SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Information Management Associates, Inc.
---------------------------------------
(Name of Issuer)
Common Stock, without par value
-------------------------------
(Title of Class of Securities)
0004569231
--------------------
(CUSIP Number)
David J. Callard
Wand Partners LLC
630 Fifth Avenue
New York, New York 10011
(212) 632-3795
------------------------------
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
August 12, 1999
------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this Schedule because of Rule 13d-1(b)(3) or (4), check the following
box: [ ]
Check the following box if a fee is being paid with this statement:
[X]
<PAGE>
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CUSIP No. 0004569231 13D Page 2 of 23 Pages
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON
Wand/IMA Investments, L.P.
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) ( )
(b) ( )
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS
OO
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e)
( )
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
State of Delaware
- --------------------------------------------------------------------------------
NUMBER OF 7. SOLE VOTING POWER
SHARES 0
BENEFICIALLY ------------------------------------------------------------
OWNED BY 8. SHARED VOTING POWER
EACH 2,222,430
REPORTING ------------------------------------------------------------
PERSON 9. SOLE DISPOSITIVE POWER
WITH 0
------------------------------------------------------------
10. SHARED DISPOSITIVE POWER
2,222,430
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
2,222,430 (See Item 5)
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES
( )
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
18.0%
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON
PN
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
CUSIP No. 0004569231 13D Page 3 of 23 Pages
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON
Wand/IMA Investments II L.P.
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) ( )
(b) ( )
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS
OO
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e)
( )
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
State of Delaware
- --------------------------------------------------------------------------------
NUMBER OF 7. SOLE VOTING POWER
SHARES 0
BENEFICIALLY ------------------------------------------------------------
OWNED BY 8. SHARED VOTING POWER
EACH 168,522
REPORTING ------------------------------------------------------------
PERSON 9. SOLE DISPOSITIVE POWER
WITH 0
------------------------------------------------------------
10. SHARED DISPOSITIVE POWER
168,522
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
168,522 (See Item 5)
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES
( )
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
1.4%
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON
PN
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
CUSIP No. 0004569231 13D Page 4 of 23 Pages
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON
Wand/IMA Investments III L.P.
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) ( )
(b) ( )
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS
OO
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e)
( )
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
State of Delaware
- --------------------------------------------------------------------------------
NUMBER OF 7. SOLE VOTING POWER
SHARES 0
BENEFICIALLY ------------------------------------------------------------
OWNED BY 8. SHARED VOTING POWER
EACH 466,076
REPORTING ------------------------------------------------------------
PERSON 9. SOLE DISPOSITIVE POWER
WITH 0
------------------------------------------------------------
10. SHARED DISPOSITIVE POWER
466,076
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
466,076
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES
( )
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
3.8%
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON
PN
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
CUSIP No. 0004569231 13D Page 5 of 23 Pages
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON
Wand Partners (S.C.) Inc.
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) ( )
(b) ( )
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS
OO
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e)
( )
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
State of Delaware
- --------------------------------------------------------------------------------
NUMBER OF 7. SOLE VOTING POWER
SHARES 0
BENEFICIALLY ------------------------------------------------------------
OWNED BY 8. SHARED VOTING POWER
EACH 2,425,660
REPORTING ------------------------------------------------------------
PERSON 9. SOLE DISPOSITIVE POWER
WITH 0
------------------------------------------------------------
10. SHARED DISPOSITIVE POWER
2,425,660
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
2,425,660
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES
( )
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
19.6%
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON
CO
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
CUSIP No. 0004569231 13D Page 6 of 23 Pages
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON
Wand (IMA) Inc.
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) ( )
(b) ( )
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS
OO
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e)
( )
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
State of Delaware
- --------------------------------------------------------------------------------
NUMBER OF 7. SOLE VOTING POWER
SHARES 0
BENEFICIALLY ------------------------------------------------------------
OWNED BY 8. SHARED VOTING POWER
EACH 634,598
REPORTING ------------------------------------------------------------
PERSON 9. SOLE DISPOSITIVE POWER
WITH 0
------------------------------------------------------------
10. SHARED DISPOSITIVE POWER
634,598
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
634,598 (See Item 5)
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES
( )
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.1%
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON
CO
- --------------------------------------------------------------------------------
<PAGE>
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CUSIP No. 0004569231 13D Page 7 of 23 Pages
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON
Wand Equity Portfolio II L.P.
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) ( )
(b) ( )
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS
OO
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e)
( )
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
State of Delaware
- --------------------------------------------------------------------------------
NUMBER OF 7. SOLE VOTING POWER
SHARES 0
BENEFICIALLY ------------------------------------------------------------
OWNED BY 8. SHARED VOTING POWER
EACH 824,104
REPORTING ------------------------------------------------------------
PERSON 9. SOLE DISPOSITIVE POWER
WITH 0
------------------------------------------------------------
10. SHARED DISPOSITIVE POWER
824,104
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
824,104 (See Item 5)
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES
( )
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
6.7%
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON
PN
- --------------------------------------------------------------------------------
<PAGE>
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CUSIP No. 0004569231 13D Page 8 of 23 Pages
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON
Wand Affiliates Fund L.P.
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) ( )
(b) ( )
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS
OO
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e)
( )
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
State of Delaware
- --------------------------------------------------------------------------------
NUMBER OF 7. SOLE VOTING POWER
SHARES 0
BENEFICIALLY ------------------------------------------------------------
OWNED BY 8. SHARED VOTING POWER
EACH 47,688
REPORTING ------------------------------------------------------------
PERSON 9. SOLE DISPOSITIVE POWER
WITH 0
------------------------------------------------------------
10. SHARED DISPOSITIVE POWER
47,688
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
47,688
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES
( )
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.4%
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON
PN
- --------------------------------------------------------------------------------
<PAGE>
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CUSIP No. 0004569231 13D Page 9 of 23 Pages
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON
Wand Partners LLC
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) ( )
(b) ( )
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS
OO
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e)
( )
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
State of Delaware
- --------------------------------------------------------------------------------
NUMBER OF 7. SOLE VOTING POWER
SHARES 0
BENEFICIALLY ------------------------------------------------------------
OWNED BY 8. SHARED VOTING POWER
EACH 824,104
REPORTING ------------------------------------------------------------
PERSON 9. SOLE DISPOSITIVE POWER
WITH 0
------------------------------------------------------------
10. SHARED DISPOSITIVE POWER
824,104
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
824,104 (See Item 5)
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES
( )
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
6.7%
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON
OO
- --------------------------------------------------------------------------------
<PAGE>
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CUSIP No. 0004569231 13D Page 10 of 23 Pages
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON
Wand AF LLC
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) ( )
(b) ( )
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS
OO
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e)
( )
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
State of Delaware
- --------------------------------------------------------------------------------
NUMBER OF 7. SOLE VOTING POWER
SHARES 0
BENEFICIALLY ------------------------------------------------------------
OWNED BY 8. SHARED VOTING POWER
EACH 47,688
REPORTING ------------------------------------------------------------
PERSON 9. SOLE DISPOSITIVE POWER
WITH 0
------------------------------------------------------------
10. SHARED DISPOSITIVE POWER
47,688
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
47,688
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES
( )
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.4%
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON
OO
- --------------------------------------------------------------------------------
<PAGE>
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CUSIP No. 0004569231 13D Page 11 of 23 Pages
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON
Bruce W. Schnitzer
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) ( )
(b) ( )
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS
OO
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e)
( )
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
United States of America
- --------------------------------------------------------------------------------
NUMBER OF 7. SOLE VOTING POWER
SHARES 21,335
BENEFICIALLY ------------------------------------------------------------
OWNED BY 8. SHARED VOTING POWER
EACH 3,736,528
REPORTING ------------------------------------------------------------
PERSON 9. SOLE DISPOSITIVE POWER
WITH 21,335
------------------------------------------------------------
10. SHARED DISPOSITIVE POWER
3,763,528
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
3,784,863
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES
( )
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
30.7%
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON
IN
- --------------------------------------------------------------------------------
<PAGE>
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CUSIP No. 0004569231 13D Page 12 of 23 Pages
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON
David J. Callard
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) ( )
(b) ( )
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS
OO
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e)
( )
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
United States of America
- --------------------------------------------------------------------------------
NUMBER OF 7. SOLE VOTING POWER
SHARES 25,875
BENEFICIALLY ------------------------------------------------------------
OWNED BY 8. SHARED VOTING POWER
EACH 955,979
REPORTING ------------------------------------------------------------
PERSON 9. SOLE DISPOSITIVE POWER
WITH 25,875
------------------------------------------------------------
10. SHARED DISPOSITIVE POWER
955,979
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
981,854 (See Item 5)
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES
[X]
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
8.0%
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON
IN
- --------------------------------------------------------------------------------
<PAGE>
Item 1. SECURITY AND ISSUER
This statement relates to the common stock (the "Common Stock"),
without par value, of Information Management Associates, Inc., a Connecticut
corporation ("IMA"), whose principal executive offices are located at One
Corporate Drive, Suite 414, Shelton, Connecticut 06484.
Item 2. IDENTITY AND BACKGROUND
This Schedule 13D is being jointly filed by (collectively, the "Filing
Persons") Wand/IMA Investments L.P., a Delaware limited partnership ("Wand- I"),
Wand/IMA Investments II L.P., a Delaware limited partnership ("Wand-II"),
Wand/IMA Investments III L.P., a Delaware limited partnership ("Wand-III"), Wand
Partners (S.C.) Inc., a Delaware corporation ("WPI"), Wand (IMA) Inc., a
Delaware corporation ("Wand (IMA)"), Wand Equity Portfolio II L.P. ("WEP"), a
Delaware limited partnership, Wand Affiliates Fund L.P. ("WAF"), a Delaware
limited partnership, Wand Partners LLC, a Delaware limited liability company
("Wand LLC"), Wand AF LLC, a Delaware limited liability company ("Wand AF"),
Bruce W. Schnitzer and David J. Callard. WPI is 66% owned by Mr. Schnitzer. Wand
(IMA) is 50.55% owned by Mr. Schnitzer. Mr. Callard owns a minority equity
interest in WPI and Wand (IMA). The general partner of Wand-I is WPI. The
general partners of Wand II are WPI and Wand (IMA). The general partner of Wand
III is Wand (IMA). Wand LLC is the general partner of WEP. Wand AF is the
general partner of WAF and is 66% owned by Mr. Schnitzer. Mr. Callard owns a
minority equity interest in Wand AF. WPI is also the general partner and owner
of 49.99% of Wand Partners L.P., a Delaware limited partnership ("WPLP"), which
is a limited partner of Wand-I and Wand-II and has a carried interest on certain
partnership distributions by these two partnerships (including those resulting
from the sale of securities of the Issuer by the partnerships). WPI also has a
carried interest on certain partnership distributions of Wand-I (including those
resulting from the sale of securities of the Issuer by Wand-I). Mr. Schnitzer is
the Chairman of WPI and Mr. Callard is the President of WPI. Mr. Schnitzer and
Mr. Callard are the only members of the board of directors of WPI. Mr. Schnitzer
and Mr. Callard each own limited partnership interests in Wand-I, Wand-III and
WAF. Mr. Schnitzer, Mr. Callard and John S. Struck are the managing members of
Wand LLC. The following individuals serve as officers of Wand (IMA): Mr.
Schnitzer (Chairman), Mr. Callard (President), Mr. Struck (Vice President) and
Malcolm P. Appelbaum (Vice President). Mr. Schnitzer and Mr. Callard are the
managing members of Wand AF.
Mr. Schnitzer's present principal occupation is as the Chairman of
Wand Partners Inc. Mr. Callard's present principal occupation is as the
President of Wand Partners Inc. Mr. Struck's present principal occupation is as
Vice President of Wand Partners Inc. Mr. Appelbaum's present principal
occupation is as Vice President of Wand Partners Inc. Wand Partners Inc.
provides management services to Wand LLC as general partner of WEP.
<PAGE>
The principal business address of all of the Filing Persons, Mr.
Struck and Mr. Appelbaum is Wand Partners Inc., 630 Fifth Avenue, Suite 2435,
New York, New York, 10111.
Neither any of the Filing Persons, nor, to the knowledge of any of the
Filing Persons, neither Mr. Struck nor Mr. Appelbaum, has, during the last five
years (i) been convicted in a criminal proceeding (excluding traffic violations
or similar misdemeanors) or (ii) been a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to a judgement, decree, or final order
enjoining future violations of or prohibiting or mandating activities subject
to, United States federal or state securities laws or finding any violations
with respect to such laws.
Mr. Schnitzer, Mr. Callard, Mr. Struck and Mr. Appelbaum are all
citizens of the United States.
Item 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
Pursuant to the Senior Subordinated Promissory Note and Warrant
Purchase Agreement, dated as of August 12, 1999, a copy of which is attached
hereto as Exhibit 2 (the "Purchase Agreement"), among IMA, WAF and WEP, WAF and
WEP loaned IMA an aggregate of $5,000,000 in cash and acquired a Common Stock
Purchase Warrant, a copy of which is attached hereto as Exhibit 3, to purchase
an aggregate of 425,000 shares of Common Stock of IMA.
In addition, in connection with an aggregate of $2,000,000 investment
in buyingedge.com inc., a subsidiary of IMA, WEP received warrants to purchase
117,417 shares of Common Stock of IMA and WAF received warrants to purchase
6,795 shares of Common Stock of IMA. A copy of the Warrant to Purchase Common
Stock in favor of WEP is attached hereto as Exhibit 4. A copy of the Warrant to
Purchase Common Stock in favor of WAF is attached hereto as Exhibit 5. In
connection with the buyingedge.com inc. investment, WEP and WAF also entered
into Option Agreements (the "Option Agreements") pursuant to which WEP received
options to purchase 304,935 shares of Common Stock of IMA and WAF received
options to purchase 17,645 shares of Common Stock of IMA. A copy of the Option
Agreement among WEP, IMA and buyingedge.com inc. is attached hereto as Exhibit
6. A copy of the Option Agreement among WAF, IMA and buyingedge.com inc. is
attached hereto as Exhibit 7.
All of the funds paid by WEP and WAF discussed in this Item 3 came
from equity contributions to each of WEP and WAF from their respective general
and limited partners.
<PAGE>
Item 4. PURPOSE OF TRANSACTION
Pursuant to the Purchase Agreement, WAF and WEP provided bridge
financing to IMA in the form of a Senior Subordinated Convertible Promissory
Note, dated August 12, 1999, a copy of which is attached hereto as Exhibit 8
(the "Note"). Under certain circumstances, the Note may be converted into Series
C Convertible Preferred Stock of IMA. Additionally, WAF and WEP acquired the
warrants to purchase an aggregate 425,000 shares of Common Stock of IMA for
investment purposes in connection with the bridge financing transaction. The
bridge financing transaction is discussed more fully in Item 6 below.
In connection with WAF and WEP's investment in buyingedge.com inc.,
(i) WEP acquired warrants to purchase 117,417 shares of Common Stock of IMA and
options to purchase 304,935 shares of Common Stock of IMA and (ii) WAF acquired
warrants to purchase 6,795 shares of Common Stock of IMA and options to purchase
17,645 shares of Common Stock of IMA. The Option Agreements provide that
concurrent with WAF's or WEP's exercise of their options to purchase shares of
common stock of IMA, WAF or WEP, as applicable, must redeem all of its interests
in the Series A Preferred Stock of buyingedge.com inc. WAF and WEP acquired the
warrants and options for investment purposes in connection with its investment
in buyingedge.com inc.
The Filing Persons intend to review their respective investments in
IMA on a continuing basis and may, at any time, consistent with federal and
state securities laws, determine to increase or decrease its ownership of shares
of Common Stock through purchases or sales of shares of Common Stock in the open
market or in privately-negotiated transactions. The Filing Persons' review of
their respective investments in IMA will depend on various factors, including
IMA's business prospects, other developments concerning IMA, general economic
conditions, money and stock market conditions and any other facts and
circumstances which may become known to the Filing Persons regarding their
respective investments in IMA.
None of the filing persons has any plans or proposals which relate to,
or could result in any of the matters referred to in paragraphs (b) through (j)
of Item 4 of Schedule 13D, except as discussed more fully in Item 6 below.
Item 5. INTEREST IN SECURITIES OF THE ISSUER
As of August 12, 1999, 2,222,430 shares of Common Stock, or 18.0% of
the total outstanding shares on that date, were held by Wand-I; 168,522 shares
of Common Stock, or 1.4% of the total outstanding shares on that date, were held
by Wand-II; 466,076 shares of Common Stock, or 3.8% of the total outstanding
shares on that date were held by Wand-III; 34,708 shares of Common Stock, or
0.3% of the total outstanding shares on that date, were held by WPI; warrants to
acquire 519,169 shares of Common Stock, or 4.2% of the total outstanding shares
<PAGE>
on that date were held by WEP and options to acquire 304,935 shares of Common
Stock, or 2.5% of the total outstanding shares on that date were held by WEP;
warrants to acquire 30,043 shares of Common Stock, or 0.2% of the total
outstanding shares on that date were held by WAF and options to acquire 17,645
shares of Common Stock, or 0.1% of the total outstanding shares on that date,
were held by WAF; 21,335 or 0.2% of the total outstanding shares on that date
were held directly by Mr. Schnitzer; and 157,750 or 1.3% of the total
outstanding shares on that date were owned by Mr. Callard, consisting of 131,875
shares of Common Stock owned indirectly by Mr. Callard through a living trust of
which he is co-trustee and options to acquire 25,875 shares of Common Stock
owned directly by Mr. Callard. Because of the relationships described above,
pursuant to Rule 13d-1, WPI may be deemed the beneficial owner of an aggregate
of 2,425,660 shares, or 19.6% of the total outstanding shares on that date,
consisting of the shares owned by itself, Wand-I and Wand-II. Because of the
relationships described above, pursuant to Rule 13d-1, Wand (IMA) may be deemed
the beneficial owner of an aggregate of 634,598 shares, or 5.1% of the total
outstanding shares on that date, consisting of the shares owned by Wand-II and
Wand-III. Because of the relationships described above, pursuant to Rule 13d- 1,
Mr. Schnitzer may be deemed the beneficial owner of an aggregate of 3,784,867
shares, or 30.7% of the total shares outstanding on that date, consisting of
shares owned by himself, Wand-I, Wand-II, Wand-III and WPI and the shares
underlying the warrants and options owned by WEP and WAF. Because of the
relationships described above, pursuant to Rule 13d-1, Wand LLC may be deemed
the beneficial owner of warrants and options to purchase an aggregate of 824,104
shares, or 6.7% of the total shares outstanding on that date, consisting of
warrants and options owned by WEP. Because of the relationships described above,
pursuant to Rule 13d-1, Wand AF may be deemed the beneficial owner of warrants
and options to purchase an aggregate of 47,688 shares, or 0.4% of the total
shares outstanding on that date, consisting of warrants and options owned by
WAF. Because of the relationships described above, pursuant to Rule 13d-1, Mr.
Callard may be deemed the beneficial owner of an aggregate of 981,854 shares, or
8.0% of the total shares outstanding on that date, consisting of the shares
owned indirectly by him through a living trust of which he is co-trustee, the
shares underlying the options owned by him and the shares underlying the
warrants and options owned by WEP, but excluding shares beneficially owned by
each of WPI, Wand (IMA) and Wand AF, each of which is controlled by Mr.
Schnitzer but in which Mr. Callard has a minority equity interest.
Because of the relationships described above, the reporting persons
may be deemed to constitute a "group" within the meaning of Rule 13d-5 under the
Securities and Exchange Act of 1934, and as such, each member of the group would
be deemed to beneficially own, in the aggregate, all the shares of Common Stock
held by members of the group. The reporting persons do not admit that they
constitute a group within the meaning of Rule 13d-5.
Wand-I may be deemed to have shared voting and dispositive power over
the 2,222,430 shares it owns. Wand-II may be deemed to have shared voting and
dispositive power over the 168,522 shares it owns. Wand-III may be deemed to
<PAGE>
have shared voting and dispositive power over the 466,076 shares it owns. WPI
may be deemed to have shared voting and dispositive power over an aggregate of
2,425,655 shares, consisting of the shares owned by itself, Wand-I and Wand-II.
Wand (IMA) may be deemed to have shared voting and dispositive power over an
aggregate of 634,598 shares, consisting of the shares owned by Wand-II and
Wand-III. Mr. Schnitzer may be deemed to have shared voting and dispositive
power over 3,784,867 shares, consisting of the shares owned by Wand-I, Wand-II,
Wand-III and WPI and the shares underlying the warrants and options owned by WEP
and WAF. WEP may be deemed to have shared voting and dispositive power over the
shares underlying the 824,104 warrants and options owned by WEP. WAF may be
deemed to have shared voting and dispositive power over the shares underlying
the 47,688 warrants and options owned by WAF, consisting of the warrants and
options owned by WAF. Wand LLC may be deemed to have shared voting and
dispositive power over the shares underlying the 824,104 warrants and options
owned by WEP. Wand AF may be deemed to have shared voting and dispositive power
over the shares underlying the 47,688 warrants and options owned by WAF. Mr.
Callard may be deemed to have shared voting and dispositive power over an
aggregate of 981,854 shares, or 8.0% of the total shares outstanding on that
date, consisting of the shares owned indirectly by him through a living trust of
which he is co-trustee, the shares underlying the options owned by him and the
shares underlying the warrants and options owned by WEP, but excluding shares
beneficially owned by each of WPI, Wand (IMA) and Wand AF, each of which is
controlled by Mr. Schnitzer but in which Mr. Callard has a minority equity
interest.
Except for the bridge financing transaction and the investment in
buyingedge.com inc., each discussed more fully in Items 3, 4 and 6, none of the
Filing Persons has effected any transactions in common stock of IMA during the
past 60 days.
Item 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER
The responses to Items 3, 4 and 5 are incorporated by reference. On
August 12, 1999, WEP and WAF entered into the Purchase Agreement pursuant to
which it provided $5,000,000 in bridge financing to IMA in the form of the Note.
The principal and unpaid interest under the Note will be converted into a new
series of convertible preferred stock ("Series C Convertible Preferred Stock")
of the Issuer unless it is redeemed by April 30, 2000 at a conversion price of
$1,000 per share of Series C Convertible Preferred Stock. In no event, however,
shall such conversion cause WEP and WAF to own, in the aggregate, more than
19.9% of the value of outstanding voting stock of IMA upon conversion. Any
remaining principal and interest amount will be converted into a new promissory
note.
<PAGE>
The Stated Value of the Series C Convertible Preferred Stock is $1,000
per share and is entitled to no dividends. Holders of the Series C Convertible
Preferred Stock are entitled to vote on all matters submitted to a vote of the
IMA stockholders with each holder entitled to cast a number of votes equal to
the number of shares of common stock of IMA into which such holder's Series C
Convertible Preferred Stock could be converted. Additionally, the holders of
Series C Convertible Preferred Stock have additional class approval rights over
(i) the creation of any preferred stock or convertible debt with rights or
privileges senior to or pari passu with the Series C Convertible Preferred
Stock, (ii) the creation of any preferred stock or convertible debt at a
conversion price less than the conversion price applicable to the Series C
Convertible Preferred Stock, (iii) payment of dividends, distributions or
repurchases of any equity securities, (iv) change of any right, preference or
term applicable to the Series C Convertible Preferred Stock, and (v) any
proposed transaction which involves a significant sale of assets or would result
in a change of control of IMA.
