any surplus resulting from such sale or sales.
(g) Effective upon and during the continuance of an event of default,
in protecting, exercising or assuring its interest, rights or remedies under
this Security Agreement, Secured Party may receive, open or dispose of mail
addressed to Debtor and subrogate to all Debtor's interests, rights and remedies
in respect to any Collateral, including the right to stop delivery and, upon
notice from Debtor that an account debtor has returned, rejected, revoked
acceptance of or failed to return goods or that such goods have been reconsigned
or diverted, the right to take possession of and to sell or dispose of said
goods unless Secured Party fails to advise Debtor of its intended exercise of
such rights within five (5) business days after receipt of notice.
11. Waiver of Certain Rights.
------------------------
Debtor waives presentment, demand, protest, notice of protest, or
other notice of dishonor or default of any kind with regard to the Obligations.
8
<PAGE>
12. Right of Setoff.
---------------
With respect to any property of the Debtor in the Secured Party's
possession or control, now or in the future, the Secured Party shall have the
right to set off all or any portion thereof, at any time, against the
Obligations hereunder, as they mature or upon default of Debtor, without prior
notice or demand to the Debtor.
13. Miscellaneous.
-------------
13.1 The Debtor agrees to indemnify the Secured Party from and against all
claims, losses and liabilities growing out of or resulting from this Agreement
(including, without limitation, enforcement of this Agreement), except claims,
losses or liabilities resulting from the Secured Party's negligence or willful
misconduct.
13.2 Upon an event of default, the Debtor will upon demand pay to the
Secured Party the amount of any and all reasonable expenses, including the
reasonable fees and disbursements of its counsel and of any experts and agents,
which the Secured Party may incur in connection with (i) the administration of
this Agreement; (ii) the custody, preservation, use or operation of, or the sale
of, collections from, or other realization upon, any of the Collateral; (iii)
the exercise of enforcement by the Secured Party of any of its rights hereunder;
or (iv) the failure by Debtor to observe or perform any of the provisions
hereof.
13.3 All agreements, representations and warranties made herein, any
agreement, statement, notice, invoice, certificate, schedule, consignment,
designation, document or other instrument delivered to the Secured Party in
connection with this Security Agreement or any other agreement shall survive the
making of this Security Agreement.
13.4 This Security Agreement may not be amended nor any provision hereof
waived except in writing signed by the party to be changed.
13.5 All Exhibits referred to herein and annexed hereto are hereby
incorporated in this Security Agreement and made a part hereof.
13.6 Any notice that either party to this Security Agreement may elect to
give shall be effective if sent by certified mail, return receipt requested,
postage prepaid, addressed to the other party at the address shown on the UCC
financing statements executed by the parties on even date hereof or, if such
other party has given written notice of a change in address, then to the last
such address. Any such notice shall be deemed effective upon receipt.
13.7 This Security Agreement shall be governed and construed according to
the internal laws of the State of Connecticut without
9
<PAGE>
regard to conflicts of laws principles.
13.8 This Security Agreement may be executed in one or more counterparts
and each of such counterparts shall, for all purposes, be deemed to be an
original, but all such counterparts shall, together, constitute but one and the
same instrument.
IN WITNESS WHEREOF, the parties have caused this Security Agreement to be
duly executed and delivered by the proper and duly authorized officers as of the
date and year first above written.
Debtor
TELEMAR SOFTWARE INTERNATIONAL, LLC
By /s/ Joseph R. Lemay, Jr.
------------------------------------
Name: Joseph R. LeMay, Jr.
Title: President and Chief
Executive Officer
Secured Party
INFORMATION MANAGEMENT
ASSOCIATES, INC.
By /s/ Gary R. Martino
------------------------------------
Name: Gary R. Martino
Title: Chairman and Chief Financial
Officer
<PAGE>
Exhibit A
(a) All property, real or personal, of the Debtor now owned or
hereafter acquired, wherever located, any additions an accessions thereto and
replacements and renewals thereof; including without limitation:
(1) All accounts, contract rights, chattel paper, instruments,
general intangibles and other obligations of any kind now or hereafter
existing arising out of or in connection with the sale or lease of goods or
the rendering of services, and all rights now or hereafter existing in and
to all security agreements, leases, and other contracts securing or
otherwise relating to any such accounts, contract rights, chattel paper,
instruments, general intangibles or obligations (and all such accounts,
contract rights, chattel paper, instruments, general intangibles and
obligations being the "Receivables," and any and all such leases, security
agreements and other contracts being the "Related Contracts");
(2) All general intangibles, the business as a going concern,
goodwill, contract rights, the "TeleMar(TM)" software system and all other
software products and software systems, including without limitation, all
designs, codes, listings, manuals, and all other embodiments thereof, of
whatever nature, all information and documentation relating thereto; all
future editions, modifications and derivative works and enhancements thereto
which hereinafter may be made; and all other trademarks, copyrights,
patents, proprietary information, computer software, trade styles and trade
names, including, without limitation, all "Intellectual Property Rights" as
that term is defined below.
"Intellectual Property Rights" means: all Trademarks, Patents,
Copyrights and Know-How and Technical Information. "Trademarks" means all
registered and unregistered trademarks, servicemarks, 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 registrations or
applications for registration and all amendments, renewals and extensions
thereof. "Patents" means 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. "Copyrights" means 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. "Know-How and Technical Information" means
data, plans, trade
1
<PAGE>
secrets, technologies, processes, specifications, know-how, operating
experience and information (business, economic and technical) relating
to the foregoing.
(3) All inventory in all of its forms, wherever located, now or
hereafter existing (including, but not limited to, (i) all products sold
in the ordinary course of business, of the Debtor and raw materials and
work in process therefor, finished goods thereof, and materials used or
consumed in the manufacture or production thereof, (ii) goods in which
Debtor has an interest in mass or a joint or other interest or right of
any kind, and (iii) goods which are returned to or repossessed by the
Debtor), and all accessions thereto and products thereof and documents
therefor (any and all such inventory, accessions, products and
documents being the "Inventory");
(4) All personal property, goods, leasehold improvements (unless
otherwise provided by and underlying lease agreement), machinery,
equipment, furnishings, furniture, fixtures, tools and attachments ("the
Equipment") now or hereafter owned by the Debtor, wherever the Equipment
may be located and whether now owned or hereafter acquired, any
additions and accessions thereto, substitutions therefor and
replacements and renewals thereof.
(b) All proceeds of any and all of the foregoing collateral and, to
the extent not otherwise included, all payments under insurance (whether or not
the Secured Party is the loss payee thereof), or any indemnity, warranty or
guaranty, payable by reason of loss or damage to or otherwise with respect to
any of the foregoing collateral.
2
<PAGE>
Exhibit 10.50
PROMISSORY NOTE
---------------
$ 238,708 December 31, 1996
FOR VALUE RECEIVED, the undersigned, Albert R. Subbloie, Jr. (the "Maker"), an
individual residing at [ADDRESS], does hereby promise to pay to the order of
Information Management Associates, Inc., a Connecticut corporation (the
"Holder") the principal sum of two hundred thirty eight thousand seven hundred
eight dollars ($ 238,708) together with interest thereon to be computed from the
date hereof at a rate equal to eight and one quarter percent ( 8.25%) per annum.
The outstanding principal amount owed hereunder, together with all interest
accrued thereon, shall be due and payable in full on the earlier of the closing
of the Company's initial public offering or June 30, 1999.
Maker further agrees to pay, on demand, in addition to said principal and
interest, all reasonable costs and expenses incurred in collection of this Note.
Maker hereby waives diligence, demand, presentment for payment and notice of
nonpayment in connection with enforcement of this Note.
This Note shall be governed by and construed in accordance with the laws of the
State of Connecticut.
/s/ Albert R. Subbloie, Jr.
----------------------------
Albert R. Subbloie, Jr.
<PAGE>
Exhibit 10.51
PROMISSORY NOTE
---------------
$ 222,625 December 31, 1996
FOR VALUE RECEIVED, the undersigned, Gary R. Martino (the "Maker"), an
individual residing at [ADDRESS], does hereby promise to pay to the order of
Information Management Associates, Inc., a Connecticut corporation (the
"Holder") the principal sum of two hundred twenty-two thousand six hundred
twenty five dollars ($ 222,625) together with interest thereon to be computed
from the date hereof at a rate equal to eight and one quarter percent (8.25%)
per annum.
The outstanding principal amount owed hereunder, together with all interest
accrued thereon, shall be due and payable in full on the earlier of the closing
of the Company's initial public offering or June 30, 1999.
Maker further agrees to pay, on demand, in addition to said principal and
interest, all reasonable costs and expenses incurred in collection of this Note.
Maker hereby waives diligence, demand, presentment for payment and notice of
nonpayment in connection with enforcement of this Note.
This Note shall be governed by and construed in accordance with the laws of the
State of Connecticut.
/s/Gary R. Martino
-------------------------------
Gary R Martino
<PAGE>
Exhibit 10.52
PROMISSORY NOTE
---------------
$ 109,072 December 31, 1996
FOR VALUE RECEIVED, the undersigned, Andrei Poludnewycz (the "Maker"), an
individual residing at [ADDRESS], does hereby promise to pay to the order of
Information Management Associates, Inc., a Connecticut corporation (the
"Holder") the principal sum of one hundred nine thousand seventy two dollars ($
109,072) together with interest thereon to be computed from the date hereof at a
rate equal to eight and one quarter percent (8.25%) per annum.
The outstanding principal amount owed hereunder, together with all interest
accrued thereon, shall be due and payable in full on the earlier of the closing
of the Company's initial public offering or June 30, 1999.
Maker further agrees to pay, on demand, in addition to said principal and
interest, all reasonable costs and expenses incurred in collection of this Note.
Maker hereby waives diligence, demand, presentment for payment and notice of
nonpayment in connection with enforcement of this Note.
This Note shall be governed by and construed in accordance with the laws of the
State of Connecticut.
/s/ Andrei Poludnewycz
----------------------------
Andrei Poludnewycz
<PAGE>
Exhibit 10.53
PROMISSORY NOTE
---------------
$ 57,000 February 28, 1997
FOR VALUE RECEIVED, the undersigned, Albert R. Subbloie, Jr. (the "Maker"), an
individual residing at [ADDRESS], does hereby promise to pay to the order of
Information Management Associates, Inc., a Connecticut corporation (the
"Holder") the principal sum of fifty seven thousand dollars ($ 57,000) together
with interest thereon to be computed from the date hereof at a rate equal to
eight and one quarter percent (8.25%) per annum.
The outstanding principal amount owed hereunder, together with all interest
accrued thereon, shall be due and payable in full on the earlier of the closing
of the Company's initial public offering or June 30, 1999.
Maker further agrees to pay, on demand, in addition to said principal and
interest, all reasonable costs and expenses incurred in collection of this Note.
Maker hereby waives diligence, demand, presentment for payment and notice of
nonpayment in connection with enforcement of this Note.
This Note shall be governed by and construed in accordance with the laws of the
State of Connecticut.
/s/ Albert R. Subbloie, Jr.
-----------------------------
Albert R. Subbloie, Jr.
<PAGE>
Exhibit 10.54
PROMISSORY NOTE
---------------
$ 58,500 February 28, 1997
FOR VALUE RECEIVED, the undersigned, Gary R. Martino (the "Maker"), an
individual residing at [ADDRESS], does hereby promise to pay to the order of
Information Management Associates, Inc., a Connecticut corporation (the
"Holder") the principal sum of fifty eight thousand five hundred dollars ($
58,500) together with interest thereon to be computed from the date hereof at a
rate equal to eight and one quarter percent (8.25%) per annum.
The outstanding principal amount owed hereunder, together with all interest
accrued thereon, shall be due and payable in full on the earlier of the closing
of the Company's initial public offering or June 30, 1999.
Maker further agrees to pay, on demand, in addition to said principal and
interest, all reasonable costs and expenses incurred in collection of this Note.
Maker hereby waives diligence, demand, presentment for payment and notice of
nonpayment in connection with enforcement of this Note.
This Note shall be governed by and construed in accordance with the laws of the
State of Connecticut.
/s/ Gary R. Martino
--------------------------------
Gary R. Martino
<PAGE>
Exhibit 10.55
PROMISSORY NOTE
---------------
$ 34,000 February 28, 1997
FOR VALUE RECEIVED, the undersigned, Andrei Poludnewycz (the "Maker"), an
individual residing at [ADDRESS], does hereby promise to pay to the order of
Information Management Associates, Inc., a Connecticut corporation (the
"Holder") the principal sum of thirty four thousand dollars ($ 34,000) together
with interest thereon to be computed from the date hereof at a rate equal to
eight and one quarter percent (8.25%) per annum.
The outstanding principal amount owed hereunder, together with all interest
accrued thereon, shall be due and payable in full on the earlier of the closing
of the Company's initial public offering or June 30, 1999.
Maker further agrees to pay, on demand, in addition to said principal and
interest, all reasonable costs and expenses incurred in collection of this Note.
Maker hereby waives diligence, demand, presentment for payment and notice of
nonpayment in connection with enforcement of this Note.
This Note shall be governed by and construed in accordance with the laws of the
State of Connecticut.
/s/ Andrei Poludnewycz
----------------------------
Andrei Poludnewycz
<PAGE>
Exhibit 10.56
MONITORING AGREEMENT
--------------------
Monitoring Agreement ("Agreement"), dated as of January 2, 1995, between
Information Management Associates, Inc., a Connecticut corporation ("IMA"), and
Wand Partners L.P., a Delaware limited partnership ("Wand").
RECITALS
--------
Affiliates of Wand have invested in IMA in 1990 and on two occasions in each of
1991 and 1994, and Wand has designated two persons to serve as Directors of IMA.
Wand, by and through its partners, agents and affiliates (and their respective
officers and employees), has developed knowledge in the fields of
(a) management, finance and strategic planning and (b) acquisitions and
divestitures, as well as other corporate finance matters and planning. Wand
regularly meets with IMA management to review operating results, business
strategies and financial requirements. IMA wishes to continue to avail itself of
Wand's knowledge and expertise (hereinafter referred to as the "Services").
AGREEMENT
---------
The parties hereby agree as follows:
1. Services.
---------
IMA hereby retains Wand to render the Services to IMA, and Wand hereby
agrees to render the Services, for the period commencing on the date hereof
and continuing during the term of this Agreement.
The consulting and other services to be provided by Wand pursuant to this
Agreement specifically do not include any role in any sale or distribution
of securities, as Wand does not offer such services. Wand's engagement
pursuant to this Agreement is subject to IMA providing reasonable indemnity
to Wand as detailed below under item 6, "Indemnity".
2. Term.
-----
This Agreement shall commence on January 2, 1995 and shall remain in effect
until the earlier of (a) an initial public offering by IMA involving sale of
common stock with gross proceeds to IMA of at least $10 million; or (b) sale
by IMA of substantially all of its stock or assets; or (c) January 2, 1998.
<PAGE>
3. Compensation.
-------------
As compensation for the Services pursuant to Section 1, IMA shall pay Wand a
fee (the "Monitoring Fee") of $40,000 per year, payable in arrears in equal
quarterly installments of $10,000. The first installment shall be paid on
April 1, 1995, and the succeeding installments shall be paid on each July 1,
October 1, January 1, and April 1 (each a "Payment Date") thereafter during
the term of this Agreement.
Any directors' fees paid by IMA to David J. Callard or his successor as
representative of Wand in any quarter shall reduce the Monitoring Fee
payment for such quarter.
4. Reimbursement of Expenses.
--------------------------
In addition to the compensation to be paid pursuant to Section 3 hereof, IMA
agrees to reimburse Wand, promptly following demand therefor, together with
invoices or reasonably detailed descriptions thereof, for all reasonable
out-of-pocket expenses (including, without limitation, all reasonable
attorneys' fees and expenses) incurred by Wand in connection with the
performance by it of the Services contemplated by Section 1 hereof.
5. Late Payments and Defaults.
---------------------------
In the event IMA shall fail to pay all or any part of the Monitoring Fee
when due, and IMA does not cure such failure prior to the 30th day following
the date on which such payment is due, then Wand shall be entitled to
interest on the unpaid amount equal to the prime interest rate plus 2% per
annum from the date such payment was due until the date payment is made.
6. Indemnity.
----------
IMA shall indemnify and hold harmless Wand and its controlling persons, and
each of their respective stockholders, partners, directors, and officers, as
well as agents and employees thereof, to the full extent lawful, from and
against any losses, settlements, claims, damages or liabilities related to
or arising out of this engagement or Wand's role in connection herewith,
including related activities prior to the date hereof, and shall promptly
reimburse Wand and any other party entitled to be indemnified hereunder for
all reasonable out-of-pocket expenses (including attorneys' fees and
expenses) as incurred by Wand or any such party in connection with
investigating, preparing or defending any such claim, regardless of whether
Wand or any other party entitled to be indemnified hereunder is a party to
any such pending or threatened claim, action, litigation or other
proceeding. IMA will not, however, be responsible for any claims,
liabilities, losses, damages or expenses which are finally judicially
determined to have resulted primarily from Wand's willful misconduct or
gross negligence. IMA also agrees that neither Wand nor any
-2-
<PAGE>
person affiliated with Wand shall have any liability to IMA or its
affiliates for or in connection with this engagement, except for such
liability for losses incurred by IMA which is finally judicially determined
by a court of competent jurisdiction to have resulted primarily from the
willful misconduct or gross negligence of such person.
Neither IMA nor Wand shall, without the other party's prior consent, settle
or compromise any pending or threatened claim, action or suit in respect of
which indemnification or contribution may be sought hereunder which consent
shall not be unreasonably withheld. IMA hereby consents to personal
jurisdiction, service and venue in any court in which any claim which is
subject to this Agreement is brought against Wand or any other party
entitled to be indemnified hereunder. Any right to trial by jury with
respect to any claim or action arising out of or contemplated by this
section is hereby waived. The provisions of this section shall survive the
expiration of this Agreement
7. Litigation Expenses.
--------------------
In the event of any claim, litigation, arbitration or other dispute
resolution proceedings between IMA, on the one hand, and Wand on the other
hand, relating to or arising out of this Agreement, all costs, charges and
expenses incurred by the prevailing party in connection with such claim,
litigation, arbitration or other dispute resolution proceedings (including
attorneys' fees) shall be borne by the other party in such litigation or
other proceedings.
8. Notices.
--------
Any notice required or permitted to be given hereunder shall be in writing
and shall be deemed sufficient if (a) delivered in person, (b) mailed by
certified mail, return receipt requested, or (c) sent by facsimile
transmission, with a copy sent simultaneously by the U.S. mail, as follows:
If to IMA, to:
Information Management Associates, Inc.
One Corporate Drive
Suite 414
Shelton, CT 06484
Attention: Mr. Gary R. Martino
-3-
<PAGE>
With a copy to:
LeBouef, Lamb, Greene & MacRae
Goodwin Square
225 Asylum Street
Hartford, CT 06103
Attention: Thomas Fairfield, Esq.
If to Wand, to:
Wand Partners Inc.
630 Fifth Avenue
Suite 2435
New York, NY 10111
Attention: Mr. David J. Callard
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, NY 10022
Attention: Nancy L. Henry, Esq.
Any party, by notice to the other parties hereto, may designate additional
or different addresses for subsequent notices or communications.
9. Permissible Activities.
-----------------------
Nothing herein shall in any way preclude Wand from engaging in any business
activities or from performing services for its own account or for the
account of others.
10. Amendments.
-----------
This Agreement is intended as a complete and exclusive statement of the
terms of the Agreement among the parties with respect thereto and cannot be
amended or terminated orally. The failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be
considered a waiver or deprive that party of the right thereafter to insist
upon strict adherence to that term or any other term of this Agreement. A
waiver by any party of any breach of this Agreement shall not operate as, or
be construed to be, a waiver of any subsequent breach. Any waiver must be
in writing.
-4-
<PAGE>
11. Monitoring Relationship
-----------------------
It is understood and agreed that nothing contained herein shall be deemed to
create an employer/employee relationship between IMA, on the one hand, and
Wand, on the other hand. No federal, provincial, state or local withholding
deductions shall be withheld from the fees payable to Wand pursuant to this
Agreement
12. Governing Law.
--------------
This Agreement shall be construed, interpreted and enforced in accordance
with the laws of the State of Connecticut, excluding any choice-of-law
provisions thereof.
13. Counterparts.
-------------
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one
and the same instrument, and the signature of any party to any counterpart
shall be deemed a signature to, and may be appended to, any other
counterpart.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
INFORMATION MANAGEMENT ASSOCIATES, INC.
By: /s/ Gary R. Martino
------------------------------
WAND PARTNERS L.P.
By: WAND PARTNERS INC.
as general partner
By: /s/ David J. Callard
------------------------------
David J. Callard
President
-5-
<PAGE>
Exhibit 10.57
LEASE AGREEMENT
This Lease Agreement is made as of this 6th day of October, 1993, by
and between Robert D. Scinto, of Easton, Connecticut (hereinafter called
"Landlord") and Information Management Associates, Inc., a Connecticut
corporation (hereinafter called "Tenant").
W I T N E S S E T H:
ARTICLE I
Data Section
Wherever this Lease refers to any item specified in this Data Section,
such reference shall be deemed to incorporate the information set forth in the
Data Section. Some terms mentioned in the Data Section are further defined by
other provisions in the Lease. Whenever a term is more specifically defined, the
more specific definition shall control.
1.01 The Leased Premises shall consist of 18,137 square feet of
Tenant's Net Rentable Area.
1.02 The Leased Premises is on the 4th floor in Landlord's building at
One Corporate Drive, Shelton, Connecticut. The floor area outline for the Leased
Premises is attached hereto as Exhibit A.
1.03 The Initial Term of the Lease is ten years, commencing on the
Commencement Date.
1.04 The Commencement Date shall be the later of November 1, 1993 or
the date of substantial completion of the Leased Premises in accordance with
Tenant's Finish Plan (defined in Article XIX and attached hereto as Exhibit D)
and delivery of a certificate of occupancy for the Leased Premises issued by the
City of Shelton. Upon execution of this Lease by Tenant, Landlord shall promptly
commence construction of the Leased Premises and diligently pursue the same to
completion.
1.05 The Basic Minimum Annual Rent and monthly installments thereof
for the Initial Term are:
<TABLE>
<CAPTION>
Basic Minimum Monthly
period Annual Rent Installments
<S> <C> <C>
months 1 through 18 $ 00.00 $ 00.00
months 19 through 24 $ 108,816.00 $ 9,068.00
months 25 through 36 $ 145,092.00 $12,091.00
months 37 through 48 $ 181,368.00 $15,114.00
</TABLE>
-1-
<PAGE>
<TABLE>
<S> <C> <C>
months 49 through 60 $ 217,644.00 $18,137.00
months 61 to the end
of the Initial Term $ 315,588.00 $26,299.00
</TABLE>
Notwithstanding the foregoing, the Basic Minimum Annual Rent shall be
adjusted in the event of a "Trumbull Sale" (hereinafter defined), if the same
shall take place at any time between May 1, 1993 and the end of the first four
years of the Initial Term. If a Trumbull Sale shall take place, then from and
after the sale date, the Basic Minimum Annual Rent shall be adjusted to be
$178,428 per annum, payable in equal monthly installments of $14,689 each, for
the period from the sale date to the end of the 60th month of the Initial Term,
and the Basic Minimum Annual Rent shall be adjusted for the balance of the
Initial Term such that the Basic Minimum Annual Rent for the balance of the
Initial Term consists of equal monthly installments which, when added to the
total monthly installments paid for the first 60 months of the Initial Term
would result in the average Basic Minimum Annual Rent over the Initial Term
equaling $217,644 per annum. By way of example, if, for the purposes of the
example, it is assumed that a Trumbull Sale takes place as of the last day of
the 18th month of the Initial Term and if the Commencement Date is on the first
day of a month, making the Initial Term an even 120 months, then the Basic
Minimum Annual Rent would be $217,644 per annum for the 19th month through the
60th month, and the Basic Minimum Annual Rent for months 61 through 120 would be
$291,337.20 per annum (which would result in a total Basic Minimum Annual Rent
payable over the Initial Term of $2,176,440, equivalent to an average of
$217,644 per annum). The term "Trumbull Sale" means the conveyance of the fee
interest in all or substantially all of the property known as 6527 Main Street,
Trumbull, Connecticut. Tenant agrees to promptly notify Landlord upon execution
of any contract or agreement for a Trumbull Sale, of the prospective sale date
and of the actual sale date promptly after the occurrence of the sale.
1.06 The Security Deposit is $0.
1.07 Tenant shall use the Leased Premises for the sole purpose of a general
administrative business office, including, without limitation, computer
software, licensing, maintenance, consulting and development business.
1.08 The Notice Address for each of the parties is:
Landlord Tenant
Robert D. Scinto Information Management Associates, Inc.
One Corporate Drive One Corporate Drive
Shelton, Connecticut 06484 Shelton, Connecticut 06484
but until occupancy
Information Management Associates, Inc.
6527 Main Street
Trumbull, Connecticut 06611
-2-
<PAGE>
ARTICLE II
Definitions
The following words and phrases shall have the following meanings.
2.01 "Leased Premises" means the usable area leased to Tenant in
Landlord's building. The outer vertical boundary of the Leased Premises is
outlined on the floor plan attached hereto as Exhibit A. The upper boundary of
the Leased Premises shall be the lower surface of the suspended or finished
ceiling. The lower boundary of the Leased Premises shall be the surface of the
unfinished floor. The vertical boundary of the Leased Premises shall be the
unfinished surface exposed to the Leased Premises of all walls bounding the
exterior of the building, other rentable area, building common area, and other
area not for use by Tenant (HVAC duct chases and structural column enclosures
for example).
2.02 The "Project" means the One Corporate Drive, Shelton office
building (the "Building"), the parking garage serving the Building and the real
property appurtenant thereto. The Project boundary is described in Exhibit B,
attached hereto.
2.03 "Tenant's Net Rentable Area" means the square footage of the
useable area of the Leased Premises plus a share of the core area of the
Building.
2.04 "Tenant's Pro Rata Share" means the percentage obtained by
dividing Tenant's Net Rentable area by the total Net Rentable Area in the
Building. Although a specific Pro Rata Share may be set forth in the Data
Section, the Pro Rata Share shall be subject to adjustment upon increase or
decrease of the total Net Rentable Area in the Building. The total Net Rentable
Area in the Project as of the execution of this Lease is 275,192 square feet,
and Tenant's Pro Rata Share as of the execution of this Lease is 6.59%.
2.05 "General Common Area" means all areas and facilities in the
Building and all exterior areas of the Project which are available for the use
of all tenants. The General Common Area includes corridors, janitor closets,
rest rooms and parking facilities. General Common Area does not include
restricted areas such as boiler rooms, machine rooms for elevator equipment and
utility rooms of the Landlord.
2.06 "Lease Year" shall mean the period from the Commencement Date to
the expiration of the first full twelve calendar month period of the Initial
Term of this Lease and each succeeding twelve month period of the Term of this
Lease. If the Commencement Date is not the first day of a calendar month, the
first Lease Year shall be twelve months plus the remaining portion of the
partial month of the Commencement Date.
2.07 "Term of this Lease" means the Initial Term, and if the Lease
grants any option to extend the Term of this Lease, Term of this Lease shall
include any validly exercised option to extend.
2.08 "Basic Operating Cost" shall mean all Operating Expenses of the
Project, which shall be computed on the accrual basis and shall consist of all
costs and expenses incurred by Landlord to maintain all facilities in the
operation of the Project and such additional facilities now and in subsequent
years as may be determined by Landlord to be necessary to the Project. All
Operating Expenses shall be determined in accordance with generally accepted
accounting principles, which shall be consistently applied (with accruals
appropriate to Landlord's business). The term "Operating Expenses" shall include
the amortized cost of capital items, provided, however, that the
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useful life of any item shall in no event exceed fifteen years, and provided
further that such capital items: do not constitute improvements to any rentable
area in the Project; do not constitute improvements made as a part of any
addition to the Building; and do not constitute repair or replacement of any
item in the leased premises of any tenant which is not a repair or replacement
which would have been provided to Tenant by Landlord without separate charge to
Tenant. The term "Operating Expenses" as used herein shall mean the reasonable
expenses and costs which Landlord shall pay or become obligated to pay for the
maintenance, repair, insurance and operation of the Project and supporting
facilities of the Project. Operating Expenses shall be limited so as not to
include: [i] specific costs which are otherwise allocated to tenant areas under
other provisions of this Lease; [ii] expenses and costs which are billed to and
paid by specific tenants; [iii] expenses associated with any financing
indebtedness of Landlord, whether or not secured by the Project; [iv] leasing
commissions; [v] depreciation; [vi] repairs or replacements caused by casualty
damage required to be insured by Landlord under the provisions of this Lease;
[vii] repairs or replacements caused by a condemnation; [viii] advertising or
marketing expenses; [ix] income taxes of Landlord; and [x] penalties for
Landlord's failure to timely pay fees or taxes or for Landlord's default under
any lease. Operating expenses, include, but are not limited to, the following:
(a) the cost of all supplies, materials and equipment used in the operation and
maintenance of the Project; (b) the cost of utilities, including water and
power, heating, lighting, air conditioning and ventilating the entire Project;
(c) management fees at rates in accordance with the prevailing rates charged for
comparable properties in the area of the Project; (d) the cost of all
maintenance, janitorial and service agreements for the Project and the equipment
therein, including, without limitation, alarm service, window cleaning and
elevator maintenance; (e) accounting costs, including the costs of audits by
certified public accountants; (f) the cost of all insurance, including but not
limited to fire, casualty, liability, rental abatement, workers compensation and
any other type of insurance reasonably obtained, all as limited to those
coverages applicable to the Project and the employee's and Landlord's personal
property used in connection therewith; (g) the cost of repairs, replacements and
general maintenance (excluding repairs and general maintenance paid by proceeds
of insurance or by Tenant or other third parties, and alterations attributable
solely to tenants of the Project other than Tenant); (h) gardening, landscaping,
planting, replanting and replacing of flowers and shrubbery; (i) any and all
General Common Area maintenance costs relating to public areas of the Project,
including sidewalks, parking areas, landscaping and service areas, including
repaving, restriping, plowing and sanding of the walks and parking areas, and
including rubbish removal from the Project; (j) compensation to personnel
directly engaged in implementing all of the services set forth in this
paragraph, including wages, workers compensation insurance premiums and other
items paid for the employment of said personnel, except that the same shall not
exceed fair market rates in the Shelton, Connecticut area obtainable via arms
length transactions, and the amount of such compensation shall only be included
with respect to time actually spent by such employees in the performance of such
services; (k) all taxes, service payments in lieu of taxes, excises,
assessments, levies, fees or charges, general and special, ordinary and
extraordinary, unforeseen as well as foreseen, of any kind which are assessed,
levied, charged, confirmed, or imposed by any public authority upon the Project,
its operation or the rent provided for in this Lease Agreement (It is agreed
that Tenant will be responsible for ad valorem taxes on Tenant's personal
property, if any, and on the value of leasehold improvements to the extent that
same exceed standard building allowances provided by Landlord under this Lease).
2.09 "Repair" shall mean replacement wherever reasonably necessary.
2.10 "Consent" or "Approval" of Landlord shall mean approval or
consent in writing.
2.11 "Notice" from either party to the other shall mean written
notice, served by either party upon the other by certified mail, return receipt
requested, at the address herein set forth or at such other address as either
party may from time to time designate.
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ARTICLE III
Grant and Term
3.01 In consideration of the rent and covenants herein reserved and
contained on the part of Tenant to be observed and performed, Landlord demises
and leases to Tenant and Tenant rents from Landlord the Leased Premises and the
improvements now or hereafter therein. Together with the Leased Premises,
Landlord grants to Tenant and Tenant's employees and invitees the right to use
the General Common Area, subject to the rules and regulations reasonably
established by Landlord.
3.02 The Initial Term shall be the period of time set forth in the
Data Section. The Term of this Lease shall commence on the Commencement Date or
extended Commencement Date, as provided below. Notwithstanding the exact number
of years and/or months set forth for the Initial Term in the Data Section,
unless express provision is made to the contrary, if the Commencement Date is
not the first day of a calendar month, the Initial Term set forth in the Data
Section shall be increased by any partial month from the Commencement Date to
the end of the calendar month. Notwithstanding the specific date for the
Commencement Date set forth in the Data Section, unless express provision is
made to the contrary, if the Leased Premises requires preparation by the
Landlord before occupancy by the Tenant, the Commencement Date shall be extended
to the sooner of: [i] date on which Landlord obtains a certificate of occupancy
of the Leased Premises from the applicable municipality; or [ii] the date on
which Tenant has moved in to the Leased Premises. Landlord and Tenant shall sign
a written confirmation of the commencement and termination dates of the Initial
Term of this Lease if either party so requests.
ARTICLE IV
Rent
4.01 Tenant agrees to pay Landlord during the Term of this Lease the
Basic Minimum Annual Rent.
4.02 Tenant agrees to pay Landlord during the Term of this Lease
Additional Rent, consisting of: [i] Tenant's Pro Rata Share of the Basic
Operating Cost; [ii] all utility charges which are not included as items of
Basic Operating Cost but are the cost responsibility of Tenant under other
provisions of this Lease (which have not been paid by Tenant directly to the
utility providing the service under other provisions of this Lease); [iii] and
any other item specifically set forth elsewhere in this Lease as an item of
Additional Rent or as an item which is in any other manner the cost
responsibility of Tenant. Landlord shall give Tenant within thirty days after
the commencement of Landlord's fiscal operating year for the Project a
reasonably detailed statement of Tenant's Pro Rata Share of estimated Basic
Operating Cost for the ensuing year, specifying all items of Basic Operating
Cost. Tenant agrees to pay Tenant's Pro Rata Share of the Basic Operating Cost
for each fiscal year in monthly installments in accordance with Landlord's
statement. Landlord shall, within a reasonable period of time after the end of
each fiscal year for which Basic Operating Cost has been charged in accordance
with the estimated charges, give to Tenant a statement, prepared in accordance
with Generally Accepted Accounting Principles, consistently applied, of the
actual Basic Operating Cost incurred for the previous year. Adjustment shall be
made for any overpayment or underpayment of the actual charges resulting from
any variance between the actual Basic Operating Cost for the previous year and
the estimated Basic Operating Cost paid by Tenant, which adjustment may be made
by increasing or decreasing the Additional Rent charges for the next year, or a
refund, provided, however, that Landlord shall not be required to make such
adjustment more than once per year. If during any fiscal operating year,
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Landlord shall not have delivered to Tenant the statement mentioned for such
year, Tenant shall continue to pay Landlord the sums payable for the immediately
preceding year, until the statement for the current year shall have been
delivered, at which time the monthly payments by Tenant shall be adjusted
retroactively. If during all or part of any fiscal year any particular item or
items of service or work (which would constitute an element of Additional Rent
hereunder) are not furnished to any portion of the Project due to the fact that
such portion is not completed, occupied or leased, then for the purposes of
computing Additional Rent payable hereunder, the amount of such expenses for
such items shall be increased by an amount equal to the expenses which would
have reasonably been incurred during such period if Landlord had at his own
expense furnished such items of service or work to such portion of the Project.