The Series C Convertible Preferred Stock is convertible by the holder
into common stock of IMA at any time. The applicable per share conversion price
shall be the lowest of the following: (i) the average closing price of the IMA
common stock for the 20 trading days following August 12,1999, (ii) the average
closing price of IMA's common stock for the 20 trading days preceding April 30,
2000 (or upon earlier conversion of the Note, the date of conversion) or (iii)
$4.00. In addition, IMA, WEP and WAF entered into a Registration Rights
Agreement, a copy of which is set forth as Exhibit 9 hereto under which WEP and
WAF have certain demand and piggyback registration rights relating to shares of
common stock of IMA owned by WEP and/or WAF.
In a separate transaction, WEP and WAF received 1,063,830 shares of
Series A Preferred Stock of buyingedge.com inc. for a purchase price of
$2,000,000. The Series A Preferred Stock is convertible into common stock of
buyingedge.com inc. at any time. In event that the holder does not convert the
Series A Preferred Stock of buyingedge.com inc. into common stock of
buyingedge.com, the holder can demand that buyingedge.com inc. redeem the Series
A Preferred Stock and simultaneously exercise its option to purchase Common
Stock of IMA at the price of $6.20 per share. In connection with WEP and WAF's
investment in buyingedge.com inc., WEP received options to purchase 304,935
shares of Common Stock of IMA and WAF received options to purchase 17,645 shares
of Common Stock of IMA at the price of $4.00 per share. The warrants are
exercisable at any time.
<PAGE>
Item 7. MATERIAL TO BE FILED AS EXHIBITS
Exhibit 1: Joint Filing Agreement pursuant to Rule 13d-1(f)(1).
Exhibit 2: Senior Subordinated Promissory Note and Warrant Purchase
Agreement, dated August 12, 1999, among Wand Equity Portfolio II
L.P., Wand Affiliates Fund L.P. and the Issuer.
Exhibit 3: Common Stock Purchase Warrant, dated August 12, 1999, in favor of
Wand Equity Portfolio II L.P. and Wand Affiliates Fund L.P.
Exhibit 4: Warrant to Purchase Common Stock, dated August 12, 1999, in favor
of Wand Equity Portfolio II L.P.
Exhibit 5: Warrant to Purchase Common Stock, dated August 12, 1999, in favor
of Wand Affiliates Fund L.P.
Exhibit 6: Option Agreement, dated August 12, 1999, among Wand Equity
Portfolio II L.P., Information Management Associates and
buyingedge.com inc.
Exhibit 7: Option Agreement, dated August 12, 1999, among Wand Affiliates
Fund L.P., Information Management Associates and buyingedge.com
inc.
Exhibit 8: Promissory Note, dated August 12, 1999, in favor of Wand Equity
Portfolio II L.P. and Wand Affiliates Fund L.P.
Exhibit 9: Registration Rights Agreement, dated August 12, 1999, among Wand
Equity Portfolio II L.P., Wand Affiliates Fund L.P. and
Information Management Associates.
<PAGE>
SIGNATURES
After reasonably inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
WAND/IMA INVESTMENTS, L.P.
September 15, 1999 /s/ Bruce W. Schnitzer
- ------------------ ----------------------------------------
Dated Signed by Bruce W. Schnitzer,
Treasurer of Wand Partners (S.C.)
Inc., its general partner
WAND/IMA INVESTMENTS II L.P.
September 15, 1999 /s/ Bruce W. Schnitzer
- ------------------ ----------------------------------------
Dated Signed by Bruce W. Schnitzer,
Treasurer of Wand Partners (S.C.) Inc.
and Chairman and Treasurer of Wand
(IMA) Inc., its general partners
WAND/IMA INVESTMENTS III L.P.
September 15, 1999 /s/ Bruce W. Schnitzer
- ------------------ ----------------------------------------
Dated Signed by Bruce W. Schnitzer,
Treasurer of Wand (IMA) Inc.,
its general partner
WAND PARTNERS (S.C.) INC.
September 15, 1999 /s/ Bruce W. Schnitzer
- ------------------ ----------------------------------------
Dated Signed by Bruce W. Schnitzer,
its Treasurer
<PAGE>
WAND (IMA) INC.
September 15, 1999 /s/ Bruce W. Schnitzer
- ------------------ ----------------------------------------
Dated Signed by Bruce W. Schnitzer,
its Chairman and Treasurer
WAND EQUITY PORTFOLIO II L.P.
September 15, 1999 /s/ Bruce W. Schnitzer
- ------------------ ----------------------------------------
Dated Signed by Bruce W. Schnitzer,
Managing Member of Wand Partners
LLC, its general partner
WAND AFFILIATES FUND L.P.
September 15, 1999 /s/ Bruce W. Schnitzer
- ------------------ ----------------------------------------
Dated Signed by Bruce W. Schnitzer,
Managing Member of Wand AF LLC,
its general partner
WAND PARTNERS LLC
September 15, 1999 /s/ Bruce W. Schnitzer
- ------------------ ----------------------------------------
Dated Signed by Bruce W. Schnitzer,
Its Managing Member
WAND AF LLC
September 15, 1999 /s/ Bruce W. Schnitzer
- ------------------ ----------------------------------------
Dated Signed by Bruce W. Schnitzer,
Its Managing Member
BRUCE W. SCHNITZER
September 15, 1999 /s/ Bruce W. Schnitzer
- ------------------ ----------------------------------------
Dated
<PAGE>
DAVID J. CALLARD
September 15, 1999 /s/ David J. Callard
- ------------------ ----------------------------------------
Dated
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Exhibit
1 Joint Filing Agreement pursuant to Rule 13d-1(f)(1).
2 Senior Subordinated Promissory Note and Warrant Purchase
Agreement, dated August 12, 1999, among Wand Equity Portfolio II
L.P., Wand Affiliates Fund L.P. and the Issuer.
3 Common Stock Purchase Warrant, dated August 12, 1999, in favor of
Wand Equity Portfolio II L.P. and Wand Affiliates Fund L.P.
4 Warrant to Purchase Common Stock, dated August 12, 1999, in
favor of Wand Equity Portfolio II L.P.
5 Warrant to Purchase Common Stock, dated August 12, 1999, in favor
of Wand Affiliates Fund L.P.
6 Option Agreement, dated August 12, 1999, among Wand Equity
Portfolio II L.P., Information Management Associates and
buyingedge.com inc.
7 Option Agreement, dated August 12, 1999, among Wand Affiliates
Fund L.P., Information Management Associates and buyingedge.com
inc.
8 Promissory Note, dated August 12, 1999, in favor of Wand Equity
Portfolio II L.P. and Wand Affiliates Fund L.P.
9 Registration Rights Agreement, dated August 12, 1999, among Wand
Equity Portfolio II L.P., Wand Affiliates Fund L.P. and
Information Management Associates.
EXHIBIT 1
Joint Filing Agreement Pursuant to Rule 13d-1(f)(1)
This agreement is made pursuant to Rule 13d-1(f)(1) under the
Securities Exchange Act of 1934 (the "Act") by and among the parties listed
below, each referred to herein as a "Joint Filer". The Joint Filers agree
that a statement of beneficial ownership as required by Section 13(d) of
the Act and the Rules thereunder may be filed on each of their behalf on
Schedule 13D or Schedule 13G, as appropriate, and that said joint filing
may thereafter be amended by further joint filings. The Joint Filers state
that they each satisfy the requirements for making a joint filing under
Rule 13d-1.
WAND/IMA INVESTMENTS, L.P.
September 15, 1999 /s/ Bruce W. Schnitzer
_____________________ _____________________________________
Dated Signed by Bruce W. Schnitzer,
Treasurer of Wand Partners (S.C.) Inc.,its
general partner
WAND/IMA INVESTMENTS II L.P.
September 15, 1999 /s/ Bruce W. Schnitzer
______________________ ________________________________________
Dated Signed by Bruce W. Schnitzer,
Treasurer of Wand Partners (S.C.) Inc. and
Chairman and Treasurer of Wand (IMA) Inc.,its
general partners
WAND/IMA INVESTMENTS III L.P.
September 15, 1999 /s/ Bruce W. Schnitzer
________________________ _________________________________________
Dated Signed by Bruce W. Schnitzer,
Treasurer of Wand (IMA) Inc.,
its general partner
WAND PARTNERS (S.C.) INC.
September 15, 1999 /s/ Bruce W. Schnitzer
_________________________ _________________________________________
Dated Signed by Bruce W. Schnitzer,
its Treasurer
WAND (IMA) INC.
September 15, 1999 /s/ Bruce W. Schnitzer
_________________________ _______________________________________
Dated Signed by Bruce W. Schnitzer,
its Chairman and Treasurer
WAND EQUITY PORTFOLIO II L.P.
September 15, 1999 /s/ Bruce W. Schnitzer
__________________________ _______________________________________
Dated Signed by Bruce W. Schnitzer,
Managing Member of Wand Partners LLC, its
general partner
WAND AFFILIATES FUND L.P.
September 15, 1999 /s/ Bruce W. Schnitzer
__________________________ _______________________________________
Dated Signed by Bruce W. Schnitzer,
Managing Member of Wand AF LLC, its general
partner
WAND PARTNERS LLC
September 15, 1999 /s/ Bruce W. Schnitzer
___________________________ _____________________________________
Dated Signed by Bruce W. Schnitzer,
Its Managing Member
WAND AF LLC
September 15, 1999 /s/ Bruce W. Schnitzer
___________________________ ____________________________________
Dated Signed by Bruce W. Schnitzer,
Its Managing Member
BRUCE W. SCHNITZER
September 15, 1999 /s/ Bruce W. Schnitzer
___________________________ ___________________________________
Dated
DAVID J. CALLARD
September 15, 1999 /s/ David J. Callard
___________________________ ___________________________________
Dated
SENIOR SUBORDINATED CONVERTIBLE PROMISSORY NOTE
AND WARRANT PURCHASE AGREEMENT
SENIOR SUBORDINATED CONVERTIBLE PROMISSORY NOTE AND WARRANT PURCHASE
AGREEMENT dated as of August 12, 1999 by and among Information Management
Associates, Inc., a Connecticut corporation (the "Company"), on the one hand,
Wand Equity Portfolio II L.P. and Wand Affiliates Fund L.P. (collectively, with
their respective successors and assigns, the "Investors"), on the other hand.
WHEREAS, the Investors wish to purchase from the Company and the
Company wishes to sell to the Investors the Company's 9% Senior Subordinated
Convertible Promissory Note in the principal face amount of $5,000,000 (the
"Note") according to the terms and subject to the conditions set forth in this
Agreement and in the Note; and
WHEREAS, the Investors wish to purchase from the Company and the
Company wishes to sell to the Purchasers warrants (the "Warrants") initially
exercisable for up to an aggregate of 425,000 shares of the common stock,
without par value, of the Company (the "Common Stock"), according to the terms
and subject to the conditions set forth in this Agreement and in the Warrants;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained in this Agreement, the parties agree as follows:
ARTICLE I
THE NOTE AND THE WARRANTS
SECTION 1.01 Issuance, Sale and Delivery of the Note and Warrants. In
accordance with the terms hereof, the Company agrees to issue and sell to the
Investors and the Investors hereby agree to purchase from the Company, the Note
and the Warrants for an aggregate purchase price of $5,000,000. The Note shall
have such terms and conditions and shall be substantially in the form set forth
in Exhibit A attached hereto; and the Warrants shall have such terms and
conditions and shall be substantially in the form as set forth in Exhibit B
attached hereto.
SECTION 1.02 Closing. The closing shall take place at the offices of
Skadden, Arps, Slate, Meagher & Flom, LLP, 919 Third Avenue, New York, New York
10022-3897, at 10:00 a.m., New York time, on August 12, 1999, or at such other
location, date and time as may be agreed upon between the Investors and the
Company (such closing being called the "Closing" and such date and time being
called the "Closing Date"). At the Closing, the Company shall issue and deliver
to the Investors the Note in substantially the form attached hereto as Exhibit A
and Warrants in substantially the form attached hereto as Exhibit B, in
definitive form, in the name of the Investors. As payment in full for the Note
<PAGE>
and Warrants being purchased by the Investors under this Agreement, and against
delivery of the Note and Warrants therefor as aforesaid, on the Closing Date the
Investors shall transfer an aggregate of $5,000,000 to the account of the
Company by wire transfer.
SECTION 1.03 Warrant Shares. Shares of Common Stock to be issued to
the Investor upon the exercise of the Warrants shall be referred to herein as
the "Warrant Shares."
SECTION 1.04 Character of the Warrants. The Company and the Investors,
having adverse interests and as a result of arm's length bargaining, agree that
(i) neither of the Investors nor any of their affiliates has rendered or has
agreed to render any services to the Company in connection with this Agreement
or the issuance of the Note and Warrants; and (ii) the Warrants, when issued,
shall not be issued as compensation. The Company and the Investors agree that
the aggregate fair market value of the Warrants is equal to $425,000. The
parties agree not to take any action that is inconsistent with such agreed value
and, without limitation, agree to file all tax returns and reports consistent
with such value.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investors that, except as
set forth in the Disclosure Schedule attached as Schedule I (which Disclosure
Schedule makes explicit reference to the particular representation or warranty
as to which exception is taken, which in each case shall constitute the sole
representation and warranty as to which such exception shall apply; except that
any disclosure as to which it shall be obvious from the face thereof shall also
apply to any other representation and warranty):
SECTION 2.01 Organization, Qualifications and Corporate Power.
(a) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Connecticut and is
duly licensed or qualified to transact business as a foreign corporation and is
in good standing in each jurisdiction in which the nature of the business
transacted by it or the character of the properties owned or leased by it
requires such licensing or qualification in order to avoid a Material Adverse
Effect (as herein defined). As used herein, "Material Adverse Effect" means a
material adverse effect on the financial condition, assets, liabilities, results
of operations or prospects of the Company. The Company has the corporate power
and authority to own and hold its properties and to carry on its business as now
conducted and as proposed to be conducted, to execute, deliver and perform this
Agreement, the Note, the Warrants and that certain Registration Rights Agreement
with the Investors in the form attached as Exhibit C (the "Registration Rights
Agreement," and collectively with this Agreement, the Note and the Warrants, the
"Transaction Documents").
(b) The Company's subsidiaries are listed on Schedule I (the
"Subsidiaries"). Except for the Subsidiaries, the Company does not (i) own of
record or beneficially, directly or indirectly, (A) any shares of capital stock
or securities convertible into capital stock of any other corporation or (B) any
<PAGE>
participating interest in any partnership, joint venture or other non-corporate
business enterprise or (ii) control, directly or indirectly, any other entity.
SECTION 2.02 Authorization of Agreements, Etc.
(a) The execution and delivery by the Company of the Transaction
Documents, the performance by the Company of its obligations thereunder and the
issuance and delivery of the Warrant Shares have been duly authorized by all
requisite corporate action and will not violate any provision (i) of the
Certificate of Incorporation of the Company, as amended or the By-laws of the
Company, as amended, (ii) of law, any order of any court or other agency of
government, or (iii) of any indenture, agreement or other instrument to which
the Company or any of its properties or assets is bound, or conflict with,
result in a breach of or constitute (with due notice or lapse of time or both) a
default under any such indenture, agreement or other instrument (except for
conflicts, breaches or defaults under clauses (ii) and (iii) which would not,
individually or in the aggregate, have a Material Adverse Effect), or result in
the creation or imposition of any lien, charge, restriction, claim or
encumbrance of any nature whatsoever upon any of the properties or assets of the
Company.
(b) The shares of Common Stock issuable upon exercise of the
Warrants have been duly reserved for issuance upon such exercise and, when so
issued, will be duly authorized, validly issued, fully paid and nonassessable
shares of Common Stock with no personal liability attaching to the ownership
thereof and will be free and clear of all liens, charges, restrictions, claims
and encumbrances imposed by or through the Company except as set forth in the
Registration Rights Agreement. Neither the issuance, sale or delivery of the
Warrant Shares is subject to any preemptive right of stockholders of the Company
or to any right of first refusal or other right in favor of any person.
SECTION 2.03 Validity. This Agreement has been duly executed and
delivered by the Company and constitutes the legal, valid and binding obligation
of the Company, enforceable in accordance with its terms. The other Transaction
Documents, when executed and delivered in accordance with this Agreement, will
constitute the legal, valid and binding obligations of the Company, enforceable
in accordance with their respective terms.
SECTION 2.04 Authorized Capital Stock. The authorized capital stock of
the Company consists of 20,000,000 shares of Common Stock and 500,000 shares of
Preferred Stock. Immediately prior to the Closing, 9,698,106 shares of Common
Stock will be validly issued and outstanding, fully paid and nonassessable and
no shares of Preferred Stock are issued and outstanding. The Company has granted
non-qualified stock options which will vest over the next four years pursuant to
a stock option grant plan. 2,101,954 shares have been granted in accordance with
such plan, 1,016,156 shares have vested under such plan and 750,787 shares are
authorized by not yet awarded. All shares of Common Stock issued pursuant to
such plan are validly issued and outstanding, fully paid and nonassessable. The
designations, powers, preferences, rights, qualifications, limitations and
restrictions in respect of the authorized capital stock of the Company are as
set forth in the Certificate of Incorporation, a copy of which is attached as
Exhibit D and all such designations, powers, preferences, rights,
qualifications, limitations and restrictions are valid, binding and enforceable
<PAGE>
and in accordance with all applicable laws. Except as provided for in the
Certificate of Incorporation or as set forth in the attached Schedule II, the
Company has no obligation (contingent or other) to purchase, redeem or otherwise
acquire any of its equity securities or any interest therein or to pay any
dividend or make any other distribution in respect thereof. To the best of the
Company's knowledge there are no voting trusts or agreements, stockholders'
agreements, pledge agreements, buy-sell agreements, rights of first refusal,
preemptive rights or proxies relating to any securities of the Company (whether
or not the Company is a party thereto). All of the outstanding securities of the
Company were issued in compliance with all applicable Federal and state
securities laws.
SECTION 2.05 Events Subsequent to the Date of the Balance Sheet.
Except as disclosed in filings made by the Company with the Securities and
Exchange Commission ("Public Filings"), since March 31, 1999, the Company has
not (i) made any material change in the manner of business or operations of the
Company, (ii) entered into any transaction except in the ordinary course of
business consistent with past practice or as otherwise contemplated hereby,
(iii) taken any action that could have a Material Adverse Effect or (iv) entered
into any commitment (contingent or otherwise) to do any of the foregoing.
SECTION 2.06 Litigation; Compliance with Law.
(a) There is no (i) action, suit, claim, proceeding or
investigation pending or, to the best of the Company's knowledge, threatened
against or affecting the Company, at law or in equity, or before or by any
Federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, (ii) arbitration
proceeding relating to the Company pending under collective bargaining
agreements or otherwise or (iii) governmental inquiry pending or, to the best of
the Company's knowledge, threatened against or affecting the Company (including
without limitation any inquiry as to the qualification of the Company to hold or
receive any license or permit) that could (in the case of any matter described
in clauses (i), (ii), or (iii)) have a Material Adverse Effect. The Company is
not in default with respect to any order, writ, injunction or decree known to or
served upon the Company of any court or of any Federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign. There is no action or suit by the Company
pending, threatened or contemplated against others that could have Material
Adverse Effect.
(b) The Company has complied with all laws, rules, regulations
and orders applicable to its business, operations, properties, assets, products
and services; the Company has all necessary permits, licenses and other
authorizations required to conduct its business as conducted and as proposed to
be conducted, and the Company has been operating its business pursuant to and in
compliance with the terms of all such permits, licenses and other
authorizations, in each case where the failure to be in compliance or to possess
such a permit, license or other authorization would, individually or in the
aggregate, have a Material Adverse Effect.
(c) There is no existing law, rule, regulation or order, and the
Company is not aware of any proposed law, rule, regulation or order, whether
Federal, state, county or local, which would prohibit or restrict the Company
<PAGE>
from, or otherwise materially adversely affect the Company in, conducting its
business in any jurisdiction in which it is now conducting business or in which
it proposes to conduct business.
SECTION 2.07 Proprietary Information of Third Parties.
(a) No third party has claimed or, to the best of the Company's
knowledge, has reason to claim that any person employed by or affiliated with
the Company has (i) violated or may be violating any of the terms or conditions
of his employment, non-competition or non-disclosure agreement with such third
party, (ii) disclosed or may be disclosing or utilized or may be utilizing any
trade secret or proprietary information or documentation of such third party or
(iii) interfered or may be interfering in the employment relationship between
such third party and any of its present or former employees. No third party has
requested information from the Company which suggests that such a claim might be
contemplated.
(b) To the best of the Company's knowledge, none of the
execution or delivery of this Agreement, or the carrying on of the business of
the Company by any officer, director or key employee of the Company, or the
conduct or proposed conduct of the business of the Company, will conflict with
or result in a breach of the terms, conditions or provisions of or constitute a
default under any contract, covenant or instrument under which any such person
is obligated.
SECTION 2.08 Patents, Trademarks, Etc.
(a) Set forth in Schedule I is a list and brief description of
all domestic and foreign patents, patent rights, patent applications,
trademarks, trademark applications, internet domain names, service marks,
service mark applications, trade names owned by the Company. The Company owns or
possesses adequate licenses or other rights to use all patents, patent
applications, trademarks, trademark applications, service marks, service mark
applications, trade names, internet domain names, copyrights, manufacturing
processes, formulae, trade secrets, customer lists, know how and rights of
publicity and privacy with respect to likenesses and data pertaining to real
persons (collectively, "Intellectual Property") used in or necessary to the
conduct of its business as conducted and as proposed to be conducted. No claim
is pending or, to the best of the Company's knowledge, threatened to the effect
that the operations of the Company infringe upon or conflict with the asserted
rights of any other person under any Intellectual Property or that any third
party is infringing upon or conflicting with the asserted rights of the Company
under any Intellectual Property.
(b) All patents, registrations and applications for Intellectual
Property that are set forth in Schedule I (i) are valid and enforceable, and
have been duly maintained, (ii) are standing in the record ownership of the
Company (or all documents needed to bring title to such Intellectual Property
into the name of the Company have been filed and all recording fees paid) and
(iii) have not lapsed, expired or been abandoned, and are not the subject of any
opposition, interference, cancellation proceeding or other legal or governmental
proceeding before any governmental entity in any jurisdiction that could have a
Material Adverse Effect on the Company. No claim is pending or to the best of
the Company's knowledge threatened to the effect that any such Intellectual
<PAGE>
Property owned or licensed by the Company, or which the Company otherwise has
the right to use, is invalid or unenforceable by the Company, and there is no
basis for any such claim (whether or not pending or threatened). The Company is
not, nor will it be as a result of the execution and delivery of this Agreement
or the performance of its obligations under this Agreement, in breach of any
license, sublicense or other agreement relating to Intellectual Property.
SECTION 2.09 Title to Properties. The Company has good, clear and
valid title to its properties and assets reflected on the Balance Sheet or
acquired by it since the date of the Balance Sheet (other than properties and
assets disposed of in the ordinary course of business since the date of the
Balance Sheet), and all such properties and assets are free and clear of
mortgages, pledges, security interests, liens, charges, claims, restrictions and
other encumbrances (including without limitation, easements and licenses),
except for any security interest which will be granted in favor of any lender
that provides senior debt financing not to exceed $8,000,000, for which the
Company is currently negotiating and liens for or current taxes not yet due and
payable and minor imperfections of title, if any, not material in nature or
amount and not materially detracting from the value or impairing the use of the
property subject thereto or impairing the operations or proposed operations of
the Company, including, without limitation, the ability of the Company to secure
financing using such properties and assets as collateral. To the best of the
Company's knowledge after due inquiry, there are no condemnation, environmental,
zoning or other land use regulation proceedings, either instituted or planned to
be instituted, which would adversely affect the use or operation of the
Company's properties and assets for their respective intended uses and purposes,
or the value of such properties, and the Company has not received notice of any
special assessment proceedings which would affect such properties and assets.