Utility charges set forth as a portion of Additional Rent, above, may be
included with the statement of estimated Basic Operating Cost and billed and
adjusted in the same manner as Tenant's Pro Rata Share of the Basic Operating
Cost. If any part of the first or last Lease Years of the Term of this Lease
shall include part of a tax or operating expense year, Tenant's liability under
this paragraph shall be apportioned so that Tenant shall pay only for such parts
of such tax year and operating expense years that shall be included in the Term
of this Lease. Landlord may elect to bill the full amount of any item of
Additional Rent which is not an item of Basic Operating Cost as such item of
expense is incurred by Landlord (repair of damage caused by Tenant, for
example). All items of Additional Rent which are capital items not specifically
the immediate cost responsibility of Tenant pursuant to other terms of the Lease
shall be amortized in accordance with generally accepted accounting principles,
provided that no item shall have a useful life of more than fifteen years.
Tenant shall have the right to examine, and Landlord shall keep for a period of
at least three years, Landlord's books and records relating to the calculation
of Tenant's Pro Rata Share of the Basic Operating Cost and Operating Expenses,
which examination shall be at Tenant's sole cost and expense, upon reasonable
advance notice to Landlord and during normal business hours.
4.03 Notwithstanding the provisions of paragraph 4.02, Tenant's Pro
Rata Share of the Basic Operating Cost shall be limited in the manner set forth
in this Paragraph. For the calendar year 1993, Tenant's Pro Rata Share of the
entire Basic Operating Cost, excluding Tenant's separately metered paragraph
8.01 electricity, shall not exceed $7.54 per square foot of Tenant's Net
Rentable Area. For the purposes of the limitation of Tenant's Pro Rata Share of
the Basic Operating Cost for periods after 1993, the Basic Operating Cost shall
be divided into two portions, the "Tax, Utility and Insurance Portion" of Basic
Operating Cost (set forth as items (b), (f) and (k) of paragraph 2.08) and the
"Other Portion" of Basic Operating Cost (set forth as all other items of Basic
Operating Cost described in paragraph 2.08). For all calendar years after 1993,
Tenant's Pro Rata Share of the Other Portion of the Basic Operating Cost shall
not exceed the actual amount of the Other Portion of the Basic Operating Cost
for 1993 increased by the percentage increase in the "CPI" between May 1993 and
May of each subsequent calendar year. The "CPI" is the United States Department
of Labor Bureau of Labor Statistics Consumer Price Index-All Urban Consumers-
All Cities (1982-4 = 100), or if such index shall no longer be published, such
index used by Landlord which represents similar changes in purchasing power of
consumers. The Tax, Utility and Insurance Portion of the Basic Operating Cost
shall not be limited for any time period after 1993.
4.04 The Basic Minimum Annual Rent and the monthly installment portion
of the Additional Rent shall be due in installments, commencing with the
Commencement Date and continuing on the first day of each month thereafter, in
advance. If the Commencement Date is not the first day of a calendar month, the
installment due on the Commencement Date shall be pro rated for the fractional
period remaining in the month of the Commencement Date. It is the intention of
the Landlord and Tenant that the rents herein specified shall be net to the
Landlord in each year during the Term of this Lease, payable without any
reduction, abatement, counterclaim or setoff, and that all costs, expenses and
obligations specified in this Lease relating to the Leased Premises, which may
arise or become due under any contingency whatsoever during the Term of this
Lease shall be paid by the Tenant and the Tenant shall indemnify the Landlord
and save the Landlord harmless
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from and against all such costs, expenses and obligations. All past due
installments of rent shall bear interest at the lesser of three percentage
points over the prime rate of interest as announced by People's Bank of
Bridgeport, Connecticut, or its successor, or, if less, the maximum rate
permitted by applicable law, from date due until payment is received. Any
liability for unpaid Basic Minimum Annual Rent and Additional Rent shall survive
the termination of the Lease.
ARTICLE V
Conduct of Tenant
5.01 Tenant agrees that Tenant and Tenant's permitted assignees or
sub-lessees shall use the Leased Premises for the sole and exclusive purpose set
forth in paragraph 1.07. The use of the Leased Premises shall also be in
accordance with the ordinances and regulations of the municipality in which the
Leased Premises is located. Without limitation of the foregoing, Tenant agrees
that the Leased Premises will not be used for any purpose other than that
provided above. Tenant agrees to comply with all rules and regulations, of which
Tenant is given notice, reasonably established by Landlord for the governing of
conduct of tenants in general in the Project. The current rules and regulations
for tenants in the Project are set forth in Exhibit C.
5.02 Tenant agrees that Tenant will not keep, use, sell or offer for
sale in or upon the Leased Premises any article which may be prohibited by the
standard form of fire insurance policy. Tenant agrees to pay any increase in
premiums for fire and extended and/or all risk coverage insurance that may be
charged during the Term of this Lease on the amount of such insurance which may
be carried by Landlord on the Project, resulting from the type of equipment,
merchandise or services used by Tenant in the Leased Premises, whether or not
Landlord has consented to the same. In determining whether increased premiums
are the result of Tenant's use of the Leased Premises, a schedule issued by the
organization making the insurance rate on the Leased Premises, showing the
various components of such rate, shall be conclusive evidence of the several
items and charges which make up the fire insurance rate on the Leased Premises
and the Project.
5.03 Tenant shall not commit or suffer to be committed any waste upon
the Leased Premises or Project or any nuisance or other act or thing which may
materially and unreasonably disturb the quiet enjoyment of any other tenant in
the Project.
5.04 Tenant shall, at Tenant's sole cost and expense, comply with all
of the requirements of all county, municipal, state, federal and other
applicable governmental authorities, now in force or which may hereafter be in
force and not being reasonably disputed by Tenant, pertaining to the Tenant's
use of the Leased Premises or any act therein by Tenant. Tenant shall faithfully
observe in the use of the Leased Premises all federal, state, county and
municipal laws, ordinances and regulations now in force or which may hereafter
be in force not being reasonably disputed by Tenant, excepting any structural
changes required by such authorities which are not caused by the act or neglect
of the Tenant or by Tenant's specific use of the Leased Premises. Specific
reference is made to Tenant's duty to comply with all state, federal and local
laws concerning environmental protection and Tenant's conduct at the Project.
Tenant agrees to indemnify Landlord against any cost and expense which Landlord
may suffer by reason of Tenant's failure to comply with the laws governing its
conduct at the Project, including all laws concerning environmental protection.
Tenant shall undertake no acts which would result in the Leased Premises being
defined as an "Establishment" under the environmental laws of the State of
Connecticut. Landlord represents that to the best of Landlord's knowledge, as of
the date of this Lease, the Project is not polluted by any hazardous waste,
asbestos, PCBs, or other hazardous materials, and the Project complies with
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all laws, including environmental laws affecting it. During the Term of this
Lease, Landlord shall comply with all laws, including environmental laws,
affecting Landlord's conduct at the Project.
5.05 Tenant will not place or maintain, or cause to be placed or
maintained, on any portion of the Project exterior to the Leased Premises or any
portion of the Project (including the Leased Premises) visible from the exterior
of the Leased Premises, any sign or advertising matter without Landlord's
written consent. Tenant shall not place any object on any portion of the Project
exterior to the Leased Premises without Landlord's written consent. Tenant shall
not install or maintain any window treatment without the prior written consent
of Landlord. Notwithstanding the foregoing, Landlord will consent to a tenant
listing or listings in the Building directory sign in the lobby, a listing or
listings on any floor directory sign near the elevator bank at Tenant's floor,
and a sign on or outside of the entrance door to the Leased Premises, provided
that the size and type of sign is reasonably acceptable to Landlord.
5.06 Tenant agrees to keep the Leased Premises in a clean and sanitary
condition, in a manner reasonable and customary for similar businesses, and free
from trash, inflammable material and other objectionable matter and to make all
non-structural interior repairs other than to Landlord's mechanical systems,
reasonable wear and tear and obsolescence and casualty damage required to be
insured by Landlord under the terms of this Lease excepted. Tenant shall
maintain all equipment installed by Tenant at Tenant's own cost and expense.
Tenant shall not make any Building alteration or addition to the Leased Premises
without Landlord's consent, which shall not be unreasonably withheld.
5.07 If Tenant refuses or neglects to perform any item of maintenance
or repair which is Tenant's responsibility within a reasonable time, Landlord
may make such repairs, and upon completion thereof, Tenant shall pay Landlord's
cost for making such repairs upon presentation of an invoice therefor, as
Additional Rent, which shall include interest from the date of such repairs at
the same rate as that due for overdue rental payments. In the case of a repair
which is not an emergency repair, Landlord shall not exercise Landlord's right
to make the repair unless Tenant has not commenced the repair within ten days
after written demand from Landlord and proceeds to complete same with diligence.
5.08 Tenant shall promptly pay all contractors and materialmen hired
by Tenant to furnish any labor or materials which may give rise to the filing of
a mechanic's lien against the Project attributable to contracts entered into by
the Tenant. Should any such lien be made or filed, Tenant shall cause same to be
discharged as a lien against the Project within the sooner of [i] thirty days
after Tenant receives notice of such lien or [ii] thirty days after request by
Landlord to remove such lien. If a bond is posted and the lien is released and
discharged as a lien on the Project, then such discharge by bonding shall
satisfy Tenant's obligations under this paragraph as to the removal of said
lien, and Tenant shall thereafter not be obligated by the terms of this Lease to
pay or compromise the claim which gave rise to the lien. Notwithstanding any
notice and grace period before default elsewhere set forth in this Lease, if
Tenant shall fail to discharge such lien within the time period set forth in
this paragraph above, and shall further fail to discharge such lien within ten
more business days after notice of failure to discharge the lien is given from
Landlord, then Tenant shall be in material default of the Lease, without any
further notice or grace period.
ARTICLE VI
Landlord's Conduct and Services at the Project
6.01 Landlord agrees to keep the parking areas in the Project
reasonably free of snow, ice and debris and to keep same reasonably lighted
during normal business hours of the tenants in the
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Project. Landlord agrees to keep the General Common Area (including any common
restrooms) in reasonably good repair and order. Landlord shall perform all
structural repairs to the Building or buildings in the Project, all General
Common Area in the Project, and all mechanical equipment installed by Landlord
for heating, ventilation and air conditioning, plumbing and other mechanical
systems of the Leased Premises. Tenant shall pay: [i] Tenant's Pro Rata Share
for maintenance and repair of the portion of said mechanical systems which are
building standard; and [ii] the incremental cost of said maintenance and repair
for the portion of said mechanical systems servicing the Leased Premises in
excess of building standard, the incremental cost being that amount which is the
cost which is in addition to the cost which would have been incurred had the
system been building standard. Although Landlord is responsible for the
performance of certain work under this paragraph, the cost of such work may be
Tenant's responsibility under this and other provisions of the Lease, in full or
as a Pro Rata Share. Landlord shall comply with all laws affecting Landlord's
conduct at the Project, and all work done at the Project by or through Landlord
shall be done in a good and workmanlike manner.
6.02 Landlord shall furnish keys to Tenant so that Tenant may have
access to the Leased Premises before and after normal business hours. No locks
other than those furnished by Landlord shall be installed on the doors providing
access to the Leased Premises without Landlord's written consent. Tenant shall
furnish to Landlord keys to any such locks allowing access to Tenant's Leased
Premises.
6.03 Landlord shall have the right to make alterations and/or
additions to the Project and the Building, and may alter the grade and/or
location of the improvements in the Project. The exercise by Landlord of any
right under this paragraph shall be limited so that there shall be no
unreasonable interference with Tenant's use of the Leased Premises and the
General Common Area.
6.04 Landlord shall have the right to establish reasonable rules and
regulations for the use of the parking areas by Tenant and other tenants in the
project, but Landlord shall not have any duty to police the traffic in the
parking areas. Tenant shall have the use of the parking areas, existing from
time to time in the Project, for the benefit of Tenant's employees, visitors and
customers, which usage in the case of Tenant shall be limited to four parking
spaces per thousand square feet of Tenant's Net Rentable Area, 4 of which spaces
may be marked as reserved for Tenant and the balance of which spaces shall be
available to Tenant in Landlord's parking area, the unreserved spaces in the
parking area to be in common usage with other tenants.
ARTICLE VII
Insurance, Indemnity and Subrogation Waiver
7.01 Tenant shall during the entire Term of this Lease keep in full
force and effect a policy of public liability and property damages insurance,
consistent with a normal business of the same type as Tenant's business.
Tenant's insurance policy shall include normal and customary general liability
coverage. The policy limits of Tenant's insurance shall be at least $1,000,000
per occurrence. Tenant's policy shall name Landlord as an additional insured and
shall contain a clause providing that the insurer will not cancel or change the
insurance without first giving the Landlord fifteen days prior written notice.
Tenant's insurance policy shall be with an insurance company approved by
Landlord and a copy of the policy or a certificate of insurance shall be
delivered to Landlord prior to the Commencement Date. Approval of Tenant's
insurance company shall not be unreasonably withheld and shall be based upon
said company having a reasonably sufficient rating with a service such as A. M.
Best.
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7.02 Tenant shall during the entire Term of this Lease keep in full
force and effect a hazard and all risk insurance policy, including fire,
extended and all risk type coverage, in an amount adequate to cover the cost of
repair and replacement of all alterations, decorations, or improvements made by
Tenant in the Leased Premises, subject to a commercially reasonable deductible.
Tenant's policy shall name Landlord as an additional insured and shall contain a
clause that the insurer will not cancel or change the insurance without first
giving the Landlord fifteen days prior written notice. Tenant's insurance policy
shall be with an insurance company approved by Landlord and a copy of the policy
or a certificate of insurance shall be delivered to Landlord prior to the
Commencement Date. Approval of Tenant's insurance company shall not be
unreasonably withheld and shall be based upon said company having a reasonably
sufficient rating with a service such as A. M. Best.
7.03 Landlord agrees to maintain or cause to be maintained hazard and
all risk insurance, with fire, extended and all risk type coverage, upon all of
the buildings, structures or improvements (excluding tenant improvements
required to be insured by Tenant under other terms of this Lease) in the
Project, in an amount adequate to cover the cost of replacing the foregoing in
the event of fire or other destruction, less a commercially reasonable
deductible. In the event of fire or other destruction to such property, Landlord
agrees, subject to the rights of any mortgagee to insurance proceeds, to
immediately collect or cause to be collected the insurance proceeds and to apply
the same to the reconstruction and repair of the damaged property. Tenant shall
pay Tenant's Pro Rata Share of the premiums for the insurance specified herein
as an item of Basic Operating Cost Additional Rent.
7.04 Each policy of public liability insurance, hazard insurance or
other insurance insuring risks arising out of any occurrence at the Project,
carried by Tenant or Landlord, shall provide that the insurer waives any rights
of subrogation against the Landlord (in the case of Tenant's policies) and
against the Tenant (in the case of Landlord's policies) in connection with or
arising out of any claim or benefit provided under such insurance policy. In no
event shall Tenant or any person or corporation claiming an interest in the
Leased Premises by, through or under Tenant and over whom Tenant shall have
control, claim, maintain or prosecute any action or suit at law or in equity
against the Landlord for any loss, cost or damage caused by or resulting from
fire or other risk or casualty in the Project for which Tenant is or may be
insured under a standard hazard and all risk insurance policy, including fire,
extended and/or all risk type coverage, whether or not the property (tangible or
intangible) is insured or required to be insured under this Lease, and whether
or not caused by the negligence of the Landlord, or the agents, or servants, or
employees of the Landlord. In no event shall Landlord or any person or
corporation claiming an interest in the Project by, through or under Landlord
and over whom Landlord shall have control, claim, maintain or prosecute any
action or suit at law or in equity against the Tenant for any property damage to
the Project caused by or resulting from fire or other risk or casualty in the
Project for which Landlord is required to be insured under the provisions of the
Lease, whether or not caused by the negligence of the Tenant or the agents,
servants and/or employees of the Tenant. The provisions of this paragraph 7.04
are notwithstanding, and shall control over, the provisions of paragraphs 7.05
and 7.06.
7.05 In the case of third party claims arising out of an act or
omission of Tenant or an agent, servant or employee of Tenant (a "Tenant Fault
Claim") and not out of an act or omission of Landlord or an agent, servant or
employee of Landlord (a "Landlord Fault Claim"), Tenant shall be responsible for
the Tort Indemnity of Landlord. In the event of a Landlord fault claim, Landlord
shall be responsible for the Tort Indemnity of Tenant. In the event of claims
which are both Tenant Fault Claims and Landlord Fault Claims, each party shall
be responsible for the claim in proportion its fault bears to the total fault of
Landlord and Tenant and shall be responsible for the Tort Indemnity of the other
party for the portion of the claim which is the responsibility of the party
owing the Tort Indemnity. Tort Indemnity shall mean that the party responsible
for the
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indemnification shall provide the legal defense of the claim (counsel
being subject to the approval of the indemnified party, approval not to be
unreasonably withheld) and the indemnifying party shall be responsible to pay
the amount of the claim (subject to the right to defend it) up to the limits of
the indemnifications set forth in this paragraph, above, except that in the case
of claims which are both Tenant Fault Claims and Landlord Fault Claims, each
party shall be responsible for its own costs of legal defense. Tort Indemnity
shall not be owed to the extent that the party owing the indemnification has
been prejudiced by any failure of the party seeking the indemnification to give
notice to the other party within a reasonable time after said party becomes
aware of a claim in which the other party may owe an indemnity obligation under
this paragraph.
ARTICLE VIII
Utilities
8.01 From and after the Commencement Date, Tenant shall pay all
charges for utilities used, consumed in or allocable to the Leased Premises,
including, but not limited to, fuel, electricity, water and gas. Said utilities
may be either directly metered to Tenant or shared with other tenants. If any
utility consumption in the Leased Premises is not separately metered, Landlord
may allocate the shared utility consumption to the Leased Premises in any
reasonable manner, but taking into account Tenant's relative consumption of the
utility compared to the total consumption of the utility at the Building. In the
case of building systems such as HVAC, utility consumption of such systems may
be allocated in accordance with Tenant's Pro Rata Share. The charges for all
utilities not paid directly to the utility providing the service shall be paid
to Landlord as an element of Additional Rent; and Tenant shall, at Landlord's
option, either pay the separately metered utilities directly to the utility
providing the service, or pay for said separately metered utilities as an item
of Additional Rent. The Leased Premises electricity is separately metered to
Tenant.
ARTICLE IX
Estoppel Statement, Attornment, Subordination
9.01 Upon request of Landlord or any mortgagee of Landlord, Tenant
shall execute an estoppel certificate, certifying the status of any facts with
respect to the Lease. Estoppel certification may include: whether the Lease is
in full force and effect; the rentals due under the Lease and the degree to
which same have been paid; that there are no defenses or claims against Landlord
for any alleged violation of the Lease by Landlord, or a statement of such
defenses or claims; acknowledgment of the interpretation or meaning of any term
of the Lease, provided such acknowledgment shall not change any term or
provision hereof; and such other matters reasonably requested to be certified in
the estoppel certificate.
9.02 The Tenant agrees that the Lease and all rights of the Tenant
herein shall, at the election of Landlord or mortgagee, be subordinate to the
lien of any mortgage or mortgages now or which may hereafter be placed on the
Project or any part of the Project during the term of this Lease. In the event
any proceeding is brought for the foreclosure of the Leased Premises, Tenant
agrees to attorn to the mortgagee in the event of strict foreclosure, or to the
purchaser in the event of foreclosure by sale or deed in lieu of foreclosure,
and recognize such mortgagee or purchaser (as the case may be) as the Landlord
under this Lease. Tenant further agrees to execute any further instrument or
instruments which the Landlord or its successors in title may at any time
require to evidence the subordination of this Lease to the lien of any such
mortgage or mortgages and Tenant's agreement to attorn, provided, however, that
the Landlord, if Tenant so requests, obtains
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a standard non-disturbance agreement from the mortgagee for the benefit of the
Tenant. Notwithstanding the foregoing, if there shall be a first mortgage placed
on all or a portion of the Project, this Lease shall not be subordinated to any
other encumbrance subsequent in right to the first mortgage unless the first
mortgagee shall consent to such subordination, in writing.
9.03 Tenant agrees to execute and deliver to Landlord or the party
designated by Landlord, within ten days after presentation of the proposed form,
any estoppel certificate and/or subordination, attornment and/or non disturbance
agreement requested to be executed by Tenant pursuant to the terms of this
Lease. Tenant further agrees to include in any such documents, if requested by
Landlord: an agreement not to pay Landlord rent for more than one month in
advance; an agreement to give any mortgagee a notice of any alleged default by
Landlord and a reasonable time for such mortgagee to have such default cured
before Tenant will exercise any right to terminate this Lease; and an agreement
that Tenant will not look to such mortgagee for the return of any security
deposit or other monies not actually received by such mortgagee. If Tenant shall
not have delivered the executed documents, required to be executed and delivered
under this Article, within the ten day period set forth above, Landlord may give
Tenant written notice of Tenant's failure to deliver such documents, and if
Tenant shall then fail to deliver said executed documents within three business
days after delivery of such written notice, notwithstanding any provision for
notice and grace period for default elsewhere contained in this Lease, Tenant
shall be in material default of the Lease, and Landlord shall have all rights
provided for in the event of such default, including termination. It is
acknowledged that a material default by Tenant of Tenant's obligations under
this Article (after all applicable notice and grace periods provided herein) may
lead to a loss of a financing, a loss of a buyer for the Project or increased
fees or expenses incurred in connection with a sale or financing, it being
understood that Tenant shall be entitled to include in any estoppel certificate,
agreement or document referred to in this paragraph any facts reasonably
believed by the Tenant to be true, without liability. Upon execution of this
Lease, Landlord shall use best efforts to obtain a Consent to Subordination of
Mortgage Agreement executed by Teachers Insurance and Annuity Association of
America, substantially in the form attached hereto as Exhibit E.
ARTICLE X
Destruction of Leased Premises
10.01 Landlord agrees, subject to and excepting the other provisions
of this Article, that if the Leased Premises shall be damaged by fire or other
casualty during the term of this lease, Landlord shall, at Landlord's own
expense, use best efforts to cause the damage to be promptly repaired within a
reasonable time after such damage has occurred, which period shall not exceed
six months. If by reason of such occurrence, any portion of the Leased Premises
is thereby rendered untenantable for Tenant's business and Tenant ceases use of
said portion (provided, that, Tenant shall not be required to remove any items
of personal property from the damaged area unless required to do so for purposes
of Landlord's repairs or replacement and the presence of Tenant's personal
property in the damaged portion of the Leased Premises shall not constitute
"use" within the meaning of this Section), the rent and other charges payable by
Tenant hereunder shall be abated in proportion to the area of the Leased
Premises which is rendered untenantable and which is not used by Tenant, said
abatement to continue until the sooner of the time when the Leased Premises is
repaired or until Tenant uses the damaged portion of the Leased Premises.
Landlord's obligation to restore under this Article shall be limited to the
extent of insurance proceeds made available by any mortgagee having control over
the disposition of such proceeds.
10.02 In the event that twenty percent or more of the Leased Premises
shall be damaged or destroyed by fire or other cause during the Term of this
Lease and same shall not be repairable
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by Landlord within six months, Landlord or Tenant shall have the right, to be
exercised by written notice to the other party, within sixty days from and after
said occurrence, to elect to cancel and terminate this Lease. Upon the giving of
such notice, the term of this Lease shall expire by lapse of time upon the
thirtieth day after such notice is given, and Tenant shall vacate the Leased
Premises and surrender the same to Landlord on such date of expiration.
ARTICLE XI
Eminent Domain and Cessation of Business
11.01 In the event any portion of the Leased Premises or any portion
of the Project which renders the Leased Premises unusable is taken in
condemnation proceedings or by any right of eminent domain or for any public or
quasi-public use, this Lease shall terminate as of the date of vesting of title
in the condemning authority and all rent, including additional rent, payable
under this lease shall be paid to that date.
11.02 In the event of any taking provided for in this Article, all
proceeds of any award, judgment or settlement payable by the condemning
authority shall be and remain the sole and exclusive property of Landlord, and
Tenant waives any right to make any claim to said award, judgment or settlement
received by Landlord. Tenant may pursue its own claim against the condemning
authority permitted by statute to be paid to Tenant without diminishing or
reducing the award, judgment or settlement payable to Landlord.
ARTICLE XII
Assignment and Subletting
12.01 Tenant will not assign this Lease in whole or in part nor sublet
all or any part of the Leased Premises without the prior written consent of
Landlord, which shall not be unreasonably withheld. Landlord hereby expressly
consents to any assignment or subletting to a related entity in which Tenant is
a substantial stockholder or partner. The consent by Landlord to any assignment
or subletting shall not constitute a waiver of the necessity for such consent to
any subsequent assignment or subletting. This prohibition against assigning or
subletting shall be construed to include a prohibition against any assignment or
subletting by operation of law. If the Leased Premises shall be occupied by
anybody other than Tenant, Landlord may collect rent from the assignee,
under-tenant or occupant and apply the net amount collected to the rent herein
reserved, but no such assignment, underletting, occupancy or collection shall be
deemed a waiver of this covenant, or the acceptance of the assignee,
under-tenant or occupant as tenant, or a release of Tenant from the further
performance by Tenant of covenants on the part of Tenant herein contained.
Notwithstanding any assignment or sublease, Tenant shall remain primarily liable
on this Lease and shall not be released from performing any of the terms,
covenants and conditions of this Lease. Any attempted assignment by Tenant
without the prior written consent of Landlord shall be void. No assignment or
subletting shall provide for a rental payment, or other payment for use and
occupancy or utilization, based in whole or in part on the net income or profits
derived by any person or entity from the property assigned, subleased, occupied
or utilized (other than an amount based upon a fixed percentage of sales), and
any such purported assignment or subletting based upon such payment shall be
void and any amount payable thereunder or any rental amount therefor passed to
any person or entity shall not have deducted therefrom any expenses or costs
related in any way to the leasing of such space.
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ARTICLE XIII
Default of the Tenant
13.01 In the event of any failure of Tenant to pay any Basic Minimum
Annual Rent, Additional Rent or any other monies payable to Landlord under this
Lease within ten (10) days after written notice of failure to pay said sums,
Tenant shall be in material default of the Lease. Tenant shall also be in
material default of this Lease upon the happening of any of the following: [i]
the failure to deliver any estoppel or subordination, non disturbance and/or
attornment agreement within the time limits set forth for default in the Article
of this Lease requiring execution and delivery of such documents; [ii] the
failure to have any mechanic's lien discharged within the time period set forth
for default in the Article requiring removal of mechanic's liens; [iii] the
failure to commence within thirty (30) days after written notice of failure to
perform, and diligently pursue the performance of, any other of the terms,
conditions or covenants of this Lease to be observed or performed by Tenant;
[iv] if Tenant or any guarantor shall become bankrupt or insolvent, or file any
debtor proceedings, or take or have taken against them, in any court, pursuant
to any statute either of the United States or of any State, a petition in
bankruptcy or insolvency or for the reorganization or for the appointment of a
receiver or trustee of all or a portion of Tenant's property or make an
assignment for the benefit of creditors; or [v] if Tenant's interest in this
Lease shall be taken under any writ of execution. The foregoing conditions of
default shall be limited to the extent required by any state or federal laws
affecting this Lease and Landlord's rights against Tenant, including the United
States bankruptcy laws. To the extent permitted by law, all payments are due on
the due dates set forth in the Lease, and there shall be no grace period for the
due date of the rent other than the above ten day period after notice from
Landlord.
13.02 In the event of default, then Landlord, besides other rights or
remedies Landlord may have, shall have the right to terminate this Lease and
proceed under any law entitling Landlord to recover possession of the Leased
Premises, and to the extent permitted by law, shall be entitled the right of
immediate reentry and to eject Tenant from the Project, without resort to court
proceedings. Upon such default, to the extent permitted by law, Tenant's
property may be removed and stored in a public warehouse or elsewhere at the
cost of, and for the account of Tenant.
13.03 Should Landlord elect to reenter, as herein provided, or should
it take possession pursuant to legal proceedings or pursuant to any notice
provided for by law, Landlord may either terminate this Lease or Landlord may
from time to time, without terminating this Lease, make such alterations and
repairs as may be necessary in order to relet the Leased Premises, or any part
thereof, for such term or terms (which may be for a term extending beyond the
terms of this Lease) and at such rental or rentals and upon such other terms and
conditions as Landlord in Landlord's discretion may deem advisable. Upon each
such reletting, all rentals received by the Landlord from such reletting shall
be applied first to the payment of any indebtedness other than rent due
hereunder from Tenant to Landlord; second, to the payment of any costs and
expenses of such reletting, including brokerage fees and attorney's fees and of
costs of such alterations and repairs; third, to the payment of rent due and
unpaid hereunder, and the residue, if any, shall be held by Landlord and applied
in payment of future rent as the same may become due and payable hereunder. If
such rentals received from such reletting during any month are less than that to
be paid during that month by Tenant hereunder, Tenant shall pay any deficiency
to Landlord. Such deficiency shall be calculated and paid monthly. No such
reentry or taking possession of the Leased Premises by Landlord shall be
construed as an election on Landlord's part to terminate this Lease unless a
written notice of such intention be given to Tenant or unless the termination
thereof be decreed by a court of competent jurisdiction. Notwithstanding any
such reletting without termination, Landlord may at any time thereafter elect to
terminate this Lease for such previous breach. Should Landlord at any time
terminate this Lease for any breach, in addition to any other
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remedies Landlord may have, Landlord may recover from Tenant all damages
Landlord may incur by reason of such breach (except for consequential damages
not allowed under the law), including the cost of recovering the Leased
Premises, reasonable attorney's fees, and the present value of the lost rent
resulting from the failure of Landlord or Tenant to obtain another Tenant for
the Leased Premises for any period of time after Tenant's default, and/or
resulting from the fact that the reasonable rental value of the Leased Premises
at the time of Tenant's default is less than the value of the remaining rental
payments due under this Lease. It is acknowledged that if this Lease shall be
terminated by Landlord on account of Tenant's breach, Landlord's recovery shall
take into account rental which could be reasonably expected to be produced by
Landlord (which would take into account the reasonable market rates then
prevailing and the reasonable lag period to find and obtain rent from a new
tenant) if Landlord used reasonable efforts to re-rent the Leased Premises.
13.04 In case Landlord shall retain an attorney to enforce the
provisions of this Lease or if suit shall be brought for recovery of possession
of the Leased Premises, for the recovery of rent or any other amount due under
the provisions of this Lease, or because of the breach of any other covenant
herein contained on the part of Tenant to be kept or performed, Tenant shall pay
to Landlord all expenses incurred therefor, including a reasonable attorney's
fee.
ARTICLE XIV
Security Deposit
(This Article is intentionally omitted.)
ARTICLE XV
Limitation of Liability of Landlord
15.01 In the event of any alleged default of Landlord, Tenant agrees
that Tenant shall not seek to secure any claim for damages or indemnification by
any attachment, garnishment or other security proceeding against any property of
the Landlord other than the Project or property related thereto, or the proceeds
therefrom in the case of a sale of Landlord's interest in the Project, and in
the event Tenant obtains any judgment against Landlord by virtue of an alleged
default by Landlord under this Lease, Tenant agrees that Tenant will not look to
any property of Landlord other than the Project for satisfaction of such
judgment.
15.02 Except as provided in paragraphs 7.05: [i] Landlord shall not be
liable for any damage to property of Tenant or of others located on the Leased
Premises, or for the loss of or damage to any property of Tenant or of others by
theft or otherwise; [ii] Landlord shall not be liable for any injury or damage
to persons or property resulting from fire, explosion, falling plaster, steam,
gas, electricity, water, rain or snow or leaks from any part of the Leased
Premises or from the pipes, appliances or plumbing works or from the roof,
street or subsurface or from any other place or by dampness or by any other
cause of whatsoever nature; [iii] Landlord shall not be liable for any such
damage caused by other tenants or persons in the Project, by occupants of
adjacent property to the Project, by other members of the public, or caused by
operation or construction of any other private or public work; and [iv] all
property of Tenant kept or stored on the Leased Premises shall be so kept or
stored at the risk of Tenant only.
15.03 Upon any transfer of Landlord's interest in the Project, the
then transferor Landlord shall be relieved of any and all liability to Tenant
under this Lease, except for claims of Tenant against Landlord arising out of
events occurring prior to such transfer.
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ARTICLE XVI
Quiet Enjoyment
16.01 Upon payment by the Tenant of the rents herein provided, and
upon the observance and performance of all the material covenants, terms and
conditions on Tenant's part to be observed and performed, Tenant shall peaceably
and quietly hold and enjoy the Leased Premises for the term hereby demised
without hindrance or interruption by Landlord, subject, nevertheless to the
terms and conditions of this Lease, and subject to the restrictions and
easements or other matters as of record appear.
ARTICLE XVII
Miscellaneous Covenants
17.01 The Landlord and Tenant hereby waive trial by jury in any
action, proceeding or counterclaim brought by either of the parties hereto
against the other on any matters whatsoever arising out of or in any way
connected with this Lease, the relationship of Landlord and Tenant, Tenant's use
or occupancy of the Leased Premises, and/or claim of injury or damage. In any
dispute between the parties relating to the tenancy hereby created, the
exclusive forum for any such legal action shall be the Bridgeport, Connecticut,
state courthouse, if venue shall be accepted by such court, or the nearest state
courthouse to Bridgeport having jurisdiction and venue over the matter.
Connecticut law shall apply to all state law matters arising under this Lease.
17.02 The waiver by Landlord of any breach by Tenant of any term,
covenant or condition herein contained shall not be deemed to be a waiver of
such term, covenant or condition or any subsequent breach of the same or any
other term, covenant or condition herein contained. The subsequent acceptance of
rent hereunder by Landlord shall not be deemed to be a waiver of any preceding
breach by Tenant of any term, covenant or condition of this Lease, other than
the failure of Tenant to pay the particular rental so accepted, regardless of
Landlord's knowledge of such preceding breach at the time of acceptance of such
rent. No covenant, term or condition of this lease shall be deemed to have been
waived by Landlord or Tenant unless such waiver be in writing by Landlord.
17.03 No payment by Tenant or receipt by Landlord of a lesser amount
than the monthly rent herein stipulated shall be deemed to be other than on
account of the earliest stipulated rent, nor shall any endorsement or statement
on any check or any letter accompanying any check or payment as rent be deemed
an accord and satisfaction, and Landlord may accept such check or payment
without prejudice to Landlord's right to recover the balance of such rent or
pursue any other remedy in this Lease provided.
17.04 This Lease and the Exhibits, attached hereto and forming a part
hereof, set forth all the covenants, promises, agreements, conditions and
understandings between Landlord and Tenant concerning the Leased Premises and
there are no covenants, promises, agreements, conditions or understandings,
either oral or written, between the parties other than those herein set forth.
No subsequent alteration, amendment, change or addition to this lease shall be
binding upon Landlord or Tenant unless reduced to writing and signed by the
party to be charged.
17.05 If any term, covenant or condition of this Lease or the
application thereof to any person or circumstances shall, to any extent, be
invalid or unenforceable, the remainder of this Lease, or the application of
such term, covenant or condition to persons or circumstances other
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than those as to which it is held invalid or unenforceable, shall not be
affected thereby and each term, covenant or condition of this Lease shall be
valid and enforced to the fullest extent permitted by law.
17.06 If the Commencement Date is not a date certain, the Commencement
Date shall in no event be later than a time which would not violate any
applicable rule against perpetuities, determined as if all relevant lives in
being ceased as of the date of execution of this Lease.
17.07 In the event that Landlord or Tenant shall be delayed in,
hindered in, or prevented from, the performance of any act required hereunder by
reason of Force Majeure (except for the payment of money), which shall mean
strikes, lock-outs, labor troubles, inability to procure materials, failure of
power, restrictive governmental laws or regulations, riots, insurrection, war or
other reason of a like nature not the fault of the party suffering the delay and
despite such party's good faith efforts to avoid such Force Majeure, then
performance of such act shall be excused for the period of the delay.
17.08 Tenant agrees that the Landlord and Landlord's agents and other
representatives shall have the right to enter into and upon the Leased Premises
at all reasonable hours, upon reasonable notice, consistent with Tenant's
security requirements, (without notice in the case of an emergency) for the
purpose of examining the Leased Premises, or making such repairs or alterations
therein as may be necessary for the safety and preservation the Project.
17.09 Tenant agrees to permit the Landlord or Landlord's agents to
show the Leased Premises to persons wishing to hire or purchase the same upon
reasonable notice to Tenant and at reasonable hours.
17.10 Tenant shall not encumber or obstruct the General Common area in
the Project, nor allow the same to be obstructed or encumbered in any manner.
Landlord shall not obstruct the entrance to the Leased Premises and shall not
unreasonably interfere with Tenant's use of the General Common Area.
17.11 The submission of this Lease for examination does not constitute
a reservation of or option for the Leased Premises and this Lease shall become
effective only upon execution and delivery thereof by Landlord and Tenant.
17.12 Neither party shall record this Lease, but the parties hereto
agree to execute a Notice of Lease drawn in accordance with the Connecticut
statutes, and the parties agree to execute in recordable form an agreement
establishing the specific commencement date of this Lease when the same is
ascertainable.
17.13 If there shall be one or more tenants or one or more landlords,
each tenant and landlord shall be jointly and severally liable for all of the
covenants and obligations of the Tenant and Landlord hereunder, as the case may
be, except as express provision may be elsewhere made to the contrary.
17.14 The use of the neuter singular pronoun to refer to Landlord or
Tenant shall be deemed a proper reference even though Landlord or Tenant may be
an individual, a partnership, a corporation, or a group of two or more
individuals or corporations. The necessary grammatical changes required to make
the provisions of this Lease apply in the plural sense where there is more than
one Landlord or Tenant, or to either corporations, associations, partnerships,
or individuals, males or females, shall in all instances be assumed as though in
each case fully expressed.
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17.15 The headings, section numbers and article numbers appearing in
this Lease are inserted only as a matter of convenience and in no way define,
limit, construe, or describe the scope or intent of such sections or articles of
this Lease nor in any way affect this Lease.
ARTICLE XVIII
Surrender and Holding Over
18.01 At the expiration of the tenancy hereby created, whether by
lapse of time or otherwise, Tenant shall surrender the Leased Premises in the
same condition as the Leased Premises were in upon delivery of possession
thereto under this Lease, reasonable wear and tear and insured casualty
excepted, and Tenant shall surrender all keys for the Leased Premises to
Landlord at the place then fixed for the payment of rent, and Tenant shall
inform Landlord of all combinations on locks, safes and vaults, if any, in the
Leased Premises. Tenant shall remove all its trade fixtures and/or, at the
option of the Landlord, any alteration or improvements installed by Tenant,
before surrendering the premises as aforesaid and shall repair any damage to the
Leased Premises caused thereby. Tenant's obligation to observe or perform this
covenant shall survive the expiration or other termination of the term of this
Lease. If Tenant fails to remove such trade fixtures and restore the Leased
Premises, then upon the expiration or sooner termination of this Lease, and upon
the Tenant's removal from the premises, all such alterations, decorations,
additions and improvements shall become the property of the Landlord.
18.02 Holding over with the written consent of Landlord shall be at
the Basic Minimum Annual Rent and the Additional Rent specified herein and shall
otherwise be on all terms and conditions set forth herein, except for the term,
which shall be month to month, and without any right of first refusal or options
to extend the term, lease other space and/or purchase property. Should Tenant
withhold possession of the Leased Premises from Landlord after termination of
the within Lease, whether by lapse of time, by termination by either party as
provided herein, or in any other manner, and except where Landlord has given
consent or has not given written notice that the holdover is or would be without
Landlord's consent, the damages Tenant shall be liable for are hereby liquidated
at a monthly sum equal to: the monthly installment of Basic Minimum Annual Rent
in effect immediately prior to the holdover; plus one and one-half times the
greater of: $14,869; or the monthly installment of Basic Minimum Annual Rent in
effect immediately prior to the holdover. Tenant shall also be responsible for
any items of Additional Rent Tenant would otherwise be responsible for under
this Lease (Tenant's Pro Rata Share of the Basic Operating Cost, attorney's fees
and damage to Landlord's property, for example).
ARTICLE XIX
Work to be Performed in the Leased Premises
19.01 The work set forth in this Article below which is Landlord's
responsibility to perform is hereinafter referred to as the "Finish Work". The
plan attached hereto as Exhibit D is hereinafter referred to as the "Finish
Plan". Upon execution of this Lease by Tenant, Landlord shall promptly undertake
and diligently pursue to completion the Finish Work. The Finish Work shall be
performed by Landlord before the Commencement Date of this Lease.
Notwithstanding the foregoing, if Landlord shall be delayed in completing the
Finish Work or if Landlord shall be otherwise delayed in obtaining a certificate
of occupancy for the Leased Premises, and if such delay is caused by the failure
of Tenant to provide reasonable turnaround time on architectural decisions to be
made by Tenant, or the failure of Tenant to provide items to the Leased Premises
on time which are Tenant's responsibility, then the Commencement Date shall be
the date on which the Leased
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Premises would have been ready but for the delay due to Tenant, provided that
this provision shall not affect Tenant's right to terminate this Lease as set
forth in paragraph 21.01, unless the delay in completing the Finish Work and
obtaining a certificate of occupancy for the Leased Premises is the fault of
Tenant.
19.02 All work performed by Landlord under this Article shall be
performed in a workmanlike manner in accordance with all applicable building
codes and regulations. The work performed by Landlord hereunder shall be
warranted for a period of one year from the completion date, and Tenant shall
not be responsible for repair or replacement of said items during said one year
period. Thereafter, repair and replacement of the aforesaid shall be an element
of Additional Rent, either by Tenant's Pro Rata Share or the full responsibility
of Tenant, as otherwise provided in this Lease.
19.03 Tenant shall, within 2 weeks of the date on which this Lease is
executed by Tenant, make, in writing, flooring selection, color choices and
other finish materials selections which have not been specified in Tenant's
Finish Plan. If Tenant shall fail to approve of final architectural plans or
make the flooring selection, color choices and other finish materials selections
within the time periods set forth above, then if Tenant shall continue to fail
to render said approval or make said choices or selections within 3 business
days after notice from Landlord of plans, choices and/or selections to be made
by Landlord, then Landlord's plans, choices and/or selections shall govern.
19.04 All plans shall be reviewed by the Landlord's architect and
shall be consistent with the design, construction and equipment of the Building.
Such plans shall show the location and extent of any excess floor loading and
all special requirements for air conditioning, plumbing and electricity, and the
estimated total electrical load. Unless otherwise provided, Tenant may make use
of Landlord's architectural services, within reasonable limits, for development
of Tenant's finish plans for the building improvements, without charge to
Tenant. All such plans and specifications are expressly subject to Landlord's
written approval, which Landlord will not unreasonably withhold. Landlord shall
bear the cost and expense of filing such plans and specifications with the
appropriate governmental agencies.
19.05 Landlord shall perform all of the work set forth in Tenant's
finish plans, the cost of which (the "Finish Cost") shall be reimbursed to
Landlord, as provided in this paragraph below. The Finish Cost shall be the
actual cost of the work to Landlord, without markup for overhead or profit of
Landlord. Tenant shall pay the Finish Cost in installments, as the work
progresses, 1/3 upon execution of this Lease, 1/3 upon substantial completion of
the sheetrock, and 1/3 upon substantial completion of the work and delivery of a
certificate of occupancy therefor (as set forth in paragraph 1.04). Each
progress payment due within 15 days after presentment of an invoice therefor
from Landlord. In the event any progress payment or payments shall be late
beyond their 15 day due dates, Landlord may accelerate the Commencement Date by
the number of days each payment is late beyond its due date, regardless of
whether the Leased Premises construction is complete by the Commencement Date.
The Finish Cost for the work set forth in the Finish Plans shall not exceed
$169,175.
19.06 Landlord will, subject to all the covenants, agreements, terms,
provisions and conditions of this Lease give access to the Leased Premises to
decorators and other contractors employed by Tenant for the purpose of making
improvements therein, when so long as, in Landlord's reasonable judgment, the
work to be done in the Leased Premises by Landlord as provided herein shall have
been completed to such an extent that the making of such improvements will not
interfere with or delay Landlord's performance of the remaining portion of its
work; it being understood that Tenant shall not be deemed to have entered into
occupancy of the Leased Premises by reason of the presence in the Leased
Premises of any decorator or other contractor. If at any time such entry shall
cause disharmony, delay or interference with Landlord's
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performance of the remaining portion of the work, this license may be withdrawn
by Landlord immediately upon written notice to Tenant.
19.07 In the event Landlord shall be delayed in obtaining delivery of
any item specially ordered for Tenant's Leased Premises in accordance with
Tenant's finish plans and if such delay shall cause a delay in Landlord's
obtaining a certificate of occupancy, the Commencement Date shall be the date on
which Landlord would have been able to obtain a certificate of occupancy but for
the delay in obtaining the specially ordered item. Landlord shall use best
efforts to obtain prompt delivery of all items required for completion of the
Leased Premises in time to complete the Leased Premises on time. In the event,
however, that Landlord shall foresee difficulty in obtaining timely delivery of
any such specially ordered item referred to above, Landlord shall notify Tenant
of this condition, and Tenant shall have the option of obtaining delivery of
said item through Tenant's own source or replacing the item for which timely
delivery is not obtainable with an item with an earlier delivery date.
ARTICLE XX
Right of First Offer
20.01 Provided that this Lease shall then be in full force and effect
and the Tenant shall not then be in default of the Lease, then during the Term
of this Lease, Tenant shall have the Right of First Offer on any available space
on the third, fourth and fifth floors of the One Corporate Drive, Shelton,
building. During the Term of this Lease, Landlord shall notify the Tenant in
writing reasonably promptly after Landlord becomes aware that any space on the
third, fourth or fifth floors is expected to become available, which
notification shall include the Basic Minimum Annual Rent (on a per square foot
of tenant's Net Rentable Area basis) at which said space is being offered to
Tenant by Landlord (said notice of offer hereinafter referred to as the "Notice
of Availability"). For the purposes of this paragraph, "available" shall mean
that space which had been previously rented has become vacant and the lease
thereon has expired. Tenant may exercise Tenant's Right of First Offer in
response to Landlord's Notice of Availability, but only by giving written notice
of exercise within fifteen days after receipt of Landlord's Notice of
Availability. If Tenant exercises the Right of First Offer, the exercise shall
include the desired square footage of Tenant's Net Rentable Area to be covered
by the exercise, which must be not more than the square footage for the total
available space, or the desired floor area outline desired to be rented by
Tenant in exercise of the Right of First Offer. If Tenant's notice contains the
floor area outline desired to be rented, the desired demising lines shall be
subject to Landlord's approval and adjustment, which shall not be unreasonably
withheld and which will be made based upon factors such as having the demising
lines reasonably divide the available space so as to leave reasonably configured
rentable areas. If the notice contains the desired square footage instead of the
desired floor area outline, Landlord shall designate an area within plus or
minus 7% of the Tenant's Net Rentable Area desired by Tenant, subject to
Tenant's approval, which shall not be unreasonably withheld. If Tenant shall
have failed to exercise Tenant's Right of First Offer within the time period set
forth above, the space which was subject to Landlord's Notice of Availability
shall be deemed, for the purposes of this paragraph, as not "available", unless
Landlord shall desire to rent the same at a lower rent than contained in the
Notice of Availability or unless and until the next lease on said space expires
and the space becomes vacant. Notwithstanding the foregoing, if Landlord is
presented with a bona fide offer acceptable to Landlord from a third party, to
rent space subject to Tenant's Right of First Offer at a lower rent than may
have been contained in a previous Notice of Availability, pursuant to which
Tenant had not exercised Tenant's Right of First Offer, then Landlord shall
issue to Tenant a notice of bona fide offer ("Notice of Bona Fide Offer")
regarding said third party offer. If Landlord issues a Notice of Bona Fide
Offer, Tenant may accept said offer within 10 days. If Tenant fails to accept
said offer within the 10 day period, then the space which was the subject of the
Notice of
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<PAGE>
Bona Fide Offer shall be deemed to be no longer available for the purposes of
Tenant's Right of First Offer. If the Notice of Bona Fide Offer to Tenant is not
in the form of a formal lease and if Tenant shall accept the offer, Tenant shall
promptly execute a formal lease in accordance with the accepted offer (the offer
not necessarily addressing legal terms such as subordination, casualty and
eminent domain, for example). If Tenant shall fail to execute the proffered
lease, Landlord may give notice to Tenant that unless Tenant delivers the
executed lease within five days, then Landlord intends to rent the space to a
third party. If Tenant fails to deliver the executed lease within said five day
period, then the space which was the subject of Landlord's Notice of Bona Fide
Offer shall be deemed as not available for the purposes of this paragraph, and
Tenant's acceptance of the Bona Fide shall be deemed rescinded.
20.02 If Tenant exercises Tenant's Right of First Offer, then Landlord
shall use Landlord's best efforts to make the space which was the subject of the
exercise available on or as soon after the expected date of availability as is
reasonably possible. The first date after Tenant's exercise of the Right of
First Offer on which the subject said space is actually available is the "New
Space Effective Date", and as of such New Space Effective Date: the Leased
Premises shall be increased to include the space which is the subject of the
exercise (subject to the approvals and adjustments set forth in paragraph
20.01); the Tenant's Net Rentable Area shall be increased by the Tenant's Net
Rentable Area for the new space; Tenant's Pro Rata Share shall be adjusted for
the new Tenant's Net Rentable Area; the Basic Minimum Annual Rent for the
balance of the Term of this Lease shall be increased by the amount of Basic
Minimum Annual Rent set forth in Landlord's Notice of Availability. Said new
space shall be provided to Tenant as-is and broom clean.
ARTICLE XXI
Tenant's Right to Terminate
21.01 If Landlord shall not have substantially completed the Leased
Premises and shall not have obtained a certificate of occupancy therefor from
the City of Shelton within 180 days (the "Termination Contingency Date") after
the execution of this Lease by Tenant, then Tenant shall have the right to
terminate this Lease by written notice to Landlord not earlier than the
Termination Contingency Date and not later than the date upon which the Leased
Premises has been substantially completed and a certificate of occupancy has
been issued therefor. The Termination Contingency Date shall be extended for the
period of any delay caused by Tenant (for example, if the Leased Premises
completion is being held in abeyance as a result of a request of Tenant to
suspend construction until delivery of a special piece of computer equipment
being ordered by Tenant, the delay caused by the wait for such equipment would
be a delay caused by Tenant). "Substantial completion" shall mean that the
Finish Work is complete except for punch list items whose absence does not
materially affect Tenant's ability to carry on Tenant's business in the Leased
Premises. Upon termination in accordance with the provisions of this paragraph,
the Lease shall come to an end by lapse of time as of the date on which the
termination notice is given, and all sums paid by Tenant prior thereto on
account of the construction of the Finish Work shall be promptly refunded by
Landlord to Tenant.
This agreement shall inure for the benefit and be binding upon the
parties hereto, their respective heirs, representatives, successors and assigns,
except where provided to the contrary by
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<PAGE>
express provisions contained herein.
IN WITNESS WHEREOF, the parties have hereunto set their hands and
seals as of the day and year first above written.
Information Management
Associates, Inc.
by /s/ Albert R. Subbloie, Jr.
----------------------------------
its duly authorized
PRESIDENT
----------------------------------
/s/ Robert D. Scinto
----------------------------------
Robert D. Scinto
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<PAGE>
State of Connecticut
ss City of Shelton
County of Fairfield
Personally appeared Albert Subbloie, signer and sealer of the
foregoing instrument, who acknowledged himself or herself to be the duly
authorized President of Information Management Associates, Inc. and the
execution to be his or her free act and deed and the duly authorized free act
and deed of Information Management Associates, Inc., before me, this 6th day of
October, 1993.
/s/ William Piacitelli
----------------------------
Court/Notary Public
[SEAL OF NOTARY PUBLIC APPEARS HERE]
State of Connecticut
ss City of Shelton
County of Fairfield
Personally appeared Robert D. Scinto, signer and sealer of the
foregoing instrument, who acknowledged the same to be his free act and deed,
before me, this 6th day of October, 1993.
/s/ William Piacitelli
----------------------------
Court/Notary Public
[SEAL OF NOTARY PUBLIC APPEARS HERE]
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<PAGE>
Exhibit 10.58
FIRST AMENDMENT OF LEASE
This First Amendment of Lease is made as of this 30th day of January,
1996, by and between Robert D. Scinto, of Easton, Connecticut (hereinafter
referred to as "Landlord"), and Information Management Associates, Inc., a
Connecticut corporation (hereinafter referred to as "Tenant").
In consideration of the mutual benefits and obligations set forth
herein, the parties hereby amend a certain lease between them dated October 6,
1993, for the lease of space in Landlord's building at One Corporate Drive,
Shelton, Connecticut (the October 6, 1993 lease and all amendments thereto
hereinafter referred to collectively as the "Lease"), in the following manner:
A. Paragraph 1.01 of the Lease is deleted and is replaced
with the following:
"1.01 The Leased Premises is located on the fourth floor in
Landlord's building at One Corporate Drive, Shelton, Connecticut (the
"Building"). The square footage constituting Tenant's Net Rentable
Area and the space constituting the Leased Premises vary over the Term
of the Lease. The square footage of Tenant's Net Rentable Area and the
description of the space constituting the Leased Premises during the
various periods during the Term of the Lease are set forth in the
following table:
Period Tenant's Net Locations Of Space Comprising
Rentable Area Leased Premises
4/1/94 to First 18,137 The space shown on Exhibit A as the
First Expansion "Original Space"
Commencement Date
First Expansion 25,147 The Original Space and the space
Commencement Date shown on Exhibit A as the "First
to the End of Expansion Space"
the Term
B. Paragraph 1.02 of the Lease is deleted, as the information
previously contained in it is now included as a part of paragraph 1.01."
- 1 -
<PAGE>
C. Paragraph 1.03 of the Lease is deleted and replaced with the
following:
"1.03 The Initial Term of the Lease is from April 1, 1994 to the
end of the day on March 31, 2004."
D. Paragraph 1.04 of the Lease is deleted and is replaced with the
following:
"1.04 The "Commencement Date" is April 1, 1994. The "First
Expansion Commencement Date" is the date upon which possession of the
First Expansion Space is delivered to Tenant."
E. Paragraph 1.05 of the Lease is deleted and is replaced with the
following:
"1.05 The Basic Minimum Annual Rent for the Initial Term is:
Period Basic Minimum Annual Monthly Installments
Rent
4/1/94 to 9/30/95 $ 00.00 $00.00
10/1/95 to 3/31/96 $145,095.96 $12,091.33
4/1/96 to 3/31/99 $181,370.04 $15,114.17
4/1/99 to the end of $311,956.44 $25,996.37
the Initial Term
Beginning on the First Expansion Commencement Date, the Basic Minimum
Annual Rent indicated in the above table shall be increased, as
follows:
[i] for the period from the First Expansion Commencement Date to March
31, 1999 - by $94,635 per annum ($7,886.25 per month); and
[ii] for the period from April 1, 1999 to the end of the Initial Term
- by $94,635 per annum multiplied by the "CPI Factor".
- 2 -
<PAGE>
The "CPI Factor" is the fraction whose numerator is the CPI for
January 1999 and whose denominator is the CPI for January 1996, which
fraction shall be deemed to in no event be less than 1. The "CPI" is
defined in paragraph 4.03. The Basic Minimum Annual Rent shall be paid
in monthly installments."
F. Article XXI (Tenant's Right To Terminate) is deleted and a new
Article XXI is substituted in its place, as follows:
"ARTICLE XXI
Delivery of First Expansion Space
21.01 Article XIX governs Landlord's obligations with respect to
the fit-out of the original Leased Premises, which have been
completed, to Tenant's satisfaction.
21.02 It is acknowledged that as of the date of the First Amendment
of Lease, the First Expansion Space is occupied by another tenant,
who intends to vacate the same pursuant to an agreement with Landlord
which Landlord is negotiating contemporaneously with this First
Amendment of Lease. If, as of the date of this First Amendment of
Lease said other tenant has not already vacated the First Expansion
Space, Landlord shall use Landlord's best efforts to obtain possession
of the same as soon as possible. As soon as Landlord has obtained
possession of the First Expansion Space from said other tenant,
Landlord shall promptly thereafter provide possession of the same to
Tenant, in as-is condition, broom clean and free of all personal
property not belonging to Tenant."
G. Exhibit A of the Lease is deleted and is replaced with the Exhibit
A attached to this First Amendment of Lease.
In the event of any conflict between this First Amendment of Lease and
the October 6, 1993 lease, this First Amendment of Lease shall control, the
Lease being, and
- 3 -
<PAGE>
is to remain, in full force and effect in all other respects.
IN WITNESS WHEREOF, the parties have hereunto set their hands and
seals as of the day and year first above written.
Information Management Associates, Inc.
by /s/ Gary R. Martino
----------------------------------
its duly authorized
CHAIRMAN CFO
----------------------------------
/s/ Robert D. Scinto
----------------------------------
Robert D. Scinto
- 4 -
<PAGE>
State of Connecticut
ss City/Town of Shelton
County of New Haven
Personally appeared Gary R. Martino, signer and sealer of the
foregoing instrument and the duly authorized Chairman/CFO of Information
Management Associates, Inc., who acknowledged the same to be his free act and
deed and the duly authorized free act and deed of Information Management
Associates, Inc., before me, this 10th day of January, 1996.
/s/ Melanie A. Burns
---------------------------------
Notary Public
[NOTARIAL STAMP APPEARS HERE]
State of Connecticut
ss City/Town of Shelton
County of Fairfield
Personally appeared Robert D. Scinto, signer and sealer of the
foregoing instrument, who acknowledged the same to be his free act and deed,
this 30th day of January, 1996.
/s/ Eleanor M. Choate
---------------------------------
Notary Public
[NOTARIAL STAMP APPEARS HERE]
- 5 -
<PAGE>
Exhibit 10.59
FULL SERVICE OFFICE LEASE
FOR
LAKESHORE TOWERS
By and Between
LAKESHORE TOWERS LIMITED PARTNERSHIP PHASE I,
a California limited partnership
Landlord
and
INFORMATION MANAGEMENT ASSOCIATES, INC.,
a Connecticut corporation
Tenant
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Article Page
Number Number
- ----------------------------------------------------------------------------
<S> <C> <C>
1. PROPERTY LEASED..................................................4
A. Premises................................................4
B. Common Areas............................................4
2. TERM.............................................................4
A. Initial Term............................................4
B. Acceptance and Suitability..............................4
3. RENT.............................................................5
A. Monthly Rental..........................................5
B. Monthly Rental Increases................................5
C. Consumer Price Index Increases..........................5
D. Additional Rental.......................................6
4. REIMBURSEMENT OF COMMON EXPENSES.................................6
A. Definitions.............................................6
B. Reimbursement...........................................7
C. Rebate or Additional Charges............................8
D. Control of Common Areas.................................8
5. TENANT'S TAXES...................................................8
6. SERVICE AND UTILITIES............................................9
7. ASSIGNMENT AND SUBLETTING.......................................10
8. MAINTENANCE AND REPAIRS.........................................12
A. Landlord's Obligations.................................12
B. Tenant's Obligations...................................12
C. Landlord's Right to Make Repairs.......................12
D. Condition of Premises Upon Surrender...................13
9. INSURANCE.......................................................13
A. Tenant.................................................13
B. Landlord...............................................14
C. Release of Claims......................................14
10. INDEMNITY.......................................................15
11. SECURITY DEPOSIT................................................15
12. USE OF PREMISES.................................................15
A. Permitted Uses.........................................15
B. Compliance with Laws, Covenants and Requirements.......16
C. Landlord's Rules and Regulations.......................16
D. Hazardous Material.....................................16
13. PARKING.........................................................17
14. SIGNS...........................................................18
15. ALTERATIONS, ADDITIONS AND TRADE FIXTURES.......................18
16. MECHANIC'S LIENS................................................19
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
17. DESTRUCTION
A. Insured Damages
B. Uninsured Damage
C. Abatement of Rent
18. CONDEMNATION
A. Total or Partial Taking
B. Award
C. Abatement in Rent
D. Temporary Taking
E. Transfer of Landlord's Interest to Condemnor
19. DEFAULT
A. Tenant's Default
B. Remedies
20. ENTRY BY LANDLORD
21. HOLDING OVER
22. ATTORNEYS' FEES
23. LATE PAYMENTS; INTEREST AND LATE CHARGES
A. Interest
B. Late Charges
D. No Waiver
24 MORTGAGE PROTECTION/SUBORDINATION
A. Subordination
B. Attornment
25. TRANSFER OF LANDLORD'S INTEREST/ESTOPPEL
CERTIFICATE/FINANCIAL STATEMENTS
A. Estoppel Certificate
B. Furnishing of Financial Statements
C. Liability of Transferee
26. BROKER
27. RELEASE OF PARTNERS OF LANDLORD
28. NOTICES
29. QUIET ENJOYMENT
31. WAIVER OF JURY TRIAL
32. LENDER'S APPROVAL
33. NO PROFIT PARTICIPATIONS
34. ERISA
35. GENERAL
A. Paragraph Headings
B. Incorporation of Prior Agreements; Amendments
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Article Page
Number Number
- ------------------------------------------------------------------------------
<S> <C> <C>
C. Waiver.......................................................29
D. Short Form...................................................29
E. Time of Essence..............................................29
F. Examination of Lease.........................................29
G. Severability.................................................29
H. Surrender of Lease Not Merger................................29
I. Corporate Authority..........................................29
J. Partnership Authority........................................29
36. EXECUTION.......................................................30
Exhibit "A" - Site Plan ................................................A-1
Exhibit "B" - Floor Plan of the Premises................................B-1
Exhibit "C" - Work Letter...............................................C-1
Exhibit "D" - Intentionally Deleted.....................................D-1
Exhibit "E" - First Amendment to Lease..................................E-1
Exhibit "F" - Project Rules and Regulations.............................F-1
Exhibit "G" - Parking Rules and Regulations.............................G-1
Exhibit "H" - Suite Entry Sign..........................................H-1
Exhibit "I" - Janitorial Specifications.................................I-1
Exhibit "J" - Subordination Agreement...................................J-1
Addendum to Lease
</TABLE>
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<PAGE>
FULL SERVICE OFFICE LEASE
This summary of the basic lease provisions (the "Basic Lease
Provisions") of the attached Full Service Office Lease (the "Lease") is entered
into by and between Landlord and Tenant this 4th day of November, 1994 for the
purpose of convenience in discussing the terms and conditions of the Lease, and
is hereby made a part of the Lease. In the event of any conflict, inconsistency
or ambiguity between the Basic Lease Provisions and the attached Lease, the
Basic Lease Provisions shall govern.
BASIC LEASE PROVISIONS
1. "Landlord" means Lakeshore Towers Limited Partnership Phase I, a
California limited partnership.
2. "Tenant" means Information Management Associates, Inc., a
Connecticut corporation.
3. "Building" means the building in which the Premises are located,
which Building consists of an eighteen (18) story office tower with a total of
approximately three hundred seventy-eight thousand seven hundred eighty-one
(378,781) rentable square feet.
4. "Phase I" means the first of two (2) phases referred to
collectively as Lakeshore Towers located at 18101 Von Karman Avenue, Irvine,
California, containing the Building, together with related parking and on and
off-site improvements located as shown on the site plan attached hereto as
Exhibit "A".
5. "Premises" means suite 1100 of the Building. The Premises consists
of approximately twenty-one thousand eight hundred thirty-eight (21,838)
rentable square feet (which may include a portion of the Common Areas of the
Building) and approximately nineteen thousand two hundred thirty-four (19,234)
usable square feet, as more particularly shown on Exhibit "B" attached hereto
and incorporated herein by this reference.
6. "Term" means sixty (60) months.
7. "Target Commencement Date" means January 5, 1995.
8. "Monthly Rental" means the amounts set forth below, subject to
adjustments as set forth in Article "3. RENT":
<TABLE>
<CAPTION>
Monthly Rental
Rate Per Total Monthly
Months Square Foot Rental
------ -------------- -------------
<S> <C> <C>
1-24 $1.60 $ 34,940.80
25-30 $1.55 $ 33,848.90
31-60 $1.65 $ 36,032.70
Extension Term $1.90 $ 41,492.20
Option Term Prevailing Market
Rental
</TABLE>
10. "Tenant's Proportionate Share" means six and sixty-nine
thousandths percent (6.069%) calculated in accordance with Article "4.A.(5)."
11. "Monthly Parking Charge" means the amounts set forth below per
parking stall allocated to Tenant pursuant to Item "12." below:
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<PAGE>
<TABLE>
<CAPTION>
Reserved Reserved
Non-Reserved (non-designated) (designated)
Months (per stall) (per stall) (per stall)
- ------ ------------ ---------------- ------------
<S> <C> <C> <C>
1-60 $20.00 $50.00 $75.00
Extension Term Market Rate Market Rate Market Rate
Option Term Market Rate Market Rate Market Rate
</TABLE>
12. "Parking Spaces" means the actual number of parking spaces
requested in writing by Tenant from time to time in an amount not to exceed 3.75
vehicle parking spaces per 1,000 usable square feet of the Premises, allocated
to Tenant amongst the various categories listed above as requested by Tenant.
Visitor parking is currently provided at rates of Seventy-Five Cents ($0.75) per
one-half hour with a Six Dollar ($6.00) per day maximum. Visitor parking rates
are subject to change without notice.
13. "Base Year" means calendar year 1995.
14. "Security Deposit" means Thirty-Three Thousand Eight Hundred
Forty-Eight Dollars Ninety Cents ($33,848.90).
15. "Permitted Use" means general office use, including without
limitation, an electronic data processing center.
16. "Broker" means Cushman Realty Corporation and Lee & Associates.
17. "Guarantor" means None.
18. "Landlord's Address for Notice" means Birtcher Lakeshore Towers
Limited Partnership Phase I, Box A-1, Laguna Niguel, California 92677, Attn:
Property Management.
19. "Tenant's Address for Notice" means 18101 Von Karman Avenue, Suite
1100, Irvine, California 92715, Attn: Office Manager, with a copy to LeBoeuf,
Lamb, Greene & MacRae, City Place II, 185 Asylum Street, Hartford, Connecticut
06103, Attn: Thomas Fairfield, Esq.; provided, however, if the Premises shall be
the Tenant's Address for Notice, then prior to the Lease Commencement Date,
Tenant's Address for Notice shall be 1 Corporate Drive, Suite 414, Shelton,
Connecticut 06484, Attn: Gary Martino.
20. "Tenant Improvement Allowance" means Three Hundred Thousand
Dollars ($300,000.00).
This Lease contains a total of ninety-one (91) pages, including all exhibits and
any Addendum attached hereto, but excluding the table of contents and cover
sheet.