SECTION 2.10 Insurance. The Company holds valid policies covering all
of the insurance required to be maintained by it under Section 5.03.
SECTION 2.11 Taxes. The Company has filed all tax returns, Federal,
state, county and local, required to be filed by it and the Company has paid all
taxes shown to be due by such returns as well as all other taxes, assessments
and governmental charges which have become due or payable, including without
limitation all taxes which the Company is obligated to withhold from amounts
owing to employees, creditors and third parties. The Company has established
adequate reserves for all taxes accrued but not yet payable. Except as set forth
in Schedule I, all tax elections of any type which the Company has made as of
the date hereof are set forth in the financial statements referred to in Section
2.05. The Federal income tax returns of the Company have never been audited by
the Internal Revenue Service. No deficiency assessment with respect to or
proposed adjustment of the Company's Federal, state, county or local taxes is
pending or, to the best of the Company's knowledge, threatened. There is no tax
lien (other than for current taxes not yet due and payable), whether imposed by
any Federal, state, county or local taxing authority, outstanding against the
assets, properties or business of the Company.
SECTION 2.12 Material Contracts. The Company, and to the best of the
Company's knowledge, each other party thereto has in all material respects
performed all the obligations required to be performed by them to date (or each
non-performing party has received a valid, enforceable and irrevocable written
<PAGE>
waiver with respect to its non-performance), have received no notice of default
and are not in default (with due notice or lapse of time or both) under any
agreement, instrument, commitment, plan or arrangement to which the Company is a
party or by which it or its property may be bound, which the default would,
individually or in the aggregate, have a Material Adverse Effect. The Company
has no present expectation or intention of not fully performing all its
obligations under each such agreement, instrument, commitment, plan or
arrangement, and the Company has no knowledge of any breach or anticipated
breach by the other party to any material agreement, instrument, commitment,
plan or arrangement to which the Company is a party. The Company is in
compliance with all of the terms and provisions of its Certificate of
Incorporation and By-laws, as amended.
SECTION 2.13 Loans and Advances. Except as set forth on Schedule I,
the Company does not have any outstanding loans or advances to any person and is
not obligated to make any such loans or advances, except, in each case, for
advances to employees of the Company in respect of reimbursable business
expenses anticipated to be incurred by them in connection with their performance
of services for the Company.
SECTION 2.14 Assumptions, Guaranties, Etc. of Indebtedness of Other
Persons. The Company has not assumed, guaranteed, endorsed or otherwise become
directly or contingently liable on any indebtedness of any other person
(including, without limitation, liability by way of agreement, contingent or
otherwise, to purchase, to provide funds for payment, to supply funds to or
otherwise invest in the debtor, or otherwise to assure the creditor against
loss), except for guaranties by endorsement of negotiable instruments for
deposit or collection in the ordinary course of business.
SECTION 2.15 Significant Customers and Suppliers. No customer or
supplier which was significant to the Company during the past two year period
has terminated, materially reduced or threatened to terminate or materially
reduce its purchases from or provision of products or services to the Company,
as the case may be.
SECTION 2.16 Governmental Approvals. Subject to the accuracy of the
representations and warranties of the Investors set forth in Article III, no
registration or filing with, or consent or approval of or other action by, any
Federal, state or other governmental agency or instrumentality is or will be
necessary for the valid execution, delivery and performance by the Company of
any of the Transaction Documents or the issuance and delivery of the Warrant
Shares, other than (i) filings pursuant to Regulation D promulgated by the
Securities and Exchange Commission and state securities laws (all of which
filings have been made by the Company, other than those which are required to be
made after the Closing and which will be duly made on a timely basis) in
connection with the sale of the Note and the Warrants, and (ii) with respect to
the Registration Rights Agreement, the registration of the shares covered
thereby with the Commission and filings pursuant to state securities laws.
SECTION 2.17 Disclosure. Neither this Agreement, nor any Schedule or
Exhibit to this Agreement, nor any of the Public Filings (as of the respective
dates thereof) (collectively, the "Disclosure Materials"), contains an untrue
statement of a material fact or omits a material fact necessary to make the
statements contained herein or therein not misleading in the light of the
<PAGE>
circumstances in which they were made except in the case of the Public Filings
for statements that have been superseded or corrected in any subsequent Public
Filing.
SECTION 2.18 Offering of the Note and Warrants. Neither the Company
nor any person acting on its behalf has taken or will take any action
(including, without limitation, any offer, issuance or sale of any security of
the Company under circumstances which might require the integration of such
security with the Note and Warrants under the Securities Act or the rules and
regulations of the Commission thereunder), so as to subject the offering,
issuance or sale of the Note and Warrants to the registration provisions of the
Securities Act.
SECTION 2.19 Brokers. The Company has no contract, arrangement or
understanding with any broker, finder or similar agent with respect to the
transactions contemplated by this Agreement, and/or recent proposed investment
transactions within the prior 12 months.
SECTION 2.20 Knowledge. As used herein, the knowledge of the Company
means the actual knowledge after reasonable investigation as of the Closing Date
of any officer or employee of the Company in a position to have knowledge and
information based on the nature and function of such person's position with the
Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES AND COVENANTS OF THE INVESTORS
SECTION 3.01 Investor Representations and Warranties. Each Investor
severally represents and warrants to the Company that:
(a) it is an "accredited investor" within the meaning of Rule
501 under the Securities Act and was not organized for the specific
purpose of acquiring the Note or the Warrants;
(b) it has sufficient knowledge and experience in investing in
companies similar to the Company in terms of the Company's stage of
development so as to be able to evaluate the risks and merits of its
investment in the Company and it is able financially to bear the risks
thereof;
(c) it has had an opportunity to discuss the Company's business,
management and financial affairs with the Company's management;
(d) the Note, Warrants and Warrant Shares being purchased by it
are being acquired for its own account for the purpose of investment
and not with a view to or for sale in connection with any distribution
thereof;
(e) it understands that (i) the Note, the Warrants and the
Warrant Shares have not been registered under the Securities Act by
reason of their issuance in a transaction exempt from the registration
requirements of the Securities Act, (ii) the Note, the Warrants and
Warrant Shares must be held indefinitely unless a subsequent
disposition thereof is registered under the Securities Act or is
<PAGE>
exempt from such registration, (iii) the Warrant Shares will bear a
legend to such effect and (iv) the Company will make a notation on its
transfer books to such effect;
(f) all action on the part of each of the Investor's partners,
board of directors, shareholders and members, as applicable, necessary
for the authorization, execution, delivery and performance of the
Transaction Documents by each Investor, the purchase of and payment
for the Note and the Warrants and the performance of all of each
Investor's obligations under the Transaction Documents has been taken
or will be taken prior to Closing. The Transaction Documents, when
executed and delivered be each Investor, shall constitute valid and
binding obligations of each Investor, enforceable in accordance with
their terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable
remedies; provided, however, that the Investors make no
representations as the enforceability of the indemnification
provisions contained in the Registration Rights Agreement.
SECTION 3.02 Investor Covenants. Each Investor severally covenants to
the Company that in no event will it dispose of any of the Note or the Warrants
or the Warrant Shares (other than in conjunction with an effective registration
statement for such securities under the Act or other than to an affiliate of
either Investor) unless and until such Investor shall have notified the Company
of the proposed disposition and shall have furnished the Company with an opinion
of counsel reasonably satisfactory in form and substance to the Company to the
effect that (x) such disposition will not require registration under the Act and
(y) appropriate action necessary for compliance with the Act, and any other
applicable securities laws of any jurisdiction has been taken.
ARTICLE IV
CONDITIONS TO THE OBLIGATIONS OF THE INVESTORS
The obligations of the Investors to purchase and pay for the Note and
Warrants being purchased by it on the Closing Date are subject to the
satisfaction, on or before the Closing Date, of the following conditions; which
may be waived or modified only at the option of the Investors:
(a) Opinion of Company's Counsel. The Investors shall have
received from LeBoeuf, Lamb, Greene & MacRae, counsel for the Company, an
opinion dated the Closing Date, in form and scope satisfactory to the Investors
and counsel to the Investors, subject to customary qualifications, to the effect
that:
(i) The Company is a corporation validly existing and in
good standing under the laws of Connecticut. The Company has the
corporate power and authority to own and hold its properties and to
carry on its business as currently conducted and as proposed to be
conducted. The Company has the corporate power and authority to
<PAGE>
execute, deliver and perform each of the Transaction Documents and to
issue and deliver the Warrant Shares.
(ii) All of the Transaction Documents have been duly
authorized, executed and delivered by the Company and constitute the
legal, valid and binding obligations of the Company, enforceable in
accordance with their respective terms (subject, as to enforcement of
remedies, to the discretion of courts in awarding equitable relief and
to applicable bankruptcy, reorganization, insolvency, moratorium and
similar laws affecting the rights of creditors generally), except that
such counsel need not express any opinion as to the validity or
enforceability of the indemnification and contribution provisions of
the Registration Rights Agreement.
(iii) The execution and delivery by the Company of the
Transaction Documents, the performance by the Company of its
obligations thereunder and the issuance and delivery of the Warrant
Shares, will not violate any provision of law, the Certificate of
Incorporation or By-laws, as amended, of the Company, or, to the
knowledge of such counsel, any material provision of any order of any
court or other agency of government or any material indenture,
agreement or other instrument known to such counsel to which the
Company or any of its properties or assets is bound, or conflict with,
result in a breach of or constitute (with due notice or lapse of time
or both) a default under any such indenture, agreement or other
instrument, or result in the creation or imposition of any lien,
charge, restriction, claim or encumbrance of any nature whatsoever
upon any of the properties or assets of the Company. In rendering the
foregoing opinion, such counsel may rely on a certificate as to
certain facts from an officer of the Company, may assume full
disclosure to the Investors of all material facts and, with respect to
performance by the Company of its obligations under the Registration
Rights Agreement, may assume compliance by the Company at such time
with the registration requirements of the Securities Act and with
applicable state securities laws and may disclaim any opinion as to
the validity or enforceability of the indemnification and contribution
provisions of the Registration Rights Agreement.
(iv) The authorized capital stock of the Company consists of
20,000,000 shares of Common Stock, without par value and 500,000
shares of Preferred Stock, without par value. Immediately prior to the
Closing, no shares of Preferred Stock will be issued and outstanding.
The designations, powers, preferences, rights, qualifications,
limitations and restrictions in respect of the authorized capital
stock of the Company are as set forth in the Certificate of
Incorporation, and all such designations, powers, preferences, rights,
qualifications, limitations and restrictions are valid, binding and
enforceable and in accordance with all applicable laws (subject, as to
enforcement, to the discretion of courts in awarding equitable relief
and to applicable bankruptcy, reorganization, insolvency, moratorium
and similar laws affecting the rights of creditors generally).
(v) The shares of Common stock issuable upon exercise of the
Warrants have been duly authorized and reserved by all required
corporate action and when issued and paid for in accordance with the
<PAGE>
terms of the Warrants, will be validly issued, fully paid and
nonassessable with no personal liability attaching to the ownership
thereof. Neither the issuance, sale or delivery of the shares of
Common stock issuable upon exercise of the Warrants is subject to any
preemptive right of stockholders of the Company arising under law or
the Certificate of Incorporation or By-laws of the Company, each as
amended, or, to the knowledge of such counsel, to any contractual
right of first refusal or other right in favor of any person.
(vi) Except as described in Schedule I, LeBoeuf, Lamb,
Greene & MacRae, L.L.P. has not been engaged by the Company to give
substantive legal advice with respect to any (A) action, suit, claim,
proceeding or investigation pending or threatened against or affecting
the Company, at law or in equity, or before or by any Federal, state,
municipal or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, (B) arbitration
proceeding relating to the Company pending under collective bargaining
agreements or (C) governmental inquiry pending or threatened against
or affecting the Company (including, without limitation, any inquiry
as to the qualification of the Company to hold or receive any license
or permit). To the knowledge of such counsel, the Company is not in
default with respect to any order, writ, injunction or decree known to
such counsel of any court or of any Federal, state, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign.
(viii) Assuming the accuracy of the representations and
warranties of the Investors set forth in Article III, no registration
or filing with, and no consent or approval of, or other action by any
Federal, state or other governmental agency or instrumentality is or
will be necessary for the valid execution, delivery and performance by
the Company of the Transaction Documents or the issuance and delivery
of the Warrant Shares, other than filings pursuant to Regulation D
promulgated by the Securities and Exchange Commission and state
securities laws (all of which filings, other than those which are
required to be made after the Closing, have been made by the Company).
In rendering the foregoing opinion with respect to performance by the
Company of its obligations under the Registration Rights Agreement,
such counsel may assume compliance by the Company at such time with
the registration requirements of the Securities Act and with
applicable state securities laws.
(ix) To the knowledge of such counsel, none of the
outstanding shares of Common Stock is the subject of any recission
claim alleging that such shares have been issued in violation with the
registration requirements of the Act or any applicable state
securities laws. The shares of Preferred Stock, when issued and paid
for in accordance with the terms of this Agreement and the shares of
Common Stock issuable upon exercise of the Warrant, when issued and
paid for in accordance with the terms of the Warrants, will be issued
in compliance with the registration requirements of the Act and all
applicable state securities laws.
(b) Representations and Warranties to be True and Correct. The
representations and warranties contained in Article II shall be true, complete
<PAGE>
and correct on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date, and the
President and Chief Financial Officer of the Company shall have certified to
such effect to the Investors in writing.
(c) Performance; Closing Certificate Deliveries. The Company
shall have performed and complied with all agreements contained herein required
to be performed or complied with by it prior to or at the Closing Date, and the
President and Chief Financial Officer of the Company shall have delivered a
certificate to the Investors confirming in writing to such effect and to the
further effect that all of the conditions set forth in this Article IV have been
satisfied.
(d) All Proceedings to be Satisfactory. All corporate and other
proceedings to be taken by the Company in connection with the transactions
contemplated hereby and all documents incident thereto shall be reasonably
satisfactory in form and substance to the Investors and counsel to the
Investors, and the Investors and counsel to the Investors shall have received
all such counterpart originals or certified or other copies of such documents as
they reasonably may request.
(e) Supporting Documents. The Investors and counsel to the
Investors shall have received copies of the following documents:
(i) (A) the Certificate of Incorporation, certified as of a
recent date by the Secretary of State of the State of Connecticut and
(B) a certificate of said Secretary dated as of a recent date as to
the due incorporation and good standing of the Company.
(ii) a certificate of the Secretary or an Assistant
Secretary of the Company dated the Closing Date and certifying: (A)
that attached thereto is a true and complete copy of the By-laws of
the Company as in effect on the date of such certification; (B) that
attached thereto is a true and complete copy of all resolutions
adopted by the Board of Directors or the shareholders of the Company
authorizing the execution, delivery and performance of the Transaction
Documents and the reservation, issuance and delivery of the shares of
Common Stock to be issued upon exercise of the Warrants, and that all
such resolutions are in full force and effect and are all the
resolutions adopted in connection with the transactions contemplated
by the Transaction Documents; (C) that the Certificate of
Incorporation have not been amended since the date of the last
amendment referred to in the certificate delivered pursuant to clause
(i)(B) above; and (D) to the incumbency and specimen signature of each
officer of the Company executing any of the Transaction Documents, and
any certificate or instrument furnished pursuant hereto, and a
certification by another officer of the Company as to the incumbency
and signature of the officer signing the certificate referred to in
this clause (ii); and
(iii) such additional supporting documents and other
information with respect to the operations and affairs of the Company
as the Investors or counsel to the Investors reasonably may reasonably
request.
<PAGE>
(f) Registration Rights Agreement. The Company shall have
executed and delivered the Registration Rights Agreement.
(g) Fairness Opinion. The Company shall have received a
favorable fairness opinion with respect to the transaction contemplated by this
Agreement and the Transaction Documents from SoundView Technology Group, Inc.
(h) Approval by Investors' Advisory Committee. The Investors'
Advisory Committee shall have approved of the transaction contemplated by this
Agreement and the Transaction Documents.
(i) Transaction Fee. The Company shall have paid (i) a $100,000
transaction fee to the Investors and (ii) an amount calculated by multiplying
(a) the amount by which the per share price of Common Stock at the end of
trading on August 12, 1999 exceeds $3.25 or, if the per share price of Common
Stock at the end of trading on August 12, 1999 is equal to or less than $3.25,
zero by (b) 425,000.
(j) Fees of Investors' Counsel. The Company shall have paid in
accordance with Section 6.01 the fees and disbursements of Skadden, Arps, Slate,
Meagher & Flom, LLP, counsel to the Investors.
(k) Due Diligence Review. Representatives of the Investors and
counsel to the Investors shall have satisfactorily completed a comprehensive
business and legal due diligence review of the Company.
All such documents shall be reasonably satisfactory in form and substance to the
Investors and counsel to the Investors.
ARTICLE V
COVENANTS OF THE COMPANY
The Company covenants and agrees with the Investors that until the
repayment of all amounts due and payable under the Note:
SECTION 5.01 Reserve for Warrant Shares. The Company shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock, for the purpose of effecting the exercise of the Warrants and
otherwise complying with the terms of this Agreement, such number of its duly
authorized shares of Common Stock as shall be sufficient to effect the exercise
of the Warrants or otherwise to comply with the terms of this Agreement (the
"Reserved Shares"). If at any time the number of authorized but unissued shares
of Common Stock shall not be sufficient to effect the exercise of the Warrants
or otherwise to comply with the terms of this Agreement, the Company will
forthwith take such corporate action as may be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purposes. The Company will obtain any authorization,
consent, approval or other action by or make any filing with any court or
<PAGE>
administrative body that may be required under applicable state securities laws
in connection with the issuance of shares of Common Stock upon the exercise of
the Warrants. The Company will not issue any of its current or future authorized
but unissued Reserved Shares without the written consent of the Investors,
except upon the exercise of the Warrants in accordance with the terms thereof.
SECTION 5.02 Corporate Existence. The Company shall maintain its
corporate existence, rights and franchises in full force and effect.
SECTION 5.03 Properties, Business, Insurance. The Company shall
maintain insurance on its properties and business, with financially sound and
reputable insurers, insurance against such casualties and contingencies and of
such types and in such amounts as is customary for companies similarly situated,
which insurance shall be deemed by the Company to be sufficient. The Company
shall not cause or permit any assignment or change in beneficiary and shall not
borrow against any such policy.
SECTION 5.04 Inspection, Consultation and Advice. The Company shall
permit a representative of the Investors, at the Investors' expense, to visit
and inspect any of the properties of the Company, examine their books and take
copies and extracts therefrom, discuss the affairs, finances and accounts of the
Company with their officers, employees and public accountants (and the Company
hereby authorizes said accountants to discuss with such representative such
affairs, finances and accounts), and consult with and advise the management of
the Company as to their affairs, finances and accounts, all at reasonable times
and upon reasonable prior notice. The Investors agree that they shall keep all
information regarding the Company or the Subsidiaries obtained by the Investors
or their representatives confidential and shall not disclose such information to
any other person or use such information for any purpose other than monitoring
their investment. The Investors further agree not to use such information in any
way that would be a violation of federal securities laws.
SECTION 5.05 Restrictive Agreements Prohibited. The Company shall not
become a party to any agreement which by its terms restricts the Company's
performance of any of the Transaction Documents or the Certificate of
Incorporation.
SECTION 5.06 Compliance with Laws. The Company shall comply with all
applicable laws, rules, regulations and orders, noncompliance with which would
have a Material Adverse Effect.
SECTION 5.07 Dividends and Distributions. The Company will not declare
or pay any dividends, or purchase, redeem, retire, or otherwise acquire for
value any of its capital stock (or any rights, options or warrant to purchase
such shares) now or hereafter outstanding, return any capital to its
stockholders as such, or make any distribution of assets to its stockholders as
such, provided, however, that nothing herein contained shall prevent the Company
from:
(i) effecting a stock split (except for a reverse stock split)
or declaring or paying any dividends consisting of shares of Common Stock to the
holders of shares of Common Stock;
<PAGE>
(ii) complying with any specific provisions of the terms of the
Note, the Warrants or this Agreement;
(iii) repurchasing any stock at cost pursuant to restricted stock
agreements with employees, consultants, directors, and others under restricted
stock agreements previously approved by the board of directors and disclosed to
the Investors; and
(iv) making annual distributions to its stockholders in an amount
sufficient to cover such stockholder's tax liabilities resulting from the
ownership of Common Stock of the Company.
SECTION 5.08 Merger or Disposition. The Company shall not without the
prior written approval of the Investors merge or consolidate with, or sell,
assign, lease or otherwise dispose of or voluntarily part with the control of
(whether in one transaction or in a series of transactions) substantially all of
its assets (whether now owned or hereafter acquired), except for sales or other
dispositions of assets in the ordinary course of business provided, however,
that the Company may merge another entity into it or otherwise acquire such
entity so long as the Company is the surviving entity, the holders of voting
stock of the Company immediately prior to such merger are the holders of not
less than 100% of the voting stock of the merged or acquired company immediately
following such merger, such merger or acquisition will be accretive to the
Company's earnings, such merger or acquisition does not result in the violation
of any of the provisions of this Agreement and no such violation exists at the
time of such merger or acquisition. The provisions of this Section 5.08 shall
not apply to any merger, consolidation, sale, assignment lease or other
transaction or series of transactions wherein the Company disposes of a majority
of its assets or voting stock in exchange for cash or other assets that would
yield a realized return to the Investor of two times Investors' Investment
Amount and would yield an internal rate of return to the Investors of 35%
compounded annually on the total of the Investors' Investment Amount. For
purposes of this Section 5.08 immediately below, "Investment Amount" shall equal
the sum of $5,000,000, plus (i) all interest and other amounts payable by the
Company to the Investors under the terms of the Note; and (ii) the fair market
value (determined by reference to the per share amount of consideration paid by
the acquiring company for the Common Stock of the Company) of all shares of
Common Stock issuable upon exercise of the Warrants.
SECTION 5.09 Material Adverse Effect. The Company will not take any
action which will have a Material Adverse Effect on the rights, preferences or
privileges afforded the Investors under the Transaction Documents.
SECTION 5.10 Termination of Covenants. Unless sooner terminated, all
of the covenants set forth in this Article V shall terminate and be of no
further force or effect as to the Investors when the Company has repaid the Note
in full along with all interest and other payments required thereunder.
<PAGE>
ARTICLE VI
MISCELLANEOUS
SECTION 6.01 Expenses. Each party hereto will pay its own expenses in
connection with the transactions contemplated hereby, whether or not such
transactions shall be consummated, provided, however, that the Company shall pay
the reasonable fees and disbursements of Investors' counsel, Skadden, Arps,
Slate, Meagher & Flom LLP, in connection with such transactions, which shall in
no event exceed $40,000.
SECTION 6.02 Bank Agreements. If the Company's senior creditor bank so
requests, the Investors shall enter into an Intercreditor Agreement and
Subordination Agreement with such bank, with respect to the Company's
indebtedness obligations in favor of the Investors under the terms of the Note,
with such terms and conditions to be reasonably satisfactory to the Investors.
SECTION 6.03 Survival of Agreements. All covenants, agreements,
representations and warranties made in any of the Transaction Documents or any
certificate or instrument delivered to the Investors at the Closing pursuant to
or in connection with any of the Transaction Documents, shall survive the
execution and delivery of all of the Transaction Documents and the issuance and
delivery of the Warrant Shares, and all statements contained in any certificate
or other instrument delivered by the Company hereunder or thereunder or in
connection herewith or therewith shall be deemed to constitute representations
and warranties made by the Company. All such representations and warranties
shall terminate and cease to be in effect on the first anniversary of the
Closing.
SECTION 6.04 Brokerage. Each party hereto will indemnify and hold
harmless the others against and in respect of any claim for brokerage or other
commissions relative to this Agreement or to the transactions contemplated
hereby, based in any way on agreements, arrangements or understandings made or
claimed to have been made by such party with any third party.
SECTION 6.05 Parties in Interest. All representations, covenants and
agreements contained in this Agreement by or on behalf of any of the parties
hereto shall bind and inure to the benefit of the respective successors and
assigns of the parties hereto whether so expressed or not. Without limiting the
generality of the foregoing, all representations, covenants and agreements
benefitting the Investors shall inure to the benefit of any and all subsequent
holders from time to time of Warrant Shares.
SECTION 6.06 Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be delivered in person,
mailed by certified or registered mail, return receipt requested, or sent by
telecopier or telex, addressed as follows:
(a) if to the Company, at Information Management Associates, One
Corporate Drive, Suite #414, Shelton, Connecticut 06484, Attention: President,
with a copy to Thomas L. Fairfield, Esq., LeBoeuf, Lamb, Greene & MacRae,
L.L.P., 225 Asylum Street, Hartford, Connecticut, 06103;and
<PAGE>
(b) if to the Investors, at Wand Partners LLC, 630 Fifth Avenue, Suite
2435, New York, New York 10111, with a copy to Marcia Nirenstein, Esq., Skadden,
Arps, Slate, Meagher & Flom, LLP, 1440 New York Avenue, N.W., Washington, D.C.
20005.
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.
SECTION 6.07 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 6.08 Entire Agreement. This Agreement, including the Schedules
and Exhibits hereto, constitutes the sole and entire agreement of the parties
with respect to the subject matter hereof. All Schedules and Exhibits hereto are
hereby incorporated herein by reference.
SECTION 6.09 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.
SECTION 6.10 Amendments. This Agreement may not be amended or
modified, and no provisions hereof may be waived, without the written consent of
the Company and each of the Investors.
SECTION 6.11 Severability. If any provision of this Agreement shall be
declared void or unenforceable by any judicial or administrative authority, the
validity of any other provision and of the entire Agreement shall not be
affected thereby.
SECTION 6.12 Titles and Subtitles. The titles and subtitles used in
this Agreement are for convenience only and are not to be considered in
construing or interpreting any term or provision of this Agreement.
SECTION 6.13 Certain Defined Terms. As used in this Agreement, the
term "person" shall mean an individual, corporation, trust, partnership, joint
venture, unincorporated organization, government agency or any agency or
political subdivision thereof, or other entity.
<PAGE>
IN WITNESS WHEREOF, the Company and the Investors have executed this
Agreement as of the day and year first above written.
INFORMATION MANAGEMENT
ASSOCIATES, INC.
By: /s/ Albert Subbloie, Jr.
--------------------------------
Name: Albert Subbloie, Jr.
--------------------------------
[Corporate Seal] Title: President and CEO
--------------------------------
Attest:
/s/ Michael P. McGroarty
- -----------------------------------
Secretary
INVESTORS:
WAND EQUITY PORTFOLIO II L.P.
By: /s/ John S. Struck
----------------------------
Name: John S. Struck
----------------------------
Title: Managing Member
----------------------------
WAND AFFILIATES FUND L.P.
By: /s/ John S. Struck
----------------------------
Name: John S. Struck
----------------------------
Title: Managing Member
----------------------------
COMMON STOCK PURCHASE WARRANT
THIS WARRANT AND ANY SHARES ISSUED UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
UNLESS REGISTERED UNDER THE ACT AND ALL APPLICABLE STATE SECURITIES LAWS OR
UNLESS AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS AVAILABLE AT THE TIME
OF SUCH OFFERING, SALE OR TRANSFER.
INFORMATION MANAGEMENT ASSOCIATES, INC.
Common Stock Purchase Warrant
New York, New York
No. W-1 August 12, 1999
Information Management Associates, Inc. (the "Company"), a Connecticut
corporation, for value received, hereby certifies that Wand Equity Portfolio
Fund II L.P. and Wand Affiliates Fund L.P., or their registered assigns
(collectively, the "Holder"), are entitled to purchase from the Company the
number of duly authorized, validly issued, fully paid and nonassessable shares
of common stock, without par value of the Company (the "Common Stock") set forth
opposite their names on Exhibit A hereto, at the purchase price per share equal
to the higher of (i) $3.25 or (ii) the last sale price of the Company's Common
Stock reported as of the close of trading on the NASDAQ National Market on
August 12, 1999, at any time or from time to time prior to 5:00 P.M., New York
City time, on August 11, 2007 (or such later date as may be determined pursuant
to section 18), all subject to the terms, conditions and adjustments set forth
below in this Warrant.
This Warrant is the Common Stock Purchase Warrant (the "Warrant", such
term to include any such warrants issued in substitution therefor) originally
issued in connection with the Senior Subordinated Convertible Promissory Note
and Warrant Purchase Agreement, dated August 12, 1999, by and among the Company
and the Holder, and the issue by the Company of a 9% Senior Subordinated
Convertible Note, dated August 12, 1999, to the Holder. The Warrant originally
so issued evidences rights to purchase an aggregate of 425,000 shares of Common
Stock subject to adjustment as provided herein. Certain capitalized terms used
in this Warrant are defined in section 13; 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.
<PAGE>
1. Exercise of Warrant.
1.1. Manner of Exercise. This Warrant may be exercised by the Holder,
in whole or in part, during normal business hours on any Business Day, by
surrender of this Warrant to the Company at its principal office, accompanied by
a subscription in substantially the form attached to this Warrant (or a
reasonable facsimile thereof) duly executed by the Holder and accompanied by
payment, in cash, by certified or official bank check payable to the order of
the Company or by wire transfer, in lawful money of the United States of
America, or in the manner provided in section 1.5 or section 1.6 (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) $3.25, 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 from time to time 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 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
<PAGE>
this Warrant minus the number of such shares designated by the holder upon
such exercise as provided in section 1.1.
All shares of Common Stock issued upon the exercise of this Warrant shall be
validly issued, fully paid and nonassessable.
1.4. Company to Reaffirm Obligations. The Company will, at the time of
each exercise of this Warrant, upon the request of the Holder, acknowledge in
writing its continuing obligation to afford to the Holder all rights 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 shall fail to make any
such request, such failure shall not affect the continuing obligation of the
Company to afford such rights to the Holder.
1.5 Payment by Application of Shares Otherwise Issuable. Upon any
exercise of this Warrant, the Holder 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.
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 the fraction of which (a) the numerator is $3.25 and (b) the denominator is
the Warrant Price in effect on the date of such exercise. The "Warrant Price"
shall initially be $3.25 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
<PAGE>
or for a consideration per share less than the lesser 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 lesser 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, (x) 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,
and (y) treasury shares shall not be deemed to be outstanding.
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 dividend
payable in Additional Shares of Common Stock, 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 reducing such
Warrant Price by 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.
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 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
<PAGE>
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 lesser 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; provided, that, no such further adjustment shall be made
if such event or occurrence results in an adjustment to the Warrant Price
under the other provisions hereof that equitably accounts for such event or
occurrence.
(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;
<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 thereof originally made in respect of the
issue, sale, grant or assumption of such Options or Convertible Securities;
and
<PAGE>
(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, without deducting any expenses paid
or incurred by the Company or any commissions or compensations paid or
concessions or discounts allowed to underwriters, dealers or others
performing similar services in connection with such issue or sale,
(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 (subject to confirmation by a firm of
independent certified public accountants of recognized standing
approved by the Holder), 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
<PAGE>
(subject to confirmation by a firm of independent public accountants
of recognized standing approved by the Holder);
(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, purchase or other acquisition pursuant to any Options issued or
granted by the Company (or any such other issuer or Person) for a consideration
<PAGE>
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 (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, subject to adjustments (subsequent to such
consummation) as nearly equivalent as possible to the adjustments provided for
in sections 2 through 4.
<PAGE>
3.2. Assumption of Obligations. Notwithstanding anything contained in
this Warrant 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, (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 the Holder such shares of stock,
securities, cash or property as, in accordance with the foregoing provisions of
this section 3, the Holder may be entitled to receive, and such Person shall
have similarly delivered to the 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.
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 (such firm to be subject to the approval of the Holder), 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 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
<PAGE>
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 the Warrant 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 cause independent certified public accountants of recognized
national standing (such firm to be subject to the approval of The Holder)
selected by the Company to verify such computation 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 The Holder and will, upon the written request at any
time of the Holder, furnish to the 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
principal office and will cause the same to be available for inspection at such
office during normal business hours by The Holder or any prospective purchaser
of a Warrant designated by the holder thereof.
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 a regular periodic dividend
payable in cash out of earned surplus in an amount not exceeding the amount
of the immediately preceding cash dividend for such period) 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
<PAGE>
(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 30 days prior to the date therein specified.
8. Registration of Common Stock. If any shares of Common Stock (or
Other Securities) 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) 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:
<PAGE>
"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 a registration under such Act is in effect or pursuant to 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. A complete and correct copy of the form of such Warrant is
available for inspection at the principal office of Information Management
Associates, Inc. or at the office or agency maintained by Information
Management Associates, Inc. as provided in such Warrant and will be
furnished to the holder of such shares upon written request and without
charge."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution pursuant to a registration statement under the Act)
shall also bear such legend unless the holder of such certificate delivers to
the Company an opinion of counsel reasonably acceptable to the Company that an
exemption from registration under the Act is available with respect to Common
Stock issued upon exercise of this Warrant.
10. Availability of Information. 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 (including Rule 144 adopted by the Commission under the Securities
Act) from time to time in effect and relating to the availability of an
exemption from the Securities Act for the sale of any Common Stock. 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 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.
<PAGE>
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. Registration and Transfer of Warrants, etc.
12.1. Warrant Register; Ownership of Warrants. The Company will keep
at its principal office a register in which the Company will provide for the
registration of Warrants and the registration of transfers of Warrants. The
Company may treat the Person in whose name any Warrant is registered on such
register as the owner thereof for all other purposes, and the Company shall not
be affected by 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. 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. Transfer and Exchange of Warrants. Upon surrender of any Warrant
for registration of transfer or for exchange to the Company at its principal
office, the Company at its expense will (subject to compliance with section 9,
if applicable) execute and deliver in exchange therefor 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,
upon delivery of an indemnity bond in such reasonable amount as the Company may
determine or, in the case of any such mutilation, upon the surrender of such
Warrant for cancellation to the Company at its principal office, the Company at
its expense will execute and deliver, in lieu thereof, a new Warrant of like
tenor.
13. 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,
<PAGE>
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) up 2,101,954 shares (as constituted on such date) issued upon the
exercise of options granted or to be granted under the Company's stock
option plans as in effect on the date hereof or under any other employee
stock option or purchase plan or plans adopted or assumed after such date
that represent 20% of the fully-diluted ownership of the Company,
(c) shares issued upon the exercise of the common stock purchase
warrants and options to be issued to CMG @Ventures III, LLC, @Ventures
Investors, LLC., @Ventures Foreign Fund III, L.P., Wand Equity Portfolio II
L.P. and Wand Affiliates Fund L.P. in connection with the purchase of such
entities of preferred stock in the Company's buyingedge.com inc.
Subsidiary.
(d) such additional number of shares as may become issuable upon the
exercise of any of the securities referred to in the foregoing clauses (a),
(b) and (c) by reason of adjustments required pursuant to anti-dilution
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
(e) such additional number of shares as may become issuable upon the
exercise of any of the securities referred to in the foregoing clauses (a),
(b) and (c) by reason of adjustments required pursuant to anti-dilution
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 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
<PAGE>
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.
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.
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 value as determined by a firm of independent public
accountants of recognized standing selected by the Board of Directors of the
Company, and approved by the Holder, as of the last day of any month ending
within 30 days preceding the date as of which the determination is to be made.
NASD: The National Association of Securities Dealers, Inc.
<PAGE>
Note: The 9% Senior Subordinated Convertible Promissory Note, due
April 30, 2000, of the Company originally issued in the aggregate principal
amount of $5 million, such term to include any such notes issued in substitution
for such note.
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 limited liability company, a
partnership, an organization, a business, an individual, a government or
political subdivision thereof or a governmental agency.
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.
Warrant Price: As defined in section 2.1.
Warrants: As defined in the introduction to this Warrant.
14. 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.
15. No Rights or Liabilities as Stockholder. Nothing contained in this
Warrant shall be construed as conferring upon the Holder 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
<PAGE>
stockholder of the Company, whether such obligation or liabilities are asserted
by the Company or by creditors of the Company.
16. Notices. All notices and other communications under this Warrant
shall be in writing and shall be delivered, or mailed by registered or certified
mail, return receipt requested, by a nationally recognized overnight courier,
postage prepaid, 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 principal office, provided that the exercise of any Warrant
shall be effective in the manner provided in section 1.
17. Amendments. 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.
18. Expiration. The Company will give the holder of this Warrant not
less than six weeks nor more than two months notice of the expiration of the
right to exercise this Warrant. The right to exercise this Warrant shall expire
at 5:00 P.M., New York City time, on August 11, 2007, unless the Company shall
fail to give such notice as aforesaid, in which event the right to exercise this
Warrant shall not expire until a date six weeks after the date on which the
Company shall give the holder hereof notice of the expiration of the right to
exercise this Warrant.
19. Descriptive Headings. The headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the meaning
hereof.
20. GOVERNING LAW. THIS WARRANT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF
THE STATE OF NEW YORK.
21. Judicial Proceedings; Waiver of Jury. Any judicial proceeding
brought against the Company with respect to this Warrant may be brought in any
court of competent jurisdiction in the State of New York or of the United States
of America for the Southern District of New York and, by execution and delivery
of this Agreement, the Company (a) accepts, generally and unconditionally, the
nonexclusive jurisdiction of such courts and any related appellate court, and
irrevocably agrees to be bound by any judgment rendered thereby in connection
with this Warrant, subject to any rights of appeal, and (b) irrevocably waives
any objection the Company may now or hereafter have as to the venue of any such
suit, action or proceeding brought in such a court or that such court is an
inconvenient forum. The Company hereby waives personal service of process and
consents that service of process upon it may be made by certified or registered
mail, return receipt requested, at its address specified or determined in
<PAGE>
accordance with the provisions of section 16, and service so made shall be
deemed completed on the third Business Day after such service is deposited in
the mail or, if earlier, when delivered. Nothing herein shall affect the right
to serve process in any other manner permitted by law or shall limit the right
of any holder of any Warrant to bring proceedings against the Company in the
courts of any other jurisdiction. THE COMPANY HEREBY WAIVES TRIAL BY JURY IN ANY
JUDICIAL PROCEEDING INVOLVING, DIRECTLY, OR INDIRECTLY, ANY MATTER (WHETHER
SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO,
OR CONNECTED WITH THIS WARRANT OR THE RELATIONSHIP ESTABLISHED HEREUNDER.
INFORMATION MANAGEMENT
ASSOCIATES INC.
By: /s/ Albert Subbloie, Jr.
---------------------------------
Title: President and CEO
<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
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.
<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:
- ------------------------------
<PAGE>
EXHIBIT A
Name of Company Number of Shares
Wand Equity Portfolio II L.P. 401,752
Wand Affiliates Fund L.P. 23,248
<PAGE>
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION THEREUNDER OR
EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS. INVESTORS SHOULD BE AWARE THAT
THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION
OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT
ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
INFORMATION MANAGEMENT ASSOCIATES, INC.
WARRANT TO PURCHASE COMMON STOCK
Void after August 12, 2002
1. Warrant to Purchase Stock.
(a) Warrant to Purchase Shares. This warrant (the "Warrant")
certifies that for good and valuable consideration duly received, Wand Equity
Portfolio Fund II L.P. (the "Warrant Holder") is entitled, effective as of
August 12, 1999, subject to the terms and conditions of this Warrant, to
purchase from Information Management Associates, Inc., a Connecticut company
(the "Company"), up to a total of 117,417 shares of Common Stock, (the "Common
Stock"), of the Company (the "Shares") at the price of $4.00 per share (the
"Exercise Price") at any time or from time to time during the period commencing
on the date hereof until 5:00 p.m. Eastern Time on August 12, 2002 (the
"Expiration Date"). This Warrant must be exercised, if at all, on or before the
Expiration Date. Unless the context otherwise requires, the term "Shares" shall
mean and include the stock and other securities and property at any time
receivable or issuable upon exercise of this Warrant. The term "Warrant" as used
herein, shall include this Warrant and any warrants delivered in substitution or
exchange therefor as provided herein.
(b) Adjustment of Exercise Price and Number of Shares. The number and
character of Shares issuable upon exercise of this Warrant (or any shares of
stock or other securities or property at the time receivable or issuable upon
exercise of this Warrant) and the Exercise Price therefor are subject to
adjustment upon occurrence of the following events:
(i) Adjustment for Stock Splits, Stock Dividends,
Recapitalizations, etc. The Exercise Price of this Warrant and the number of
Shares issuable upon exercise of this Warrant shall each be proportionally
adjusted to reflect any stock dividend, stock split, reverse stock split,
combination of shares, reclassification, recapitalization or other similar event
altering the number of outstanding shares of the Company's Common Stock.
<PAGE>
(ii) Adjustment for Other Dividends and Distributions. In case
the Company shall make or issue, or shall fix a record date for the
determination of eligible holders entitled to receive, a dividend or other
distribution with respect to the Shares payable in securities of the Company
then, and in each such case, the Warrant Holder, on exercise of this Warrant at
any time after consummation, effective date or record date of such event, shall
receive, in addition to the Shares (or such other stock or securities) issuable
on such exercise prior to such date, the securities of the Company to which such
Warrant Holder would have been entitled upon such date if such Warrant Holder
had exercised this Warrant immediately prior thereto (all subject to further
adjustment as provided in this Warrant).
(c) Adjustment for Capital Reorganization, Consolidation, Merger. If
any capital reorganization of the capital stock of the Company, or any
consolidation or merger of the Company with or into another corporation, or the
sale of all or substantially all of the Company's assets to another corporation
shall be effected in such a way that holders of the Company's capital stock will
be entitled to receive stock, securities or assets with respect to or in
exchange for the Company's capital stock, and in each such case the Warrant
Holder, upon the exercise of this Warrant, at any time after the consummation of
such capital reorganization, consolidation, merger, or sale, shall be entitled
to receive, in lieu of the stock or other securities and assets receivable upon
the exercise of this Warrant prior to such consummation, the stock or other
securities or assets to which such Warrant Holder would have been entitled upon
such consummation is such Warrant Holder had exercised this Warrant immediately
prior to the consummation of such capital reorganization, consolidation, merger,
or sale, all subject to further adjustment as provided in this Section 1(c); and
in each such case, the terms of this Warrant shall be applicable to the shares
of stock or other securities or assets receivable upon the exercise of this
Warrant after such consummation.
2. Manner of Exercise.
(a) Exercise Agreement. This Warrant may be exercised, in whole or in
part, on any business day on or prior to the Expiration Date. To exercise this
Warrant, the Warrant Holder must surrender to the Company this Warrant and
deliver to the Company: (i) a duly executed exercise agreement in the form
attached hereto as Exhibit A, or in such other form as may be approved by the
Company form time to time (the "Warrant Exercise Agreement"); and (ii) payment
in full of the Exercise Price for the number of Shares to be purchased upon
exercise hereof. Upon partial exercise, this Warrant shall be surrendered, and a
new Warrant of the same tenor for purchase of the number of remaining Shares not
previously purchased shall be issued by the Company to the Warrant Holder. This
Warrant shall be deemed to have been exercised immediately prior to the close of
business on the date of its surrender for exercise as provided above, and the
person entitled to receive the Shares issuable upon such exercise shall be
treated for all purposes as the holder of record of such Shares as of the close
of business on such date.
(b) Limitations on Exercise. This Warrant may not be exercised for
fewer than 1,000 Shares unless it is exercised for all Shares as to which this
Warrant is then exercisable.
<PAGE>
(c) Payment. The Warrant Exercise Agreement shall be accompanied by
full payment of the Exercise Price for the Shares being purchased in cash (by
check), or where permitted law:
(i) by cancellation of indebtedness of the Company to the
Warrant Holder;
(ii) subject to the provisions of Section 3 below relating to
compliance with applicable securities laws, provided that a public market for
the Company's stock exists, (1) through a "same-day-sale" commitment from the
Warrant Holder and a broker-dealer that is a member of the National Association
of Securities Dealers (an "NASD Dealer") whereby the Warrant Holder irrevocably
elects to exercise this Warrant and to sell a portion of the Shares so purchased
to pay for the Exercise Price and whereby the NASD Dealer irrevocably commits
upon receipt of such Shares to forward the Exercise Price directly to the
Company, or (2) through a "margin" commitment form the Warrant Holder and an
NASD Dealer whereby the Warrant Holder irrevocably elects to exercise this
Warrant and to pledge the Shares so purchased to the NASD Dealer in a margin
account as security for a loan from the NASD Dealer in the amount of the
Exercise Price, and whereby the NASD Dealer irrevocably commits upon receipt of
such Shares to forward the Exercise Price directly to the Company.
(iii) by "Net Exercise," in which case the Company shall deliver
to the Warrant Holder (without payment of any additional Exercise Price) that
number of shares equal to the quotient obtained by dividing;
1) the value of the Shares purchased upon exercise at the
time of exercise (such value to be determined by subtracting (i) the aggregate
Exercise Price for such Shares as in effect immediately prior to exercise from
(ii) the aggregate Fair Market Value (as defined in Section 11 below) for such
Shares immediately prior to the exercise of this Warrant), by
2) the Fair Market Value of one (1) Share immediately
prior to exercise; or
(iv) by any combination of the foregoing.
(d) Tax Withholding. Prior to the issuance of the Shares upon
exercise of this Warrant, the Warrant Holder must pay or provide for any
applicable federal or state withholding obligations of the Company.
(e) Issuance of Shares. Provided that the Exercise Agreement and
payment have been received by the Company as provided above, the Company shall
issue the Shares (adjusted as provided herein) registered in the name of the
Warrant Holder, the Warrant Holder's authorized assignee, or the Warrant
Holder's legal representative, and shall deliver certificates representing the
Shares with the appropriate legends affixed thereto.
3. Compliance with Laws and Regulations. The exercise of this Warrant and
the issuance and transfer of Shares shall be subject to compliance by the
Company and the Warrant Holder with all applicable requirements of federal and
state securities laws and with all applicable requirements of any stock exchange
<PAGE>
and/or over-the-counter market on which the Company's Common Stock may be listed
at the time of such issuance or transfer.
4. Transfer and Exchange. This Warrant and the rights hereunder may not
be transferred, in whole or in part, without the Company's prior written
consent, which consent shall not be unreasonably withheld, and may not be
transferred unless registered under the Act and applicable state securities laws
or the Warrant Holder provides the Company with an opinion of Counsel reasonably
satisfactory to the Company to the effect that such transfer complies with all
applicable securities laws, except that, Warrant Holder shall be able to
transfer its shares and its rights under this Agreement to a transferee,
provided that the transferee is an affiliate, partner, limited partner, member,
shareholder or a lineal descendant of such partner, limited partner, member or
shareholder. If a transfer of all or part of this Warrant is permitted as
provided in the preceding sentence, then the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
5. Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and in the amount to the
Company or, in the case of mutilation, or surrender and cancellation of this
Warrant, the Company at its expense shall execute and deliver, in lieu of this
Warrant, a new warrant of like tenor.