"TENANT" "LANDLORD"
INFORMATION MANAGEMENT LAKESHORE TOWERS LIMITED
ASSOCIATES, INC., a PARTNERSHIP PHASE I, a California
Connecticut corporation limited partnership
By:/s/ Gary R. Martino By: BIRTCHER LAKESHORE, LTD., a
------------------------- California limited partnership,
General Partner
Its: CFO
------------------------ By: BIRTCHER LAKESHORE
CORPORATION, a California
By:/s/ Albert R. Subbloie corporation, General Partner
-------------------------
Its: PRESIDENT By: [SIGNATURE APPEARS HERE]
------------------------ -------------------------
Its:
------------------------
By: [SIGNATURE APPEARS HERE]
-------------------------
Its:
------------------------
[Signatures Continued on Following Page]
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<PAGE>
By: SKIPPER REALTY CORPORATION, a
Delaware corporation, General
Partner
By: [SIGNATURE APPEARS HERE]
-------------------------
Its: VP
------------------------
By:
-------------------------
Its:
------------------------
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<PAGE>
FULL SERVICE OFFICE LEASE
1. PROPERTY LEASED
A. Premises
Upon and subject to the terms, covenants and conditions hereinafter
set forth, Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord the Premises.
B. Common Areas
Tenant shall have the right, for the benefit of Tenant and its
employees, suppliers, shippers, customers and invitees, to the non-exclusive use
of all of the Common Areas as hereinafter defined.
SEE ADDENDUM TO LEASE
2. TERM
A. Initial Term
The Term of the Lease shall be for the period shown in Item "6." of
the Basic Lease Provisions, commencing on the date Landlord has (i)
substantially completed all improvements required to be constructed by Landlord
at the Premises pursuant to the "Work Letter" attached hereto as Exhibit "C"
("Substantial Completion") and (ii) delivered possession of the Premises to
Tenant, or such earlier date as Tenant takes possession or commences use of the
Premises for any purpose except as set forth in Section 2.D. set forth in the
Addendum attached hereto (the "Lease Commencement Date"). The Target
Commencement Date set forth in Item "7." of the Basic Lease Provisions is a date
which Landlord has projected for occupancy, based upon its present estimates of
construction schedules. Subject to "Force Majeure" (as that term is defined
below), Tenant shall have the right to cancel this Lease in the event Landlord
has not delivered the Premises to Tenant within Ninety (90) days after the
Target Commencement Date, as such date may be modified by the provisions of the
Work Letter, which right is exercisable by Tenant by delivering written notice
to Landlord within five (5) business days following the expiration of said
Ninety (90) day period. "Force Majeure" is hereby defined to mean any cause
beyond the reasonable control of Landlord, including, but not limited to,
strikes, acts of God, war, governmental laws and regulations or restrictions,
including delays in the issuance of permits, inspections and approvals,
shortages of labor or materials, or delays caused by acts of Tenant as more
particularly set forth in paragraph "7." of the Work Letter. In the event
permission is given to Tenant to enter or occupy all or a portion of the
Premises prior to the Target Commencement Date, such occupancy shall be subject
to all of the terms and conditions of this Lease. When the Lease Commencement
Date has been determined, the parties shall execute an amendment to this Lease
in the form of Exhibit "E" attached hereto and incorporated herein by this
reference, stating the actual Lease Commencement Date and the date for the
expiration of the Term (the "Expiration Date") and setting forth an
acknowledgment by Tenant that Landlord has completed all improvements to the
Premises in accordance with this Lease and to the satisfaction of Tenant,
subject to the items listed in a punch list, if any, delivered to Landlord
pursuant to paragraph "B." below.
B. Acceptance and Suitability
Following Landlord's Substantial Completion but prior to Tenant taking
occupancy of the Premises, Tenant shall be provided with an opportunity to
inspect the Premises and provide Landlord with a punch list which sets forth any
corrective work to be performed by Landlord with respect to the improvements
constructed by Landlord as set forth in the Work Letter; provided, however, that
if within thirty (30) days after written notice to Landlord from Tenant,
Landlord fails to complete the punch list and is not diligently pursuing those
items on the punch list which reasonably require more than 30 days to complete
the Tenant may proceed to take the required action in accordance with the
provisions of Section 8A. of the Addendum to Lease. Except for those items set
forth in any such punch list provided to Landlord at the time of Tenant's
inspection of the Premises, Tenant agrees that by taking possession of the
Premises it will conclusively be deemed to have inspected the Premises and found
the Premises in satisfactory condition. Tenant acknowledges that neither
Landlord, nor any
-4-
<PAGE>
agent, employee or servant of Landlord, has made any representation with respect
to the Premises, or the Building, or with respect to the suitability of them to
the conduct of Tenant's business, nor has Landlord agreed to undertake any
modifications, alterations, or improvements of the Premises, or Building, except
as specifically provided in this Lease.
SEE ADDENDUM TO LEASE
3. RENT
A. Monthly Rental
Commencing on the Lease Commencement Date, Tenant shall pay to
Landlord during the Term, the Monthly Rental in the amount set forth in Item
"8." of the Basic Lease Provisions, which amount shall be payable by Tenant on
or before the first day of each month, in advance, at the address specified for
Landlord in Item "18." of the Basic Lease Provisions, or such other place as
Landlord shall designate, without any prior demand therefor and without any
abatement, deduction or setoff whatsoever. Tenant shall pay, upon the execution
hereof, one (1) installment of Monthly Rental for the first full calendar month
for which Monthly Rental shall be due hereunder. If the Lease Commencement Date
should occur on a day other than the first day of a calendar month, or the
Expiration Date should occur on a day other than the last day of a calendar
month, then the rental for such fractional month shall be prorated on a daily
basis based upon a thirty (30) day calendar month. As consideration for Tenant's
performance of all of its obligations under the Lease, Landlord hereby
conditionally excuses Tenant from the payment of Monthly Rental during the
months designated as having no rent or reduced rent, if so specified in Item
"8." of the Basic Lease Provisions, provided that Tenant shall pay all other
charges under this Lease from and after the Lease Commencement Date and provided
further that Tenant shall not be in material default in its obligations under
this Lease. Should Tenant at any time during the Term be in material default
under the Lease and not cure such default within the cure periods provided in
the Lease, then the total sum of such Monthly Rental so conditionally excused
shall become immediately due and payable by Tenant to Landlord. If at the date
of expiration of the Term Tenant has not so defaulted, Landlord shall waive any
payment of all such Monthly Rental so conditionally excused.
B. Monthly Rental Increases
Commencing on the dates set forth in Item "8." of the Basic Lease
Provisions, the Monthly Rental payable by Tenant under this Article "3. RENT"
shall be increased in the amounts as set forth in Item "8."
-5-
<PAGE>
D. Additional Rental
Tenant shall pay, as additional rental, all sums which Tenant is
required to pay to Landlord pursuant to this Lease in addition to Monthly
Rental, whether or not the same be designated "additional rental."
4. REIMBURSEMENT OF COMMON OPERATING COSTS
A. Definitions
(1) "Common Areas" means (i) all areas, space, equipment and services
provided by Landlord within the Building or as a part of Phase I for the common
or joint use and benefit of the tenants, their employees, agents, servants,
suppliers, customers and other invitees, including, by way of illustration, but
not limitation, retaining walls, fences, landscaped areas, parks, curbs,
sidewalks, private roads, restrooms, stairways, elevators, lobbies, hallways,
corridors, patios, service quarters, parking areas, and all other areas within
the exterior of the Building or as shown on the site plan attached to this Lease
as Exhibit "A" and (ii) all common areas as designated in that certain
Declaration of Covenants, Conditions, and Restrictions and Reservation of
Easements for the Lakeshore Towers, dated October 17, 1989, recorded October 23,
1989, as Instrument No. 89-569018 of the Official Records of Orange County,
California (the "CC&R's").
(2) "Taxes" shall mean any and all real property taxes, personal
property taxes, improvement bonds, surcharges, service charges, fees, and other
charges and assessments which are levied or assessed against Landlord or the
Building and the land on which the Building is located relating to the Building
and the land and any improvements, fixtures and equipment and all other property
of Landlord, real or personal, located in the Building and used in connection
with the operation of the Building and the land on which the Building is
located, including any increase in such taxes, whether resulting from a
reassessment of the value of the land or the Building, or any portion thereof,
or any other reason, imposed by any governmental authority. "Taxes" as defined
above shall be interpreted in the broadest sense possible to include all amounts
denominated as "taxes" as well as amounts levied or collected in addition to or
in lieu of real property or personal property taxes including, but not be
limited to, school fees, transportation corridor fees, city transportation fees,
transportation management fees and costs, impact fees and impact abatement fees,
license fees, commercial rental tax, or other tax upon Landlord's business of
leasing the Building and other similar state, county or local fees. To the
extent any such Taxes have been imposed prior to the Lease Commencement Date,
Landlord may amortize such costs and interest thereon over a reasonable period
of time and include such amortization as a Common Operating Cost. "Taxes" shall
not include any federal or state income tax, or any franchise, capital stock,
estate, inheritance, succession, transfer and excess profit taxes imposed upon
Landlord.
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(3) "Common Operating Costs" shall mean the aggregate of all actual
costs and expenses payable by Landlord in connection with the ownership,
operation and maintenance of the Premises, Building, and Common Areas,
including, but not limited to, (a) all assessments levied against the parcel of
real property upon which the Building is located pursuant to the CC&R's; (b) the
cost of landscaping, repaving, resurfacing, repairing, replacing, painting,
lighting, cleaning, removing trash and similar items with respect to the Common
Areas; (c) all Taxes; (d) the cost of insurance obtained by Landlord pursuant to
Article "9. INSURANCE" below; (e) the cost of trash disposal service; (f) the
cost of operating, repairing and maintaining fire and life safety systems,
including, without limitation, sprinkler systems; (g) the cost of operating,
repairing, and maintaining the elevator services; (h) the cost of janitorial
services for the Building; (i) the cost of security and of monitoring services,
if provided by Landlord, including, without limitation, any security, monitoring
or control device used by Landlord in regulating the parking areas; (j) the cost
of water, electricity, gas and any other utilities; (k) legal, accounting and
consulting fees and expenses incurred in connection with the management and
operation of the Building and Common Areas; (l) compensation (including
employment taxes and fringe benefits) of all persons hired directly to provide
services for the operation, maintenance and repair of the Building or Common
Areas provided that to the extent such persons do not provide services
exclusively for the Project, such persons' compensation shall be prorated based
on a reasonable allocation of such persons' time amongst the Project and all
other properties for which such persons provide services; (m) energy allocation,
energy use surcharges, or environmental charges assessed by governmental or
quasi-governmental authority; (n) municipal inspection fees or charges; (o)
amortization of capital improvements which are either (i) required by law, or
(ii) are installed for the purpose of reducing Common Operating Costs over the
period of such amortization provided that the amount amortized does not exceed
the amount anticipated to be saved as a result of such capital improvements; (p)
the cost and expense of implementing and administering any transportation
management program; (q) any other costs or expenses incurred by Landlord in
connection with the Common Areas which are not otherwise reimbursed directly by
tenants; and (r) the amount charged by any management firm contracted by
Landlord to provide any or all of the foregoing services in an amount consistent
with the fees charged for first class management services for similar projects.
The computation of Common Operating Costs shall be made in accordance with
generally accepted accounting principles. If Tenant shall require additional
services to be provided by Landlord beyond the scope of the services provided by
Landlord for the common or joint benefit of all tenants, Tenant shall be
required to pay Landlord a reasonable administrative fee for such additional
services and such fee shall not be included in Common Operating Costs.
4. REIMBURSEMENT OF COMMON EXPENSES
A. Definitions
(3) (Continued). Notwithstanding anything to the contrary contained
in this subsection "(3)", the term "Common Operating Costs" as used in this
Lease shall not include any of the following:
(1) Except as specifically permitted in this subsection "(3)",
depreciation and amortization of any capital expenditures;
(2) Ground lease rent;
(3) Brokerage commissions and attorneys' fees incurred in
connection with negotiations or disputes with present or prospective tenants of
the Building;
(4) Landlord's income, estate or inheritance taxes;
(5) Cost of expensive fine art and any similar decorative art work
and the insuring, repair or maintenance thereof;
(6) Interest, principal, points and fees on debts or amortization
in any mortgage or mortgages or any other debt instrument encumbering the
Building;
(7) Costs incurred with respect to the installation of tenant
improvements made for other tenants in the Building;
(8) Expenses for services for which Tenant or any other tenant in
the Building separately reimburses Landlord or which Landlord provides
selectively to one or more tenants (other than Tenant) without reimbursement;
(9) Salaries of Landlord's employees above the level of building
manager;
(10) Amounts paid for goods or services provided by companies
owned or controlled by Landlord to the extent prices are in excess of the cost
for such goods or services rendered by unaffiliated third parties on a
competitive basis;
(11) Advertising, promotional and/or marketing expenditures for
the Building;
(12) Voluntary dues to professional or civic organizations;
(13) Except any management fee specifically permitted herein,
property management fees and Landlord's general corporate and home office
overhead costs;
(14) Any operating expenses that are not generally charged to all
tenants of the Building;
(15) Penalties and late fees incurred as a result of (a)
Landlord's failure to make payments when due or (b) violations by Landlord of
any applicable laws, rules, ordinances or regulations;
(16) Cost of repairs and other work occasioned by condemnation,
fire, windstorm or other casualty for which Landlord receives reimbursement from
condemnation or insurance proceeds;
(17) Cost for repairs for which Landlord receives reimbursement
from applicable warranties;
(18) Electric power or other utility costs for which any tenant
directly contracts with the local public service company;
(19) Costs, penalties, fines, or awards and interest incurred as a
result of Landlord's negligence in Landlord's operation of the Project,
violations of law, negligence or inability or unwillingness to make payments
and/or to file any income tax, other tax or informational returns when due;
(20) Costs arising from Landlord's charitable or political
contributions;
(21) Costs incurred in removing and storing the property of former
tenants or occupants of the Project;
(22) The cost of correcting defects in the design, construction or
equipping of the Project or in the Project equipment;
(23) Reserves of any kind, including but not limited to
replacement reserves, and reserves for bad debts or lost rent or any similar
charge not involving the payment of money to third parties;
(24) "Takeover" expenses, including, but not limited to, the
expenses incurred by Landlord with respect to space located in another building
of any kind or nature in connection with the leasing of space in the Building;
(25) Costs incurred in connection violations of or upgrading the
Project to comply with any governmental laws and regulations applicable to the
Project, which were in effect as of the date of this Lease, including, but not
limited to life, fire and safety codes, environmental and Hazardous Materials
laws and federal, state or local laws or regulations relating to disabled
access, including, but not limited to, the Americans With Disabilities Act; and
(26) Any costs for which Landlord has been reimbursed or receives
a credit, refund or discount, provided if Landlord receives the same in
connection with any costs or expenditures previously included in Operating
Expenses for a calendar year, Landlord shall immediately reimburse Tenant for
any overpayment for any such previous calendar year in which Tenant was a tenant
in the Building. This provision shall survive the expiration or earlier
termination of the Lease; provided, that Tenant complies with all the material
terms and provisions of the Lease during the Term and that the ownership of the
Building has not changed since the expiration or earlier termination of the
Lease.
(4) "Base Operating Expense" means the actual amount of Common
Operating Costs incurred by Landlord during the Base Year, expressed as an
amount per rentable square foot per year and adjusted to reflect at least
ninety-five percent (95%) occupancy of the total number of square feet of
rentable floor area within the Building. Upon completion of construction of the
anticipated second phase office building within Lakeshore Towers ("Phase II"),
an appropriate reduction in the Base Operating Expense shall be made in order to
take into account the sharing of certain costs between Phase I and Phase II.
(5) "Tenant's Proportionate Share" means the percentage set forth in
Item "10." of the Basic Lease Provisions, which percentage represents the
quotient obtained by dividing: (a) ninety-five percent (95%) of the total number
of square feet of rentable floor area within the Building as set forth in Item
"3." of the Basic Lease Provisions into (b) the total number of square feet of
rentable floor area within the Premises as set forth in Item "5." of the Basic
Lease Provisions. In no event shall the amount of Common Operating Costs
retained by Landlord from Tenants exceed the actual Common Operating Costs paid
or incurred by Landlord.
(6) "Excess Common Operating Costs" means the amount by which the
Common Operating Costs paid or incurred by Landlord for a full calendar year
(adjusted to reflect at least ninety-five percent (95%) occupancy of the
rentable floor area of the Building) exceeds an amount equal to the product
obtained by multiplying the Base Operating Expense by the total number of square
feet of rentable floor area within the Building.
B. Reimbursement
Before the expiration of the Base Year and thereafter before the
commencement of each calendar year during the Term, Landlord shall deliver to
Tenant an estimate of the anticipated Excess Common Operating Costs for the
forthcoming calendar year. Tenant shall pay to Landlord, as additional
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rental, commencing on the expiration of the Base Year and continuing on the
first day of each calendar month thereafter, an amount equal to one-twelfth
(1/12th) of the product obtained by multiplying the then estimated Excess Common
Operating Costs for the year times Tenant's Proportionate Share. The estimated
monthly charge for Tenant's Proportionate Share may be adjusted periodically by
Landlord during the calendar year on the basis of Landlord's anticipated costs.
Any major expenditure by Landlord during the year which was not included in
determining the estimated Common Operating Costs, may be billed separately to
Tenant according to Tenant's Proportionate Share of the Excess Common Operating
Costs and shall be payable by Tenant within ten (10) days of receipt of said
bill.
C. Rebate or Additional Charges SEE ADDENDUM TO LEASE
After the end of each calendar year, Landlord shall furnish to Tenant
a statement showing the total Common Operating Costs and Tenant's Proportionate
Share of the Excess Common Operating Costs for the calendar year just ended. If
the amount of estimated Excess Common Operating Costs paid by Tenant for any
year during the Term exceeds the actual Excess Common Operating Costs for such
year, Landlord may choose either to credit such excess against the next
installments of Tenant's Proportionate Share of Excess Common Operating Costs
due from Tenant to Landlord hereunder or to refund such excess to Tenant. If the
estimated Excess Common Operating Costs for such year are less than the actual
Excess Common Operating Costs for such year, then Tenant shall pay to Landlord,
within thirty (30) days of Tenant's receipt of Landlord's statement, as
additional rent, Tenant's Proportionate Share of the amount by which the actual
Excess Common Operating Costs exceeds the estimated Excess Common Operating
Costs. In the event the Term of this Lease expires, or this Lease is otherwise
terminated, Landlord shall compute the credit or deficiency up to the date the
Lease expired or was terminated and any such credit or deficiency shall be paid
by Landlord or Tenant, as the case may be, upon such expiration or earlier
termination of the Lease.
D. Control of Common Areas
Landlord shall have the sole and exclusive control of the Common
Areas, as well as the right to make changes to the Common Areas. Landlord's
rights shall include, but not be limited to, the right to (a) restrain the use
of the Common Areas by unauthorized persons, (b) utilize from time to time any
portion of the Common Areas for promotional and related matters, (c) temporarily
close any portion of the Common Areas for repairs, improvements or alterations,
and (d) change the shape and size of the Common Areas or change the location of
improvements within the Common Areas, including, without limitation, parking
areas, roadways and curb cuts. Landlord may determine the nature, size and
extent of the Common Areas as well as make changes to the Common Areas from time
to time which, in its opinion, are deemed desirable.
5. TENANT'S TAXES
Tenant shall pay and be liable for any tax or fee (now or hereafter
imposed by any governmental entity) applicable to or measured by or on the rents
or any other charges payable by Tenant under this Lease, including, without
limitation, any gross income tax, gross receipts tax or excise tax with respect
to the receipt of such rent or other charges or the possession, leasing or
operation, use or occupancy of the Premises, but not including any net income,
franchise, capital stock, estate or inheritance taxes. If any such tax is paid
to the governmental taxing entity directly by Landlord, Landlord shall, upon
demand, be fully reimbursed by Tenant for such payment.
Tenant shall also be liable for all taxes levied against the leasehold
held by Tenant or against any personal property, additions, alterations and
fixtures placed by or for Tenant in, on or about the Premises or any leasehold
improvements which are constructed by Landlord for Tenant in the Premises and
are over and above that which are generally provided by Landlord to other
tenants in the Building; and if any such taxes are levied against Landlord or
Landlord's property, or if the assessed value of the property is increased
(whether by special assessment or otherwise) by the inclusion therein of value
placed on such leasehold, personal property, leasehold improvements, additions,
alterations and fixtures, and Landlord pays
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any such taxes (which Landlord shall have the right to do regardless of the
validity thereof), Tenant, upon demand, shall fully reimburse Landlord for the
taxes so paid by Landlord or for the proportion of such taxes resulting from
such increase in any assessment.
6. SERVICE AND UTILITIES SEE ADDENDUM TO LEASE
Landlord agrees to furnish to the Premises (a) water and electricity
suitable for use of the Premises as general office space, which utilities shall
be made available to the Premises twenty-four (24) hours per day, and (b)
janitorial service. Landlord further agrees to furnish to the Premises between
the hours of 8:00 A.M. and 6:00 P.M., Monday through Friday, and between the
hours of 9:00 A.M. and 1:00 P.M. Saturdays (legal holidays excepted) (the
"Scheduled Hours"), heat and air conditioning (hereinafter "HVAC") required in
Landlord's judgment for the comfortable use and occupation of the Premises. All
such service and utilities shall be subject to the reasonable rules and
regulations of the Building as well as any governmental requirements or
standards relating to, among other things, energy conservation. Elevator service
to the Building shall be provided twenty-four (24) hours a day, subject to any
regulations reasonably enacted by Landlord. The costs of providing the service
and utilities under this Article "6." is included in Common Operating Costs
pursuant to Article "4. REIMBURSEMENT OF COMMON OPERATING COSTS".
Tenant shall be required to pay to Landlord as additional rent any
increased cost of any utilities or services provided to the Premises at
Landlord's actual cost and expense, including, without limitation, electricity,
water and HVAC, resulting from (1) any substantial recurrent use of the Premises
at any time other than the Scheduled Hours of hours for such utilities and
services, (2) any special cooling or ventilating needs created by Tenant's use
of telephone equipment, computers and other similar equipment or uses, (3) any
usage of electricity which is in excess of .926 kilowatt hours per usable square
foot per month or (4) any and all electricity usage provided to Tenant's
computer room in the Premises, including any auxiliary HVAC units. Tenant shall
receive a monthly credit in an amount equal to the product of (x) .926 kilowatt
hours multiplied by (y) the usable square feet of Tenant's computer room. Tenant
shall not, without the prior written consent of Landlord, use any apparatus or
device on the Premises, including, without limitation, electronic data
processing machines, punch card machines or machines using in excess of one
hundred twenty (120) volts, which consumes more electricity than is usually
furnished or supplied for the Permitted Use of the Premises, as determined by
Landlord. Landlord consents to Tenants installation of computers and other
electronic data processing equipment provided that Tenant shall remove same and
all associated wiring and cabling at the expiration or earlier termination of
the Lease, all at Tenants sole cost and expense, unless Landlord agrees
otherwise in writing upon the expiration or earlier termination of the Lease.
The amount of electrical power consumed by Tenant during any billing period of
the utility company supplying electricity to the Building will be determined by
a separate meter to be installed, maintained and read by Landlord or the utility
company as appropriate. The cost of installation and maintenance of the meter
shall be paid by Tenant. All utility charges on the meter will be paid directly
by tenant to Landlord or the utility company, as appropriate. If the Building is
designed for individual tenant operation of the HVAC, Tenant agrees to pay the
cost of operating the HVAC at any time other than the above schedule of hours,
which cost shall include the operation of the HVAC for space located outside the
Premises when such space is serviced concurrently with the operation of the HVAC
for the benefit of the Premises. Any excess use of the HVAC during the Scheduled
Hours shall be determined in the same manner set forth above for excess
electrical use. Any use of the HVAC after the Scheduled Hours shall be billed to
Tenant at Landlord's then scheduled hourly rates. Landlords current hourly
rates for after-hours HVAC services is $45.00 for the first hour and $40.00 for
each hour thereafter, subject to rate increase pursuant only to increased
utility costs. After-hours HVAC services shall be provided for a minimum of one
hour. Any failure to pay any excess costs as described above shall constitute a
breach of this Lease and shall entitle Landlord to the same rights and remedies
as provided in this Lease for failure to pay rent.
Landlord shall not be liable for and Tenant shall not be entitled to
any abatement or reduction of rent by reason of Landlord's failure to furnish
any of the foregoing when such failure is caused by accidents, breakage,
repairs, strikes, brownouts, blackouts, lockouts or other labor disturbances or
labor disputes of any character, or by any other cause, similar or dissimilar,
beyond the reasonable control of Landlord, nor shall such failure under such
circumstances be construed as a constructive or actual eviction of Tenant.
Landlord shall not be liable under any circumstances for loss or injury to
property or business, however occurring, through or in connection with or
incidental to Landlord's failure to furnish any of said service or utilities.
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7. ASSIGNMENT AND SUBLETTING
A. Tenant shall not directly or indirectly, voluntarily or by
operation of law, sell, assign, encumber, pledge or otherwise transfer or
hypothecate all or any part of the Premises or Tenant's leasehold estate
hereunder (collectively "Assignment"), or permit the Premises, or any portion
thereof, to be occupied by anyone other than Tenant or to sublet the Premises,
or any portion thereof, (collectively "Sublease") without Landlord's prior
written consent in each instance, which consent shall not be unreasonably
withheld, delayed or conditioned, subject to the terms and conditions contained
in this Article "7."
B. If Tenant is a partnership, there shall be deemed an Assignment of
this Lease if either of the following occurs: (i) a dissolution of the
partnership or (ii) the transfer of any interest of a general partner in the
partnership or the withdrawal of a general partner from the partnership when
such transfer or withdrawal results in a reduction of the partnership's
financial net worth below the partnership's financial net worth as of the date
of this Lease. Tenant shall provide such information as Landlord may reasonably
request in order to verify the effect of any such transfer or withdrawal by a
general partner on the partnership's net worth. If Tenant is a corporation,
unless Tenant is a public corporation whose stock is regularly traded on a
national stock exchange, or is regularly traded in the over-the-counter market
and quoted on NASDAQ, an Assignment shall be deemed to have occurred if there is
any transfer by merger, consolidation, or other reorganization of Tenant
resulting in the sale or other transfer of fifty percent (50%) or more of the
voting stock of Tenant within a twelve (12) month period but only when such
transfer results in a reduction of the corporation's financial net worth below
the corporation's financial net worth as set forth in the December 31, 1993
financial statements for Tenant. The restrictions set forth in paragraph "A"
shall not apply to an Assignment or Sublease to an "Affiliate" so long as the
Affiliate will have, after the effective date of the Assignment or Sublease, a
net worth equal to or greater than Tenant's as set forth in the December 31,
1993 financial statements for Tenant. In such case, Tenant shall provide
Landlord with the information specified in paragraph "C", below. An "Affiliate"
shall be deemed to include any entity which owns or controls, is owned or
controlled by or is under common control or ownership with Tenant.
C. If Tenant desires at any time to enter into an Assignment or a
Sublease of the Premises or any portion thereof, Tenant shall request in writing
Landlord's consent to the Assignment or Sublease, and provide the following: (a)
the name of the proposed assignee, subtenant or occupant, (b) the nature of the
proposed assignee's, subtenant's or occupant's business to be carried on in the
Premises, (c) the terms and provisions of the proposed Assignment or Sublease,
(d) sufficient financial information concerning the proposed assignee, subtenant
or occupant to allow Landlord to assess the financial condition of such person
or entity, and (e) such other information as Landlord may reasonably request
concerning the proposed assignee or sublessee.
D. At any time within ten (10) business days after Landlord's receipt
of the notice specified in paragraph "C", above, Landlord may by written notice
to Tenant elect either to (a) consent to the proposed Assignment or Sublease,
(b) refuse to consent to the proposed Assignment or Sublease or (c) terminate
this Lease in full with respect to an Assignment or terminate in part with
respect to a Sublease. If Landlord fails to notify Tenant within said ten (10)
business day period of its election, Landlord shall be deemed to have refused to
consent to said Assignment or Sublease. Landlord and Tenant agree (by way of
example and without limitation) that it shall be reasonable for Landlord to
withhold its consent if any of the following situations exist or may exist: (i)
the proposed transferee's use of the Premises conflicts with the Permitted Use
under this Lease, (ii) in Landlord's reasonable business judgment, the proposed
transferee lacks sufficient business reputation or experience to operate a
successful business of the type and quality permitted under this Lease, (iii)
Tenant is in default pursuant to this Lease, (iv) the proposed transferee's use
of the Premises requires alterations of a nature which Landlord does not approve
for the Building or (v) the proposed transferee's financial condition is less
favorable than Tenant's financial condition as of the date of this Lease.
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E. If Landlord elects to terminate this Lease, Tenant may withdraw its
notice specified in paragraph "C", above, at any time within ten (10) days after
receipt of Landlord's notice of election to terminate, in which event the Lease
shall continue in full force and effect. If Tenant does not withdraw its notice,
Tenant shall surrender the Premises to Landlord within sixty (60) days after
receipt of Landlord's notice and the Lease shall terminate as of such date
subject to the same terms and conditions as would be applicable upon the
expiration of the Term of the Lease. Tenant understands and acknowledges that
Landlord's option to terminate this Lease rather than consent to an Assignment
or Sublease is a material inducement for Landlord's agreeing to lease the
Premises to Tenant.
F. If Landlord consents to the Sublease or Assignment within said ten
(10) business day period, Tenant may enter into such Assignment or Sublease of
the Premises or portion thereof, but only upon the terms and conditions set
forth in the notice furnished by Tenant to Landlord pursuant to paragraph "C";
provided, however, that in connection with such Assignment or Sublease, Landlord
may, as a condition to Landlord's consent, require Tenant to pay to Landlord
fifty percent (50%) of the excess, if any, of (i) in the case of an Assignment,
the rental and other payment obligations of the proposed assignee under the
terms of the proposed Assignment (after deducting the reasonable amount actually
incurred by Tenant for brokers commissions, attorney's fees, tenant improvement
costs and marketing expenses) over the rental and other payment obligations of
Tenant under the terms of this Lease, or (ii) in the case of a Sublease, the
amount proposed to be paid by the sublessee (after deducting the reasonable
amount actually incurred by Tenant for brokers commissions, attorney's fees,
tenant improvement costs and marketing expenses) over the proportionate amount
of rental and other payment obligations required to be paid by Tenant to
Landlord under the terms of this Lease applicable to the portion of the Premises
so subleased.
G. No Assignment or Sublease by Tenant, whether or not the consent of
Landlord is required hereunder, shall relieve Tenant of any obligation to be
performed by Tenant under this Lease, whether arising before or after the
Assignment or Sublease. The consent by Landlord to any Assignment or Sublease
shall not relieve Tenant of the obligation to obtain Landlord's express written
consent to any other Assignment or Sublease. Landlords consent to any sublease
shall include an agreement to provide the sublessee with notice of and an
opportunity to cure any default by Tenant under this Lease. Any Assignment or
Sublease that is not in compliance with this Article "7." shall be void and, at
the option of Landlord, shall constitute a material default by Tenant under this
Lease. The acceptance of rent or payment of any other monetary obligation by
Landlord from a proposed assignee or sublessee shall not constitute the consent
by Landlord to such Assignment or Sublease.
H. Each assignee, or other transferee, other than Landlord, shall
assume, as provided in this paragraph "H", all obligations of Tenant under this
Lease and shall be and remain liable jointly and severally with Tenant for the
payment of Monthly Rental and all other monetary obligations hereunder, and for
the performance of all the terms, covenants, conditions and agreements herein
contained on Tenant's part to be performed for the Term; provided, however, that
the assignee, sublessee, or other transferee shall be liable to Landlord for
rent only in the amount set forth in the Assignment or Sublease. No Assignment
shall be binding on Landlord unless the assignee or Tenant shall deliver to
Landlord a counterpart of the Assignment and an instrument in recordable form
that contains a covenant of assumption by the assignee satisfactory in substance
and form to Landlord, consistent with the requirements of this paragraph "H",
but the failure or refusal of the assignee to execute such instrument of
assumption shall not release or discharge the assignee from its liability as set
forth above.
I. Tenant shall pay all of Landlord's reasonable expenses, for each
such proposed transfer to cover the legal review and processing expenses of
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Landlord, whether or not Landlord shall grant its consent to such proposed
transfers.
TENANT ACKNOWLEDGES THAT THE PROVISIONS OF THIS ARTICLE "7." REFLECT
THE NEGOTIATED AGREEMENT OF THE PARTIES.
[INITIALS APPEAR HERE]
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Initials of Tenant
8. MAINTENANCE AND REPAIRS
A. Landlord's Obligations SEE ADDENDUM TO LEASE
Landlord shall keep in a first class order condition and repair
(comparable to other first class office buildings in the Newport Beach/Irvine
area of the same age, and size as the Project) and in compliance with all
applicable laws, the standard plumbing, electrical, and lighting improvements
initially installed in the Premises (including replacement of fluorescent bulbs
but excluding the replacement of all non-building standard light bulbs),
heating, ventilating and air conditioning systems which service the Premises in
common with other premises or Common Areas within the Building, the foundations,
exterior walls, structural condition of bearing walls, roof of the Premises,
parking lots, parking garages, walkways, driveways, landscaping, fences, signs
and utility installations and other improvements in the Common Areas. Landlord
shall not be required to pay for the cost of any repairs that are the obligation
of or are caused by any negligent or intentional act or omission of Tenant or
any person claiming through or under Tenant or any of Tenant's employees,
subtenants, suppliers, shippers, customers or invitees, however, Landlord shall
repair such damage and Tenant shall reimburse Landlord upon demand for the cost
thereof. Notwithstanding anything to the contrary contained in this Lease,
Landlord shall not be liable for failure to make repairs required to be made by
Landlord under the provisions of this Lease unless Tenant has previously
notified Landlord in writing of the need for such repairs and Landlord has
failed to commence and complete the repairs within a reasonable period of time
following receipt of Tenant's written notification. Landlord shall not be liable
for and there shall be no abatement of rent with respect to, any injury to or
interference with Tenant's business arising from any repair, maintenance,
alteration or improvement in and to any portion of Phase I, the Building or the
Premises. Tenant hereby waives and releases its right to make repairs at
Landlord's expense under Sections 1941 and 1942 of the California Civil Code or
any similar law, statute or ordinance now or hereafter in effect. Landlord shall
not be in breach of its obligations under this Article unless Landlord fails to
make any repairs or perform maintenance which it is obligated to perform
hereunder and such failure persists for an unreasonable time after written
notice of a need for such repairs or maintenance is given to Landlord by Tenant.