6. Repurchase on Sale, Merger, or Consolidation of the Company.
(a) "Acquisition". For the purpose of this Warrant, "Acquisition"
means any sale, license, or other disposition of all or substantially all of the
assets (including intellectual property) of the Company, or any reorganization,
consolidation, or merger of the Company where the holders of the Company's
securities before the transaction beneficially own less than 50% of the
outstanding voting securities of the surviving entity after the transaction.
(b) Assumption of Warrant. If upon the closing of any Acquisition the
successor entity assumes the obligations of this Warrant, then this Warrant
shall be exercisable for the same securities, cash, and property as would be
payable for the Shares issuable upon exercise of the unexercised portion of this
Warrant as if such Shares were outstanding on the record date for the
Acquisition and subsequent closing. The Warrant Price shall be adjusted
accordingly. The Company shall use reasonable efforts to cause the surviving
corporation to assume the obligations of the Warrant.
(c) Nonassumption. If upon the closing of any Acquisition the
successor entity does not assume the obligations of his Warrant and Holder has
not otherwise exercised this Warrant in full, then the unexercised portion of
this Warrant shall be deemed to have been automatically converted pursuant to
Section 1.2 and thereafter Holder shall participate in the acquisition on the
same terms as other holders of the same class of securities of the Company.
(d) Purchase Right. Notwithstanding the foregoing, if in any
acquisition the Company receives consideration consisting solely of cash or cash
<PAGE>
equivalents, then, at the election of Holder, the Company shall purchase the
unexercised portion of this Warrant for cash upon the closing of any Acquisition
for an amount equal to (a) the fair market value of any consideration that would
have been received by Holder in consideration of the Shares had Holder exercised
the unexercised portion of this Warrant immediately before the record date for
determining the shareholders entitled to participate in the proceeds of the
Acquisition, less (b) the aggregate Warrant Price of the Shares, but in no event
less than zero.
7. Representations and Warranties. The Company hereby represents and
warrants to the Holder as follows:
(a) All Shares which may be issued upon the exercise of the purchase
right represented by this Warrant, and all securities, if any, issuable upon
conversion of the Shares, shall, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable, and free of any liens and encumbrances
except for restrictions on transfer provided for herein or under applicable
federal and state securities laws.
(b) The Company is a corporation validly existing and in good
standing under the laws of the state of Connecticut.
(c) The consummation by the Company of the transactions contemplated
hereby will not conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any statute, any
indenture, mortgage, loan agreement or any other agreement or instrument to
which the Company is a party.
8. Piggyback Registration Rights.
(a) Company Obligation. If the Company shall determine to register
any of its securities either for its own account or the account of a
shareholder(s) exercising demand registration rights, other than a registration
relating solely to employee benefit plans, or a registration relating solely to
a transaction pursuant to Rule 145 promulgated under the Securities Act of 1933,
as amended (the "Act"), or a registration on any registration form which does
not permit secondary sales or does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Warrant Stock, the Company will promptly give to the
Warrant Holder written notice thereof and include in such registration (and any
related qualification under blue sky laws), and in any underwriting involved
therein, the number of shares specified in a written request made by the Warrant
Holder within fifteen (15) days after receipt of such written notice from the
Company, except as set forth in Section 8(b) below.
(b) Underwritten Public Offering. If the registration for which the
Company gives notice is for a registered public offering involving an
underwriting, the right of any Warrant Holder to registration shall be
conditioned upon the Warrant Holder's participation in such underwriting and the
inclusion of such Warrant Holder's Warrant Stock in the underwriting pursuant to
an underwriting agreement in customary form with the underwriter or underwriters
selected by the Company. Notwithstanding any other provision of this Section, if
the underwriter reasonably determines that marketing factors require a
limitation on the number of shares to be underwritten the underwriter may
exclude some or all of the Warrant Stock with the number of shares that may be
included in the registration and underwriting being allocated among the Warrant
<PAGE>
Holder and all other shareholders entitled to have securities included in such
registration in proportion, as nearly as practicable, to the respective amounts
of securities which they had requested to be included in such registration
(provided, however, that if the registration is for the account of shareholders
exercising demand registration rights, the number of shares that may be included
by the Warrant Holder shall be cut back entirely before any limitation on the
number of shares that may be included by such shareholders).
(c) Expenses. All expenses of the registration shall be borne by the
Company, except underwriting discounts and selling commissions applicable to the
sale of any of Warrant Holder's Warrant Stock and any other securities of the
Company being sold in the same registration by other shareholders, which shall
be borne by the Warrant Holder and such other shareholders pro rata on the basis
of the number of their shares registered.
9. Information Rights. So long as the Holder holds this Warrant and/or
any of the Shares, the Company shall deliver to the Holder (a) promptly after
mailing, copies of all notices or other written communications to the
shareholders of the Company, (b) within ninety (90) days after the end of each
fiscal year of the Company, the annual audited financial statements of the
Company certified by independent public accountants of recognized standing and
(c) within forty-five (45) days after the end of each of the first three
quarters of each fiscal year, the Company's quarterly, unaudited financial
statements.
10. Reservation of Stock. On and after the Commencement Date, the Company
will reserve from its authorized and unissued Securities a sufficient number of
shares to provide for the issuance of Warrant Stock upon the exercise or
conversion of this Warrant and shall reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the issuance of Common
Stock upon the conversion of the Warrant Stock. Issuance of this Warrant shall
constitute full authority to the Company's officers who are charged with the
duty of executing stock certificates to execute and issue the necessary
certificates for shares of Warrant Stock issuable upon the exercise or
conversion of this Warrant.
11. Legends. This Warrant and the Shares (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT
AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
12. Compliance with Securities Laws on Transfer. This Warrant and the
Shares issuable upon exercise of this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws or an available exemption by the transferor
and the transferee (including, without limitation, the delivery of investment
<PAGE>
representation letters and legal opinions reasonably satisfactory to the
Company). The Company shall not require any Holder to provide an opinion of
counsel if the transfer is to an affiliate of a Holder or if there is no
material question as to the availability of current information as referenced in
Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e) in
reasonable detail, the selling broker represents that it has complied with Rule
144(f), and the Company is provided with a copy of Holder's notice of proposed
sale. Reference to Rule 144 shall mean Rule 144 promulgated by the Securities
and Exchange Commission under the Securities Act of 1933, as amended, as the
same may be modified, amended, supplemented or superseded.
13. Notices. All notices and other communications from the Company to the
Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or the Holder, as the case
may be, in writing by the Company or such Holder from time to time.
14. Waiver. 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.
15. Attorneys' Fees. In the event of any dispute between the parties
concerning the terms and provisions of this Warrant , the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
16. Entire Agreement. This Warrant and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof.
<PAGE>
17. Governing Law. The validity of the issuance of the Shares shall be
governed by The Connecticut Business Corporation Act, as amended from time to
time. In all other respects, this Warrant shall be governed by and construed in
accordance with the laws of the State of Connecticut, without giving effect to
its principles regarding conflicts of law which might cause the application of
the laws of any other jurisdiction.
INFORMATION MANAGEMENT ASSOCIATES, INC.
By: /s/ Albert Subbloie, Jr.
-----------------------------------
Name: Albert Subbloie, Jr.
Title: President & Chief Executive Officer
Wand Equity Portfolio Fund II L.P.
By: /s/ John S. Struck
-----------------------------------
Name: John S. Struck
Title: Managing Member
<PAGE>
Exhibit A
NOTICE OF EXERCISE
TO: Information Management Associates, Inc.
1. The undersigned hereby elects to purchase ________________ shares of the
Common Stock of Information Management Associates, Inc. pursuant to the
terms of the attached Warrant, and tenders herewith payment of the purchase
price in full, together with all applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
----------------------------------
(Name)
----------------------------------
(Address)
- --------------------------------- ----------------------------------------
(Date) (Name of Warrant Holder)
By:
----------------------------------
Title:
----------------------------------
<PAGE>
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION THEREUNDER OR
EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS. INVESTORS SHOULD BE AWARE THAT
THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION
OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT
ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
INFORMATION MANAGEMENT ASSOCIATES, INC.
WARRANT TO PURCHASE COMMON STOCK
Void after August 12, 2002
1. Warrant to Purchase Stock.
(a) Warrant to Purchase Shares. This warrant (the "Warrant")
certifies that for good and valuable consideration duly received, Wand
Affiliates Fund L.P. (the "Warrant Holder") is entitled, effective as of August
12, 1999, subject to the terms and conditions of this Warrant, to purchase from
Information Management Associates, Inc., a Connecticut company (the "Company"),
up to a total of 6,795 shares of Common Stock, (the "Common Stock"), of the
Company (the "Shares") at the price of $4.00 per share (the "Exercise Price") at
any time or from time to time during the period commencing on the date hereof
until 5:00 p.m. Eastern Time on August 12, 2002 (the "Expiration Date"). This
Warrant must be exercised, if at all, on or before the Expiration Date. Unless
the context otherwise requires, the term "Shares" shall mean and include the
stock and other securities and property at any time receivable or issuable upon
exercise of this Warrant. The term "Warrant" as used herein, shall include this
Warrant and any warrants delivered in substitution or exchange therefor as
provided herein.
(b) Adjustment of Exercise Price and Number of Shares. The number and
character of Shares issuable upon exercise of this Warrant (or any shares of
stock or other securities or property at the time receivable or issuable upon
exercise of this Warrant) and the Exercise Price therefor are subject to
adjustment upon occurrence of the following events:
(i) Adjustment for Stock Splits, Stock Dividends,
Recapitalizations, etc. The Exercise Price of this Warrant and the number of
Shares issuable upon exercise of this Warrant shall each be proportionally
adjusted to reflect any stock dividend, stock split, reverse stock split,
combination of shares, reclassification, recapitalization or other similar event
altering the number of outstanding shares of the Company's Common Stock.
<PAGE>
(ii) Adjustment for Other Dividends and Distributions. In case
the Company shall make or issue, or shall fix a record date for the
determination of eligible holders entitled to receive, a dividend or other
distribution with respect to the Shares payable in securities of the Company
then, and in each such case, the Warrant Holder, on exercise of this Warrant at
any time after consummation, effective date or record date of such event, shall
receive, in addition to the Shares (or such other stock or securities) issuable
on such exercise prior to such date, the securities of the Company to which such
Warrant Holder would have been entitled upon such date if such Warrant Holder
had exercised this Warrant immediately prior thereto (all subject to further
adjustment as provided in this Warrant).
(c) Adjustment for Capital Reorganization, Consolidation, Merger. If
any capital reorganization of the capital stock of the Company, or any
consolidation or merger of the Company with or into another corporation, or the
sale of all or substantially all of the Company's assets to another corporation
shall be effected in such a way that holders of the Company's capital stock will
be entitled to receive stock, securities or assets with respect to or in
exchange for the Company's capital stock, and in each such case the Warrant
Holder, upon the exercise of this Warrant, at any time after the consummation of
such capital reorganization, consolidation, merger, or sale, shall be entitled
to receive, in lieu of the stock or other securities and assets receivable upon
the exercise of this Warrant prior to such consummation, the stock or other
securities or assets to which such Warrant Holder would have been entitled upon
such consummation is such Warrant Holder had exercised this Warrant immediately
prior to the consummation of such capital reorganization, consolidation, merger,
or sale, all subject to further adjustment as provided in this Section 1(c); and
in each such case, the terms of this Warrant shall be applicable to the shares
of stock or other securities or assets receivable upon the exercise of this
Warrant after such consummation.
2. Manner of Exercise.
(a) Exercise Agreement. This Warrant may be exercised, in whole or in
part, on any business day on or prior to the Expiration Date. To exercise this
Warrant, the Warrant Holder must surrender to the Company this Warrant and
deliver to the Company: (i) a duly executed exercise agreement in the form
attached hereto as Exhibit A, or in such other form as may be approved by the
Company form time to time (the "Warrant Exercise Agreement"); and (ii) payment
in full of the Exercise Price for the number of Shares to be purchased upon
exercise hereof. Upon partial exercise, this Warrant shall be surrendered, and a
new Warrant of the same tenor for purchase of the number of remaining Shares not
previously purchased shall be issued by the Company to the Warrant Holder. This
Warrant shall be deemed to have been exercised immediately prior to the close of
business on the date of its surrender for exercise as provided above, and the
person entitled to receive the Shares issuable upon such exercise shall be
treated for all purposes as the holder of record of such Shares as of the close
of business on such date.
(b) Limitations on Exercise. This Warrant may not be exercised for
fewer than 1,000 Shares unless it is exercised for all Shares as to which this
Warrant is then exercisable.
<PAGE>
(c) Payment. The Warrant Exercise Agreement shall be accompanied by
full payment of the Exercise Price for the Shares being purchased in cash (by
check), or where permitted law:
(i) by cancellation of indebtedness of the Company to the
Warrant Holder;
(ii) subject to the provisions of Section 3 below relating to
compliance with applicable securities laws, provided that a public market for
the Company's stock exists, (1) through a "same-day-sale" commitment from the
Warrant Holder and a broker-dealer that is a member of the National Association
of Securities Dealers (an "NASD Dealer") whereby the Warrant Holder irrevocably
elects to exercise this Warrant and to sell a portion of the Shares so purchased
to pay for the Exercise Price and whereby the NASD Dealer irrevocably commits
upon receipt of such Shares to forward the Exercise Price directly to the
Company, or (2) through a "margin" commitment form the Warrant Holder and an
NASD Dealer whereby the Warrant Holder irrevocably elects to exercise this
Warrant and to pledge the Shares so purchased to the NASD Dealer in a margin
account as security for a loan from the NASD Dealer in the amount of the
Exercise Price, and whereby the NASD Dealer irrevocably commits upon receipt of
such Shares to forward the Exercise Price directly to the Company.
(iii) by "Net Exercise," in which case the Company shall deliver
to the Warrant Holder (without payment of any additional Exercise Price) that
number of shares equal to the quotient obtained by dividing;
1) the value of the Shares purchased upon exercise at the
time of exercise (such value to be determined by subtracting (i) the aggregate
Exercise Price for such Shares as in effect immediately prior to exercise from
(ii) the aggregate Fair Market Value (as defined in Section 11 below) for such
Shares immediately prior to the exercise of this Warrant), by
2) the Fair Market Value of one (1) Share immediately
prior to exercise; or
(iv) by any combination of the foregoing.
(d) Tax Withholding. Prior to the issuance of the Shares upon
exercise of this Warrant, the Warrant Holder must pay or provide for any
applicable federal or state withholding obligations of the Company.
(e) Issuance of Shares. Provided that the Exercise Agreement and
payment have been received by the Company as provided above, the Company shall
issue the Shares (adjusted as provided herein) registered in the name of the
Warrant Holder, the Warrant Holder's authorized assignee, or the Warrant
Holder's legal representative, and shall deliver certificates representing the
Shares with the appropriate legends affixed thereto.
3. Compliance with Laws and Regulations. The exercise of this Warrant and
the issuance and transfer of Shares shall be subject to compliance by the
Company and the Warrant Holder with all applicable requirements of federal and
<PAGE>
state securities laws and with all applicable requirements of any stock exchange
and/or over-the-counter market on which the Company's Common Stock may be listed
at the time of such issuance or transfer.
4. Transfer and Exchange. This Warrant and the rights hereunder may not
be transferred, in whole or in part, without the Company's prior written
consent, which consent shall not be unreasonably withheld, and may not be
transferred unless registered under the Act and applicable state securities laws
or the Warrant Holder provides the Company with an opinion of Counsel reasonably
satisfactory to the Company to the effect that such transfer complies with all
applicable securities laws, except that, Warrant Holder shall be able to
transfer its shares and its rights under this Agreement to a transferee,
provided that the transferee is an affiliate, partner, limited partner, member,
shareholder or a lineal descendant of such partner, limited partner, member or
shareholder. If a transfer of all or part of this Warrant is permitted as
provided in the preceding sentence, then the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
5. Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and in the amount to the
Company or, in the case of mutilation, or surrender and cancellation of this
Warrant, the Company at its expense shall execute and deliver, in lieu of this
Warrant, a new warrant of like tenor.
6. Repurchase on Sale, Merger, or Consolidation of the Company.
(a) "Acquisition". For the purpose of this Warrant, "Acquisition"
means any sale, license, or other disposition of all or substantially all of the
assets (including intellectual property) of the Company, or any reorganization,
consolidation, or merger of the Company where the holders of the Company's
securities before the transaction beneficially own less than 50% of the
outstanding voting securities of the surviving entity after the transaction.
(b) Assumption of Warrant. If upon the closing of any Acquisition the
successor entity assumes the obligations of this Warrant, then this Warrant
shall be exercisable for the same securities, cash, and property as would be
payable for the Shares issuable upon exercise of the unexercised portion of this
Warrant as if such Shares were outstanding on the record date for the
Acquisition and subsequent closing. The Warrant Price shall be adjusted
accordingly. The Company shall use reasonable efforts to cause the surviving
corporation to assume the obligations of the Warrant.
(c) Nonassumption. If upon the closing of any Acquisition the
successor entity does not assume the obligations of his Warrant and Holder has
not otherwise exercised this Warrant in full, then the unexercised portion of
this Warrant shall be deemed to have been automatically converted pursuant to
Section 1.2 and thereafter Holder shall participate in the acquisition on the
same terms as other holders of the same class of securities of the Company.
(d) Purchase Right. Notwithstanding the foregoing, if in any
acquisition the Company receives consideration consisting solely of cash or cash
<PAGE>
equivalents, then, at the election of Holder, the Company shall purchase the
unexercised portion of this Warrant for cash upon the closing of any Acquisition
for an amount equal to (a) the fair market value of any consideration that would
have been received by Holder in consideration of the Shares had Holder exercised
the unexercised portion of this Warrant immediately before the record date for
determining the shareholders entitled to participate in the proceeds of the
Acquisition, less (b) the aggregate Warrant Price of the Shares, but in no event
less than zero.
7. Representations and Warranties. The Company hereby represents and
warrants to the Holder as follows:
(a) All Shares which may be issued upon the exercise of the purchase
right represented by this Warrant, and all securities, if any, issuable upon
conversion of the Shares, shall, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable, and free of any liens and encumbrances
except for restrictions on transfer provided for herein or under applicable
federal and state securities laws.
(b) The Company is a corporation validly existing and in good
standing under the laws of the state of Connecticut.
(c) The consummation by the Company of the transactions contemplated
hereby will not conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any statute, any
indenture, mortgage, loan agreement or any other agreement or instrument to
which the Company is a party.
8. Piggyback Registration Rights.
(a) Company Obligation. If the Company shall determine to register
any of its securities either for its own account or the account of a
shareholder(s) exercising demand registration rights, other than a registration
relating solely to employee benefit plans, or a registration relating solely to
a transaction pursuant to Rule 145 promulgated under the Securities Act of 1933,
as amended (the "Act"), or a registration on any registration form which does
not permit secondary sales or does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Warrant Stock, the Company will promptly give to the
Warrant Holder written notice thereof and include in such registration (and any
related qualification under blue sky laws), and in any underwriting involved
therein, the number of shares specified in a written request made by the Warrant
Holder within fifteen (15) days after receipt of such written notice from the
Company, except as set forth in Section 8(b) below.
(b) Underwritten Public Offering. If the registration for which the
Company gives notice is for a registered public offering involving an
underwriting, the right of any Warrant Holder to registration shall be
conditioned upon the Warrant Holder's participation in such underwriting and the
inclusion of such Warrant Holder's Warrant Stock in the underwriting pursuant to
an underwriting agreement in customary form with the underwriter or underwriters
selected by the Company. Notwithstanding any other provision of this Section, if
the underwriter reasonably determines that marketing factors require a
limitation on the number of shares to be underwritten the underwriter may
exclude some or all of the Warrant Stock with the number of shares that may be
included in the registration and underwriting being allocated among the Warrant
<PAGE>
Holder and all other shareholders entitled to have securities included in such
registration in proportion, as nearly as practicable, to the respective amounts
of securities which they had requested to be included in such registration
(provided, however, that if the registration is for the account of shareholders
exercising demand registration rights, the number of shares that may be included
by the Warrant Holder shall be cut back entirely before any limitation on the
number of shares that may be included by such shareholders).
(c) Expenses. All expenses of the registration shall be borne by the
Company, except underwriting discounts and selling commissions applicable to the
sale of any of Warrant Holder's Warrant Stock and any other securities of the
Company being sold in the same registration by other shareholders, which shall
be borne by the Warrant Holder and such other shareholders pro rata on the basis
of the number of their shares registered.
9. Information Rights. So long as the Holder holds this Warrant and/or
any of the Shares, the Company shall deliver to the Holder (a) promptly after
mailing, copies of all notices or other written communications to the
shareholders of the Company, (b) within ninety (90) days after the end of each
fiscal year of the Company, the annual audited financial statements of the
Company certified by independent public accountants of recognized standing and
(c) within forty-five (45) days after the end of each of the first three
quarters of each fiscal year, the Company's quarterly, unaudited financial
statements.
10. Reservation of Stock. On and after the Commencement Date, the Company
will reserve from its authorized and unissued Securities a sufficient number of
shares to provide for the issuance of Warrant Stock upon the exercise or
conversion of this Warrant and shall reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the issuance of Common
Stock upon the conversion of the Warrant Stock. Issuance of this Warrant shall
constitute full authority to the Company's officers who are charged with the
duty of executing stock certificates to execute and issue the necessary
certificates for shares of Warrant Stock issuable upon the exercise or
conversion of this Warrant.
11. Legends. This Warrant and the Shares (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT
AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
12. Compliance with Securities Laws on Transfer. This Warrant and the
Shares issuable upon exercise of this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws or an available exemption by the transferor
and the transferee (including, without limitation, the delivery of investment
<PAGE>
representation letters and legal opinions reasonably satisfactory to the
Company). The Company shall not require any Holder to provide an opinion of
counsel if the transfer is to an affiliate of a Holder or if there is no
material question as to the availability of current information as referenced in
Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e) in
reasonable detail, the selling broker represents that it has complied with Rule
144(f), and the Company is provided with a copy of Holder's notice of proposed
sale. Reference to Rule 144 shall mean Rule 144 promulgated by the Securities
and Exchange Commission under the Securities Act of 1933, as amended, as the
same may be modified, amended, supplemented or superseded.
13. Notices. All notices and other communications from the Company to the
Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or the Holder, as the case
may be, in writing by the Company or such Holder from time to time.
14. Waiver. 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.
15. Attorneys' Fees. In the event of any dispute between the parties
concerning the terms and provisions of this Warrant , the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
16. Entire Agreement. This Warrant and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof.
<PAGE>
17. Governing Law. The validity of the issuance of the Shares shall be
governed by The Connecticut Business Corporation Act, as amended from time to
time. In all other respects, this Warrant shall be governed by and construed in
accordance with the laws of the State of Connecticut, without giving effect to
its principles regarding conflicts of law which might cause the application of
the laws of any other jurisdiction.
INFORMATION MANAGEMENT ASSOCIATES, INC.
By: /s/ Albert Subbloie, Jr.
-----------------------------------
Name: Albert Subbloie, Jr.
Title: President & Chief Executive Officer
Wand Affiliates Fund L.P.