B. Tenant's Obligations
Tenant shall make all repairs and replacements as and when Landlord
deems necessary to preserve in a first class order, condition and repair and in
compliance with all applicable laws the Premises and every part thereof,
including, without limitation, all fixtures, interior walls, interior surfaces
of exterior walls, ceilings, windows, doors, cabinets, draperies, window
coverings, carpeting and other floor coverings, plate glass and skylights
located within the Premises, and all non-standard utility systems and facilities
(i.e., plumbing, electrical, lighting, heating, ventilating and air conditioning
systems which have been specifically designed and installed for the exclusive
use of the Premises); provided, however, that Tenant shall not be responsible
for material defects in the construction by Landlord of any of the fixtures or
structures on the Premises, nor shall Tenant be responsible for repairs
necessitated by the negligent acts of Landlord or its employees, contractors or
authorized agents.
C. Landlord's Right to Make Repairs
In the event that Tenant fails to maintain the Premises in a
first-class order, condition and repair as required by this Lease, then,
immediately following written notification to Tenant (except in the case of an
emergency, in which case no prior notification shall be required), Landlord
shall have the right, but not the obligation, to enter the Premises and to do
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such acts and expend such reasonable amounts at the expense of Tenant as are
required to place the Premises in good and sanitary order, condition and repair.
Any amount so expended by Landlord shall be paid by Tenant promptly upon demand.
Landlord shall have no liability to Tenant for any loss or damage that may
accrue to Tenant's merchandise, fixtures, equipment, furniture or other property
or for any inconvenience or interference with the use of the Premises by Tenant
resulting from Landlord's performance of such maintenance or repair work.
Notwithstanding the foregoing, Landlord shall perform such work in such a manner
so as to minimize, to the extent reasonably possible, any interference with
Tenants' business operations in the Premises.
D. Condition of Premises Upon Surrender
Tenant shall, upon the expiration or earlier termination of the Term,
surrender the Premises to Landlord in the same condition and configuration as on
the date Tenant took possession, broom clean, reasonable wear and tear excepted.
All appurtenances, fixtures, improvements, additions and other property attached
to the Premises pursuant to Article "15. ALTERATIONS, ADDITIONS AND TRADE
FIXTURES", whether by Landlord or by or on behalf of Tenant, and whether at
Landlord's expense or Tenant's expense, shall be and remain the property of
Landlord, at Landlord's option. Any furnishings and personal property installed
on the Premises that are removable without material damage to the Building or
the Premises, whether the property of Tenant or leased by Tenant, shall be and
remain the property of Tenant and, at the expiration of the Term, shall be
removed by Tenant at Tenant's sole cost and expense. Tenant shall promptly
repair any damage to the Premises or the Building resulting from removal of such
property. Any of Tenant's property not removed from the Premises prior to the
expiration of the Term shall, at Landlord's option, either become the property
of Landlord or may be removed by Landlord and Tenant shall pay to Landlord the
cost of such removal within ten (10) days after delivery of a bill therefor. Any
damage to the Premises, including any structural damage, resulting from Tenant's
use or from the removal of Tenant's fixtures, furnishings and equipment shall be
repaired by Tenant at Tenant's expense. Landlord may also elect to require
Tenant to remove, at the expiration or earlier termination of the Term, at
Tenant's sole cost and expense, all telephone, computer and other electronic
wiring and cabling installed for the benefit of Tenant within the Premises and
within the common ducts and shafts of the Building. If so required of Tenant,
Tenant shall use all necessary care in removing such wires and cables in order
to avoid any damage to other tenant's wiring and cabling or any disruption of
service to such other tenants and Tenant agrees to be solely liable for any such
damage or disruption of service caused by its removal. If Landlord elects to
require Tenant to remove such wiring and cabling and Tenant fails to accomplish
such removal prior to the expiration or earlier termination of the Term,
Landlord may remove such wires and cables and Tenant shall pay the cost of such
removal within ten (10) days after delivery of a bill therefor.
9. INSURANCE
A. Tenant
Tenant shall, during the Term hereof, keep in full force and effect
the following insurance:
(1) comprehensive general liability insurance with a limit of not less
than One Million Dollars ($1,000,000.00) combined single limit per occurrence
for the benefit of Tenant and Landlord as named additional insured against
claims for personal injury liability including, without limitation, bodily
injury, death or property damage liability and covering (i) the business(es)
operated by Tenant and by any subtenant of Tenant on the Premises, (ii)
operations of independent contractors engaged by Tenant for construction on or
about the Premises, (iii) owned, non-owned and hired vehicles and (iv)
contractual liability; such insurance may be furnished under a "primary" policy
or an "umbrella" policy, provided that it is primary insurance and not excess
over or contributory with any insurance in force for Landlord;
(2) a policy of fire, extended coverage, and vandalism and malicious
mischief insurance, insuring the personal property, furniture, furnishings and
fixtures belonging to Tenant located on the Premises for not less than one
hundred percent (100%) of the actual replacement value thereof;
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(3) worker's compensation insurance, with coverage as required by the
State of California; and
(4) such other insurance as Landlord or Landlord's financial partner
or lender deems reasonably necessary provided that Landlord reasonably
demonstrates that such other insurance is consistent with the insurance
generally required by prudent landlords/owners of other projects in the Newport
Beach/Irvine area comparable in age, size and quality to Phase I ("Comparable
Buildings") and that such other insurance is available to Tenant at commercially
reasonable rates.
Each insurance policy obtained by Tenant pursuant to this Lease shall
contain a clause that the insurer will provide Landlord with at least thirty
(30) days prior written notice of any material change, non-renewal or
cancellation of the policy and shall be in a form reasonably satisfactory to
Landlord and shall be taken out with an insurance company authorized to do
business in the State of California and rated not less than Best's Financial
Class X and Best's Policy Holder Rating "A". Except for worker's compensation
insurance, each insurance certificate shall indicate that the insurer waives its
rights of subrogation against Landlord. In addition, any insurance policy
obtained by Tenant shall be written as primary policies, non-contributing with
or in excess of any coverage which Landlord may carry, with loss payable clauses
satisfactory to Landlord and in favor of Landlord and naming Landlord as an
additional insured. The liability limits of the above described insurance
policies shall in no manner limit the liability of Tenant under the terms of
Article "10. INDEMNITY" below. Not more frequently than every two (2) years, if,
in the reasonable opinion of Landlord, the amount of liability insurance
specified in this Article "9." is not adequate, in view of increased judgments
and verdicts granted for injury to persons or damage to property, the
above-described limits of coverage shall be adjusted by Landlord, by written
notification to Tenant, in order to maintain insurance protection at least equal
to the protection afforded on the date the Term commences, provided that such
adjustment is consistent with the limits of coverage being required by prudent
landlords/owners of Comparable Buildings. If Tenant fails to maintain and secure
the insurance coverage required under this Article "9.", then Landlord shall
have, in addition to all other remedies provided herein and by law, the right,
but not the obligation, to procure and maintain such insurance, the cost of
which shall be due and payable to Landlord by Tenant on demand.
If, on account of the failure of Tenant to comply with the provisions
of this Article, Landlord is deemed a co-insurer by its insurance carrier, then
any loss or damage which Landlord shall sustain by reason thereof shall be borne
by Tenant and shall be immediately paid by Tenant upon receipt of a bill
therefor and evidence of such loss.
B. Landlord
Landlord shall, during the Term hereof, keep in full force and effect
the following insurance:
(1) a policy of "all risk" property insurance insuring the Building of
which the Premises are a part, in an amount at least equal to the full
replacement cost thereof; and
(2) such other insurance as Landlord or Landlord's financial partner
or lender deems reasonably necessary.
All insurance policies shall be issued in the names of Landlord and
Landlord's lender. The insurance policies shall provide that any proceeds shall
be made payable to Landlord, or to the holders of mortgages or deeds of trust
encumbering Landlord's interest in the Premises and Building. All insurance
premiums for Landlord's insurance shall be included in Common Operating Costs,
as described in Article "4. REIMBURSEMENT OF COMMON OPERATING COSTS" above.
C. Release of Claims
Landlord and Tenant release each other and their respective authorized
representatives, by reason of any rights of subrogation, from any claims for
damage to the Premises, the Building or Phase I, and to the fixtures, personal
property, improvements and alterations of either Landlord or Tenant in or on
the Premises, the Building or Phase I, including loss in income, that is caused
by or results from risks insured against under any insurance policies carried by
the parties as required hereunder. It is mutually agreed that this paragraph is
not applicable to any other property
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except that contained within the boundaries of the Premises, the Building or
Phase I.
10. INDEMNITY SEE ADDENDUM TO LEASE
Tenant agrees to indemnify, defend and hold Landlord and its officers,
directors, partners and employees entirely harmless from and against all
liabilities, losses, demands, actions, expenses or claims, including reasonable
attorneys' fees and court costs, for injury to or death of any person or for
damages to any property arising out of or in any manner connected with (i) the
use, occupancy or enjoyment of the Common Areas or Premises by Tenant or
Tenant's agents, employees, invitees or contractors (the "Tenant's Agents") or
any work, activity or other things allowed or suffered by Tenant or Tenant's
Agents to be done in or about the Common Areas or Premises, (ii) any breach or
default in the performance of any obligation of Tenant under this Lease and
(iii) any act or failure to act, whether negligent or otherwise tortious, by
Tenant or Tenant's Agents on or about the Premises, the Building or Phase I.
Notwithstanding the foregoing, Tenant shall not be liable and Landlord shall
indemnify and hold Tenant free and harmless to the extent that damage or injury
is ultimately determined to be caused substantially by the negligence or willful
misconduct of Landlord. All property of Tenant kept or stored on the Premises
or in the Building shall be so kept or stored at the risk of Tenant only, and
Tenant shall hold Landlord harmless from any claims arising out of damage to the
same, including subrogation claims by Tenant's insurance carriers, unless such
damage shall be caused substantially by the negligence of Landlord. The
indemnifications contained herein shall survive the expiration or early
termination of this Lease.
11. SECURITY DEPOSIT
Upon commencement of the thirteenth (13th) month of the Lease Term,
Tenant shall deposit with Landlord the Security Deposit in the amount specified
in Item "14." of the Basic Lease Provisions for the performance by Tenant of all
terms, covenants and conditions of this Lease. It being expressly understood and
agreed that such deposit is not an advance rental deposit or a measure of
Landlord's damages in case of Tenant's default. If Tenant defaults with respect
to any provision of this Lease, including, but not limited to, the provisions
relating to the payment of rent or the obligation to repair and maintain the
Premises or to perform any other term, covenant or condition contained herein,
Landlord may (but shall not be required to), without prejudice to any other
remedy provided herein or provided by law and without notice to Tenant, use the
Security Deposit, or any portion of it, to cure the default or to compensate
Landlord for all damages sustained by Landlord resulting from Tenant's default.
Tenant shall immediately on demand pay to Landlord a sum equivalent to the
portion of the Security Deposit expended or applied by Landlord as provided in
this paragraph so as to maintain the Security Deposit in the sum initially
deposited with Landlord. Although the Security Deposit shall be deemed the
property of Landlord, if Tenant is not in default at the expiration or
termination of this Lease, Landlord shall return the Security Deposit to Tenant.
Landlord shall not be required to keep the Security Deposit separate from its
general funds and Tenant shall not be entitled to interest on any such deposit.
Upon any sale or transfer of its interest in the Building, Landlord may transfer
the Security Deposit to its successor in interest in accordance with the
provisions of California Civil Code Section 1950.7 and upon transfer of such
security deposit, Landlord shall be released from any liability or obligation
with respect thereto.
12. USE OF PREMISES
A. Permitted Uses
Tenant shall use the Premises for the Permitted Use only, and for no other
use. Tenant shall not do or permit anything to be done in or about the Premises
which may diminish the market value of the Premises or Phase I, will in any way
obstruct or interfere with the rights of other tenants or occupants of the
Building or injure or annoy them or use or allow the Premises to be used for any
immoral or unlawful purpose, nor shall Tenant cause, maintain or permit any
nuisance in, on or about the Premises. Tenant shall not commit or suffer to be
committed any waste in or upon the Premises.
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B. Compliance with Laws, Covenants and Requirements
Tenant, its agents, servants, employees, invitees and licensees, shall
comply with, and shall not use the Premises in any way (or permit or suffer
anything to be done in or about the Premises) which will conflict with (a) any
law, statute, ordinance or governmental rule or regulation affecting Phase I or
the Building, now in force or which may be hereafter promulgated, including, but
not limited to, the provisions of any city or county zoning codes regulating the
use of Phase I or the Building or any transportation management program
established by any governmental or quasi-governmental entity that is
involuntarily made applicable to Phase I or the Building; (b) any CC&R's; (c)
provided that other prudent landlords/owners of Comparable Buildings are also
establishing the following types of programs: any comprehensive transportation
management program established by Landlord, now in force or which may hereafter
be established, to reduce work commute trips and gain maximum efficiency from
existing and future transportation facilities servicing Phase I, including
without limitation, participating in an annual employee commute survey, allowing
a transportation coordinator to have access to Tenant's employees to implement a
transportation management program, adjustments in parking fees or preferential
parking for carpools and vanpools, regulations and restrictions on the timing of
ingress and egress to the parking areas, alternative work schedules, van or
carpooling between Tenant's employees and the employees of other tenants in
Phase I or area, ride sharing, shuttle services, public transit, and other
measures related to the reduction or mitigation of the effects of traffic and
the promotion of efficient transportation services in and around Phase I; or (d)
all requirements, now in force or which may hereafter be in force, of any board
of fire underwriters or other similar body now or hereafter constituted relating
to or affecting the condition, use or occupancy of the Premises (hereinafter
"Applicable Laws, Covenants and Requirements"). Tenant shall, at its sole cost
and expense, promptly comply with all Applicable Laws, Covenants and
Requirements. The judgment of any court of competent jurisdiction or the
admission by Tenant in any action against Tenant, whether Landlord be a party
thereto or not, that Tenant has violated any Applicable Laws, Covenants and
Requirements, shall be conclusive of the fact as between Landlord and Tenant.
C. Landlord's Rules and Regulations
Tenant shall, and Tenant agrees to cause its agents, servants,
employees, invitees and licensees to observe and comply fully and faithfully
with the rules and regulations (the "Rules") attached hereto as Exhibit "F" or
such reasonable rules and regulations which may hereafter be adopted by Landlord
for the care, protection, cleanliness, and operation of the Premises and
Building, and any modifications or additions to the Rules adopted by Landlord;
provided that, Landlord shall give written notice thereof to Tenant. Landlord
shall not be responsible to Tenant for failure of any other tenant or occupant
of the Building to observe or comply with any of the Rules.
D. Hazardous Material SEE ADDENDUM TO LEASE
(a) Tenant hereby agrees that neither Tenant, nor Tenant's officers,
directors, partners, employees, contractors, or invitees will engage in any
activity in, on or about the Premises, the Building or the Common Areas, nor
permit others to engage in any such activity, which will result in the Premises,
the Building or the Common Areas containing any of the following: (a) any
petroleum products or "Hazardous Material" as such term is defined below; (b)
asbestos in any form which is or could become friable; (c) urea formaldehyde
foam insulation; (d) transformers or other equipment which contain dielectric
fluid containing levels of polychlorinated biphenyls in excess of fifty (50)
parts per million; or (e) any other chemical, material, or substance exposure
which is prohibited, limited or regulated by any governmental authority or
agency or which may or could pose a hazard to the health and safety of the
occupants of the Building or the owners of property adjacent to the Building.
The foregoing prohibition shall not apply to ordinary and customary office
supplies such as liquid correction fluid and similar supplies, provided that
Tenant complies with all applicable laws governing the use, handling and storage
of such office supply substances. Tenant agrees to indemnify, defend and hold
Landlord and its officers, directors, partners and employees entirely harmless
from and against all liabilities, losses, demands, actions, expenses or claims,
including
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attorneys' fees and court costs, arising out of or in any manner connected with
any Hazardous Material which may be located in or emanating from any furnishings
or equipment brought onto the Premises by Tenant. If at any time it is
determined that Tenant, or Tenant's officers, directors, partners or employees,
have been responsible for the Premises, the Building or the Common Areas
containing any of the equipment or substances described in subsections (a)
through (e) of this Article "12. USE OF PREMISES, D. Hazardous Material" then
Tenant shall be solely responsible for and shall pay for all costs incurred in
connection with the removal of said equipment and/or substances. The obligations
on the part of Tenant set forth in this Article "12. USE OF PREMISES, D.
Hazardous Material" shall survive the expiration of the Term of this Lease or
the exercise by Landlord of any of Landlord's remedies under this Lease.
(b) For the purpose of this Lease, Hazardous Material shall include,
but not be limited to, substances defined, or as may be defined, as "hazardous
substances," "hazardous materials," or "toxic substances" in: the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. Section 9601, et seq. ("CERCLA"); the Hazardous Materials Transportation
Act, 49 U.S.C. Section 1801, et seq.; the Resource Conservation and Recovery
Act, 42 U.S.C. Section 6901, et seq. ("RCRA"); Section 25117 of the California
Health & Safety Code; Section 25316 of the California Health & Safety Code; and
in any other rules or regulations adopted and publications promulgated pursuant
to said laws.
(c) The provisions of this Article "12. USE OF PREMISES, D. Hazardous
Material" are required to be in this Lease under the Deed of Trust encumbering
the Premises and the Building and such provisions cannot be modified or waived
by Landlord in any manner.
13. PARKING
Landlord hereby leases to Tenant, and Tenant hereby agrees to lease
from Landlord for the Term of this Lease, the number of Parking Spaces
identified in Item "12." of the Basic Lease Provisions. The parking spaces
allocated to Tenant for Tenant's use during the Term shall be subject to a
Monthly Parking Charge in the amount set forth in Item "11." of the Basic Lease
Provisions, payable by Tenant concurrently with the payment of Monthly Rental.
Landlord agrees to maintain or cause to be maintained an automobile parking area
and to maintain and operate, or cause to be maintained and operated, said
automobile parking area during the Term of this Lease for the benefit and use of
the customers, service suppliers, other invitees and employees of Tenant.
Whenever the words "automobile" or "parking area" are used in this Lease, it is
intended that the same shall include, whether in a surface parking area or a
parking structure, the automobile parking stalls, driveways, loading docks,
truck areas, service drives, entrances and exits and sidewalks, landscaped
areas, pedestrian passageways in conjunction therewith and other areas designed
for parking. Landlord shall keep said automobile parking area in a neat, clean
and orderly condition, lighted and landscaped, and shall repair any damage to
the facilities thereof, the cost of which shall be included in Common Operating
Costs as defined in Article "4. REIMBURSEMENT OF COMMON OPERATING COSTS", above.
Nothing contained herein shall be deemed to impose liability upon Landlord for
personal injury or theft, for damage to any motor vehicle, or for loss of
property from within any motor vehicle, which is suffered by Tenant or any of
its employees, customers, service suppliers or other invitees in connection with
their use of said automobile parking area. Landlord shall have the right, in its
sole discretion exercisable at any time, to impose fees and charges for parking
in the automobile parking area. In order to assure the proper and efficient
operation and maintenance of said automobile parking area, Tenant shall comply
with the parking rules and regulations set forth on Exhibit "G" attached hereto
and incorporated herein by this reference (the "Parking Rules") and shall cause
each of its employees, customers, service suppliers and invitees to comply with
said Parking Rules.
Landlord shall at all times during the Term hereof have the sole and
exclusive control of the automobile parking area, and may at any time during the
Term hereof exclude and restrain any person from use or occupancy thereof;
excepting, however, Tenant and employees, customers, service suppliers and
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other invitees of Tenant and of other tenants in the Building who make use of
said area in accordance with the Parking Rules. The rights of Tenant and its
employees, customers, service suppliers and invitees referred to in this Article
shall at all times be subject to (i) the rights of Landlord and other tenants in
the Building to use the same in common with Tenant and its employees, customers,
service suppliers and invitees, (ii) the availability of parking spaces in said
automobile parking area, and (iii) Landlord's right to change the location of
any assigned reserved parking spaces in such instances as shall be determined at
Landlord's sole but reasonable discretion.
14. SIGNS
Tenant shall not have the right to place, construct, or maintain on or
about the Premises, the Building of which the Premises are a part, anywhere in
the Common Area, or in any interior portions of Building except for interior
portions of the Premises that are not visible from the exterior of the Building,
signs, names, insignia, advertising placard, trademarks, descriptive material or
any other similar item without Landlord's prior written consent, which consent
may be withheld in Landlord's sole discretion. In the event Landlord consents to
Tenant placing a sign on or about the Premises, or the Building, any such sign
shall be subject to Landlord's approval of the color, size, style and location
of such sign, and shall conform to any current or future sign criteria
established by Landlord for the Building or Phase I. If Landlord enacts a sign
criteria or revises an existing sign criteria, after Tenant has erected a sign
to which Landlord has granted its consent, Tenant agrees, at Landlord's expense,
subject to Landlord's prior approval of the cost thereof, to make the necessary
changes to its sign in order to conform the sign to Landlord's sign criteria, as
enacted or revised, provided that such changes shall be limited to the color,
size, style and location of Tenant's sign and that Tenant shall not be required
to change the content of its sign. Notwithstanding the foregoing, Landlord shall
install, at Tenant's sole cost and expense, one (1) suite entry sign (the "Suite
Entry Sign") in accordance with the drawing and description set forth on Exhibit
"H" attached hereto and incorporated herein by this reference.
15. ALTERATIONS, ADDITIONS AND TRADE FIXTURES
Tenant shall not make any alterations, additions or improvements to
the Premises, or any part thereof, whether structural or nonstructural
(hereafter "Alterations"), without Landlord's prior written consent. In order to
obtain Landlord's consent, Tenant shall submit such information as Landlord may
require, including, without limitation, (i) plans and specifications,
(ii) permits, licenses and bonds and (iii) evidence of insurance coverage in
such types and amounts and from such insurers as Landlord deems satisfactory.
All Alterations shall be done in a good workmanlike manner by Birtcher
Construction, or other affiliate of Landlord, or by qualified and licensed
contractors or mechanics, as approved by Landlord. Tenant, and Tenant's
contractors, shall keep Common Areas free from debris during the construction of
any Alterations. In no event shall any alterations affect the structure of the
Building or its exterior appearance. Tenant shall indemnify, defend against and
keep Landlord free and harmless from all liability, loss, damage, cost,
attorneys' fees and any other expense incurred on account of claims by any
person performing work or furnishing materials or supplies for Tenant or any
person claiming under Tenant. Landlord may require Tenant to provide Landlord,
at Tenant's sole cost and expense, a lien and completion bond in an amount equal
to one and one-half times the estimated cost of such improvements, to insure
Landlord against any liability for mechanic's liens and to insure completion of
the work. Landlord shall have the right at all times to post on the Premises any
notices permitted or required by law, or that Landlord shall deem proper, for
the protection of Landlord, the Premises, the Building, and any other party
having an interest therein, from mechanics' and materialmen's liens, and Tenant
shall give to Landlord at least thirty (30) business days notice of commencement
of any construction on the Premises. Landlord may charge Tenant a reasonable
administrative fee not to exceed five percent (5%) of the "hard costs" in order
to cover the cost of Landlord's services in monitoring or supervising such work,
excluding, however, any initial tenant improvements which are governed by the
terms of the attached Work Letter.
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16. MECHANIC'S LIENS
Tenant shall keep the Premises free from any liens arising out of any
work performed, material furnished or obligation incurred by or for Tenant or
any person or entity claiming through or under Tenant. In the event that Tenant
shall not, within thirty (30) days following Tenants receipt of notice of the
imposition of any such lien, cause the same to be released of record by payment
or posting of a proper bond, Landlord shall have, in addition to all other
remedies provided herein and by law, the right, but not the obligation, to cause
such lien to be released by such means as Landlord deems proper, including
payment of the claim giving rise to such lien. All such sums paid and all
expenses incurred by Landlord in connection therewith shall be due and payable
to Landlord by Tenant on demand.
17. DESTRUCTION
A. Insured Damages
In the event the Premises, the Building of which the Premises are a
part, or any portion thereof, is damaged or destroyed by any casualty that is
covered by the insurance maintained by Landlord pursuant to Article "9.
INSURANCE" above, then Landlord shall rebuild and restore the Premises or
Building, as the case may be, and repair the damaged portion thereof, provided
that (1) the amount of insurance proceeds available to Landlord equals or
exceeds the cost of such rebuilding, restoration and repair, (2) such
rebuilding, restoration and repair can be completed within one hundred twenty
(120) days after the work commences in the opinion of a registered architect or
engineer appointed by Landlord, (3) the damage or destruction has occurred more
than twelve (12) months before the expiration of the Term and (4) such
rebuilding, restoration, or repair is then permitted, under applicable
governmental laws, rules and regulations, to be done in such a manner as to
return the Premises, or Building, as the case may be, to substantially its
condition immediately prior to the damage or destruction, including, without
limitation, the same net rentable floor area. To the extent that insurance
proceeds must be paid to a mortgagee or beneficiary under, or must be applied to
reduce any indebtedness secured by, a mortgage or deed of trust encumbering the
Premises, or the Building, such proceeds, for the purposes of this Section,
shall be deemed not available to Landlord unless such mortgagee or beneficiary
permits Landlord to use such proceeds for the rebuilding, restoration, and
repair of the Premises, or Building. Notwithstanding the foregoing, Landlord
shall have no obligation to repair any damage to, or to replace any of, Tenant's
personal property, furnishings, fixtures, equipment or other such property or
effects of Tenant.
B. Uninsured Damage
In the event the Premises, or the Building in which the Premises
are a part, or any portion thereof, is damaged or destroyed by any casualty not
covered by the insurance maintained by Landlord pursuant to Section "A. Insured
Damages" above, then Landlord may, at its option, either (1) rebuild or restore
the Premises or Building and repair the damaged portions thereof at Landlord's
own expense or (2) terminate this Lease effective as of the date the damage or
destruction occurred. If Landlord elects not to repair or restore the damage as
provided above, Landlord shall so notify Tenant in writing within sixty (60)
days after the damage occurs and this Lease shall terminate as of the date of
such notice. Notwithstanding the foregoing, Tenant may terminate this Lease upon
thirty (30) days prior written notice if Landlord elects to perform such repair
or restoration and either (i) Landlord determines that such repair or
restoration cannot be completed within one hundred twenty (120) days or (ii) the
damage or destruction occurs within the last twelve (12) months of the Term,
unless Tenant's actions or omissions are the cause of the damage for which
Tenant shall indemnify Landlord against pursuant to Article "10." above.
C. Abatement of Rent
Tenant shall be entitled to an abatement of rent by reason of
damage to or destruction of the Premises or the Building, or any portion
thereof, to the extent that
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the floor area of the Premises cannot be reasonably used by Tenant for conduct
of its business, in which event the Monthly Rental shall abate proportionately
commencing on the date the damage to or destruction of the Premises or Building
has occurred, and except that, if Landlord or Tenant elects to terminate this
Lease as provided in Section "B. Uninsured Damage" next above, no obligation
shall accrue under this Lease after such termination. Notwithstanding the
provisions of this Article "17. DESTRUCTION," if any such damage is due to the
fault or neglect of Tenant, any person claiming through or under Tenant, or any
of their employees, suppliers, shippers, customers or invitees, then there shall
be no abatement of rent by reason of such damage, unless and until Landlord is
reimbursed for such abatement pursuant to any rental insurance policy that
Landlord may, in its sole discretion, elect to carry. Tenant's right to
terminate this Lease in the event of any damage or destruction to the Premises
or Building is governed by the terms of this Article "17." and therefore Tenant
hereby expressly waives the provisions of Section 1932, Subdivision 2, and
Section 1933, Subdivision 4, of the California Civil Code and any and all laws,
whether now or hereafter in force, and whether created by ordinance, statute,
judicial decision, administrative rules or regulations, or otherwise, that would
cause this Lease to be terminated, or give Tenant a right to terminate this
Lease, upon any damage to or destruction of the Building that occurs.
18. CONDEMNATION
A. Total or Partial Taking
If all or substantially all of the Premises is condemned or taken
in any manner for public or quasi-public use, including but not limited to, a
conveyance or assignment in lieu of the condemnation or taking, or if so much of
the Premises is so taken or condemned so as to render the remaining portion of
the Premises unusable by Tenant for the conduct of Tenant's business, as
reasonably determined by Tenant this Lease shall automatically terminate as of
the earlier of the date on which actual physical possession is taken by the
condemnor or the date of dispossession of Tenant as a result of such
condemnation or other taking. If less than all or substantially all of the
Premises is so condemned or taken, rendering the remaining portion of the
Premises usable by Tenant for the conduct of its business as reasonably
determined by Tenant, this Lease shall automatically terminate only as to the
portion of the Premises so taken as of the earlier of the date on which actual
physical possession is taken by the condemnor or the date of dispossession of
Tenant as a result of such condemnation or taking. If such portion of the
Building is condemned or otherwise taken so as to require, in the opinion of
Landlord, a substantial alteration or reconstruction of the remaining portions
thereof, this Lease may be terminated by Landlord, as of the date on which
actual physical possession is taken by the condemnor or dispossession of Tenant
as a result of such condemnation or taking, by written notice to Tenant within
sixty (60) days following notice to Landlord of the date on which such physical
possession is taken or dispossession will occur.
B. Award
Landlord shall be entitled to the entire award in any condemnation
proceeding or other proceeding for taking for public or quasi-public use,
including, without limitation, any award made for the value of the leasehold
estate created by this Lease. No award for any partial or total taking shall be
apportioned, and Tenant hereby assigns to Landlord any award that may be made in
such condemnation or other taking, together with any and all rights of Tenant
now or hereafter arising in or to the same or any part thereof. Although all
damages in the event of any condemnation are to belong to Landlord whether such
damages are awarded as compensation for diminution in value of the leasehold or
to the fee of the Premises, Tenant shall have the right to claim and recover
from the condemnor, but not from Landlord, such compensation as may be
separately awarded or recoverable by Tenant in Tenant's own right on account of
damages to Tenant's business by reason of the condemnation and for or on account
of any cost or loss to which Tenant might be put in removing Tenant's
merchandise, furniture and other personal property, fixtures, and equipment or
for the interruption of or damage to Tenant's business.
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C. Abatement in Rent
In the event of a partial condemnation or other taking that does
not result in a termination of this Lease as to the entire Premises pursuant to
this Article "18.", the rent and all other charges shall abate in proportion to
the portion of the Premises taken by such condemnation or other taking. If this
Lease is terminated, in whole or in part, pursuant to any of the provisions of
this Article "18.", all rentals and other charges payable by Tenant to Landlord
hereunder and attributable to the Premises taken shall be paid up to the date
upon which actual physical possession shall be taken by the condemnor. Landlord
shall be entitled to retain all of the Security Deposit until such time as this
Lease is terminated as to all of the Premises.
D. Temporary Taking
If all or any portion of the Premises is condemned or otherwise
taken for public or quasi-public use for a limited period of time (not to exceed
six (6) months), this Lease shall remain in full force and effect and Tenant
shall continue to perform all terms, conditions and covenants of this Lease;
provided, however, the rent and all other charges payable by Tenant to Landlord
hereunder shall abate during such limited period in proportion to the portion of
the Premises that is rendered untenable and unusable as a result of such
condemnation or other taking. Landlord shall be entitled to receive the entire
award made in connection with any such temporary condemnation or other taking.
E. Transfer of Landlord's Interest to Condemnor
Landlord may, without any obligation to Tenant, agree to sell
and/or convey to the condemnor the Premises, the Building, or any portion
thereof, sought by the condemnor, free from this Lease and the rights of Tenant
hereunder, without first requiring that any action or proceeding be instituted
or, if instituted, pursued to a judgment.
19. DEFAULT
A. Tenant's Default
The occurrence of any one or more of the following shall constitute
a default hereunder by Tenant:
(1) Tenant abandons the Premises or vacates the Premises for a
period of five (5) or more consecutive days while in default in the payment of
rent;
(2) Tenant fails to pay any rent or other charges required to be
paid by Tenant under this Lease and such failure continues for five (5) days
after written notice from Landlord notifying Tenant that such payment is due and
payable; provided, however, that, if payment is not made within said grace
period, the obligation of Tenant to pay a late charge or interest pursuant to
Article "23. LATE PAYMENTS; INTEREST AND LATE CHARGES" shall commence as of the
due date of the rent or such other monetary obligation and not on the expiration
of such five (5) day grace period;
(3) Tenant involuntarily transfers Tenant's interest in this Lease
or voluntarily transfers (attempted or actual) its interest in this Lease,
without Landlord's prior written consent;
(4) Tenant files a voluntary petition for relief or if a petition
against Tenant in a proceeding under the Federal Bankruptcy Laws or other
insolvency laws is filed and not withdrawn or dismissed within forty-five (45)
days thereafter, or if under the provisions of any law providing for
reorganization or winding up of corporations, any court of competent
jurisdiction assumes jurisdiction, custody or control of Tenant or any
substantial part of the Premises or any of Tenant's personal property located at
the Premises and such jurisdiction, custody or control remains in force
unrelinquished, unstayed or unterminated for a period of forty-five (45) days;
(5) If in any proceeding or action in which Tenant is a party, a
trustee, a receiver, agent or custodian is appointed to take charge of the
Premises or any of Tenant's personal property located at the Premises (or has
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the authority to do so) for the purpose of enforcing a lien against the Premises
or Tenant's personal property;
(6) Tenant fails to promptly and fully perform any other covenant,
condition or agreement contained in this Lease and such failure continues for
thirty (30) days after written notice thereof from Landlord to Tenant or if the
nature of such failure requires more than thirty (30) days to cure, Tenant shall
be in default hereunder if Tenant fails to commence corrective action within
said thirty (30) day period and diligently prosecutes such cure to completion
thereafter;
(7) If any financial statements or financial information provided
by Tenant pursuant to the terms of this Lease are materially inaccurate; or
(8) If Tenant is a partnership or consists of more than one (1)
person or entity, the involvement of any partner of the partnership or other
such person or entity in any of the acts or events described in subparagraphs
"(4)", "(5)" or "(7)" above.
B. Remedies
Upon the occurrence of a default by Tenant that is not cured by
Tenant within the applicable grace period specified above, Landlord shall have
the following rights and remedies in addition to all other rights and remedies
available to Landlord at law or in equity:
(1) The rights and remedies provided by California Civil Code
Section 1951.2 to recover from Tenant upon termination of the Lease:
(a) the worth at the time of award of the unpaid rent which had
been earned at the time of termination;
(b) the worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the
time of award exceeds the amount of such rental loss that Tenant
proves could have been reasonably avoided;
(c) subject to Subdivision (c) of California Civil Code Section
1951.2, the worth at the time of award of the amount by which the
unpaid rent for the balance of the Term after the time of award
exceeds the amount of rental loss that Tenant proves could be
reasonably avoided; and
(d) any other amount necessary to compensate Landlord for all
the detriment proximately caused by Tenant's failure to perform its
obligations under this Lease or which in the ordinary course of things
would be likely to result therefrom, including, but not limited to,
any reasonable attorneys' fees, broker's commissions or finder's fees
(not only in connection with the reletting of the Premises, but also
that portion of any leasing commission paid by Landlord in connection
with this Lease which is applicable to that portion of the Lease Term
which is unexpired as of the date on which this Lease is terminated),
any costs for repairs, clean-up, refurbishing, removal (including the
repair of any damage caused by such removal) and storage (or disposal)
of Tenant's personal property, equipment, fixtures, and anything else
that Tenant is required (under this Lease) to remove but does not
remove, and any costs for alterations, additions and renovations (and
any other costs and expenses) incurred by Landlord in regaining
possession of and reletting (or attempting to relet) the Premises.
The "worth at the time of award" of the amounts referred to in clauses "(a)" and
"(b)" of this Article "19." shall be computed by allowing interest at the
reference rate of Bank of America NT&SA. The "worth at the time of award" of the
amount referred to in clause "(c)" of this Article "19." shall be computed by
discounting such amount at the discount rate of the Federal Reserve Bank of San
Francisco at the time of award plus one percent (1%).
(2) The rights and remedies provided by California Civil Code
Section 1951.4, which allows Landlord to continue this Lease in effect and to
enforce all of its rights and remedies under this Lease, including the right to
recover rent and any other additional monetary charges as they become due, for
as long as Landlord does not terminate Tenant's right to possession;
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provided, however, if Landlord elects to exercise its remedies described in this
subsection "(2)" and Landlord does not terminate this Lease, and if Tenant
requests Landlord's consent to an assignment of this Lease or a sublease of the
Premises at such time as Tenant is in default, Landlord shall not unreasonably
withhold its consent to such assignment or sublease. Acts of maintenance or
preservation, efforts to relet the Premises or the appointment of a receiver
upon Landlord's initiative to protect its interest under this Lease shall not
constitute a termination of Tenant's right to possession.
(3) The right to terminate this Lease by giving notice to Tenant in
accordance with applicable law.
(4) The right and power to enter the Premises and remove therefrom
all persons and property, to store such property in a public warehouse or
elsewhere at the cost of and for the account of Tenant, and to sell such
property and apply the proceeds therefrom pursuant to applicable California law.
Landlord may from time to time relet the Premises or any part thereof for such
term or terms (which may extend beyond the Term) and at such rent and such other
terms as Landlord in its sole discretion may deem advisable, with the right to
make alterations in and repairs to the Premises. Upon each such reletting,
Tenant shall be immediately liable for payment to Landlord of the cost of such
reletting and such alterations and repairs incurred by Landlord, if any. Any
amounts received by Landlord from such reletting shall be applied first toward
the cost of any alterations or repairs made to the Premises in connection with
such reletting; second, to payment of Monthly Rental, Tenant's Proportionate
Share of Excess Common Operating Costs, and other monetary obligations due and
unpaid hereunder, and the residue, if any, shall be held by Landlord and applied
in payment of future Monthly Rental, Tenant's Proportionate Share of Excess
Common Operating Costs, and other monetary obligations as the same become due
hereunder. If Tenant has been credited with any rent to be received by such
reletting and such rent shall not be promptly paid to Landlord by the tenant(s),
or if such rentals received from such reletting during any month are less than
those to be paid during that month by Tenant hereunder, Tenant shall pay any
such deficiency to Landlord. Such deficiency shall be calculated and paid
monthly. No taking possession of the Premises by Landlord shall be construed as
an election on Landlord's part to terminate this Lease unless written notice of
such intention is given to Tenant. Notwithstanding any such reletting without
termination, Landlord may at any time thereafter elect to terminate this Lease
for such previous breach.
(5) The right to have a receiver appointed for Tenant, upon
application by Landlord, to take possession of the Premises and to apply any
rental collected from the Premises and to exercise all other rights and remedies
granted to Landlord for Tenant pursuant to this Article "19."
SEE ADDENDUM TO LEASE
20. ENTRY BY LANDLORD
Landlord reserves and shall at any and all times have the right to
enter the Premises at reasonable times after reasonable notice to Tenant (except
in the case of an emergency), to inspect the same, to supply any service to be
provided by Landlord hereunder and to determine whether Tenant is complying with
its obligations hereunder, to supply janitorial service and any other service to
be provided by Landlord to Tenant hereunder, to exhibit the Premises to
prospective purchasers, mortgagees or tenants, to post notices of
nonresponsibility, and to alter, improve or repair the Premises and any portion
of the Building, without abatement of rent, and may for that purpose erect
scaffolding and other necessary structures that are reasonably required by the
character of the work to be performed by Landlord, provided that the business of
Tenant shall not be interfered with unreasonably. Landlord will use its best
efforts not to disrupt Tenant's business. Tenant hereby waives any claim for
damages for any injury or inconvenience to or interference with Tenant's
business, any loss of occupancy or quiet enjoyment of the Premises, and any
other loss occasioned thereby, except to the extent caused by Landlord's
negligence or willful misconduct. For each of the aforesaid purposes, Landlord
shall at all times have and retain a key with which to unlock all of the doors
in, upon and about the Premises, excluding Tenant's vaults and safes, and
Landlord shall have the right to use any and all means which Landlord may deem
proper to open such doors in the event of an emergency. Any entry to the
Premises or portions thereof obtained by Landlord by any of said means, or
otherwise, shall not under any circumstances be construed or deemed to be a
forcible or unlawful entry into, or a detainer
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of, the Premises, or an eviction, actual or constructive, of Tenant from the
Premises, or any portion thereof.
21. HOLDING OVER
Any holding over after the expiration of the Term, with the consent of
Landlord, shall be construed to be a tenancy from month to month at two hundred
percent (200%) of the rental applicable immediately prior to the holdover period
(prorated on a monthly basis) unless Landlord shall specify a lesser amount for
rent in its sole discretion, together with an amount estimated by Landlord for
the monthly installments of Excess Common Operating Costs payable under this
Lease, and shall otherwise be on the terms and conditions herein specified as
far as applicable. Any holding over without Landlord's consent shall constitute
a default by Tenant and shall entitle Landlord to re-enter the Premises as
provided in Article "20. ENTRY BY LANDLORD" hereof.
22. ATTORNEYS' FEES
Tenant shall pay to Landlord all costs, including, but not limited to,
reasonable attorneys' fees and amounts paid to any collection agency, incurred
by Landlord in connection with any breach or default by Tenant under this Lease.
Such amounts shall be payable upon demand. In addition, if any action shall be
instituted by either Landlord or Tenant for the enforcement or interpretation of
any of its rights or remedies in or under this Lease, the prevailing party shall
be entitled to recover from the losing party all costs incurred by the
prevailing party in said action and any appeal therefrom, including reasonable
attorneys' fees and court costs to be fixed by the court therein. In the event
Landlord is made a party to any litigation between Tenant and any third party,
then Tenant shall pay all costs and attorneys' fees incurred by or imposed upon
Landlord in connection with such litigation; provided, however, if Landlord is
ultimately held to be liable, then Landlord shall reimburse Tenant for the cost
of any reasonable attorneys' fees paid by Tenant on behalf of Landlord.
23. LATE PAYMENTS; INTEREST AND LATE CHARGES
A. Interest
Any amount due from Tenant to Landlord which is not paid when due
(subject to any applicable grace period) shall bear interest at the maximum rate
permitted under Article XV., Section l of the California Constitution for the
contractual loan of money assuming Landlord is not an exempt lender, which
interest shall accrue from the date such payment is due until paid, except that
amounts spent by Landlord on behalf of Tenant shall bear interest at such rate
from the date of disbursement by Landlord.
B. Late Charges
Tenant hereby acknowledges that in addition to lost interest, the
late payment by Tenant to Landlord of rent or any other sums due hereunder will
cause Landlord to incur other costs not contemplated in this Lease, the exact
amount of which will be extremely difficult and impracticable to ascertain. Such
other costs include, but are not limited to, processing, administrative and
accounting costs. Accordingly, if any installment of rent or any additional rent
or other sum due from Tenant shall not be received by Landlord within five (5)
days after written notice from Landlord that such amount shall be due, Tenant
shall pay to Landlord, without notice from Landlord, a late charge equal to five
percent (5%) of such overdue amount. The parties hereby agree that (i) such late
charge represents a fair and reasonable estimate of the costs Landlord will
incur in processing such delinquent payment by Tenant, (ii) such late charge
shall be paid to Landlord as liquidated damages for each delinquent payment
pursuant to California Civil Code Section 1671, and (iii) the payment of late
charges and the payment of interest are distinct and separate from one another
in that the payment of interest is to compensate Landlord for the use of
Landlord's money by Tenant, while the payment of late charges is to compensate
Landlord for the additional administrative expense incurred by Landlord in
handling and processing delinquent payments.
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D. No Waiver
Neither assessment nor acceptance of interest or late charges
by Landlord shall constitute a waiver of Tenant's default with respect to such
overdue amount, nor prevent Landlord from exercising any of its other rights and
remedies under this Lease. Nothing contained in this Article shall be deemed to
condone, authorize, sanction or grant to Tenant an option for the late payment
of rent, additional rent or other sums due hereunder, and Tenant shall be deemed
in default with regard to any such payments should the same not be made by the
date on which they are due.
24. MORTGAGE PROTECTION/SUBORDINATION SEE ADDENDUM TO LEASE
A. Subordination
The rights of Tenant under this Lease are and shall be, at the
option of Landlord, either subordinate or superior to any mortgage or deed of
trust (including a consolidated mortgagee or deed of trust) constituting a lien
on the Premises or Landlord's interest therein or any part thereof, placed upon
the Premises by Landlord after the date of this Lease, and to any ground or
master lease after the date of this Lease. To further assure the foregoing
subordination or superiority, Tenant shall, upon Landlord's request, together
with the request of any mortgagee under a mortgage or beneficiary under a deed
of trust or ground or master lessor, execute any instrument or instruments
(including without limitation an amendment to this Lease that does not
materially and adversely affect Tenant's rights or duties under this Lease),
intended to subordinate this Lease, or at the option of Landlord, to make it
superior to any mortgage, deed of trust, or ground or master lease.
Notwithstanding the foregoing, any such subordination to a mortgage or deed of
trust constituting a lien on the Premises placed on the Premises by Landlord
after the date of this Lease shall provide that Tenant's right to occupy the
Premises pursuant to this Lease shall remain in effect for the full term so long
as Tenant is not in default hereunder. Tenant hereby acknowledges that Skipper
Realty Corporation, a Delaware corporation ("Skipper"), owns a direct, general
partner's interest in Landlord and that Skipper or an affiliate of Skipper may
from time to time own an interest, whether direct or indirect, in Landlord
and/or in Phase I and may from time to time be the holder of a mortgage loan
secured by Phase I, the Building and/or the Premises. Notwithstanding any other
provision of this Paragraph "24.A" to the contrary and notwithstanding the
execution and delivery of this Lease, or any amendment thereto, by Skipper or
Skipper's affiliate, as owner of an interest in Landlord or in the Building,
Phase I or the Premises, Tenant agrees that this Lease is subordinated hereby to
any lien securing such mortgage loan subject to any subordination,
nondisturbance and attornment agreement entered into between the holder thereof
and Tenant.
B. Attornment
Notwithstanding the provisions of "A. Subordination" next above,
Tenant agrees (1) to attorn to any mortgagee of a mortgage or beneficiary of a
deed of trust encumbering the Premises and to any party acquiring title to the
Premises by judicial foreclosure, trustee's sale, or deed in lieu of
foreclosure, and to any ground or master lessor, as the successor to Landlord
hereunder, (2) to execute any attornment agreement reasonably requested by a
mortgagee, beneficiary, ground or master lessor, or party so acquiring title to
the Premises, and (3) that this Lease, subject to the rights under any
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outstanding non-disturbance agreement, shall remain in force notwithstanding any
such judicial foreclosure, trustee's sale, deed in lieu of foreclosure, or
merger of titles. Notwithstanding the foregoing, neither a mortgagee of a
mortgage or beneficiary of a deed of trust encumbering the Premises, any party
acquiring title to the Premises by judicial foreclosure, trustee sale, or deed
in lieu of foreclosure, or any ground lessor or master lessor, as the successor
to Landlord hereunder, shall be liable or responsible for any breach of a
covenant contained in this Lease that occurred before such party acquired its
interest in the Premises and no such party shall be liable or responsible for
any security deposits held by Landlord hereunder which have not been transferred
or actually received by such party, and such party shall not be bound by any
payment of rent or additional rent for more than three (3) months in advance.
25. TRANSFER OF LANDLORD'S INTEREST/ESTOPPEL CERTIFICATE/FINANCIAL
STATEMENTS
A. Estoppel Certificate SEE ADDENDUM
Tenant, at any time and from time to time upon not less than ten
(10) days prior written notice from Landlord, agrees to execute and deliver to
Landlord a statement (a) certifying that this Lease is unmodified and in full
force and effect, or, if modified, stating the nature of such modification and
certifying that this Lease, as so modified, is in full force and effect and the
date to which the rent and other charges are paid in advance, if any, and (b)
acknowledging that there are not, to Tenant's knowledge, any uncured defaults on
the part of Landlord hereunder, or specifying such defaults if they are claimed
evidencing the status of this Lease. Tenant's failure to deliver an estoppel
certificate within such time shall be conclusive upon Tenant that (a) this Lease
is in full force and effect without modification except as may be represented by
Landlord, (b) to Tenant's knowledge there are no uncured defaults in Landlord's
performance, and (c) no rent has been paid in advance except as set forth in
this Lease.
B. Furnishing of Financial Statements
Landlord has reviewed financial statements if so requested of
Tenant and has relied upon the truth and accuracy thereof with Tenant's
knowledge and representations of the truth and accuracy of such statements and
that said statements accurately and fairly depict the financial condition of
Tenant as of the date of this Lease. Said financial statements are an inducing
factor and consideration for the entering into of this Lease by Landlord with
this particular Tenant. Tenant shall not more frequently then once in any twelve
month period upon not less than ten (10) days prior written notice from
Landlord, furnish Landlord with current annual audited financial statements,
which accurately reflect Tenant's financial condition at the time of the
statements.
C. Liability of Transferee
In the event Landlord (or any mortgagee of a mortgage, beneficiary
of a deed of trust or ground or master lessor, who succeeds to Landlord's
interest in the Premises) shall sell or otherwise convey its title to the
Premises, after the effective date of such sale or conveyance Landlord shall
have no further liability under this Lease to Tenant except as to matters of
liability which have accrued and are unsatisfied as of the date of sale or
conveyance, and Tenant shall seek performance solely from Landlord's (or such
other parties') purchaser or successor in title.
26. BROKER
Tenant warrants and represents to Landlord and Landlord represents and
warrants to Tenant that it has not dealt with any real estate broker or agent in
connection with this Lease or its negotiation except the Broker identified in
Item "16." of the Basic Lease Provisions. Tenant shall indemnify and hold
Landlord harmless from any cost, expense or liability (including costs of suit
and reasonable attorneys' fees) for any compensation, commission or fees claimed
by any other real estate broker or agent in connection with this Lease or its
negotiation by reason of any act of Tenant. Landlord shall indemnify and hold
Tenant harmless from any cost, expense or liability (including costs of suit and
reasonable attorneys' fees) for any compensation, commission or fees claimed by
any other real estate broker or agent in connection with this Lease or its
negotiation by reason of any act of Landlord.
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27. RELEASE OF PARTNERS OF LANDLORD
Tenant agrees that in the event Tenant shall have any claim against
Landlord under this Lease arising out of the subject matter of this Lease,
Tenant's sole recourse shall be against the assets of Landlord and Tenant
further hereby waives any and all right to assert any claim against or obtain
any damages from, for any reason whatsoever, the directors, officers and
partners of Landlord. This release, notwithstanding Section 1542 of the
California Civil Code which provides that: "A general release does not extend to
claims which the creditor does not know or suspect to exist in his favor at the
time of executing the release, which if known by him must have materially
affected his settlement with the debtor", releases such partners of Landlord
from all injuries, damages, or losses to Tenant's property, real and personal,
whether known, unknown, foreseen, unforeseen, patent or latent, which Tenant may
have against the partners of Landlord arising out of the subject matter of this
Lease. Tenant understands and acknowledges the significance and consequence of
such specific waiver of Section 1542.
28. NOTICES
Any notice, demand, approval, consent, bill, statement or other
communication required or desired to be given under this Lease in writing shall
be directed to Landlord at Landlord's Address for Notice or to Tenant at
Tenant's Address for Notice, as set forth in Items "18." and "19.,"
respectively, of the Basic Lease Provisions or to such other address as the
parties may request by notice given pursuant to this section and shall be
personally served or given by mail, and if mailed, shall be deemed to have been
received when two (2) business days have elapsed from the date of the deposit
into the United States Mail, certified and postage prepaid. If more than one
Tenant is named under this Lease, service of any notice upon any one of said
Tenants shall be deemed as service upon all of such Tenants.
29. QUIET ENJOYMENT
Upon payment by Tenant of the rents herein provided, and upon the
observance and performance of all the covenants, terms and conditions on
Tenant's part to be observed and performed, Tenant shall peaceably and quietly
hold and enjoy the Premises for the term hereby demised without hindrance or
interruption by Landlord or any other person or persons lawfully or equitably
claiming by, through or under Landlord, subject, nevertheless, to the terms and
conditions of this Lease, and any mortgage and/or deed of trust to which this
Lease is subordinate.
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31. WAIVER OF JURY TRIAL
LANDLORD AND TENANT EACH ACKNOWLEDGES THAT IT IS AWARE OF AND HAS HAD THE
ADVICE OF COUNSEL OF ITS CHOICE WITH RESPECT TO ITS RIGHTS TO TRIAL BY JURY, AND
EACH PARTY DOES HEREBY EXPRESSLY AND KNOWINGLY WAIVE AND RELEASE ALL SUCH RIGHTS
TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER
PARTY HERETO AGAINST THE OTHER ON ANY MATTERS WHATSOEVER ARISING, OUT OF OR IN
ANY WAY CONNECTED WITH THIS LEASE, TENANT'S USE OR OCCUPANCY OF THE PREMISES,
AND/OR ANY CLAIM OF INJURY OR DAMAGE.
32. LENDER'S APPROVAL
The execution of this Lease by Tenant and its return to Landlord shall not
be binding upon Landlord until such time as Landlord has obtained the approval
hereof from Landlord's lender. If Landlord's lender fails to notify Landlord of
its disapproval within ten (10) business days following the date Landlord
submits the executed Lease to its lender, this condition shall be deemed
satisfied and this Lease shall be effective upon execution by Landlord and
delivery to Tenant of a fully executed counterpart.
33. NO PROFIT PARTICIPATIONS
If Tenant enters into an Assignment or a Sublease pursuant to the terms of
Paragraph 7 of this Lease, Tenant agrees (a) that such Assignment or Sublease
(as the case may be) shall not provide for any rental or other payment to Tenant
or to Landlord based in whole or in part on the income or profits derived by
such assignee or sublessee (as the case may be) from the premises demised under
such Assignment or Sublease (other than a rental or other payment based upon a
fixed percentage of such assignee's or sublessee's receipts or sales), and (b)
that, notwithstanding any consent to such Assignment or Sublease granted by
Landlord, any Assignment or Sublease containing such rental or other payment
based upon profits or income shall be null and void and of no effect as a
conveyance of a portion of the Premises.
34. ERISA
Tenant hereby represents and warrants that Tenant is not and shall not be
during the Term of this Lease with respect to the General Electric Pension Trust
or the General Electric Master Retirement Trust: (a) a non-exempt "party-in-
interest" under the Employment Retirement Income Security Act or (b) a non-
exempt "disqualified person" under Section 4975(e) of the Internal Revenue Code
or any regulation promulgated thereunder.
35. GENERAL
A. Paragraph Headings
The paragraph headings used in this Lease are for the purposes of
convenience only. They shall not be construed to limit or to extend the meaning
of any part of this Lease.
B. Incorporation of Prior Agreements; Amendments
This Lease contains all agreements of Landlord and Tenant with respect
to any matter mentioned, or dealt with, herein. No prior agreement or
understanding pertaining to any such matter shall be binding upon Landlord. Any
amendments to or modifications of this Lease shall be in writing, signed by the
parties hereto, and neither Landlord nor Tenant shall be liable for any oral or
implied agreements.
-28-
<PAGE>
C. Waiver
Waiver by Landlord or Tenant of any breach of any term, covenant, or
condition contained in this Lease shall not be deemed to be a waiver of such
term, covenant, or condition or of any subsequent breach of the same or of any
other term, covenant, or condition contained in this Lease. Landlord's consent
to, or approval of, any act shall not be deemed to render unnecessary the
obtaining of Landlord's consent to, or approval of, any subsequent act by
Tenant. The acceptance of rent or other sums payable hereunder by Landlord shall
not be a waiver of any preceding breach by Tenant of any provision hereof, other
than failure of Tenant to pay the particular rent or other sum so accepted,
regardless of Landlord's knowledge of such preceding breach at the time of
acceptance of such rent, or sum equivalent to rent.
D. Short Form
Tenant agrees, at the request of Landlord, to execute, deliver, and
acknowledge a short form of this Lease satisfactory to counsel for Landlord, and
Landlord may in its sole discretion, record such short form in the county where
the Premises are located. Tenant shall not record this Lease, or a short form of
this Lease, without Landlord's prior written consent, and such recordation
shall, at the option of Landlord, constitute a Default of Tenant hereunder.
E. Time of Essence
Time is of the essence in the performance of each provision of this
Lease.
F. Examination of Lease
Submission of this instrument for examination or signature by Tenant
does not constitute a reservation of or option for lease, and it is not
effective as a lease or otherwise until execution by and delivery to both
Landlord and Tenant.
G. Severability
If any term or provision of this Lease or the application thereof to
any person or circumstance shall, to any extent, be invalid or unenforceable,
the remainder of this Lease, or the application of such term or provision to
persons or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby, and each term and provision of
this Lease shall be valid and be enforced to the fullest extent permitted by
law.
H. Surrender of Lease Not Merger
Neither the voluntary or other surrender of the Lease by Tenant nor
the mutual cancellation thereof shall cause a merger of the titles of Landlord
and Tenant, but such surrender or cancellation shall, at the option of Landlord,
either terminate all or any existing subleases or operate as an assignment to
Landlord of any such subleases.
I. Corporate Authority
If Tenant is a corporation, each individual executing this Lease on
behalf of Tenant represents and warrants (1) that he is duly authorized to
execute and deliver this Lease on behalf of Tenant in accordance with a duly
adopted resolution of the Board of Directors of Tenant in accordance with the
By-laws of Tenant and (2) that this Lease is binding upon and enforceable by
Landlord against Tenant in accordance with its terms. If Tenant is a
corporation, Tenant shall, within thirty (30) days after execution of this
Lease, deliver to Landlord a certified copy of a resolution of its Board of
Directors authorizing or ratifying the execution of this Lease.
J. Partnership Authority
If Tenant is a partnership, each individual executing this Lease on
behalf of Tenant represents and warrants (1) that he is duly authorized to
execute and deliver this Lease on behalf of Tenant in accordance with the
-29-
<PAGE>
terms of Tenant's partnership agreement, or has received such authorization
pursuant to the terms of such partnership agreement, and (2) that this Lease is
binding upon and enforceable by Landlord against Tenant in accordance with its
terms.
36. EXECUTION
This Lease is executed in several duplicate counterparts, each of which
shall be deemed an original of this Lease for all purposes.
SEE ADDENDUM TO LEASE
"TENANT" "LANDLORD"
INFORMATION MANAGEMENT LAKESHORE TOWERS LIMITED PARTNERSHIP
ASSOCIATES, INC., a PHASE I, a California limited
Connecticut corporation partnership
By: /s/ Gary R. Martino By: BIRTCHER LAKESHORE, LTD., a
------------------------ California limited
partnership,
Its: CFO General Partner
----------------------
By: /s/ Albert R. Subbloie By: BIRTCHER LAKESHORE
------------------------ CORPORATION, a California
corporation,
Its: PRESIDENT General Partner
------------------------
By: [SIGNATURE APPEARS HERE]
-----------------------------
Its:
----------------------------
By: [SIGNATURE APPEARS HERE]
-----------------------------
Its:
----------------------------
By: SKIPPER REALTY CORPORATION, a
Delaware corporation, General
Partner
By: [SIGNATURE APPEARS HERE]
-----------------------------
Its: V. P.
----------------------------
By:
----------------------------
Its:
----------------------------
-30-
<PAGE>
Exhibit 10.62
Information Management Associates, Inc.
6527 Main Street
Trumbull, CT 06611
December 21, 1990
Wand/IMA Investments, L.P.
30 Rockefeller Plaza
Suite 45-38
New York, New York 10112
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 Mr. Gary R.
Martino, Mr. Andrei Poludnewycz, Mr. Paul J. Schmidt, Mr. Albert R. Subbloie,
Mr. Wendell Covalt, Mr. Dennis Dobson and Mr. Joseph R. Lemay (collectively, the
"Shareholders") agree with you as follows:
1. Board of Directors. (a) So long as any of the Notes are
------------------
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
- --------
* Capitalized terms not defined herein shall, unless otherwise indicated,
have the meanings assigned to them in the Purchase Agreement.
<PAGE>
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,
------------------------------
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
2
<PAGE>
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.
3
<PAGE>
(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
-----------------
"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 Thomas F. Hill 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
4
<PAGE>
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
--- ----
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
5
<PAGE>
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 Thomas F. Hill.
4. Survival of Representations and Incorporation by Reference of
-------------------------------------------------------------
Covenants. In order to induce you to purchase the Notes and the Warrants, the
- ---------
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
6
<PAGE>
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
-----------------------
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:
7
<PAGE>
<TABLE>
<CAPTION>
Column A Column B
-------- --------
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)
- ----------------------------- ------------------------------
<S> <C>
$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
</TABLE>
6. Refinancing of Mortgage.
-----------------------
Mr. Gary R. Martino, Mr. Andrei Poludnewycz and Mr. Albert R. Subbloie,
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.
----------------------------
Albert R. Subbloie, Gary R. Martino and Andrei 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
8
<PAGE>
such further documents to implement the transfer of the Intellectual
Property Rights to the Company as contemplated by the Purchase Agreement.
8. Definitions.
-----------
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
-----------
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.
------------------------
10.1 Amendment. This Agreement may be altered or amended only with the
---------
written consent of all of the parties hereto.
10.2 Specific Performance. The parties recognize that the obligations
--------------------
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
----------
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
9
<PAGE>
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
--------------------------------
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
------
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
------------
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
----------------
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
-------------
LAWS OF THE STATE OF CONNECTICUT.
10.9 Entire Agreement. This Agreement contains the entire understanding
----------------
of the parties hereto respecting the subject matter hereof and supersedes all
prior agreements, discussions and understandings.
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date and year first above written.
By: /s/ Joseph R. Lemay
--------------------------------
Joseph R. Lemay
By: /s/ Gary Martino
--------------------------------
Gary Martino
By: /s/ Andrei Poludnewycz
--------------------------------
Andrei Poludnewycz
By: /s/ Paul J. Schmidt
--------------------------------
Paul J. Schmidt
By: /s/ Al Subbloie
--------------------------------
Al Subbloie
By: /s/ Wendell Covalt
--------------------------------
Wendell Covalt
By: /s/ Dennis Dobson
--------------------------------
Dennis Dobson
INFORMATION MANAGEMENT
ASSOCIATES, INC.
By: /s/ Gary R. Martino
--------------------------------
Name: Gary R. Martino
Title: Treasurer
The foregoing Agreement is
hereby agreed to as of the
date thereof.
Wand/IMA Investments, L.P.
By: [SIGNATURE APPEARS HERE]
----------------------------------
Name:
Title:
11
<PAGE>
Exhibit 10.63
Information Management Associates, Inc.
6527 Main Street
Trumbull, CT 06611
October 29, 1991
Wand/IMA Investments, L.P.
30 Rockefeller Plaza
Suite 3226
New York, N.Y. 10112
Dear Sirs:
Reference is made to a certain Letter Agreement, dated
December 21, 1990 (the "Letter Agreement") among you, Information Management
Associates, Inc. (the "Company") and certain shareholders of the Company. You
and the Company now propose to enter into a Stock Purchase Agreement, dated
October 29, 1991 (the "Stock Purchase Agreement") providing for the purchase by
you of 29,632 shares of the Company's Common Stock, and an Exchange and Note
Modification Agreement, dated October 29, 1991 (the "Exchange and Note
Modification Agreement"), providing, among other things, for the issue to you of
a new warrant (the "New Warrant") entitling you to purchase 14,812 shares of the
Company's Common Stock, and for the amendment of the original $1,600,000 15%
senior subordinated note originally issued to you to reduce the principal amount
to $1,000,000 and the interest rate thereon to 12%, and to change the principal
repayment schedule, all as set forth in a 12% senior subordinated note to be
issued to you (the "Amended Note"). In order to induce you to enter into the
Stock Purchase Agreement and the Exchange and Note Modification Agreement, the
Company and Gary R. Martino, Albert R. Subbloie, Andrei Poludnewycz, Paul J.
Schmidt, Wendell Covalt, Dennis Dobson and Joseph R. LeMay (collectively, the
"Shareholders") agree with you, and the Letter Agreement is hereby amended, as
follows:
1. Paragraph 1(a) is hereby deleted in its entirety
and the following paragraph is substituted therefor:
"1. Board of Directors. (a) So long as any of the
------------------
Notes are outstanding or, if no Notes are outstanding and any Warrants or
Registrable Securities (as such terms are defined in the New Warrant) are
outstanding, so long as there has not been an Initial Public Offering (as
defined in the New Warrant), 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
<PAGE>
Company, required to cause the Board of Directors of the Company to at all
times have two members 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 the Company to at all times have
a third 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."
2. The reference in the first sentence of Paragraph 3
to "65%" is hereby deleted and "40%" is substituted therefor.
3. Paragraph 5 is hereby deleted in its entirety and
the following paragraph is substituted therefor:
"5. Financial Advisory Fees. The Company hereby
-----------------------
agrees to pay to you in cash on or before January 15, 1992 an advisory fee of
$20,000 for the 1991 calendar year, and thereafter to pay to you in cash an
annual advisory fee of $20,000 for each of the 1992, 1993 and 1994 calendar
years, such annual advisory fees being payable in quarterly installments on
March 31, June 30, September 30, and December 31 in each such calendar year. The
Company also hereby agrees to pay to Wand Partners Inc., the general partner of
Wand/IMA Investments, Inc., in cash on or before January 15, 1992, a financial
advisory fee of $5,000, and thereafter to pay to Wand Partners Inc. in cash an
annual advisory fee of $30,000 for the 1992 calendar year and each calendar year
thereafter, such financial advisory fees being payable in quarterly installments
on March 31, June 30, September 30 and December 31 in each such calendar year.
The annual advisory fee to Wand Partners Inc. shall continue to be paid by the
Company until the later to occur of (a) January 1, 1995; (b) the date on which a
registration statement relating to an Initial Public Offering is filed with the
Securities and Exchange Commission; (c) the date on which the Company has
entered into a definitive agreement providing for sale of all or substantially
all of the assets of the Company; or (d) the date on which you own or have the
right to acquire less than ten percent (10%) of the issued and outstanding
common stock of the Company (calculated on
-2-
<PAGE>
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). All payments pursuant to this Section 5 shall be
paid on or before the due date. Late payments shall bear interest from the
expiration of the 30th calendar date after the due date through the date of
payment at the publicly announced interest rate of the Morgan Guaranty
Trust Company of New York in effect from time to time during such period,
plus 2%.
4. The following new Paragraph 11 is hereby inserted:
11. Right of First Refusal. (a) The Company hereby grants to
----------------------
you the right of first refusal to purchase all (but not less than all) of any
issue or sale of New Securities (as defined in this Section 11) which the
Company may, from time to time, propose to issue or sell at a price per share of
(i) less than $50 (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 $50 (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 securities
convertible into or exercisable for, Common Stock.
(b) "New Securities" shall mean 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 hereof; provided that
"New Securities" does not include 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.
(c) The value of any non-cash "consideration" shall be
determined in good faith by the Board of Directors of the Company.
-3-
<PAGE>
(d) In the event the Company proposes to undertake an issuance
or sale of New Securities for consideration of less than $50 per share as
described in clause (b) above, the Company shall give you written notice of the
Company's intention, describing the type of New Securities, 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. You shall have thirty (30) days from the
date of such notice to agree (by written notice to the Company) to purchase such
New Securities upon such price and terms.
(e) The rights of first refusal 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 of 1933, as amended (the "Securities
Act") with the Securities and Exchange Commission which is declared effective by
the Securities and Exchange Commission.
(f) During the period of 60 days after the expiration of the
notice period to which you 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 you under clause (d) above.