By: /s/ John S. Struck
-----------------------------------
Name: John S. Struck
Title: Managing Partner
<PAGE>
Exhibit A
NOTICE OF EXERCISE
TO: Information Management Associates, Inc.
1. The undersigned hereby elects to purchase ________________ shares of the
Common Stock of Information Management Associates, Inc. pursuant to the
terms of the attached Warrant, and tenders herewith payment of the purchase
price in full, together with all applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
----------------------------------
(Name)
----------------------------------
(Address)
- ------------------------------------ ----------------------------------------
(Date) (Name of Warrant Holder)
By:
--------------------------------
Title:
--------------------------------
<PAGE>
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE
SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT
TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE
TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND
THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION
THEREUNDER OR EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS.
INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR
THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF
TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF
COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE
EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE
WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
OPTION AGREEMENT
This OPTION AGREEMENT (the "Agreement") is entered into as of this
12th day of August, 1999 by and between Information Management Associates, Inc.,
a Connecticut corporation ("IMA"), and Wand Equity Portfolio Fund II L.P., an
investor ("Holder") in the capital stock of buyingedge.com, a Connecticut
corporation ("buyingedge.com").
RECITALS
WHEREAS, buyingedge.com, Holder and certain other parties have entered
into a Series A Preferred Stock Purchase Agreement (the "Purchase Agreement") of
even date herewith (the "Series A Financing") pursuant to which buyingedge.com
has agreed to sell shares of its Series A Preferred Stock to Holder and certain
other investors;
WHEREAS, as a condition to the closing of the Series A Financing, IMA
has agreed to grant an option to Holder to acquire shares of IMA's capital
stock;
WHEREAS, to induce Holder to enter into the Purchase Agreement, IMA,
buyningedge.com and Holder have agreed to enter into this Agreement to provide
Holder with the right to purchase shares of capital stock of IMA.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises and covenants contained herein, the parties agree as follows:
AGREEMENT
1. Grant of Option to Buy Shares.
a. FOR VALUE RECEIVED, subject to the terms and conditions
herein set forth, IMA hereby grants to Holder an option (the "Option") to
purchase up to 304,935 shares of IMA's common stock (the "Shares") at a per
share price equal to $6.20 per share, for an aggregate purchase price of Nine
<PAGE>
Hundred Ninety-Nine Thousand Nine Hundred Ninety-Eight Dollars ($999,998) (the
"Purchase Price").
b. The number of Shares issuable upon exercise of the Option
and the Purchase Price to be paid by Holder upon exercise of the Option shall
each be appropriately adjusted to reflect any stock dividend, stock split,
reverse stock split, combination of shares, reclassification, recapitalization
or other similar event altering the number of outstanding shares of IMA's
capital stock.
c. In case IMA shall make or issue, or fix a record date for
the determination of eligible holders entitled to receive, a dividend or other
distribution with respect to the shares payable in securities of IMA, then, and
in each such case, Holder, on exercise of the Option at any time after the
consummation, effective date or record date of such event, shall receive, in
addition to the Shares (or such other stock or securities) issuable on such
exercise prior to such date, the securities of IMA to which Holder would have
been entitled upon such date if Holder had exercised this Option immediately
prior thereto (all subject to adjustment as provided for herein).
d. If any capital reorganization of the capital stock of IMA,
or any consolidation or merger of IMA with or into another corporation, or sale
of all or substantially all of IMA's assets to another corporation shall be
effected in such a way that holders of IMA's capital stock will be entitled to
receive stock, securities or assets with respect to or in exchange for IMA's
capital stock, in each such case Holder shall, upon the exercise of the Option,
at any time after the consummation of such capital reorganization,
consolidation, merger or sale, be entitled to receive, in lieu of the stock or
other securities and assets receivable upon the exercise of the Option prior to
such consummation, the stock or other securities and assets to which Holder
would have been entitled upon such consummation if Holder had exercised the
Option immediately prior to the consummation of such capital reorganization,
consolidation, merger or sale, all subject to further adjustment as provided for
herein, and in each such case, the terms of the Option shall be applicable to
the shares of stock or other securities and assets receivable upon the exercise
of the Option after such consummation.
2. Exercise of Option to Buy Shares.
a. Holder may exercise this Option by the surrender of the
Notice of Exercise and Investment Representation Statement in the forms attached
hereto as Exhibit A and Exhibit B, respectively, duly completed and executed at
the principal office of IMA, accompanied by payment in full of the Purchase
Price in cash, or by check or wire transfer in next day available funds.
b. This Option shall be deemed to have been exercised
immediately prior to the close of business on the date Holder surrenders the
Notice of Exercise and Investment Representation Statement to IMA as provided
above, and the persons or entities to receive the Shares issuable upon such
exercise shall be treated for all purposes as a stockholder of IMA as of the
close of business on such date.
<PAGE>
c. As promptly as practicable after such date, IMA shall issue
and deliver to the persons entitled to receive the Shares a certificate or
certificates for the number of full Shares issuable upon exercise.
d. The Option must be exercised for the total number of Shares
then issuable upon exercise of the Option.
3. Redemption of buyingedge.com Series A Stock.
a. Concurrent with its exercise of the Option, Holder shall
redeem (the "Redemption") all shares of buyingedge.com's Series A Preferred
Stock (the "Series A Stock") that it or any of its affiliates or related
entities owns.
b. If, at the time of the Redemption, buyingedge.com does not
have the financial resources to redeem all of Holder's shares of Series A Stock,
IMA hereby covenants to transfer to buyingedge.com to the extent it may make
such transfer pursuant to applicable law, within five (5) business days of its
receipt of the Notice of Exercise, sufficient funds to enable buyingedge.com to
legally consummate the Redemption through stock purchase, loan or other method
as IMA shall determine and which shall permit buyingedge.com to redeem such
shares.
c. The Redemption of the Series A Stock shall occur in
accordance with the provision of Article IV(B)(3) of buyingedge.com's
Certificate of Incorporation, as amended to date.
d. Holder shall use the proceeds it receives from
buyingedge.com from the Redemption of the Series A Stock to pay the Purchase
Price for the Shares and agrees to instruct buyingedge.com to transfer the full
amount of the redemption price for the Series A Stock directly to IMA in payment
of the exercise price of this Option.
4. No Stockholder Rights. This Option, by itself, as distinguished
from any Shares acquired by Holder upon exercise of this Option, shall not
entitle Holder to any of the rights of a stockholder of IMA.
5. Reservation of Stock. IMA shall reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of the Shares upon Holder's exercise of the Option. Issuance of this Option
shall constitute full authority of IMA's officers who are charged with the duty
of executing stock certificates to execute and issue the necessary certificates
for the Shares issuable upon exercise of the Option.
6. Piggyback Registration Rights.
a. If IMA shall determine to register any of its securities
either for its own account or for the account of a stockholder(s) exercising
demand registration rights, other than a registration relating solely to
employee benefit plans, or a registration relating solely to a transaction
pursuant to Rule 145 promulgated under the Securities Act of 1933, as amended
(the "Act"), or a registration on any registration form which does not permit
secondary sales or does not include substantially the same information as would
be required to be included in a registration statement covering the sale of the
Shares, IMA shall promptly give to Holder written notice thereof and include in
<PAGE>
such registration (and any related qualification under blue sky laws), and in
any underwriting involved therein, the number of shares specified in a written
request made by Holder within fifteen (15) days after receipt of such written
notice from IMA, except as set forth in subsection (b) below.
b. If the registration for which for which IMA gives notice is
for a registered public offering involving an underwriting, the right of Holder
to registration shall be conditioned upon Holder's participation in such
underwriting and the inclusion of Holder's Shares in the underwriting pursuant
to an underwriting agreement in customary form with the underwriter(s) selected
by IMA. Notwithstanding any other provision of this Section, if the underwriter
determines that marketing factors require a limitation on the number of shares
to be underwritten, the underwriter may exclude some or all of the Shares with
the number of shares that may be included in the registration and underwriting
being allocated among Holder and all other stockholders entitled to have
securities included in such registration in proportion, as nearly as
practicable, to the respective amounts of securities which they had requested to
be included in such registration (provided, however, that if the registration is
for the account of stockholders exercising demand registration rights, the
number of shares that may be included by Holder shall be cut back entirely
before any limitation on the number of shares that may be included by such
stockholders).
c. All expenses of the registration shall be borne by IMA,
except underwriting discounts and selling commissions applicable to the sale of
any of Holder's Shares and any other securities of IMA being sold in the same
registration by other stockholders, which shall be borne by Holder and such
other stockholders pro rata on the basis of the number of shares being
registered.
7. Legends. This Option and the Shares (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT
AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
8. Transfer of Option. This Option may only be transferred or
assigned by Holder hereof in whole or in part, to an affiliated or related
entity of Holder, provided that, if a party acquires Series A Stock from Holder
constituting less than all Series A Stock held by Holder, then this Option shall
be partially transferable to such party only with respect to the number of
Shares that equals the same proportion of the total number of Shares initially
covered hereby as the number of shares of Series A Stock represents to the total
number of shares of Series A Stock initially issued to Holder, which amounts
shall be proportionately adjusted to reflect any stock dividend, stock split,
reverse stock split, combination of shares, reclassification, recapitalization
or similar event altering the number of outstanding shares of IMA's or
buyingedge.com's capital stock, provided, however, that the transferor provides,
at IMA's request, an opinion of counsel reasonably satisfactory to IMA that the
<PAGE>
registration does not require registration under the Act and the securities law
applicable with respect to any other applicable jurisdiction.
9. Termination. The Option shall terminate and no longer be
exercisable at 5:00 p.m., Connecticut time, on August 12, 2002.
10. Miscellaneous. This Agreement shall be governed by the laws of
Connecticut as such laws are applied to contracted entered into and performed
entirely in Connecticut. The headings in this Agreement are for purposes of
convenience and reference only, and shall not be deemed to constitute a part
hereof. Neither this Agreement nor any term hereof may be changed or waived
orally, but only by an instrument in writing signed by IMA and Holder. All
notices and other communications shall be hand delivered, sent by facsimile or
other electronic medium, or mailed, postage prepaid, to IMA or Holder at the
address et forth below each party's signature to this Agreement or to such other
address as may be furnished in writing to the other parties hereto.
11. Counterparts. This Agreement and any exhibit hereto may be
executed in multiple counterparts, each of which shall constitute an original
but all of which shall constitute but one and the same instrument. One or more
counterparts of this Agreement or any Exhibit hereto may be delivered via
facsimile, with the intention that they shall have the same effect as an
original counterpart hereof.
12. Entire Agreement. This Agreement and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof and
they supersede, merge and render void every other prior written and/or oral
understanding or agreement among or between the parties hereto.
13. Severability. In case any provision of this Agreement shall be
found by a court of law to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions of this Agreement shall
not in any way be affected or impaired thereby.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Option
Agreement as of the date first written above.
Information Management Associates, Inc.
a Connecticut corporation
By: /s/ Albert Subbloie, Jr.
------------------------------
Address: ------------------------------
------------------------------
------------------------------
Wand Equity Portfolio Fund II L.P.
By: /s/ John S. Struck
------------------------------
Name: John S. Struck
------------------------------
Title: Managing Member
------------------------------
Address: c/o Wand Partners LLC
630 Fifth Avenue, Suite 2435
New York, NY 10111
<PAGE>
Exhibit A
NOTICE OF EXERCISE
TO: Information Management Associates, Inc.
1. The undersigned hereby elects to purchase ________________ shares of the
Common Stock of Information Management Associates pursuant to the terms of
the attached Option Agreement to which this Exhibit A is attached, and
tenders herewith payment of the purchase price in full, together with all
applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said shares of the
Common Stock in the name of the undersigned or in such other name as is
specified below:
----------------------------------
(Name)
----------------------------------
(Address)
- ------------------------------------ ----------------------------------------
(Date) (Name of Option Holder)
By:
--------------------------------
Title:
--------------------------------
<PAGE>
Exhibit B
INVESTMENT REPRESENTATION STATEMENT
Shares of
Information Management Associates, Inc.
In connection with the purchase of the above-listed securities, the undersigned
hereby represents to Information Management Associates, Inc. ("IMA") as follows:
(a) The securities to be received upon the exercise of the Option (the
"Securities") will be acquired for investment for its own account, not as a
nominee or agent, and not with a view to the sale or distribution of any
part thereof, and the undersigned has no present intention of selling,
granting participation in or otherwise distributing the same, but subject,
nevertheless, to any requirement of law that the disposition of its
property shall at all times be within its control. By executing this
Statement, the undersigned further represents that it does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer, or grant participation to such person or to any third person,
with respect to any Securities issuable upon exercise of the Option.
(b) The undersigned understands that the Securities issuable upon exercise of
the Option at the time of issuance may not be registered under the Act, and
applicable state securities laws, on the ground that the issuance of such
securities is exempt pursuant to Section 4(2) of the Act and state law
exemptions relating to offers and sales not by means of a public offering,
and that IMA's reliance on such exemptions is predicated on the
undersigned's representations set forth herein.
(c) The undersigned agrees that in no event will it make a disposition of any
Securities acquired upon the exercise of the Option unless and until (i) it
shall have notified IMA of the proposed disposition and shall have
furnished IMA with a statement of the circumstances surrounding the
proposed disposition, and (ii) it shall have furnished IMA with an opinion
of counsel satisfactory to IMA and IMA's counsel to the effect that (A)
appropriate action necessary for compliance with the Act and any applicable
state securities laws has been taken or an exemption from the registration
requirements of the Act and such laws is available, and (B) the proposed
transfer will not violate any of said laws.
(d) The undersigned acknowledges that an investment in IMA is highly
speculative and represents that it is able to fend for itself in the
transactions contemplated by this Statement, has such knowledge and
experience in financial and business matters as to be capable of evaluating
the merits and risks of its investments, and has the ability to bear the
economic risks (including the risk of a total loss) of its investment. The
undersigned represents that it has had the opportunity to ask questions of
IMA concerning IMA's business and assets and to obtain any additional
information which it considered necessary to verify the accuracy of or to
amplify IMA's disclosures, and has had all questions which have been asked
by it satisfactorily answered by IMA.
<PAGE>
(e) The undersigned acknowledges that the Securities issuable upon exercise of
the Option must be held indefinitely unless subsequently registered under
the Act or an exemption from such registration is available. The
undersigned is aware of the provisions of Rule 144 promulgated under the
Act which permit limited resale of shares purchased in a private placement
subject to the satisfaction of certain conditions, including, among other
things, the existence of a public market for the shares, the availability
of certain current public information about IMA, the resale occurring not
less than one year after a party has purchased and paid for the security to
be sold, the sale being through a "broker's transaction" or in transactions
directly with a "market makers" (as provided by Rule 144(f)) and the number
of shares being sold during any three-month period not exceeding specified
limitations.
Dated:
-----------------------
----------------------------------------
(Typed or Printed Name)
By:
-------------------------------------
(Signature)
----------------------------------------
(Title)
<PAGE>
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE
SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT
TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE
TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND
THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION
THEREUNDER OR EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS.
INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR
THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF
TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF
COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE
EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE
WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
OPTION AGREEMENT
This OPTION AGREEMENT (the "Agreement") is entered into as of this
12th day of August, 1999 by and between Information Management Associates, Inc.,
a Connecticut corporation ("IMA"), and Wand Affiliates Fund L.P., an investor
("Holder") in the capital stock of buyingedge.com, a Connecticut corporation
("buyingedge.com").
RECITALS
WHEREAS, buyingedge.com, Holder and certain other parties have entered
into a Series A Preferred Stock Purchase Agreement (the "Purchase Agreement") of
even date herewith (the "Series A Financing") pursuant to which buyingedge.com
has agreed to sell shares of its Series A Preferred Stock to Holder and certain
other investors;
WHEREAS, as a condition to the closing of the Series A Financing, IMA
has agreed to grant an option to Holder to acquire shares of IMA's capital
stock;
WHEREAS, to induce Holder to enter into the Purchase Agreement, IMA,
buyningedge.com and Holder have agreed to enter into this Agreement to provide
Holder with the right to purchase shares of capital stock of IMA.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises and covenants contained herein, the parties agree as follows:
AGREEMENT
1. Grant of Option to Buy Shares.
a. FOR VALUE RECEIVED, subject to the terms and conditions
herein set forth, IMA hereby grants to Holder an option (the "Option") to
purchase up to 17,645 shares of IMA's common stock (the "Shares") at a per share
price equal to $6.20 per share, for an aggregate purchase price of Nine Hundred
<PAGE>
Ninety-Nine Thousand Nine Hundred Ninety-Eight Dollars ($999,998) (the "Purchase
Price").
b. The number of Shares issuable upon exercise of the Option
and the Purchase Price to be paid by Holder upon exercise of the Option shall
each be appropriately adjusted to reflect any stock dividend, stock split,
reverse stock split, combination of shares, reclassification, recapitalization
or other similar event altering the number of outstanding shares of IMA's
capital stock.
c. In case IMA shall make or issue, or fix a record date for
the determination of eligible holders entitled to receive, a dividend or other
distribution with respect to the shares payable in securities of IMA, then, and
in each such case, Holder, on exercise of the Option at any time after the
consummation, effective date or record date of such event, shall receive, in
addition to the Shares (or such other stock or securities) issuable on such
exercise prior to such date, the securities of IMA to which Holder would have
been entitled upon such date if Holder had exercised this Option immediately
prior thereto (all subject to adjustment as provided for herein).
d. If any capital reorganization of the capital stock of IMA,
or any consolidation or merger of IMA with or into another corporation, or sale
of all or substantially all of IMA's assets to another corporation shall be
effected in such a way that holders of IMA's capital stock will be entitled to
receive stock, securities or assets with respect to or in exchange for IMA's
capital stock, in each such case Holder shall, upon the exercise of the Option,
at any time after the consummation of such capital reorganization,
consolidation, merger or sale, be entitled to receive, in lieu of the stock or
other securities and assets receivable upon the exercise of the Option prior to
such consummation, the stock or other securities and assets to which Holder
would have been entitled upon such consummation if Holder had exercised the
Option immediately prior to the consummation of such capital reorganization,
consolidation, merger or sale, all subject to further adjustment as provided for
herein, and in each such case, the terms of the Option shall be applicable to
the shares of stock or other securities and assets receivable upon the exercise
of the Option after such consummation.
2. Exercise of Option to Buy Shares.
a. Holder may exercise this Option by the surrender of the
Notice of Exercise and Investment Representation Statement in the forms attached
hereto as Exhibit A and Exhibit B, respectively, duly completed and executed at
the principal office of IMA, accompanied by payment in full of the Purchase
Price in cash, or by check or wire transfer in next day available funds.
b. This Option shall be deemed to have been exercised
immediately prior to the close of business on the date Holder surrenders the
Notice of Exercise and Investment Representation Statement to IMA as provided
above, and the persons or entities to receive the Shares issuable upon such
exercise shall be treated for all purposes as a stockholder of IMA as of the
close of business on such date.
<PAGE>
c. As promptly as practicable after such date, IMA shall issue
and deliver to the persons entitled to receive the Shares a certificate or
certificates for the number of full Shares issuable upon exercise.
d. The Option must be exercised for the total number of Shares
then issuable upon exercise of the Option.
3. Redemption of buyingedge.com Series A Stock.
a. Concurrent with its exercise of the Option, Holder shall
redeem (the "Redemption") all shares of buyingedge.com's Series A Preferred
Stock (the "Series A Stock") that it or any of its affiliates or related
entities owns.
b. If, at the time of the Redemption, buyingedge.com does not
have the financial resources to redeem all of Holder's shares of Series A Stock,
IMA hereby covenants to transfer to buyingedge.com to the extent it may make
such transfer pursuant to applicable law, within five (5) business days of its
receipt of the Notice of Exercise, sufficient funds to enable buyingedge.com to
legally consummate the Redemption through stock purchase, loan or other method
as IMA shall determine and which shall permit buyingedge.com to redeem such
shares.
c. The Redemption of the Series A Stock shall occur in
accordance with the provision of Article IV(B)(3) of buyingedge.com's
Certificate of Incorporation, as amended to date.
d. Holder shall use the proceeds it receives from
buyingedge.com from the Redemption of the Series A Stock to pay the Purchase
Price for the Shares and agrees to instruct buyingedge.com to transfer the full
amount of the redemption price for the Series A Stock directly to IMA in payment
of the exercise price of this Option.
4. No Stockholder Rights. This Option, by itself, as distinguished
from any Shares acquired by Holder upon exercise of this Option, shall not
entitle Holder to any of the rights of a stockholder of IMA.
5. Reservation of Stock. IMA shall reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of the Shares upon Holder's exercise of the Option. Issuance of this Option
shall constitute full authority of IMA's officers who are charged with the duty
of executing stock certificates to execute and issue the necessary certificates
for the Shares issuable upon exercise of the Option.
6. Piggyback Registration Rights.
a. If IMA shall determine to register any of its securities
either for its own account or for the account of a stockholder(s) exercising
demand registration rights, other than a registration relating solely to
employee benefit plans, or a registration relating solely to a transaction
pursuant to Rule 145 promulgated under the Securities Act of 1933, as amended
(the "Act"), or a registration on any registration form which does not permit
secondary sales or does not include substantially the same information as would
be required to be included in a registration statement covering the sale of the
Shares, IMA shall promptly give to Holder written notice thereof and include in
<PAGE>
such registration (and any related qualification under blue sky laws), and in
any underwriting involved therein, the number of shares specified in a written
request made by Holder within fifteen (15) days after receipt of such written
notice from IMA, except as set forth in subsection (b) below.
b. If the registration for which for which IMA gives notice is
for a registered public offering involving an underwriting, the right of Holder
to registration shall be conditioned upon Holder's participation in such
underwriting and the inclusion of Holder's Shares in the underwriting pursuant
to an underwriting agreement in customary form with the underwriter(s) selected
by IMA. Notwithstanding any other provision of this Section, if the underwriter
determines that marketing factors require a limitation on the number of shares
to be underwritten, the underwriter may exclude some or all of the Shares with
the number of shares that may be included in the registration and underwriting
being allocated among Holder and all other stockholders entitled to have
securities included in such registration in proportion, as nearly as
practicable, to the respective amounts of securities which they had requested to
be included in such registration (provided, however, that if the registration is
for the account of stockholders exercising demand registration rights, the
number of shares that may be included by Holder shall be cut back entirely
before any limitation on the number of shares that may be included by such
stockholders).
c. All expenses of the registration shall be borne by IMA,
except underwriting discounts and selling commissions applicable to the sale of
any of Holder's Shares and any other securities of IMA being sold in the same
registration by other stockholders, which shall be borne by Holder and such
other stockholders pro rata on the basis of the number of shares being
registered.
7. Legends. This Option and the Shares (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT
AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
8. Transfer of Option. This Option may only be transferred or
assigned by Holder hereof in whole or in part, to an affiliated or related
entity of Holder, provided that, if a party acquires Series A Stock from Holder
constituting less than all Series A Stock held by Holder, then this Option shall
be partially transferable to such party only with respect to the number of
Shares that equals the same proportion of the total number of Shares initially
covered hereby as the number of shares of Series A Stock represents to the total
number of shares of Series A Stock initially issued to Holder, which amounts
shall be proportionately adjusted to reflect any stock dividend, stock split,
reverse stock split, combination of shares, reclassification, recapitalization
or similar event altering the number of outstanding shares of IMA's or
buyingedge.com's capital stock, provided, however, that the transferor provides,
at IMA's request, an opinion of counsel reasonably satisfactory to IMA that the
<PAGE>
registration does not require registration under the Act and the securities law
applicable with respect to any other applicable jurisdiction.
9. Termination. The Option shall terminate and no longer be
exercisable at 5:00 p.m., Connecticut time, on August 12, 2002.
10. Miscellaneous. This Agreement shall be governed by the laws of
Connecticut as such laws are applied to contracted entered into and performed
entirely in Connecticut. The headings in this Agreement are for purposes of
convenience and reference only, and shall not be deemed to constitute a part
hereof. Neither this Agreement nor any term hereof may be changed or waived
orally, but only by an instrument in writing signed by IMA and Holder. All
notices and other communications shall be hand delivered, sent by facsimile or
other electronic medium, or mailed, postage prepaid, to IMA or Holder at the
address et forth below each party's signature to this Agreement or to such other
address as may be furnished in writing to the other parties hereto.
11. Counterparts. This Agreement and any exhibit hereto may be
executed in multiple counterparts, each of which shall constitute an original
but all of which shall constitute but one and the same instrument. One or more
counterparts of this Agreement or any Exhibit hereto may be delivered via
facsimile, with the intention that they shall have the same effect as an
original counterpart hereof.
12. Entire Agreement. This Agreement and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof and
they supersede, merge and render void every other prior written and/or oral
understanding or agreement among or between the parties hereto.
13. Severability. In case any provision of this Agreement shall be
found by a court of law to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions of this Agreement shall
not in any way be affected or impaired thereby.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Option
Agreement as of the date first written above.
Information Management Associates, Inc.
a Connecticut corporation
By: /s/ Albert Subbloie, Jr.
------------------------------
Address: ------------------------------
------------------------------
------------------------------
Wand Affiliates Fund L.P.
By: /s/ John S. Struck
------------------------------
Name: John S. Struck
------------------------------
Title: Managing Member
------------------------------
Address: c/o Wand Partners LLC
630 Fifth Avenue, Suite 2435
New York, NY 10111
<PAGE>
Exhibit A
NOTICE OF EXERCISE
TO: Information Management Associates, Inc.
1. The undersigned hereby elects to purchase ________________ shares of the
Common Stock of Information Management Associates pursuant to the terms of
the attached Option Agreement to which this Exhibit A is attached, and
tenders herewith payment of the purchase price in full, together with all
applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said shares of the
Common Stock in the name of the undersigned or in such other name as is
specified below:
----------------------------------
(Name)
----------------------------------
(Address)
- ------------------------------------ ----------------------------------------
(Date) (Name of Option Holder)
By:
--------------------------------
Title:
--------------------------------
<PAGE>
Exhibit B
INVESTMENT REPRESENTATION STATEMENT
Shares of
Information Management Associates, Inc.
In connection with the purchase of the above-listed securities, the undersigned
hereby represents to Information Management Associates, Inc. ("IMA") as follows:
(a) The securities to be received upon the exercise of the Option (the
"Securities") will be acquired for investment for its own account, not as a
nominee or agent, and not with a view to the sale or distribution of any
part thereof, and the undersigned has no present intention of selling,
granting participation in or otherwise distributing the same, but subject,
nevertheless, to any requirement of law that the disposition of its
property shall at all times be within its control. By executing this
Statement, the undersigned further represents that it does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer, or grant participation to such person or to any third person,
with respect to any Securities issuable upon exercise of the Option.
(b) The undersigned understands that the Securities issuable upon exercise of
the Option at the time of issuance may not be registered under the Act, and
applicable state securities laws, on the ground that the issuance of such
securities is exempt pursuant to Section 4(2) of the Act and state law
exemptions relating to offers and sales not by means of a public offering,
and that IMA's reliance on such exemptions is predicated on the
undersigned's representations set forth herein.
(c) The undersigned agrees that in no event will it make a disposition of any
Securities acquired upon the exercise of the Option unless and until (i) it
shall have notified IMA of the proposed disposition and shall have
furnished IMA with a statement of the circumstances surrounding the
proposed disposition, and (ii) it shall have furnished IMA with an opinion
of counsel satisfactory to IMA and IMA's counsel to the effect that (A)
appropriate action necessary for compliance with the Act and any applicable
state securities laws has been taken or an exemption from the registration
requirements of the Act and such laws is available, and (B) the proposed
transfer will not violate any of said laws.
(d) The undersigned acknowledges that an investment in IMA is highly
speculative and represents that it is able to fend for itself in the
transactions contemplated by this Statement, has such knowledge and
experience in financial and business matters as to be capable of evaluating
the merits and risks of its investments, and has the ability to bear the
economic risks (including the risk of a total loss) of its investment. The
undersigned represents that it has had the opportunity to ask questions of
IMA concerning IMA's business and assets and to obtain any additional
information which it considered necessary to verify the accuracy of or to
amplify IMA's disclosures, and has had all questions which have been asked
by it satisfactorily answered by IMA.
<PAGE>
(e) The undersigned acknowledges that the Securities issuable upon exercise of
the Option must be held indefinitely unless subsequently registered under
the Act or an exemption from such registration is available. The
undersigned is aware of the provisions of Rule 144 promulgated under the
Act which permit limited resale of shares purchased in a private placement
subject to the satisfaction of certain conditions, including, among other
things, the existence of a public market for the shares, the availability
of certain current public information about IMA, the resale occurring not
less than one year after a party has purchased and paid for the security to
be sold, the sale being through a "broker's transaction" or in transactions
directly with a "market makers" (as provided by Rule 144(f)) and the number
of shares being sold during any three-month period not exceeding specified
limitations.
Dated:
-----------------------
----------------------------------------
(Typed or Printed Name)
By:
-------------------------------------
(Signature)
----------------------------------------
(Title)
SENIOR SUBORDINATED CONVERTIBLE PROMISSORY NOTE
THIS NOTE AND ANY SHARES ACQUIRED UPON CONVERSION OF THIS NOTE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
UNLESS REGISTERED UNDER THE ACT AND ALL APPLICABLE STATE SECURITIES LAWS OR
UNLESS AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS AVAILABLE AT THE
TIME OF SUCH OFFERING, SALE OR TRANSFER.
INFORMATION MANAGEMENT ASSOCIATES, INC.
9% Senior Subordinated Convertible Promissory Note
Due April 30, 2000
US$5,000,000 August 12, 1999
New York, New York
Information Management Associates, Inc., a Connecticut corporation
("IMA"), hereby promises upon the terms and subject to the provisions of this 9%
Senior Subordinated Convertible Promissory Note (the "Note") to pay to the order
of Wand Equity Portfolio II L.P. and Wand Affiliates Fund L.P. (collectively,
"Holder", which term shall include any holder in due course or assignee of this
Note or such other party as the Holder from time to time may designate in
writing), the principal amount of Five Million Dollars (US$5,000,000), together
with the accrued interest on the unpaid balance of said principal amount, in the
amounts and in the manner set forth in this Note.
This Note is issued pursuant to and is entitled to the benefits of
that certain Senior Subordinated Promissory Note and Warrant Purchase Agreement
dated as of the date hereof between IMA and the Holder (as such agreement may be
amended, supplemented, modified, extended or restated from time to time, the
"Purchase Agreement"). No provision of this Note or the Purchase Agreement shall
alter or impair the obligation of IMA, which is absolute and unconditional, to
<PAGE>
pay the principal of and interest on this Note at the place, at the respective
times, at the rates, and in the currency herein prescribed.
Definitions. As used herein, the following terms shall have the
following meanings:
"Conversion Price" shall mean $1,000.00 per share of Preferred Stock.
"Default Rate" shall mean 11% per annum.
"Indebtedness" means, without duplication: (i) all obligations for
borrowed money or for the deferred purchase price of property or services (other
than trade payables incurred in the ordinary course of business consistent with
past practice), (ii) all obligations evidenced by bonds, notes, debentures or
other similar instruments or securities, (iii) all indebtedness created or
arising under any sale and leaseback arrangement, conditional sale or other
title retention agreement with respect to property owned or acquired (whether or
not 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), (iv) all
rental obligations under capital leases, (v) all obligations, contingent or
otherwise, in respect of letters of credit, bankers acceptances or similar
instruments, (vi) all obligations under interest rate swap agreements, interest
rate cap or collar agreements or any other similar agreement or arrangement
designed to provide protection against fluctuations in interest rates, (vii) all
guarantees (direct or indirect) and all other contingent obligations in respect
of, or obligations to purchase or otherwise acquire or to assure payment of,
indebtedness of others and (viii) indebtedness of others secured by any lien
upon property, whether or not assumed.
"Maturity Date" shall mean April 30, 2000.
"Preferred Stock" has the meaning set forth in Section 5(a).
"Residual Amount" has the meaning set forth in Section 5(a).
"Senior Indebtedness" means all Indebtedness of IMA that, by its
terms, ranks senior in priority of payment to all other Indebtedness of IMA.
<PAGE>
1. Payment of Interest. Interest shall accrue on the unpaid principal
amount of this Note from the date hereof at the rate of 9% per annum (the
"Interest Rate"), compounded quarterly, calculated on the basis of a 360-day
year and the actual number of days the principal is outstanding. Interest on the
outstanding principal balance hereof shall be due and payable in arrears on
October 31, 1999, January 31, 1999 and April 30, 2000. If any payment to be made
by IMA shall become due on a day other than a Business Day, such payment shall
be made on the next succeeding Business Day and such extension of time shall be
included in computing any interest with respect to such payment. Any overdue
interest will accrue interest at the Default Rate, calculated on the basis of a
360-day year and the actual number of days any unpaid interest is outstanding.
Any overdue interest, plus any accrued interest thereon, shall be payable on
demand of Holder.
2. Payment of Principal upon Maturity. Subject to the provisions of
Sections 5, 6 and 7 hereof, IMA shall pay to Holder on the Maturity Date the
entire principal amount of this Note plus any accrued interest.
3. Principal and Interest Payments. All sums due to Holder in
connection with this Note shall be calculated and payable in lawful currency of
the United States of America, in immediately available funds, at Holder's place
of business at 630 Fifth Avenue, Suite 2435, New York, New York 10111 or at such
other place as Holder might from time to time direct. All payments to be made by
IMA shall be made without any deduction, setoff, counterclaim or withholding
whatsoever and free and clear of any taxes.
4. Representations and Warranties.
(a) Ranking. IMA acknowledges and agrees that its obligations
hereunder constitute Senior Indebtedness ranking pari passu in
priority of payment with all other Senior Indebtedness of IMA;
provided, that Holder acknowledges that the obligations of IMA
hereunder shall be subordinate to IMA's obligations to a bank or other
financial institution in an amount not to exceed $8,000,000.
(b) Solvency. IMA is, and after giving effect to the
indebtedness evidenced hereby, will be solvent, with capital that is
not unreasonably small in relation to its business or any contemplated
or undertaken transaction, and has assets having a value both at fair
valuation and a present fair saleable value greater than the amount
<PAGE>
that will be required to pay its probable liability on its existing
debts as they become due.
5. Conversion.
(a) Automatic Conversion and Conversion Price. Subject to the
terms and provisions of this Section 5, any principal outstanding and,
at the option of the Holder, any accrued and unpaid interest payable
under this Note that has not been paid on or prior to 5:00 p.m.,
Eastern Standard Time, on April 30, 2000 shall be automatically
converted into fully paid and nonassessable shares of Series C
Convertible Preferred Stock of IMA ("Preferred Stock") at the
Conversion Price, subject to adjustment as set forth below. In no
event, however, shall such conversion cause this Note to convert into
a number of shares of voting stock of IMA that would represent more
than 19.9% of the voting power of the issued and outstanding voting
stock of IMA as of the Closing Date. For purposes of this calculation,
the issued and outstanding voting stock of IMA as of the Closing Date
shall exclude and voting stock issuable pursuant to options, warrants
or convertible securities. In the event that conversion of the entire
principal amount payable under this Note would result in the Holder
owning in excess of 19.9% of the voting power of the issued and
outstanding voting stock of IMA as of the Closing Date, the entire
principal amount shall not be converted into Preferred Stock. Only the
principal amount that would, when converted, result in the Holder
owning exactly 19.9% of the voting power of issued and outstanding
voting stock of IMA as of the Closing Date shall be converted into
Preferred Stock subject to the terms of this Section 5. The remaining
principal amount due and payable under this Note ("Residual Amount")
shall be cancelled upon issuance of a new Senior Subordinated
Promissory Note with the Residual Amount as the principal amount, in
the form attached hereto as Exhibit A (the "Replacement Note").
(b) Deliveries Upon Conversion. Upon conversion, Holder shall
surrender the Note to IMA, and IMA shall simultaneously issue and
deliver to Holder a certificate or certificates for the number of full
shares of Preferred Stock issuable upon conversion, together with
payment in lieu of any fraction of a share, as provided in Section
5(c) and, if applicable, the Replacement Note.
(c) Fractions of Shares. No fractional shares of Preferred Stock
shall be issued upon conversion of the Note. Instead, IMA shall pay a
<PAGE>
cash adjustment (rounded to the nearest cent) in respect of such
fraction in an amount equal to the same fraction of the Conversion
Price.
(d) Adjustment of Conversion Price. In the event that,
subsequent to the date hereof, the outstanding shares of the Common
Stock shall have been changed into a different number of shares or a
different class as a result of a stock split, reverse stock split,
stock dividend, subdivision, reclassification, combination, exchange,
recapitalization or other similar transaction, the number of shares of
Common Stock (on an as converted basis) otherwise deliverable to
Holder in accordance with the terms of this Note shall be
appropriately adjusted.
(e) Notice of Adjustments of Conversion Price. Whenever the
Conversion Price is adjusted as herein provided, IMA shall compute the
adjusted Conversion Price in accordance with Section 5(d) and shall
deliver to Holder a certificate setting forth the adjusted Conversion
Price and showing in reasonable detail the facts upon which such
adjustment is based.
(f) Reservation of Preferred Stock. IMA shall cause to be
reserved and kept available at all times a sufficient number of shares
of Preferred Stock to satisfy the conversion requirements of the Note.
IMA shall take all such action as may be necessary to insure that all
shares of Preferred Stock issued upon conversion of the Note will be
duly issued, fully paid and nonassessable.
(g) Taxes on Conversions. IMA will pay any and all transfer,
stamp and other similar taxes that may be payable in respect of the
issuance or delivery of shares of Preferred Stock upon conversion of
the Note. IMA shall not, however, be required to pay any tax that may
be payable in respect of any transfer involved in the issuance and
delivery of shares of Preferred Stock in a name other than that of
Holder, and no such issue or delivery shall be made unless and until
the person requesting such issuance has paid to IMA the amount of any
such tax, or has established to the satisfaction of IMA that such tax
has been paid.
6. Prepayments. IMA shall have the right to prepay the Note in
whole, including all accrued interest, but not in part, at its option prior to
the Maturity Date without penalty or premium. Interest shall accrue to and
include the date on which payment is made.
<PAGE>
7. Events of Default.
(a) Definition. The following shall be an "Event of Default"
under this Note:
(i) IMA shall fail to make any payment of principal of or
interest on this Note when the same shall become due and payable,
whether on the Maturity Date or otherwise;
(ii) IMA shall fail to perform or observe any other covenant
or agreement (not specified in clause (i) above) to be performed
by it hereunder or under the Purchase Agreement within fifteen
days of the date written notice of such failure is given to IMA;
(iii) (A) IMA shall commence any case, proceeding or action
(x) under any existing or future law of any jurisdiction,
domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for
relief entered with respect to it, or seeking to adjudicate it
bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to its debts, or (y) seeking
appointment of a receiver, trustee, custodian or other similar
official for it or for all or any substantial part of its assets,
(B) IMA shall make a general assignment for the benefit of its
creditors, (C) there shall be commenced against IMA any case,
proceeding or other action of a nature referred to in clause (A)
above which shall not have been vacated or discharged within 90
days from the commencement thereof, or (D) a court shall enter a
decree or order for relief in any involuntary case under Title 11
of the United States Code, as amended from time to time, or any
applicable bankruptcy or similar law now or hereafter in effect,
which decree or order is not stayed, vacated, discharged, or
bonded pending appeal within 90 days from the entry thereof; or
(iv) IMA shall default in the payment when due (whether by
scheduled maturity, required prepayment, acceleration, demand or
otherwise) of any amount owing in respect of any Indebtedness in
the aggregate principal amount of $500,000 or more; or IMA shall
default in the performance or observance of any obligation or
condition with respect to any such Indebtedness or any other
<PAGE>
event shall occur or condition exist, if the effect of such
default, event or condition is to accelerate the maturity of any
such Indebtedness or to permit (without regard to any required
notice or lapse of time) the holder or holders thereof, or any
trustee or agent for such holders, to accelerate the maturity of
any such Indebtedness, or any such Indebtedness shall become or
be declared to be due and payable prior to its stated maturity
other than as a result of a regularly scheduled payment.
(b) Remedies. If an Event of Default shall occur and be
continuing, then Holder may, upon written notice to IMA, declare all
amounts owing under this Note to be immediately due and payable. If
the Holder declares all amounts owing under this Note to be
immediately due and payable, and such amounts due are not repaid
within 20 business days from the date of the demand, Holder may, at
its sole discretion, immediately convert the Note into Preferred Stock
in accordance with Section 5 hereof. The Holder shall also have all
other rights in respect of this Note following the occurrence and
during the continuance of an Event of Default which are available
pursuant to applicable law or in equity.
8. No Presentment. IMA, for itself and any guarantors hereof, and
their successors and assigns, waives diligence, presentment, demand, protest and
notice thereof or of dishonor or nonpayment of this Note and all other notice or
demands in connection with the delivery, acceptance, performance, default or
enforcement of this Note, and waives any right to be released by reason of any
failure to act to enforce the provisions of the Note, extension of time or
change in the terms of payment.
9. Severability. In case any provision of this Note shall be
invalid, illegal or unenforceable, such provision shall be severable from the
rest of this Note and the validity, legality and enforceability of the remaining
provisions shall not, in any way be affected or impaired thereby.
10. Cancellation. After all unpaid principal and interest owed on this
Note has been paid in full or the Note has been converted at the Maturity Date,
this Note shall be surrendered to IMA for cancellation and shall not be
reissued.
11. Transfer Restrictions. This Note or the obligations represented
hereby shall not be transferable by IMA without Holder's prior written consent.
<PAGE>
12. Governing Law. THIS NOTE SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
13. Submission to Jurisdiction. ANY LEGAL ACTION OR PROCEEDING WITH
RESPECT TO THIS NOTE MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF
THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY
EXECUTION AND DELIVERY OF THIS NOTE, THE COMPANY HEREBY ACCEPTS FOR ITSELF AND
IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF
THE AFORESAID COURTS AND APPELLATE COURTS FROM ANY THEREOF. EACH PARTY HERETO
HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE
AFOREMENTIONED COURTS IN ANY ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF TO SUCH PARTY BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, RETURN
RECEIPT REQUESTED, TO SUCH PARTY AT ITS ADDRESS SPECIFIED IN SECTION 14. THE
PARTIES HERETO HEREBY IRREVOCABLY WAIVE TRIAL BY JURY, AND THE COMPANY HEREBY
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION
TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN
SUCH RESPECTIVE JURISDICTIONS.
14. Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be delivered in person, mailed by
certified or registered mail, return receipt requested, or sent by telecopier or
telex, addressed as follows:
(a) if to the IMA, at Information Management Associates, One
Corporate Drive, Suite #414, Shelton, Connecticut 06484, Attention: President,
with a copy to Thomas L. Fairfield, Esq., LeBoeuf, Lamb, Greene & MacRae,
L.L.P., 225 Asylum Street, Hartford, Connecticut 06103; and
(b) if to the Holder, at Wand Partners, Inc., 630 Fifth
Avenue, Suite 2435, New York, New York 10110, with a copy to Marcia Nirenstein,
Esq., Skadden, Arps, Slate, Meagher & Flom, LLP, 1440 New York Avenue, N.W.,
Washington, D.C. 20005.
<PAGE>
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.
15. Collection of Fees and Expenses. IMA hereby agrees to pay all
costs and expenses, including reasonable attorneys' fees, in connection with the
enforcement or collection of this Note.
16. Lost Documents. Upon receipt by IMA of evidence satisfactory to
it of the loss, theft, destruction or mutilation of this Note or any Note
exchanged for it, and (in case of loss, theft or destruction) an indemnity
satisfactory to it, and upon reimbursement to IMA of all reasonable expenses
incidental thereto, and upon surrender and cancellation of such Note, if
mutilated, the Company will make and deliver in liue of such Note a new Note of
like tenor an unpaid principal amount and dated as of the original date of the
Note.
17. Benefit. This Note shall be binding upon and inure to the benefit
of the parties hereto and their legal representatives, successors and assigns.
18. Usury Savings Clause. Anything herein to the contrary
notwithstanding, if during the period for which interest is computed hereunder,
the amount of interest computed on the basis provided for in this Note, together
with all fees, charges and other payments which are treated as interest under
applicable law, as provided for herein or in any other document executed in
connection herewith, would exceed the amount of such interest computed on the
basis of the Highest Lawful Rate (as defined below), the Company shall not be
obligated to pay, and the Holder shall not be entitled to charge, collect,
reserve or take, interest in excess of the Highest Lawful Rate, and during any
such period the interest payable hereunder shall be computed on the basis of the
Highest Lawful Rate. As used herein, "Highest Lawful Rate" means the maximum
non-usurious rate of interest, as in effect from time to time, which may be
charged, contracted for, reserved, received or collected by the Holder in
connection with this Note under applicable law.
19. Descriptive Headings. The descriptive headings of this Note are
inserted for convenience only and do not constitute a part of this Note.
<PAGE>
IN WITNESS WHEREOF, IMA has executed and delivered this Note on the
date first written above.
INFORMATION MANAGEMENT
ASSOCIATES, INC.
By: /s/ Albert Subbloie, Jr.
------------------------------
Name: Albert Subbloie, Jr.
Title: President and CEO
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of August 12, 1999 among
Information Management Associates, Inc., a Connecticut corporation (the
"Company") and Wand Equity Portfolio II L.P. and Wand Affiliates Fund L.P.
(collectively, the "Holder").
1. Introduction. The Company is a party to the separate Senior
Subordinated Convertible Promissory Note and Warrant Purchase Agreement, the
Senior Subordinated Convertible Promissory Note and the Common Stock Purchase
Warrant (the "Note and Warrant Agreements"), each dated August 12, 1999, with
the Holder, pursuant to which the Company has agreed, among other things, to
issue 5,000 shares of its Series C Convertible Preferred Stock (the "Preferred
Stock") upon maturity on April 30, 2000 of its 9% Senior Subordinated
Convertible Promissory Note if entire amount of principal payable under note has
not been repaid by such date, and 425,000 shares of Common Stock upon the
exercise by the Holder of its Warrant, each in the manner and subject to the
terms provided for therein This Agreement shall become effective upon the
issuance of such securities to such parties pursuant to the Note and Warrant
Agreements. Certain capitalized terms used in this Agreement are defined in
section 3 hereof; references to sections shall be to sections of this agreement.
2. Registration under Securities Act, etc.
2.1 Registration on Request.
(a) Request. Upon the written request of the Holder, requesting
that the Company effect the registration under the Securities Act of all or part
of Holder's Registrable Securities and specifying the intended method of
disposition thereof, the Company will promptly give written notice of such
requested registration to all registered holders of Registrable Securities, and
thereupon the Company will, subject to the terms of this Agreement, effect the
registration under the Securities Act of:
(i) the Registrable Securities which the Company has been so
requested to register by Holder for disposition in accordance with the
intended method of disposition stated in such request; and
<PAGE>
(ii) all shares of Common Stock which the Company may elect to
register in connection with the offering of Registrable Securities pursuant
to this section 2.1,
all to the extent requisite to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities and the
additional shares of Common Stock, if any so to be registered.