(g) The rights of first refusal described in this Section 11
are personal to you any may not be assigned or transferred, whether by agreement
or by operation of law or otherwise, and any attempted transfer shall be void.
(h) Upon the sale or transfer to any person of New Securities
as to which the rights of first refusal hereunder shall not have been exercised,
such new Securities shall thereafter be transferable free of the rights of first
refusal provided hereunder.
(i) The rights of first refusal hereunder shall terminate upon
the earlier to occur of either of the following events: (A) the date on which a
registration statement relating to an Initial Public Offering is filed with the
Securities and Exchange Commission; or (B) the date on which you own or have the
right to acquire less than ten percent (10%) of the issued and outstanding
Common Stock of the Company (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.
5. Except as amended hereby, all provisions of the Letter Agreement
shall remain in full force and effect.
-4-
<PAGE>
6. Capitalized terms not defined herein shall, unless otherwise
indicated, have the meanings assigned to them in the New Warrant.
INFORMATION MANAGEMENT
ASSOCIATES, INC.
By: [SIGNATURE APPEARS HERE]
------------------------
/s/ Gary R. Martino
------------------------------
Gary R. Martino
/s/ Albert R. Subbloie
------------------------------
Albert R. Subbloie
/s/ Andrei Poludnewycz
------------------------------
Andrei Poludnewycz
/s/ Paul J. Schmidt
------------------------------
Paul J. Schmidt
/s/ Dennis Dobson
------------------------------
Dennis Dobson
/s/ Wendell Covalt
------------------------------
Wendell Covalt
/s/ Joseph R. LeMay
------------------------------
Joseph R. LeMay
ACCEPTED AND AGREED:
Wand/IMA Investments, L.P.
By Wand Partners Inc., its
General Partner
By: /s/ David J. Callard
-----------------------
David J. Callard
President
-5-
<PAGE>
Exhibit 10.64
INFORMATION MANAGEMENT ASSOCIATES, INC.
6527 Main Street
Trumbull, CT 06611
June 1, 1994
Wand Partners Inc.
30 Rockefeller Plaza, Suite 3226
New York, NY 10112
Wand/IMA Investments, L.P.
30 Rockefeller Plaza, Suite 3226
New York, NY 10112
Re: Second Amendment to Letter Agreement
Originally Executed December 21, 1990
-------------------------------------
Gentlemen:
Reference is made to a certain Letter Agreement, dated December 21,
1990 (the "Letter Agreement"), among Wand/IMA Investments, L.P., a Delaware
limited partnership, (the "Wand/IMA Partnership"), Information Management
Associates, Inc., a Connecticut corporation, (the "Company") and certain
shareholders of the Company, Mr. Gary R. Martino, Mr. Andrei Podludnewycz, Mr.
Paul J. Schmidt, Mr. Albert R. Subbloie, Jr., Mr. Wendell Covalt, Mr. Dennis
Dobson, and Mr. Joseph R. Lemay. (Messrs. Martino, Podludnewycz, Schmidt and
Subbloie are referred to herein individually as a "Principal Shareholder", and,
collectively, as the "Principal Shareholders"). The Letter Agreement was
subsequently amended on October 29, 1991 (the "First Amendment") to revise its
existing terms and to add certain new provisions. The original parties to the
Letter Agreement now wish to amend the Letter Agreement further to add Wand
Partners Inc., a Delaware corporation ("WPI") as a party, to release Messrs.
Covalt, Dobson and LeMay as parties, and to correct certain other errors
contained in the First Amendment. Accordingly, the Letter Agreement is now
further amended (the "Second Amendment") as follows:
1. Principal Shareholders' Common Stock. Each Principal
------------------------------------
Shareholder severally represents that he owns
<PAGE>
the number of shares of Common Stock set forth opposite his name on Exhibit A
hereto.
2. Section 3 of the Letter Agreement as amended by the First
Amendment, is hereby deleted in its entirety and the following section is
substituted therefor:
"3. Take-Along Rights. (a) Promptly after any
-----------------
one or more Principal Shareholder (the "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 3 of this Second Amendment) of such Selling Shareholder (a
"Third Party Purchaser"), and if as a consequence of such sale the
Principal Shareholders as a group would in the aggregate own fewer than
80% of the aggregate number of shares of Common Stock indicated on
Exhibit A, then the Selling Shareholder shall give written notice (a
"Take-Along Notice") to the Wand/IMA Partnership and WPI at the address
stated at the beginning of this letter, specifying the name of the
Third Party Purchaser, the number of shares of Common Stock intended to
be sold, the purchase price and all other relevant terms and conditions
of such sale. You 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 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
2
<PAGE>
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, return receipt requested. Failure by you to deliver an
Exercise Notice to the Selling Shareholder shall constitute a binding
agreement by your to sell up to the number of shares of Common Stock
specified in such Exercise Notice at the price and on the 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:
X
A = ------- x Z
X+Y
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, X equals
the number of shares of Common Stock then owned beneficially by you
(inclusive of any shares issuable upon exercise of any warrants,
options or other rights held by you), Y equals the total number of
shares of Common Stock then owned by the Principal Shareholders on a
fully
3
<PAGE>
diluted basis and Z equals the number of shares of Common Stock
which the Selling Shareholder proposes to sell to a third Party
Purchaser; provided, however, that the formula shall only include
-------- -------
shares to be sold after the Principal Shareholders have sold 20% of the
aggregate number of shares of Common Stock indicated on Exhibit A.
(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 times 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 he gives a Take-Along Notice.
(d) The Selling Shareholder and you shall each pay a pro rata
--- ----
share, based on the number of shares of Common Stock sold, of fees,
expenses and commissions charged by any broker or agent executing the
sale of shares of Common Stock pursuant to a Take-Along 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 par-
4
<PAGE>
ticular 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 Principal
Shareholder to any Affiliate of such Principal 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 on transfer set forth herein with respect to the shares of
Common Stock so to be acquired.
(h) The rights and obligations applying to the Wand/IMA
Partnership and WPI under this Section 3 shall also apply to Thomas
F. Hill, David J. Callard, Bruce W. Schnitzel and Malcolm P.
Appelbaum."
3. Section 8 of this Letter Agreement is hereby deleted in
its entirety and the following section is substituted therefor:
"8. Definitions. (a) 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,
and (ii) 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.
(b) "Control" shall mean the possession, directly or
indirectly, of beneficial ownership of a Person sufficient to direct or
cause the direction of the management or policies of such Person;
"Controlling" and "Controlled" shall have meanings correlative to the
foregoing.
(c) "Person" shall mean an individual, a corporation, a trust,
an unincorporated organization, an association or any other entity or a
government or any department or agency thereof."
4. Wendall Covalt, Dennis Dobson and Joseph LeMay are hereby
deleted as parties to the Letter Agree-
5
<PAGE>
ment, as amended, and are accordingly released from any and all obligations
thereunder.
5. Except as amended hereby, all provisions of the Letter
Agreement, as amended by the First Amendment, shall remain in full force and
effect.
6. Capitalized terms not defined herein shall, unless
otherwise indicated, have the meanings assigned them in the
Common Share Purchase Warrant originally issued by Information
Management Associate, Inc. to the Wand/IMA Partnership on October 29, 1991.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date and year first above written.
By: /s/ Joseph R. Lemay
--------------------------------
Joseph R. Lemay
By: /s/ Gary R. Martino
--------------------------------
Gary R. Martino
By: /s/ Andrei Poludnewycz
--------------------------------
Andrei Poludnewycz
By: /s/ Paul J. Schmidt
--------------------------------
Paul J. Schmidt
By: /s/ Albert R. Subbloie, Jr.
--------------------------------
Albert R. Subbloie, Jr.
By: /s/ Wendall Covalt
--------------------------------
Wendall Covalt
6
<PAGE>
By: /s/ Dennis Dobson
---------------------------------
Dennis Dobson
INFORMATION MANAGEMENT
ASSOCIATES, INC.
By: /s/ Gary R. Martino
---------------------------------
Name: GARY R. MARTINO
Title: CFO
The foregoing Agreement is
hereby accepted and agreed
to as of the date hereof.
WAND PARTNERS INC.
By: /s/ David J. Callard
_________________________
Name: DAVID J. CALLARD
Title:
WAND/IMA INVESTMENTS, L.P.
By: WAND PARTNERS INC.
as general partner
By: /s/ David J. Callard
_________________________
Name:DAVID J. CALLARD
Title:
7
<PAGE>
Exhibit 10.65
INFORMATION MANAGEMENT ASSOCIATES, INC.
6527 Main Street
Trumbull, CT 06611
June 1, 1994
Mercury Asset Management plc
as Agent for certain of its Managed Accounts
33 King William Street
London, England EC4 R9AS
Re: Purchase of Common Stock of Informa-
tion Management Associates, Inc.
------------------------------------
Gentlemen:
As an additional inducement in connection with your purchase
on behalf of certain managed accounts (the "Managed Accounts") of an aggregate
of 117,778 shares (the "Shares") of Common Stock, no par value (the "Common
Stock"), of Information Management Associates, Inc. (the "Company") pursuant to
a Stock Purchase Agreement, dated as of June 1, 1994, with Gary R. Martino, Mr.
Andrei Poludnewycz, Mr. Paul J. Schmidt, and Mr. Albert R. Subbloie, Jr.,
individually a "Principal Shareholder", and, collectively, (the "Principal
Shareholders"), the Principal Shareholders agree with you as follows:/1/
1. Principal Shareholders' Common Stock. Each Principal
------------------------------------
Shareholder severally represents that he owns the number of shares of Common
Stock set forth opposite his name on Exhibit A hereto.
2. Take-Along Rights. (a) Promptly after any one or more
-----------------
Principal Shareholder (the "Selling Shareholder") determines to offer for sale
or otherwise dispose of (a "sale"), all or any portion of the Common
- ----------------
/1/Capitalized terms not defined herein shall, unless otherwise indicated, have
the meaning assigned to them in the Stock Purchase Agreement.
<PAGE>
Stock of the Company owned by such Selling Shareholder to any Person other than
an Affiliate (as defined in section 3 of this Agreement) of such Selling
Shareholder (a "Third Party Purchaser"), and if as a consequence of such sale
the Principal Shareholders as a group would in the aggregate own fewer than 80%
of the aggregate number of shares of Common Stock indicated on Exhibit A, then
the Selling Shareholder shall give written notice (a "Take-Along Notice") to you
at your address for notices contained in the Stock Purchase Agreement,
specifying the name of the Third Party Purchaser, the number of shares of Common
Stock intended to be sold, the purchase price and all other relevant terms and
conditions of such sale. You 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 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, return receipt requested.
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 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
2
<PAGE>
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:
X
A = _______ x Z
X+Y
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, X equals the number of
shares of Common Stock then owned beneficially by the Managed Accounts, Y equals
the total number of shares of Common Stock then owned by the Principal
Shareholders on a fully diluted basis, and Z equals the number of shares of
Common Stock which the Selling Shareholder proposes to sell to a Third Party
Purchaser; provided, however, that the formula shall only include shares to be
-------- -------
sold after the Principal Shareholders have sold 20% of the aggregate number of
shares of Common Stock indicated on Exhibit A.
(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 not obligation to you to consummate any sale
as to which he gives a Take-Along Notice.
(d) The Selling Shareholder and you shall each pay a pro rata
--- ----
share, based on the number of shares of Common Stock sold, of fees, expenses and
commissions charged by any broker or agent executing the sale of shares of
Common Stock pursuant to a Take-Along Option described in paragraph (a) of this
section.
3
<PAGE>
(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 Principal
Shareholder to any Affiliate of such Principal 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 on transfer set
forth herein with respect to the shares of Common Stock so to be acquired.
3. Definitions. (a) 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, and (ii) 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.
(b) "Control" shall mean the possession, directly or
indirectly, of beneficial ownership of a Person sufficient to direct or cause
the direction of the management or policies of such Person; "Controlling" and
"Controlled" shall have meanings correlative to the foregoing.
(c) "Person" shall mean an individual, a corporation, a trust,
an unincorporated organization, an association or any other entity or a
government or any department or agency thereof.
4. Termination. All provisions of this Agreement shall
-----------
terminate upon the earliest to occur of (i) the date on which Managed Accounts
cease to own any Shares and (ii) that date on which an Initial Public Offering
occurs. This Agreement shall in any event
4
<PAGE>
terminate ten years from the date hereof unless extended in compliance with the
laws of the State of Connecticut.
5. Miscellaneous Provisions.
------------------------
5.1. Amendment. This Agreement may be altered or amended only
---------
with the written consent of all of the parties hereto.
5.2. Specific Performance. The parties recognize that the
--------------------
obligations imposed on them in section 2 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 2 of this Agreement, without proving
damages.
5.3. Assignment. Except as otherwise expressly provided
----------
herein, the 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 section 2 of this Agreement may be assigned
or otherwise transferred only to an Affiliate. The other rights provided to you
by this Agreement are transferable with the Notes, Warrants and Registrable
Securities.
5.4. Shares Subject to this Agreement. All shares of Common
--------------------------------
Stock of the Company now owned or hereafter acquired by any of the Principal
Shareholders shall be subject to the terms of this Agreement.
5.5. Legend. Certificates evidencing shares of capital stock
------
shall bear such legends as the Company shall reasonably deem necessary to
protect the rights of the parties hereunder.
5.6. Counterparts. This Agreement may be executed in two or
------------
more 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.
5
<PAGE>
5.7. Section Headings. Headings contained in this Agreement
----------------
are 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.
5.8. Choice of Law. THIS AGREEMENT SHALL BE GOVERNED BY THE
-------------
INTERNAL LAWS OF THE STATE OF CONNECTICUT.
5.9. Entire Agreement. This Agreement contains the entire
----------------
understanding of the parties hereto respecting the subject matter hereof and
supersedes all prior agreements, discussions and understandings.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date and year first above written.
By: /s/Gary R. Martino
----------------------------
Gary R. Martino
By: /s/Andrei Poludnewycz
----------------------------
Andrei Poludnewycz
By: /s/Paul J. Schmidt
----------------------------
Paul J. Schmidt
By: /s/Albert R. Subbloie, Jr.
----------------------------
Albert R. Subbloie, Jr.
6
<PAGE>
The foregoing Agreement is
hereby accepted and agreed
to as of the date hereof.
MERCURY ASSET MANAGEMENT PLC
as Agent for Certain of its
Managed Accounts
By: /s/ [SIGNATURE APPEARS HERE]
-----------------------------
Name: N. T. Turner
Title: Assistant Director
7
<PAGE>
Exhibit 10.68
INFORMATION MANAGEMENT ASSOCIATES, INC.
THIRD PARTY CONSULTING SERVICES AGREEMENT
AGREEMENT made and entered into this 1st day of January, 1996, between Clifton
Myers Enterprise, Inc., an independent contractor of 132 Calle Alta, Orange,
California 92669, hereinafter referred to as CME, and Information Management
Associates, Inc., of One Corporate Drive, Suite 414, Shelton, Connecticut 06484,
hereinafter referred to as CUSTOMER.
WITNESSETH
CME and CUSTOMER agree that the following terms and conditions shall govern in
all cases where CME furnishes services to CUSTOMER.
1. SERVICES
CME will provide such Management and Data Processing consultation
service(s), as is provided for and set forth in the Corresponding
Schedule(s), attached hereto and made a part hereof.
2. PLACE OF PERFORMING SERVICES
The services provided by this contract shall be performed at the CUSTOMER's
premises or at CME premises or at a mutually agreed to location. CUSTOMER
shall reimburse CME for extraordinary travel and living expenses incurred
by personnel of CME in connection with work performed. In addition,
CUSTOMER will reimburse CME for special or unusual expenses incurred at the
CUSTOMER's request. It is further agreed, that any travel time greater than
one hour and 50 miles each way will be billable.
3. TIME OF PERFORMING SERVICES
Barring any prolonged incapacitation due to illness of an indispensable and
irreplaceable CME employee or any other event not within the control of
CME, or any events or circumstances which are the fault of CUSTOMER, CME
agrees to spend the number of hours requested by CUSTOMER per month on the
services to be performed under this contract and to complete said service
in accordance with the Corresponding Schedule(s), attached hereto and made
part hereof.
4. COMPENSATION FOR SERVICES
CUSTOMER shall pay CME the sum set forth in the Corresponding Schedule(s),
attached hereto and made part hereof, for each hour devoted to the services
performed by CME hereunder, plus sales, service or similar taxes, if any,
which CME becomes obligated to collect by law. Charges will be invoiced
biweekly for services rendered and are due and payable upon receipt of
invoice. A service charge of one and one-half percent (1.5%) per month may
be charged on invoices over thirty (30) days old.
<PAGE>
5. TERM, CANCELLATION AND MODIFICATION OF SCHEDULES
Either CME or CUSTOMER may terminate this entire Consulting Agreement at
any time by giving the other party thirty (30) days prior written notice.
The effect of such termination will be a cessation of all Schedules
attached hereto and made part hereof. CUSTOMER's obligation to pay the
consulting fees incurred up to the date of termination shall not be
affected by termination under this Section, and CME shall not be obligated
to provide CME services after the date of termination. Notwithstanding the
foregoing, at the request of CUSTOMER, CME shall, at CUSTOMER's expense
under the same terms as provided herein, complete any Corresponding
schedule(s), attached hereto and made part hereof, in progress at the time
of such termination.
CME and CUSTOMER acknowledge that the right to make changes to
Corresponding Schedules, attached hereto and made part hereof, with the
exception of changes to billing rates which can only be made by CME, must
be mutually consented to in writing by CME and CUSTOMER. Notwithstanding
the foregoing, any modification to or cancellation of a Corresponding
Schedule(s), attached hereto and made part hereof, by CUSTOMER which
results in a reduction in the number of consultant(s) working pursuant to
said Corresponding Schedule(s), shall require thirty (30) days prior
notice to CME to be effective.
6. EQUIPMENT, MATERIALS AND SUPPORT PROVIDED BY CUSTOMER
CUSTOMER shall furnish CME at CUSTOMER's premises, or at such location as
is mutually agreed upon, all computers, accessories, peripheral devices,
and other equipment, in addition to materials and supplies necessary for
CME to provide the services as set forth in the Corresponding Schedule(s)
attached hereto and made part hereof. Title to such equipment shall remain
with CUSTOMER and all such equipment and property shall be returned to
CUSTOMER within thirty (30) days after the termination of the Corresponding
Schedule(s) attached hereto and made part hereof, if and only if, CUSTOMER
has previously permitted equipment to leave CUSTOMER's premises. Such
agreement shall be made in writing.
7. CONFIDENTIALITY
In connection with CME's services under this Agreement, CME may be exposed
to and furnished with certain trade secret information, materials and data
relating to CUSTOMER's software procedure specifications, contracts,
designs and marketing. CME will keep confidential and shall not reveal or
disclose any such trade secret information, materials or data to anyone
during the term of this Agreement or thereafter without CUSTOMER's prior
written permission. At the termination of this Agreement, CME shall return
to CUSTOMER any trade secret materials obtained from CUSTOMER in connection
with the services herein. This Paragraph shall continue after the
termination of this Agreement.
In connection with CME's services under this Agreement, CUSTOMER may be
exposed to and furnished with certain trade secret information, materials
and data relating to CME's procedure specifications, contracts, designs and
marketing. CUSTOMER will keep confidential and shall not reveal or disclose
any such trade secret information, materials or data to anyone during the
term of this Agreement or thereafter without CME's prior written
permission. At the termination of this Agreement, CUSTOMER shall return to
CME any trade secret materials obtained from CME in connection with the
services herein. This Paragraph shall continue after the termination of
this Agreement.
<PAGE>
8. CME's CONSULTING FOR OTHERS
In recognition of the fact that CME personnel provided to the CUSTOMER
under this Agreement may perform similar services from time to time for
others, this Agreement shall not prevent CME from performing such similar
services or restrict CME from using the personnel provided to the CUSTOMER
under this Agreement as long as CUSTOMER's requirements are being met by
CME. However, CME agrees to accept any provisions in the contract between
CUSTOMER and its customer which restrict CUSTOMER personnel from performing
similar services for others.
9. CME's LIABILITY
CME DOES NOT MAKE ANY EXPRESS OR IMPLIED WARRANTIES ABOUT ITS SERVICES OR
PRODUCTS, INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. In no event will CME
be liable for consequential damages, including but not limited to lost
profits, even if CME has been advised of the possibility of such damages,
and unless provided elsewhere herein, CME shall not be liable for the
claims against CUSTOMER by any other party. However, CME agrees to accept
any deviation from these provisions as outlined and required in the
relevant Liability and Warranty provisions in the contract between the
CUSTOMER and its customer.
10. EMPLOYEE SOLICITATION
CUSTOMER and CME agree not to hire or attempt to hire employees of the
other party for the term of this Agreement and twelve (12) months following
without the prior written consent of the other party. In the event that a
person is solicited by CME of CUSTOMER, then a penalty of up to 12 months
salary for the solicited person may be imposed by CUSTOMER or CME.
11. PARTIAL INVALIDITY
If any provision of this Agreement is invalid or unenforceable, the
remainder of this Agreement shall not be affected thereby and each term and
provision hereof shall be valid and enforced to the fullest extent
permitted by law.
12. WAIVER
The failure of a party to insist upon strict adherence to any term of this
Agreement on any occasion shall not be considered a waiver or deprive that
party of the right thereafter to insist upon strict adherence to that term
or any other term of this Agreement. Any waiver must be in writing.
<PAGE>
13. ENTIRE AGREEMENT
This Agreement together with the terms of the attachments set forth the
entire agreement and understanding between the parties as to the subject
matter of the Agreement and merges all prior discussions between them, and
neither of the parties shall be bound by any conditions, definitions,
warranties or representations with respect to the subject matter of this
Agreement other than as expressly provided for in this Agreement or as duly
set forth on or subsequent to the date hereof in writing and signed by a
proper and duly authorized representative of the party to be bound thereby.
14. BINDING AGREEMENT
This Agreement shall inure to the benefit of and be binding upon the
parties, their successors, permissible assigns and legal representatives.
It shall not be assigned by either party without the consent of the other
party.
15. GOVERNING LAW
This Agreement shall be governed and construed in accordance with the laws
of the State of Connecticut.
16. HEADINGS NOT CONTROLLING
Headings used in this Agreement are for reference only and shall not be
deemed a part of this Agreement.
IN WITNESS WHEREOF, the parties to the CONSULTING SERVICES AGREEMENT have fixed
their signatures the day and year first above written.
BY: [SIGNATURE APPEARS HERE]
--------------------------------------------
Clifton Myers Enterprise, Inc.
BY: [SIGNATURE APPEARS HERE]
--------------------------------------------
Information Management Associates, Inc.
<PAGE>
CUSTOMER TASK ORDER
This TASK ORDER is issued pursuant to an Agreement dated the 1st day of January,
1996, between the parties and incorporates all of the terms therein.
SERVICES PERFORMED FOR: SERVICES PERFORMED BY:
Information Management Associates, Inc. Clifton Myers
One Corporate Drive, Suite 414 Clifton Myers Enterprise, Inc.
Shelton, CT 06484 132 Calle Alta
Orange, CA 92669
DESCRIPTION OF TASK:
Provide data processing consulting services at the direction of CME's customer.
DURATION OF TASK:
Start Date: January 1, 1996
Projected End Date: December 31, 1996
COMPENSATION:
See Schedule A.
BY: [SIGNATURE APPEARS HERE]
----------------------------------------
Clifton Myers Enterprise, Inc.
BY: [SIGNATURE APPEARS HERE]
----------------------------------------
Information Management Associates, Inc.
<PAGE>
SCHEDULE A
TO CONSULTING SERVICES AGREEMENT
DATED 1/1/96
----------
IMA shall pay Clifton Meyers Enterprise, Inc. (CME) a monthly retainer of
$100,000, to be split into two equal payments of $50,000. These payments are to
be generated on the 15th and 30th of each month and forwarded overnight to our
Irvine office for release to CME.
CME will submit project proposals to IMA for approval prior to commencing work.
For approved projects, CME will provide IMA with monthly updates of project
status in verbal or written form as mutually agreed. This information shall
include, but not be limited to, invoices, time reports, expense reports,
detailing work performed on the project. This information should be submitted to
the Vice-President of EDGE Development in Irvine.
<PAGE>
ADDENDUM NO. 1
TO THE
THIRD PARTY CONSULTING SERVICES AGREEMENT
This Addendum No. 1, effective as of January 1, 1996, is made and entered into
by and between Clifton Myers Enterprise, Inc. ("CME") and Information Management
Associates, Inc., ("Customer") and is hereby made part of and incorporated into
the Third Party Consulting Services Agreement ("Agreement") by and between CME
and Customer dated January 1, 1996. In the event that any provision of this
Addendum No. 1 and any provision of the said Agreement are inconsistent or
conflicting, then the provisions of this Addendum No. 1 shall be and constitute
an amendment of said Agreement and shall control.
IMA and CME hereby agree to amend the above referenced Agreement by adding the
following provisions:
1. PRE-APPROVAL OF EXPENSES
All extraordinary travel and living expenses incurred by personnel of CME
must be pre-approved by Customer.
2. CME'S STATUS AS AN INDEPENDENT CONTRACTOR
CME is an independent contractor. CME is not, and will not claim to be, a
legal representative, partner, franchisee, agent, or employee of Customer.
CME is responsible for the direction and compensation of its employees.
3. OWNERSHIP
CME must promptly disclose and assign to Customer all intellectual property
generated, conceived or developed under this Agreement, including, but not
limited to, inventions conceived or reduced to practice as a result of this
Agreement and any resulting patents. Any works of authorship in any form of
expression, including, but not limited to, manuals and software developed
under this Agreement, are works for hire and belong exclusively to
Customer. If, by operation of law, the ownership of works for hire do not
automatically vest in Customer, then CME will take necessary steps to
assign ownership to Customer. CME will provide reasonable assistance to
Customer to secure intellectual property protection, including, but not
limited to, assistance in the preparation and filing of any patent
applications, copyright registrations, and the execution of all
applications, assignments or other instruments for perfection of protection
or title. CME will pay its employees any compensation due in connection
with the assignment of any intellectual property or invention. CME warrants
to Customer that CME's employees are subject to agreements which will
secure Customer's rights under this section. This Paragraph shall continue
after the termination of this Agreement.
4. If CME performs work for third parties, CME agrees that it will not make
use of any confidential information or intellectual property belonging to
Customer.
IN WITNESS WHEREOF, the parties to this Addendum No. 1 have fixed their
signatures, effective as of the day and year first written above.
CLIFTON MYERS ENTERPRISE, INC. INFORMATION MANAGEMENT ASSOCIATES, INC.
By: [SIGNATURE APPEARS HERE] By: [SIGNATURE APPEARS HERE]
------------------------------- -----------------------------
President 7/31/96
<PAGE>
Exhibit 10.69
TAL FINANCIAL CORPORATION
1071 WORCESTER ROAD LEASE NO. _____
FRAMINGHAM, MASSACHUSETTS 01701
EQUIPMENT LEASE
EQUIPMENT LEASE dated as of ___________, 19__, between TAL FINANCIAL
CORPORATION, (hereinafter called "Lessor"), a Massachusetts corporation having a
place of business at 1071 Worcester Road, Framingham, Massachusetts 01701, and
Information Management Associates, Inc. (hereinafter called "Lessee"), a
Connecticut corporation with its principal place of business at One Corporate
Drive - Suite 414, Shelton, Connecticut 06484. Lessee desires to lease from
Lessor the personal property, hereinafter defined as "Equipment", and Lessor is
willing to lease such personal property to Lessee at the rent, for the term and
upon the conditions set forth in this lease or in any Exhibit, Schedule,
Addendum, Amendment or Modification hereto. Accordingly, Lessor and Lessee agree
as follows:
1. Definitions.
The following terms shall, unless the context otherwise requires, have the
following meanings for all purposes of this lease:
(a) "Equipment" means the equipment described on each Rental
Schedule now or hereafter executed pursuant to this Lease, and
owned or to be owned by Lessor and leased by Lessor to Lessee or
ordered by Lessor for lease to Lessee as provided herein.
(b) "Acquisition Cost" of any item of Equipment means an amount
equal to the sum of (i) the purchase price of such item paid by
Lessor, plus (ii) any excise, sales and use tax on or with
respect to such item of Equipment, plus (iii) any costs,
expenses, and fees paid or incurred by Lessor in obtaining and
delivering such item of Equipment to Lessee and any expenses of
installation of such item of Equipment paid for by Lessor.
Lessor shall retain the option of either including the costs and
expenses contained in (ii) and (iii) above in the Acquisition
Cost, require the Lessee to incur or demand direct reimbursement
for such costs incurred and not included in the Rental Schedule.
(c) "Certificate of Inspection and Acceptance" means a certificate,
substantially in the form attached hereto and marked "Exhibit
A", to be executed by Lessee, and dated the date of Lessee's
acceptance for lease hereunder of any Equipment delivered to
Lessee, each of which certificates shall be deemed to
incorporate all of the provisions of the Lease.
(d) "Rental Schedule" means a schedule to be executed by Lessor and
Lessee, substantially in the form attached hereto and marked
"Exhibit B", setting forth a full description of Equipment to be
leased hereunder, its location, Acquisition Cost, the amount of
rent payable by Lessee with respect thereto, the period thereof,
the Lease Commencement Date with respect thereto, and such other
details as Lessor and Lessee may desire.
(e) "Casualty Occurrence" and "Full Replacement Cost" shall have the
meanings specified in Section 14 hereof.
(f) "Events of Default" shall have the meanings specified in Section
19 hereof.
(g) "Lease Commencement Date" with respect to an item of Equipment
means the date of the commencement of the lease term of such
item which shall be the erarliest date such item is accepted by
Lessee for lease hereinunder as provided in Section 3 hereof,
shipment by the Seller or passage of risk of loss to the Lessor.
2. Lease of Equipment.
Lessee shall evidence its request to Lessor to order specific items of
Equipment for lease to Lessee hereunder by its executing and delivering to
Lessor a Rental Schedule for such items. Lessee's execution of each such
Rental Schedule shall obligate Lessee to lease the Equipment described
therein from Lessor upon the acceptance, as provided in Section 3 hereof,
of such Equipment by Lessee for lease hereunder.
3. Delivery and Acceptance.
Upon acceptance for lease by Lessee of any Equipment delivered to Lessee
and described in a Rental Schedule, Lessee shall execute and deliver to
Lessor a Certificate of Inspection and Acceptance with respect to such
Equipment. If Lessee fails to execute and deliver such Certificate of
Inspection and Acceptance to Lessor within fifteen (15) days following the
delivery of any Equipment describe in a Rental Schedule, previously
executed and delivered by Lessee, then, unless Lessee has, within such
period, notified Lessor in writing that such Equipment is defective or is
in unsatisfactory repair or working condition, it shall be conclusively
presumed as between Lessor and Lessee that such Equipment has been
unconditionally accepted for lease hereunder as of the fifteenth (15th) day
following its delivery to Lessee, with the same force and effect as if
Lessee had, on such date, executed a Certificate of Inspection and
Acceptance with respect thereto.
4. No Warranties by Lessor.
As between Lessor and Lessee, Lessee's acceptance for lease hereunder of
any Equipment as evidenced by its execution of a Certificate of Inspection
and Acceptance with respect thereto (or Lessee's presumed acceptance for
lease of such Equipment under the circumstances described in Section 3
hereof) shall constitute Lessee's acknowledgment that such Equipment (a) is
of a size, design, capacity and manufacture acceptable to Lessee for lease
hereunder, (b) is suitable for Lessee's purposes, (c) is in good order,
repair and condition, and (d) is subject to all of the terms and conditions
of the Lease. LESSOR MAKES NO WARRANTY OR REPRESENTATION, EITHER EXPRESSED
OR IMPLIED, AS TO TITLE, OR ITS FREEDOM FROM THE CLAIMS OF OTHERS BY WAY OF
INFRINGEMENT OR OTHERWISE, FITNESS, QUALITY, DESIGN, CONDITION, CAPACITY,
SUITABILITY, MERCHANTABILITY, PERFORMANCE, FITNESS FOR ANY PARTICULAR
PURPOSE, OR THE MATERIAL OR WORKMANSHIP OF ANY ITEM OF EQUIPMENT, IT BEING
AGREED AND UNDERSTOOD THAT EACH ITEM OF EQUIPMENT TO BE LEASED PURSUANT TO
THIS LEASE IS LEASED "AS IS" AND THAT ALL
<PAGE>
SUCH RISKS AS BETWEEN LESSOR AND LESSEE ARE TO BE BORNE BY LESSEE. In no
event shall any defect in, or unfitness of, any Equipment relieve Lessee of
the obligation to pay rent or to make any other payments required hereunder
or of any other obligation hereunder without deduction or set-off of any
kind. Without limiting the generality of the foregoing, Lessor shall not be
liable for any defects, either latent or patent, in any of the Equipment,
or for any direct or consequential damage therefrom; for loss of use of any
of the Equipment or for any interruption in Lessee's business occasioned by
Lessee's inability to use any of the Equipment for any reason whatsoever;
or for any failure or delay in obtaining any Equipment for delivery to
Lessee. Lessee hereby waives any such claims against Lessor, and Lessor
assigns to Lessee any of the rights which Lessor may have against Seller or
any other person for breach of warranty or other representation respecting
the equipment. Lessee hereby acknowledges that it has selected both (a) the
equipment and (b) the Seller from whom the Lessor is to purchase the
equipment. If the equipment is not properly installed, does not operate as
represented or warranted by the Seller or is unsatisfactory for any reason,
Lessee shall have any claim on account thereof solely against the Seller.
Lessee understands and agrees that neither the Seller nor any salesman or
other agent of the Seller is an agent of the Lessor. No salesman or agent
of the Seller is authorized to waive or alter any term of condition of this
lease and no representation as to the equipment or any other by the Seller
shall in any way affect the Lessee's duty to pay the rent and perform its
other obligations as set forth in this Lease.
5. Lease Term. The lease term of each item of Equipment shall
commence on the Lease Commencement Date thereof and shall, unless sooner
terminated pursuant to the provisions of Section 14, 18 or 19 hereof, be
for the period specified on the Rental Schedule therefor plus the number of
days remaining in any partial first month if the Lease Commencement Date
occurs on other than the first day of a month. However, the provisions of
Section 11 shall apply as between Lessor and Lessee with respect to any
Equipment from the date any Rental Schedule therefor is executed and
delivered by Lessee.
Unless ninety (90) days prior written notice of termination is given by
either party to the other, the Lease Term shall be automatically extended
for successive annual periods and payments for rent shall continue to be
made in the amounts and on the monthly dates theretofore payable. Any such
termination notice shall be effective only as of the last day of the
initial Lease Term or of any extended Lease Term.
6. Rent. Lessee's obligation to pay rent for each item of
Equipment shall commence on the Lease Commencement Date thereof, as defined
in Section 3, or any Seller's certification that such Equipment has been
installed and is operating properly. Lessee agrees to pay Lessor, monthly
in advance, on the first day of each month throughout the lease term of
each item of Equipment, the monthly rent specified for each item of
Equipment on the Rental Schedule therefor. If the Lease Commencement Date
of an item of Equipment occurs on other than the first day of a month, the
rent for the partial first month of the lease term shall be determined by
dividing the amount of the average monthly rent for such item by thirty
(30) and multiplying the quotient by the number of days remaining in said
partial first month, including the Lease Commencement Date, and such
partial first month's rent shall be payable with the first full month's
payment of rent. Lessee hereby authorizes Lessor to insert the amount of
such partial first month's rent for each such item of Equipment on the
Rental Schedule therefor when such item has been accepted by Lessee for
lease hereunder as provided in Section 3 hereof. The rents specified on the
Rental Schedule(s) shall be payable unconditionally, without notice or
demand, without any deduction, counter-claim, set-off, further notice or
demand, and together with all other payments due under this Lease shall be
payable directly to Lessor at the address appearing in the introductory
paragraph of this Lease, or to such other party or at such other address as
Lessor may from time to time designate in writing.
7. Errors in Acquisition Cost. In the event that at any time
before or after an item of Equipment is accepted by Lessee for lease
hereunder it becomes known that the actual Acquisition Cost of such item
differs from the Acquisition Cost figure, at the time such item was ordered
for lease hereunder, Lessee hereby authorizes Lessor to make the necessary
adjustments or corrections necessitated thereby in the rent figures for
such item set forth on such Rental Schedule.
8. Lessee's Representations and Warranties. Lessee represents
and warrants that (a) Lessee is a corporation legally incorporated and
validly existing, in good standing, under the laws of its state of
incorporation set forth above, with full corporate power to enter into this
Lease and to pay and perform all of its obligations hereunder; (b) this
Lease has been duly authorized, executed and delivered by Lessee and
constitutes the valid, legal and binding obligation of Lessee, enforceable
in accordance with its terms; (c) no approval is required from any public
regulatory body nor from any parent or affiliate of Lessee or from any
other person, firm or corporation with respect to the entering into or
performance of this Lease; (d) the entering into and performance of this
Lease by Lessee, and the leasing of the Equipment hereunder by Lessee, and
the payment by Lessee of the rent and all other obligations due hereunder,
will not result in any breach of, or constitute a default under, or result
in the creation of any lien, charge, security interest or other encumbrance
in or upon any Equipment pursuant to, any indenture, mortgage, deed of
trust, bank loan or credit agreement or other instrument to which Lessee is
a party or by or under which Lessee may be bound; (e) no mortgage, deed of
trust, or other lien of any nature whatsoever which now covers or affects,
or which may hereafter cover or affect any property or interest therein of
Lessee, now attaches or hereafter will attach to the Equipment leased
hereunder or in any manner affects or will affect adversely Lessor's right,
title and interest therein; and (f) there are no suits or proceedings
pending, or, to the knowledge of Lessee threatened, in any court or before
any regulatory commission, board or other administrative governmental
agency against or affecting Lessee, which will have a material adverse
effect on the financial condition or business of Lessee; (g) The balance
sheet of the Lessee as of the end of the end of the Lessee's most recent
fiscal year and the related earnings statement of the Lessee for the fiscal
year then ended, or for any interim period (copies of which have been
furnished to the Lessor) fairly present the Lessee's financial condition as
of such date and the results of its operations for such period, and since
such date there has been no material adverse change in such condition or
operations.
2
<PAGE>
9. Identification Marks. If requested by Lessor or assignee or
required by federal, state or local law, Lessee shall, at Lessee's expense,
affix or attach to the Equipment a sign, stencil, plaque, legend, tag or
other form of notice to disclose Lessor's ownership of the Equipment or
that the Equipment is leased from Lessor, and Lessee shall keep and
maintain such sign, stencil, plaque, legend, tag or other form of notice
affixed or attached to the Equipment throughout the lease term thereof.
Lessee will not allow the name of any persons, association or corporation
to be placed on any Equipment as a designation or as a claim of ownership
other than that of Lessor; provided, however, that Lessee may cause such
Equipment to be lettered with the names or initials or other insignia
customarily used by Lessee on equipment used by it of the same or a similar
type for convenience or identification of its rights to use such Equipment
as permitted under this Lease or normal advertising displays.
10. Fees and Taxes. Lessee agrees to pay promptly when due, and
to indemnify and hold Lessor harmless from, all license, title and
registration fees whatsoever, all levies, imposts, duties, charges or
withholdings whatsoever, and all sales, use, personal property, stamp and
other taxes whatsoever (together with any penalties, fines or interest
thereon) whether assessed, levied or imposed by any governmental or taxing
authority against or upon Lessor or otherwise, with respect to any
Equipment or the purchase, acquisition, ownership, delivery, leasing,
possession, use, operation, control, return or other disposition thereof,
or the rents, receipts or earnings arising therefrom, or with respect to
this Lease, excluding, however, any federal, state or local taxes levied on
Lessor's net income (meaning "Taxable Income" as presently determined under
the Federal Internal Revenue Code). In the event any such fees, levies,
imposts, duties, charges or taxes are paid by Lessor, or if Lessor be
required to collect or pay any thereof, Lessee shall reimburse Lessor
therefor (plus any penalties, fines or interest thereon) promptly upon
demand. Lessor will file all personal property tax returns covering the
Equipment, and unless and until Lessor notifies Lessee in writing to the
contrary, Lessor will pay the personal property taxes levied or assessed
thereon directly to the levying authority. Lessee will, promptly upon being
invoiced by Lessor, reimburse Lessor for the full amount of such personal
property taxes so paid by Lessor. In the event Lessor should request Lessee
in writing to pay such personal property taxes directly, Lessee agrees that
it will do so promptly, upon receipt of such notice. All of the obligations
of Lessee under this Section with respect to any fees, levies, imposts,
duties, charges, withholdings and taxes (together with any penalties, fines
or interest thereon) assessed, levied, imposed or accrued prior to the
expiration or other termination of this Lease or the lease term of all
Equipment leased hereunder shall continue in full force and effect
notwithstanding such expiration or other termination and are expressly made
for the benefit of, and shall be enforceable by, Lessor.
11. Indemnification By Lessee. Lessee agrees to indemnify and
hold Lessor and assignee harmless against any and all claims, demands,
liabilities, losses, damages and injuries, of whatsoever kind, and all fees
(including attorneys' fees), costs, expenses, penalties and interest,
directly or indirectly relating to, resulting from, or in any way arising
from this Lease, out of
(a) Lessor's purchase, acquisition and ownership of, and
title to, any Equipment;
(b) the manufacture, purchase, delivery, installation,
possession, maintenance, condition (including, without
limitation, latent and other defects whether or not discoverable
by Lessor), use, operation, control, loss, damage, destruction,
removal, return, storage, surrender, sale or other disposition
of any Equipment; whether or not the Lessor is also indemnified
against such liabilities, claims, and demands by any
manufacturer or seller of any such equipment;
(c) any accident in connection with the possession,
operation, use, condition, control, return or storage of any
Equipment resulting in damage to property or injury to any
person or entity;
(d) all costs, charges, damages or expenses for royalties
and/or claims and expenses of litigation, arising out of or in
any way connected with the assertion of any claim or demand
based upon any infringement or alleged infringement of any
patent or other right, by or in respect of any Equipment;
(e) strict liability in tort;
(f) Lessee's failure to perform promptly any obligation
under this Lease; and
(g) the enforcement of this Lease.
The indemnification by Lessee under this Section 11 shall survive the payment of
all other obligations under, and the termination of, this Lease and the lease
term of all Equipment leased hereunder.
12. Use of Equipment. Lessee warrants and agrees that the
Equipment will at all times be used and operated under and in compliance
with the laws of the jurisdictions in which the Equipment may be located
and operated, and in compliance with all lawful acts, rules, regulations
and orders of any judicial, legislative or regulatory body having power to
regulate or supervise the use of the Equipment. Lessee shall not permit any
liens, charges or encumbrances to be placed on or levied against the
Equipment other than liens, charges or encumbrances placed thereon by
Lessor or by persons claiming against Lessor but not Lessee. Lessee agrees
to procure and maintain in effect all licenses, certificates, permits and
other approvals and consents required by federal, state, county, municipal,
or foreign laws and regulations in connection with the possession, use,
operation and maintenance of the Equipment. Lessee agrees that without
Lessor's prior written consent Lessee will not assign or transfer its
3
<PAGE>
rights under this Lease, or sublease any of the Equipment, or remove or
suffer any of the Equipment to be removed from the location specified in
the Rental Schedule for such Equipment, or permit any Equipment to be used
by anyone other than Lessee or Lessee's employees.
13. Improvement, Maintenance and Repair of Equipment. Lessee
will, at its own expense, (a) maintain the Equipment in good and safe
operating order, repair and condition, and in accordance with the
requirements of any governmental authority, domestic or foreign, having
jurisdiction thereof, (b) will pay for all fuel, service, inspections,
overhauls, replacements, substitutions, materials and labor necessary or
desirable for the proper use, repair, operation and maintenance of the
Equipment, and (c) will keep the Equipment protected from the elements when
not in use.
14. Loss, Damage or Destruction of Equipment. Lessee shall bear
all risks of damage to, or loss or destruction of, any Equipment during the
lease term thereof and until such Equipment has been returned to Lessor
pursuant to the provisions of Sections 17 or 19, whichever is applicable.
Except as otherwise herein expressly provided, no such damage to, or loss
or destruction of, any Equipment, shall impair any obligation of Lessee to
Lessor under this Lease, including, without limitation, the obligation to
pay rent. In the event that any item of Equipment shall become lost,
stolen, destroyed or irreparably damaged from any cause whatsoever, or if
any item of Equipment or Lessor's title thereto shall be requisitioned or
seized by any governmental authority (each such occurrence being
hereinafter called a "Casualty Occurrence") during the lease term of such
item and until such item has been returned to Lessor in accordance with the
provisions of Section 17 or 19 hereof, whichever is applicable, Lessee
shall promptly notify Lessor in writing of such fact, fully informing
Lessor of all details with respect thereto (including the identifying
number or numbers thereof) and shall, within thirty (30) days after such
Casualty Occurrence, pay Lessor an amount equal to the sum of (i) the
accrued rent payable for such item from the date of such Casualty
Occurrence up to and including the date of such payment, plus (ii) an
amount equal to the Full Replacement Cost, as hereinafter defined, of such
item as of the date of such Casualty Occurrence. Upon the making of such
payment by Lessee in respect to any item of Equipment, then, at the option
of Lessor, either (a) the rent for such item shall cease to accrue as of
the date of such payment, the lease term of such item shall terminate, and
all of Lessor's title to and rights in such item shall automatically pass
to Lessee, or (b) Lessor will replace such item of Equipment with another
item of like kind, and such replacement item shall be leased hereunder by
Lessee for the then remaining lease term (plus any permitted extensions
thereof) of the original item that sustained a Casualty Occurrence, and for
the same monthly rent as for such original item, and subject to all of the
other terms and conditions of this Lease. If the Full Replacement Cost has
already been paid by Lessee then Lessor shall reimburse Lessee for the
difference between the Full Replacement Cost and the actual cost to Lessor
to replace such item of Equipment otherwise such actual cost of replacing
an item of Equipment will continue to be owed by Lessee to Lessor and shall
be immediately due and payable. Any insurance proceeds received as the
result of a Casualty Occurrence with respect to an item of Equipment shall
be applied first in reduction of any then unpaid obligation of Lessee to
Lessor hereunder and secondly in reduction of Lessee's obligation to pay
the Full Replacement Cost or the actual cost of replacement whichever is
applicable for such item, plus the full amount of any purchase option price
given to Lessee herein or in any document related to this transaction, if
not already paid by Lessee to Lessor, or, if already paid by Lessee, to the
reimbursement of Lessee for its payment of such Full Replacement Cost, or
the actual cost of replacement whichever is applicable, and the balance of
the insurance proceeds, if any, shall be paid to Lessee, if Lessee is not
then in default hereunder. In the event that an item of Equipment has been
damaged, but not irreparably, Lessor shall, if no Event of Default has
occurred and is continuing hereunder, release to Lessee the proceeds of any
insurance received by Lessor as a result of such damage for the purpose of
reimbursing Lessee for the costs of repairing or restoring such item, upon
receipt by Lessor of evidence, satisfactory to Lessor, that such repair or
restoration has been completed, and an invoice therefor. The Full
Replacement Cost of an item of Equipment means, as of any date, an amount
equal to what the replacement cost to Lessor of such item would be on such
date which shall be at least equal to the remaining monthly rental payments
due under the Lease for such item of Equipment. Upon payment by Lessee of
the Full Replacement Cost or the actual replacement cost to Lessor as cited
above of an item of Equipment resulting from Casualty Occurrence, Lessor
shall apply such payment to the monthly rental payments in the inverse
order of maturity.
15. Annual Reports. On or before April 1 in each year,
commencing with the April 1 next following the date hereof, Lessee will
cause to be furnished to Lessor an accurate statement, as of the preceding
December 31, (a) showing such information regarding the condition and state
of repair of such items as Lessor may reasonably request, and (b)
certifying that all items of Equipment have been marked as required by
Section 9 hereof, and (c) certifying that all items of Equipment continue
to remain located at the premises specified on the Rental Schedules
therefor. Lessor shall have the right at its sole cost and expense, by its
authorized representatives upon reasonable notice to Lessee, to inspect the
items of Equipment and Lessee's records with respect thereto, at such times
as shall be reasonably necessary to confirm to Lessor the existence and
proper maintenance thereof during the continuance of this Lease.
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16. Insurance. Lessee will maintain, at its sole cost and
expense, at all times during the lease term of any Equipment, and until
such Equipment has been returned to Lessor in accordance with the
provisions of Section 17 or 19, whichever is applicable, with reputable
insurers acceptable to Lessor (a) insurance in an amount not less than the
Full Replacement Cost (hereinbefore defined) of each item of Equipment
leased hereunder, insuring against loss and/or damage to such Equipment
arising out of any risk covered by fire, windstorm, explosion, and extended
coverage, and against such other risks as are customarily insured against
by companies owning property of a similar character and engaged in a
business similar to that engaged in by Lessee, and (b) comprehensive public
liability and property damage insurance, in such amounts as may be
satisfactory to Lessor, insuring against liability for death, bodily injury
and property damage resulting from ownership, maintenance, use or operation
of the Equipment. All insurance policies shall (i) name Lessor as an
additional insured, with losses under the physical loss and/or damage
policies to be payable to Lessor and Lessee (and also to any assignee of
Lessor, if requested by such assignee) as their respective interests may
appear, (ii) provide that the policies will not be invalidated as against
Lessor (or against any assignee of Lessor) because of any violation of a
condition or warranty of the policy or application therefor by Lessee, and
(iii) provide that the policies may only be materially altered or cancelled
by the insurer after thirty (30) days prior written notice to Lessor and to
any assignee of Lessor. Lessee shall deliver to Lessor, prior to the Lease
Commencement Date for any item of Equipment (or at such other time or times
as Lessor may request) a certificate or other evidence of the maintenance
of all such insurance satisfactory to Lessor; provided however, that Lessor
shall be under no duty to examine such certificate or other evidence of
insurance, or to advise Lessee in the event that its insurance is not in
compliance with this Lease. In the event of failure on the part of Lessee
to provide and furnish any of the aforesaid insurance, Lessor may procure
such insurance and Lessee shall, upon demand, reimburse Lessor for all
expenditures made by Lessor for such insurance, together with interest
thereon computed at the maximum per annum rate of interest permitted by
law, from the date of Lessor's payment until reimbursed by Lessee. The
comprehensive physical loss or damage insurance policy or policies shall
also provide that upon receipt by the insurer from Lessor of any written
notice of the occurrence of an Event of Default hereunder, any proceeds
payable by said insurer with respect to any loss or destruction of, or
damage to, any Equipment, shall be payable solely to Lessor (and to any
assignee of Lessor, if requested by such assignee) from the date of said
insurer's receipt of such written notice, up to the date said insurer
receives written notice from the Lessor that said Event of Default is no
longer continuing hereunder.
17. Return of Equipment. Upon the expiration or termination of
the lease term of any Equipment, whether by the passage of time or
otherwise, Lessee will forthwith surrender and return possession of such
Equipment to Lessor, in its original condition as of the Lease Commencement
Date therefor, reasonable wear and tear only being excepted, by (a)
properly preparing, crating and/or assembling such Equipment for shipment
by common carrier, and (b) shipping such Equipment by common carrier, with
insurance and freight prepaid, to a place designated by Lessor.
18. Lessor's Ownership; Equipment to be and Remain Personal
Property. Lessee acknowledges and agrees that it has not, and by the
execution of this Lease it does not have or obtain, and by payments and
performance hereunder it does not and will not have or obtain, any title to
the Equipment, nor any property right or interest, legal or equitable,
therein, except its rights as Lessee hereunder and subject to the terms
hereof. It is expressly understood that all of the Equipment shall be and
remain personal property notwithstanding the manner in which the Equipment
may be attached or affixed to the realty, and that upon the expiration or
other termination of the lease term of any Equipment, Lessee shall have the
obligation, and Lessor shall have the right, to remove or to cause the
removal of, such Equipment, from the premises whereon the same is then
located, for return to Lessor pursuant to the provisions of Section 17
hereof, whether or not any such Equipment is affixed or attached to the
realty or to any building, and, in the exercise of its said right, Lessor
shall not be liable for any damage caused to the realty or any such
building occasioned by any removal of the Equipment therefrom by Lessor or
its agents. Lessee further covenants and agrees that Lessee will, at the
request of Lessor, obtain and deliver to Lessor concurrently with the
execution and delivery of each Rental Schedule, a waiver, in recordable
form, from the owner and any lessor, lessee and the holder of any lien or
encumbrance on the realty or building(s) on or in which any of the
Equipment described in each such Rental Schedule is located or through
which it passes, under which such owner, lessor, lessee and holder (i)
agree and consent that such Equipment is and will remain personal property,
owned by and removable by Lessor upon the expiration or termination of the
lease term thereof, and (ii) waive any rights of distraint or similar
rights with respect to such Equipment. If Lessee is unable to return, or is
prevented from returning, any Equipment to Lessor upon the expiration or
termination of the lease term thereof as required under Section 17 hereof,
for any reason whatsoever, including, but not limited to, the assertion by
any third party of any claim against such Equipment, or of any right with
respect thereto, whether or not resulting from the manner in which such
Equipment is affixed or attached to, or installed on or in, the realty or
any building(s) thereon, or from the failure of any owner, lessor, lessee
of said realty (or the building(s) thereon) or the holder of any lien or
encumbrance thereon, to execute the waiver hereinbefore referred to, then,
in any such event, Lessee shall forthwith notify Lessor in writing of such
fact, such Equipment shall, for all purposes of this Lease, be deemed to
have been the subject of a Casualty Occurrence, and Lessee shall forthwith
pay Lessor the amounts provided in Section 14 hereof, with respect to such
Equipment, at the time, in the manner, and with the consequences provided
in such Section.
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19. Events of Default. If, during the continuance of this Lease,
one or more of the following events (herein called "Events of Default") shall
occur:
A. Default shall be made in the payment of any rent hereunder,
or default shall be made in the payment of any other obligation provided
for in this Lease, and any such default shall continue for more than five
(5) days;
B. Lessee shall default in the observance and/or performance of
any other covenant, condition and agreement on the part of Lessee to be
observed and/or performed under this Lease and such default shall continue
for fifteen (15) days after written notice from Lessor to Lessee specifying
the default and demanding the same to be remedied;
C. Any representation or warranty made by Lessee herein or in
any document or certificate furnished to Lessor in connection herewith or
pursuant hereto shall at any time prove to be incorrect when made in any
material respect;
D. Lessee shall make or permit any unauthorized assignment or
transfer of this Lease or of Lessee's rights and obligations hereunder, or
Lessee shall make or permit any unauthorized sublease or transfer of any
Equipment, or of the possession of same;
E. Lessee shall make an assignment for the benefit of its
creditors, or cease being in substantially the same line or lines of
business in which Lessee is presently engaged, or cease doing business as a
going concern, or become insolvent or bankrupt or default by Lessee in
meeting its trade, tax, borrowing, or other obligations as they mature, or
consent to the appointment of a trustee or receiver, or a trustee or a
receiver shall be appointed for Lessee or for a substantial part of
Lessee's property without Lessee's consent and such appointment shall not
be dismissed for a period of thirty (30) days, or bankruptcy,
reorganization, insolvency, arrangement, or liquidation proceedings shall
be instituted by or against Lessee and, if instituted against Lessee, shall
not be discharged or dismissed for a period of fifteen (15) days, or
Lessee's corporate existence or the business of Lessee shall terminate by
liquidation, merger, or sale of substantially all assets or the acquisition
of a majority of the then issued and outstanding voting capital stock of
Lessee by any person, entity or group who are not such owners on the date
of execution hereof; or
F. Lessee shall relocate the equipment in any manner not
consistent with Section 12.
G. Any obligation of Lessee for the payment of borrowed money or
for the acquisition of assets by lease, conditional sale or similar
arrangement, shall not be paid or refinanced at maturity, whether by
acceleration or otherwise, or shall be declared to be due and payable prior
to the stated maturity thereof by reason of default or other violation of
the terms of any promissory note, indenture or agreement evidencing or
governing such obligation;
H. Default under the mortgage and security agreement given by
the Lessee to the Lessor of even date herewith or under any other mortgage
encumbering in said property in the mortgage and security agreement.
then, in any such case, Lessor, at its option, may do any one or more of the
following:
(1) declare this Lease in default upon written notice to
Lessee, whereupon, the entire amount of rent remaining to be paid over the
balance of the lease term of all Equipment then leased hereunder, computed
from the date of Lessee's default, shall become immediately due and
payable;
(2) proceed by appropriate court action or actions at law or
in equity or in bankruptcy to enforce performance by Lessee of the
covenants and terms of this Lease and/or to recover damages for the breach
thereof;
(3) terminate this Lease upon written notice to Lessee;
(4) whether or not this Lease be so terminated, and without
notice to Lessee, repossess the Equipment wherever found, with or without
legal process, and for this purpose Lessor and/or its agents may enter upon
any premises of or under the control or jurisdiction of Lessee or any agent
of Lessee without liability for suit, action or other proceeding by Lessee
(any damages occasioned by such repossession being hereby expressly waived
by Lessee) and remove the Equipment therefrom.
With respect to any Equipment returned to Lessor, or repossessed by
Lessor pursuant to subparagraph (4) above, Lessor may hold or use such Equipment
for any purpose whatsoever, or may sell same at a private or public, cash or
credit sale, or may re-lease same for such term and upon such rental as shall be
solely determined by Lessor. In the event of the sale or re-leasing by Lessor of
any such Equipment, Lessee shall be liable for, and Lessor may forthwith recover
from Lessee as liquidated damages for breach of this Lease, and not as a
penalty, an amount equal to the sum of (X) the entire amount of rent which would
have accrued for the balance of the lease term of such Equipment, computed from
the date of Lessee's default, plus (Y) an amount equal to eighteen percent (18%)
of the actual cost to Lessor of such Equipment, less (Z) the proceeds of any
sale or re-leasing of such Equipment, after first deducting therefrom all costs
and expenses of repossession, storage, repairs, reconditioning, sale,
re-leasing, attorneys' fees and collection fees with respect to such Equipment.
If Lessee fails to deliver any Equipment to Lessor or Lessor is
unable, for any reason, to effect repossession of any Equipment, then, with
respect to such Equipment, Lessee shall be liable for, and Lessor may forthwith
recover from Lessee as liquidated damages for breach of this Lease, and not as a
penalty, an amount equal to the sum of the amounts specified in items (X) and
(Y) above for such Equipment.
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Whether or not any Equipment is returned to, or repossessed by Lessor,
as aforesaid, Lessee shall also be liable for, and Lessor may forthwith recover
from Lessee, all unpaid rent and other unpaid sums that accrued prior to the
date of Lessee's default. In addition to the foregoing, Lessor may also recover
from Lessee all costs and expenses, including, without limitation, reasonable
attorneys' fees and fees of collection agencies, incurred by Lessor in
exercising any of its right or remedies hereunder.
Since pursuant to the foregoing Lessor may receive or recover payment
of the amounts specified in subparagraph (1) and items (X) and (Y) above earlier
than Lessor would otherwise be entitled to receive or recover same but for
Lessee's default, such amounts shall be discounted to their then present value
at the rate of six percent (6%) per annum, and there shall be added to such
amounts, after such discount, interest at the rate specified in Section 23.1
hereof from the date of Lessee's default up to the date of the payment of such
amounts of Lessor.
In the event that any court of competent jurisdiction determines that
any provision of this Section 19 is invalid or unenforceable in whole or in
part, such determination shall not prohibit Lessor from establishing its damages
sustained as a result of any breach of this Lease in any action or proceeding in
which Lessor seeks to recover such damages. Any repossession or resale of any
Equipment shall not bar an action for damages for breach of this Lease, as
hereinbefore provided, and the bringing of an action or the entry of judgment
against Lessee shall not bar Lessor's right to repossess any or all Equipment.
The remedies herein provided in favor of Lessor, shall not be deemed
to be exclusive, but shall be cumulative and shall be in addition to all other
remedies in Lessor's favor existing in law, in equity or in bankruptcy.
20. Assignment and Mortgage. (a) Lessor may assign this Lease, and may
grant a mortgage on, or security interest in, any Equipment to any such
assignee, in whole or in part, without notice to, or the consent of, Lessee.
Each such assignee shall have all of the rights but none of the obligations of
Lessor under this Lease and Lessee shall, upon receipt of written notice
thereof, recognize each such assignment and mortgage or security interest and
shall accept and comply with the directions or demands given in writing by any
such assignee. Lessee shall not assert against such assignee any defense,
counter-claim or set-off that Lessee may have against Lessor. However, nothing
herein shall relieve Lessor from its obligations to Lessee hereunder. After any
such assignment this Lease may not be amended or modified without the prior
written consent of any such assignee. Upon any assignment of this Lease or the
granting of any mortgage on, or security interest in, any of the Equipment,
Lessor or its assignee may record any instruments relating to the assignment,
mortgage, or security interest desired by Lessor or such assignee in accordance
with the laws of appropriate jurisdictions. (b) Without prior written consent of
Lessor, Lessee shall not assign, pledge, mortgage or hypothecate this lease or
any of its rights under this Lease or sell or sublet any Equipment leased
hereunder or otherwise permit any Equipment to be used by or come into the
possession of anyone other than Lessee.
21. Recording and Filing; Expenses. Lessee will, upon demand of
Lessor, at Lessee's cost and expense, do and perform any other act and will
execute, acknowledge, deliver, file, register, record and deposit (and will
re-file, re-register, re-record or re-deposit whenever required) any and all
further instruments required by law in the United States or requested by Lessor
(or any assignee of Lessor) including, without limitation, lien search fees,
financing statements under the Uniform Commercial Code (which, notwithstanding
the intent of Lessor and Lessee that this is a true lease, Lessor, shall have
the right to file wherever and whenever Lessor requires), for the purpose of
proper protection to the satisfaction of Lessor, (and/or of Lessor's assignee)
of Lessor's title to any Equipment (and/or of Lessor's assignee's security
interest, if any, in any of the Equipment) or for the purpose of carrying out
the intention of this Lease. Lessee will also pay, or will upon demand reimburse
Lessor, for all of the reasonable out-of-pocket costs and expenses incurred by
Lessor in connection with this Lease and/or Lessor's purchase of any of the
Equipment for lease hereunder, and for all fees and costs of any attorney
specially retained by Lessor to take any action or proceeding to enforce the
terms of this Lease.
22. Financial Statements. If so requested by Lessor, Lessee will
furnish Lessor unaudited quarterly financial statements of Lessee within sixty
(60) days after the end of each quarter, certified to be true and correct by its
chief financial officer, and will also furnish Lessor, within one hundred twenty
(120) days after the close of each fiscal year of Lessee, a consolidated Balance
Sheet and Profit and Loss Statement as of the end of such year, certified by the
independent public accountants of Lessee.
23. Miscellaneous.
23.1 Late Charges and Interest on Overdue Payments. Any nonpayment of
rent or other amounts due hereunder shall result in the obligation on the part
of Lessee promptly to pay also an amount equal to five percent (5%) per payment
of the overdue rent or other amounts for the period of time during which they
are overdue. In addition, any sum due which is more than 30 days in arrears
shall accrue interest at the lesser of 18% per annum or the highest rate
permitted by applicable law. All payments hereunder shall be applied first to
any accrued interest, then to any late charges then due, then to any other
amounts due, and the remaining balance to any rent due.
23.2 Notices. Any notice required or permitted to be given by either
party hereto to the other shall be deemed to have been given when deposited in
the United States mails, first-class postage prepaid, addressed to either party
at its address set forth herein, or to such other address as either party shall
hereafter furnish to the other in writing.
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23.3 Entire Agreement; Severability; Effect and Modification of Lease.
This Lease and any Schedules executed by Lessor and Lessee shall
constitute the entire agreement between the parties with respect to the
Equipment and the subject matter of this Lease. No term or provision of
this Lease may be changed, waived, amended or terminated except by a
written agreement signed by the parties, except that Lessor may insert
the serial number of any item of Equipment and the Commencement Date on
the appropriate Schedule after delivery thereof and receipt of an
Acceptance Certificate with respect thereto. No express or implied waiver
by Lessor of any Event of Default shall in any way be, or construed to
be, a waiver of any future or subsequent Event of Default whether similar
in kind or otherwise. The titles of the sections of this Lease are for
convenience only and shall not define or limit any of the terms or
provisions hereof. Time is of the essence in this Lease and all of its
provisions. Except as expressly provided in any Schedule or Rider hereto,
no options to purchase any of the Equipment or extend the term of this
Lease with respect to any Equipment have been granted or agreed to by
Lessor. No information, exhibit or report furnished or to be furnished by
the Lessee to the Lessor in connection with the negotiation of this Lease
and the transactions contemplated hereby contains or will contain any
material misstatement of fact or omits or will omit a material fact
necessary to make the statement contained therein not misleading when
made. The Lessee is not aware of any material facts or circumstances not
disclosed to the Lessor which might, if disclosed, be of material
consequence in the credit evaluation of the Lessee by the Lessor. If this
Lease is signed by more than one Lessee, then each Lessee shall be
jointly and severally liable for all obligations to be performed by
Lessee hereunder. Any provision of this Lease which is prohibited or
unenforceable in any jurisdiction, shall be, as to such jurisdiction,
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
23.4 Execution in Counterparts.
This Lease may be executed in several counterparts, each of which so
executed shall be deemed to be an original, and in each case such
counterparts together shall constitute but one and the same instrument.
23.5 Venue; Governing Law.
This Lease shall be considered a Massachusetts contract and shall be
deemed to have been made in Middlesex County, Massachusetts, by Lessor
having countersigned this Lease in the Commonwealth of Massachusetts
regardless of the order in which the signatures of the parties shall be
affixed hereto. This agreement shall in all respects be governed by and
construed in accordance with the law of the Commonwealth of
Massachusetts, including, without limitation, all matters of
construction, validity and performance. Lessee specifically submits to
the personal jurisdiction of the courts, both state and federal, of the
Commonwealth of Massachusetts.
23.6 Lessor's Rights to Perform for Lessee.
If Lessee fails to duly and promptly perform any of its obligations under
this Lease (except for payment of rent) or fails to comply with any of
the covenants or agreements contained herein, Lessor may itself perform
such obligations or comply with such covenants or agreements, for the
account of Lessee without thereby waiving any default, and any amount
paid or expense (including reasonable attorney's fees) incurred by Lessor
in connection with such performance or compliance shall, together with
interest thereon at the lesser of 18% per annum or the highest rate
permitted by applicable law, be payable by Lessee to Lessor on demand.
23.7 Agreement for Lease Only.
Lessor and Lessee agree that this Lease is and is intended to be a true
lease (and not a lease intended as security or a lease in the nature of a
security interest) and further agree to treat same as a true lease for
all purposes, including, without limitation, legal, tax, clerical and
accounting.
23.8 Multiple Lessees.
In the event that more than one Lessee is named in this Lease the
liability of each Lessee hereunder shall, without limitation, be joint
and several.
IN WITNESS WHEREOF, Lessor and Lessee, each pursuant to due corporate authority,
have caused these presents to be signed in their respective corporate names by
their duly authorized officers and their respective corporate seals to be
hereunto affixed and duly attested, as of the date first above written.
[Corporate Seal] TAL Financial Corporation
Attest:
By:
------------------------------------
(Authorized Signature)
By:
------------------------
Clerk
Its: Howard D. Siegel, President
-----------------------------------
(Title)
[Corporate Seal] Information Management Associates, Inc.
---------------------------------------
(Lessee)
Attest:
By: [SIGNATURE APPEARS HERE]
------------------------------------
(Authorized Signature)
By: [SIGNATURE APPEARS HERE]
-----------------------------
Secretary
Its: Michael T. Dylag, Vice President
-----------------------------------
of Finance
-----------------------------------
(Title)
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EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
(and to all references to our Firm) included in or made a part of this
registration statement.
/s/ Arthur Andersen LLP
Hartford, Connecticut
March 21, 1997