(b) Registration Statement Form. Registrations under this
section 2.1 shall be on such appropriate registration form of the Commission (i)
as shall be selected by the Company and as shall be reasonably acceptable to the
Holder and (ii) as shall permit the disposition of such Registrable Securities
in accordance with the intended method or methods of disposition specified in
its request for such registration. If, in connection with any registration under
section 2.1 which is proposed by the Company to be on Form S-3 or any similar
short form registration statement which is a successor to Form S-3, the managing
underwriters, if any, shall advise the Company in writing that in their opinion
the use of another permitted form is of material importance to the success of
the offering, then such registration shall be on such other permitted form.
(c) Expenses. The Company will pay all Registration Expenses in
connection with any registration requested pursuant to this section 2.1 by
Holder prior to the time at which two such registrations shall have been
effected. The Registration Expenses (and underwriting discounts and commissions
and transfer taxes, if any) in connection with each other registration requested
under this section 2.1 shall be allocated pro rata among all Persons on whose
behalf securities of the Company are included in such registration, on the basis
of the respective amounts of the securities then being registered on their
behalf.
(d) Effective Registration Statement. A registration requested
pursuant to this section 2.1 shall not be deemed to have been effected (i)
unless a registration statement with respect thereto has become effective,
provided that a registration which does not become effective after the Company
has filed a registration statement with respect thereto solely by reason of the
refusal to proceed of Holder (other than a refusal to proceed based upon the
advice of counsel relating to a matter with respect to the Company) shall be
deemed to have been effected by the Company at the request of Holder unless
Holder shall have elected to pay all Registration Expenses in connection with
such registration, (ii) if, after it has become effective, such registration
<PAGE>
becomes subject to any stop order, injunction or other order or requirement of
the Commission or other governmental agency or court for any reason, or (iii)
the conditions to closing specified in the purchase agreement or underwriting
agreement entered into in connection with such registration are not satisfied,
other than by reason of some act or omission by Holder.
(e) Selection of Underwriters. If a requested registration
pursuant to this section 2.1 involves an underwritten offering, the underwriter
or underwriters thereof shall be selected by the Holder and shall be reasonably
acceptable to the Company, which shall not unreasonably withhold its acceptance
of any such underwriters.
(f) Priority in Requested Registrations. If a requested
registration pursuant to this section 2.1 involves an underwritten offering, and
the managing underwriter shall advise the Company in writing (with a copy to
each holder of Registrable Securities requesting registration) that, in its
opinion, the number of securities requested to be included in such registration
exceeds the number which can be sold in such offering within a price range
acceptable to the Holder, the Company will include in such registration, to the
extent of the number which the Company is so advised can be sold in such
offering, (i) first, Registrable Securities requested to be included in such
registration by Holder, (ii) second, securities the Company proposes to sell and
other securities of the Company included in such registration by the holders
thereof.
2.2 Incidental Registration.
(a) Right to Include Registrable Securities. If the Company at
any time proposes to register any of its securities under the Securities Act
(other than by a registration on Form S-4 or S-8, or any successor or similar
forms and other than pursuant to section 2.1), whether or not for sale for its
own account, it will each such time give prompt written notice to Holder of its
intention to do so and of the Holders rights under this section 2.2. Upon the
written request of any such holder made within 30 days after the receipt of any
such notice (which request shall specify the Registrable Securities intended to
be disposed of by Holder and the intended method of disposition thereof), the
Company will, subject to the terms of this Agreement, effect the registration
under the Securities Act of all Registrable Securities which the Company has
been so requested to register by the holders thereof, to the extent requisite to
permit the disposition (in accordance with the intended methods thereof as
aforesaid) of the Registrable Securities so to be registered, by inclusion of
<PAGE>
such Registrable Securities in the registration statement which covers the
securities which the Company proposes to register, provided that if, at any time
after giving written notice of its intention to register any securities and
prior to the effective date of the registration statement filed in connection
with such registration, the Company shall determine for any reason either not to
register or to delay registration of such securities, the Company may, at its
election, give written notice of such determination to the Holder and,
thereupon, (i) in the case of a determination not to register, shall be relieved
of its obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses in
connection therewith), without prejudice, however, to the rights of any holder
or holders of Registrable Securities entitled to do so to request that such
registration be effected as a registration under section 2.1, and (ii) in the
case of a determination to delay registering, shall be permitted to delay
registering any Registrable Securities, for the same period as the delay in
registering such other securities. No registration effected under this section
2.2 shall relieve the Company of its obligation to effect any registration upon
request under section 2.1, nor shall any such registration hereunder be deemed
to have been effected pursuant to section 2.1. The Company will pay all
Registration Expenses in connection with each registration of Registrable
Securities requested pursuant to this section 2.2.
(b) Priority in Incidental Registrations. If (i) a registration
pursuant to this section 2.2 involves an underwritten offering of the securities
so being registered, whether or not for sale for the account of the Company, to
be distributed (on a firm commitment basis) by or through one or more
underwriters of recognized standing under underwriting terms appropriate for
such a transaction, (ii) the Registrable Securities so requested to be
registered for sale for the account of Holder are not also to be included in
such underwritten offering (either because the Company has not been requested so
to include such Registrable Securities pursuant to section 2.4(b) or, if
requested to do so, is not obligated to do so under section 2.4(b), and (iii)
the managing underwriter of such underwritten offering shall inform the Company
and Holder requesting such registration by letter of its belief that the number
of securities requested to be included in such registration is less than the
number which can be sold in (or during the time of) such offering, then the
Company will include in such registration, to the extent of the number which the
Company is so advised can be sold in (or during the time of) such offering, (i)
first, Registrable Securities the registration of which shall have been
requested by the Holder, (ii) second, securities proposed by the Company to be
sold for its own account.
<PAGE>
2.3 Registration Procedures. If and whenever (a) the Company is
required to effect the registration of any Registrable Securities under the
Securities Act as provided in sections 2.1 and 2.2 or (b) Holder so requests in
connection with any other proposed registration by the Company under the
Securities Act, the Company shall, as expeditiously as possible:
(i) prepare and (within 60 days after the end of the period
within which requests for registration may be given to the Company or in
any event as soon thereafter as possible) file with the Commission the
requisite registration statement to effect such registration (including
such audited financial statements as may be required by the Securities Act
or the rules and regulations promulgated thereunder) and thereafter cause
such registration statement to become and remain effective, provided
however that the Company may discontinue any registration of its securities
which are not Registrable Securities (and, under the circumstances
specified in section 2.2(a), its securities which are Registrable
Securities) at any time prior to the effective date of the registration
statement relating thereto, provided further that before filing such
registration statement or any amendments thereto, the Company will furnish
to the counsel selected by the Holder which are to be included in such
registration copies of all such documents proposed to be filed, which
documents will be subject to the review of such counsel;
(ii) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such
registration statement until such time as all of such securities have been
disposed of in accordance with the intended methods of disposition by the
Holder;
(iii) furnish to the Holder covered by such registration
statement and each underwriter, if any, of the securities being sold by
such holder such number of conformed copies of such registration statement
and of each such amendment and supplement thereto (in each case including
all exhibits), such number of copies of the prospectus contained in such
registration statement (including each preliminary prospectus and any
summary prospectus) and any other prospectus filed under Rule 424 under the
Securities Act, in conformity with the requirements of the Securities Act,
<PAGE>
and such other documents, as such holder and underwriter, if any, may
reasonably request;
(iv) use its best efforts to register or qualify all
Registrable Securities and other securities covered by such registration
statement under such other securities laws or blue sky laws of such
jurisdictions as any seller thereof and any underwriter of the securities
being sold by such seller shall reasonably request, to keep such
registrations or qualifications in effect for so long as such registration
statement remains in effect, and take any other action which may be
reasonably necessary or advisable to enable such seller and underwriter to
consummate the disposition in such jurisdictions of the securities owned by
such seller, except that the Company shall not for any such purpose be
required to qualify generally to do business as a foreign corporation in
any jurisdiction wherein it would not but for the requirements of this
subdivision (iv) be obligated to be so qualified or to consent to general
service of process in any such jurisdiction;
(v) use its best efforts to cause all Registrable
Securities covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the to consummate the disposition of such Registrable
Securities;
(vi) furnish to the Holder a signed counterpart, addressed
to the Holder and the underwriters, if any, of:
(x) an opinion of counsel for the Company, dated the effective date of such
registration statement (or, if such registration includes an underwritten public
offering, an opinion dated the date of the closing under the underwriting
agreement), reasonably satisfactory in form and substance to such seller, and
(y) a "comfort" letter (or, in the case of any such Person which does not
satisfy the conditions for receipt of a "comfort" letter specified in Statement
on Auditing Standards No. 72, an "agreed upon procedures" letter), dated the
effective date of such registration statement (and, if such registration
includes an underwritten public offering, a letter of like kind dated the date
of the closing under the underwriting agreement), signed by the independent
public accountants who have certified the Company's financial statements
included in such registration statement,
<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
(with, in the case of an "agreed upon procedures" letter, such
modifications or deletions as may be required under Statement on
Auditing Standards No. 35) and, in the case of the accountants'
letter, such other financial matters, and, in the case of the legal
opinion, such other legal matters, as such seller (or the
underwriters, if any) may reasonably request;
(vii) notify the Holder and the managing underwriter or
underwriters, if any, promptly and confirm such advice in writing
promptly thereafter:
(v) when the registration statement, the prospectus or any
prospectus supplement related thereto or post-effective amendment to the
registration statement has been filed, and, with respect to the registration
statement or any post-effective amendment thereto, when the same has become
effective;
(w) of any request by the Commission for amendments or
supplements to the registration statement or the prospectus or for additional
information;
(x) of the issuance by the Commission of any stop order
suspending the effectiveness of the registration statement or the initiation of
any proceedings by any Person for that purpose;
(y) if at any time the representations and warranties of the
Company made as contemplated by section 2.4 below cease to be true and correct;
(z) of the receipt by the Company of any notification with
respect to the suspension of the qualification of any Registrable Securities for
sale under the securities or blue sky laws of any jurisdiction or the initiation
or threat of any proceeding for such purpose; and
(viii) notify at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, upon
discovery that, or upon the happening of any event as a result of
<PAGE>
which, the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the
circumstances then existing, and at the request of the Holder promptly
prepare and furnish to such seller and each underwriter, if any, a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then
existing;
(ix) use its best efforts to obtain the withdrawal of any
order suspending the effectiveness of the registration statement at
the earliest possible moment;
(x) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months, but
not more than eighteen months, beginning with the first day of the
Company's first fiscal quarter after the effective date of such
registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158
thereunder, and will furnish to each such seller at least five
business days prior to the filing thereof a copy of any amendment or
supplement to such registration statement or prospectus and shall not
file any thereof to which the Holder shall have reasonably objected on
the grounds that such amendment or supplement does not comply in all
material respects with the requirements of the Securities Act or of
the rules or regulations thereunder;
(xi) make available for inspection by a representative or
representatives of the holders of Registrable Securities, any
underwriter participating in any disposition pursuant to the
registration statement and any attorney or accountant retained by such
selling holders or underwriter (each, an "Inspector"), all financial
and other records, pertinent corporate documents and properties of the
Company (the "Records"), and cause the Company's officers, directors
and employees to supply all information reasonably requested by any
such Inspector in connection with such registration in order to permit
<PAGE>
a reasonable investigation within the meaning of Section 11 of the
Securities Act;
(xii) provide and cause to be maintained a transfer agent
and registrar for all Registrable Securities covered by such
registration statement from and after a date not later than the
effective date of such registration statement;
(xiii) enter into such agreements and take such other
actions as Holder shall reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities;
(xiv) use its best efforts to list all Registrable
Securities covered by such registration statement on any securities
exchange on which any of the Registrable Securities are then listed;
and
(xv) use its best efforts to provide a CUSIP number for the
Registrable Securities, not later than the effective date of the
registration statement.
The Company may require the Holder to furnish the Company such information
regarding itself and the distribution of such securities as the Company may from
time to time reasonably request in writing.
The Company will not file any registration statement or amendment
thereto or any prospectus or any supplement thereto (including such documents
incorporated by reference and proposed to be filed after the initial filing of
the registration statement) to which the Holder or the underwriter or
underwriters, if any, shall reasonably object, provided that the Company may
file such document in a form required by law or upon the advice of its counsel.
The Holder agrees by acquisition of such Registrable Securities that, upon
receipt of any notice from the Company of the occurrence of any event of the
kind described in subdivision (viii) of this section 2.3, such holder will
forthwith discontinue the Holder's disposition of Registrable Securities
pursuant to the registration statement relating to such Registrable Securities
until the Holder's receipt of the copies of the supplemented or amended
prospectus contemplated by subdivision (viii) of this section 2.3 and, if so
directed by the Company, will deliver to the Company (at the Company's expense)
all copies, other than permanent file copies, then in such holder's possession
<PAGE>
of the prospectus relating to such Registrable Securities current at the time of
receipt of such notice.
If any such registration statement refers to any holder of Registrable
Securities by name or otherwise as the holder of any securities of the Company,
then the Holder shall have the right to require (i) the insertion therein of
language, in form and substance satisfactory to the Holder, to the effect that
the holding by the Holder of such securities is not to be construed as a
recommendation by the Holder of the investment quality of the Company's
securities covered thereby and that such holding does not imply that the Holder
will assist in meeting any future financial requirements of the Company, or (ii)
in the event that such reference to the Holder by name or otherwise is not
required by the Securities Act or any similar federal statute then in force, the
deletion of the reference to the Holder.
2.4 Underwritten Offerings.
(a) Requested Underwritten Offerings. If requested by the
underwriters for any underwritten offering by the Holder pursuant to a
registration requested under section 2.1, the Company will enter into an
underwriting agreement with such underwriters for such offering, such agreement
to be satisfactory in substance and form to the Company, the Holder and the
underwriters, and to contain such representations and warranties by the Company
and such other terms as are generally prevailing in agreements of this type,
including, without limitation, indemnities to the effect and to the extent
provided in section 2.7. The Holder will cooperate with the Company in the
negotiation of the underwriting agreement and will give consideration to the
reasonable suggestions of the Company regarding the form thereof, provided that
nothing herein contained shall diminish the foregoing obligations of the
Company. The Holder of the Registrable Securities to be distributed by such
underwriters shall be parties to such underwriting agreement and may, at their
option, require that any or all of the representations and warranties by, and
the other agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of the Holder and that
any or all of the conditions precedent to the obligations of such underwriters
under such underwriting agreement be conditions precedent to the obligations of
the Holders. Any such holder of Registrable Securities shall not be required to
make any representations or warranties to or agreements with the Company or the
underwriters other than representations and warranties contained in a writing
furnished by the Holder expressly for use in such registration statement or
agreements regarding the Holder, the Holder's Registrable Securities and the
Holder's intended method of distribution.
<PAGE>
(b) Incidental Underwritten Offerings. If the Company at any
time proposes to register any of its securities under the Securities Act as
contemplated by section 2.2 and such securities are to be distributed by or
through one or more underwriters, the Company will, if requested by the Holder
Securities as provided in section 2.2 and subject to the provisions of section
2.2(b), use its best efforts to arrange for such underwriters to include all the
Registrable Securities to be offered and sold by the Holder among the securities
to be distributed by such underwriters, provided that if the managing
underwriter of such underwritten offering shall inform the Holder requesting
such registration and the holders of any other securities which shall have
exercised, in respect of such underwritten offering, registration rights
comparable to the rights under section 2.2 by letter of its belief that
inclusion in such underwritten distribution of all or a specified number of such
Registrable Securities or of such other securities so requested to be included
would interfere with the successful marketing of the securities (other than such
Registrable Securities and other securities so requested to be included) by the
underwriters (such writing to state the basis of such belief and the approximate
number of such Registrable Securities and shares of other securities so
requested to be included which may be included in such underwritten offering
without such effect), then the Company may, upon written notice to the Holder
and of such other shares of securities so requested to be included, exclude from
such underwritten offering (i) first, pro rata, (if and to the extent stated by
such managing underwriter to be necessary to eliminate such effect) the number
of such other securities requested to be included of which registration shall
have been requested by each holder thereof other than Holder whose registration
rights were granted by the Company after the date hereof, (ii) second, (if and
to the extent stated by such managing underwriter to be necessary to eliminate
such effect after reducing the number of securities to be registered under (i))
pro rata, the number of Registrable Securities or other securities requested to
be included of which registration shall have been requested by the Holder and
each holder thereof whose registration rights were granted by the Company on or
before the date hereof and (iii) third, (if and to the extent stated by such
managing underwriter to be necessary to eliminate such effect after reducing the
number of securities to be registered under (i) and (ii)) the number of
Registrable Securities the registration of which shall have been requested by
Holder, so that the resultant aggregate number of such Registrable Securities
and of such other shares of securities so requested to be included which are
included in such underwritten offering shall be equal to the approximate number
of shares stated in such managing underwriter's letter. The holders of
Registrable Securities to be distributed by such underwriters shall be parties
to the underwriting agreement between the Company and such underwriters and may,
at their option, require that any or all of the representations and warranties
<PAGE>
by, and the other agreements on the part of, the Company to and for the benefit
of such underwriters shall also be made to and for the benefit of such holders
of Registrable Securities and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be conditions
precedent to the obligations of such holders of Registrable Securities. Any such
holder of Registrable Securities shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding such
holder, such holder's Registrable Securities and such holder's intended method
of distribution and any other representation required by law.
(c) Participation in Underwritten Offerings. No Person may
participate in any underwritten offering hereunder unless such Person (i) agrees
to sell such Person's securities on the basis provided in any underwriting
arrangements approved, subject to the terms and conditions hereof, by the
Company and Holder and (ii) completes and executes all questionnaires,
indemnities, underwriting agreements and other documents (other than powers of
attorney) required under the terms of such underwriting arrangements.
Notwithstanding the foregoing, no underwriting agreement (or other agreement in
connection with such offering) shall require any holder of Registrable
Securities to make any representations or warranties to or agreements with the
Company or the underwriters other than representations and warranties contained
in a writing furnished by such holder expressly for use in the related
registration statement or agreements regarding such holder, such holder's
Registrable Securities and such holder's intended method of distribution and any
other representation required by law. Without limiting the generality of the
foregoing, each Holder agrees in connection with any public offering of the
Company's securities that, upon request of the Company or the underwriters
managing any underwritten offering of the Company's securities, that such Holder
will not sell, make any short sale of, loan, grant any option for the purchase
of, or otherwise transfer or dispose of or reduce such Holder's market risk with
respect to any Registrable Securities or other shares of stock of the Company
then owned by such Holder (other than those included in the registration)
without the prior written consent of the Company or the managing underwriters,
as the case may be, for such period of time determined by the Company and the
underwriters (not to exceed a period commencing on the date of the final
prospectus for such registration and ending 90 days thereafter). Each Holder
agrees to execute any confirmation of such lock-up agreement that may be
reasonably requested by the underwriters.
<PAGE>
2.5 Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company will give the Holders registered under
such registration statement, their underwriters, if any, and their respective
counsel and accountants, the opportunity to participate in the preparation of
such registration statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement thereto, and will give each
of them such access to its books and records and such opportunities to discuss
the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be necessary,
in the opinion of Holders' and such underwriters' respective counsel, to conduct
a reasonable investigation within the meaning of the Securities Act.
2.6 Indemnification.
(a) Indemnification by the Company. In the event of any
registration of any securities of the Company under the Securities Act, the
Company will, and hereby does agree to, indemnify and hold harmless (i) in the
case of any registration statement filed pursuant to section 2.1 or 2.2, the
holder of any Registrable Securities covered by such registration statement, its
directors and officers, each other Person who participates as an underwriter in
the offering or sale of such securities and each other Person, if any, who
controls the Holder or any such underwriter within the meaning of the Securities
Act, and (ii) in the case of any registration statement of the Company, the
holder of any Registrable Securities, its directors and officers and each other
Person, if any, who controls such holder within the meaning of the Securities
Act, against any losses, claims, damages or liabilities, joint or several, to
which the Holder or any such director or officer or underwriter or controlling
person may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any registration statement under which such securities were registered under the
Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
the Company will reimburse the Holder and each such director, officer,
underwriter and controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding, provided that the Company
<PAGE>
shall not be liable in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company through an instrument duly executed by such holder specifically
stating that it is for use in the preparation thereof and, provided further that
the Company shall not be liable to any Person who participates as an underwriter
in the offering or sale of Registrable Securities or to any other Person, if
any, who controls such underwriter within the meaning of the Securities Act, in
any such case to the extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense arises out of such Person's
failure to send or give a copy of the final prospectus, as the same may be then
supplemented or amended, within the time required by the Securities Act to the
Person asserting the existence of an untrue statement or alleged untrue
statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such Person if such
statement or omission was corrected in such final prospectus. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of the Holder or any such director, officer, underwriter or
controlling person and shall survive the transfer of such securities by the
Holder.
(b) Indemnification by the Holder. In the even that any
Registrable Securities are included in any registration statement filed pursuant
to section 2.3, the Holder will and hereby does agree to indemnify and hold
harmless (in the same manner and to the same extent as set forth in subdivision
(a) of this section 2.6) the Company, each director of the Company, each officer
of the Company and each other person, if any, who controls the Company within
the meaning of the Securities Act, with respect to any statement or alleged
statement in or omission or alleged omission from such registration statement,
any preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by such seller specifically stating that it is for use
in the preparation of such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement. Such indemnity shall
remain in full force and effect, regardless of any investigation made by or on
behalf of the Company or any such director, officer or controlling person and
shall survive the transfer of such securities by the Holder.
<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 2.6,
such indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the commencement of
such action, provided that the failure of any indemnified party to give notice
as provided herein shall not relieve the indemnifying party of its obligations
under the preceding subdivisions of this section 2.6, except to the extent that
the indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, the
indemnifying party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified, to the
extent that the indemnifying party may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such indemnified party
for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
of any such action which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability, or a covenant not to sue, in respect to such claim or litigation.
No indemnified party shall consent to entry of any judgment or enter into any
settlement of any such action the defense of which has been assumed by an
indemnifying party without the consent of such indemnifying party.
(d) Other Indemnification. Indemnification similar to that
specified in the preceding subdivisions of this section 2.6 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification of
securities under any Federal or state law or regulation of any governmental
authority, other than the Securities Act.
(e) Indemnification Payments. The indemnification required by
this section 2.6 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
<PAGE>
(f) Contribution. If the indemnification provided for in the
preceding subdivisions of this section 2.6 is unavailable to an indemnified
party in respect of any expense, loss, claim, damage or liability referred to
therein, then each indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such expense, loss, claim, damage or liability (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the holder or underwriter, as the case may be, on
the other from the distribution of the Registrable Securities or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company on
the one hand and of the holder or underwriter, as the case may be, on the other
in connection with the statements or omissions which resulted in such expense or
loss. The relative fault of the Company on the one hand and of the holder or
underwriter, as the case may be, on the other shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or omission to state a material fact relates to information
supplied by the Company, by the holder or by the underwriter and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission, provided that the foregoing contribution
agreement shall not inure to the benefit of any indemnified party if
indemnification would be unavailable to such indemnified party by reason of the
provisions contained in the first sentence of subdivision (a) of this section
2.6, and in no event shall the obligation of any indemnifying party to
contribute under this subdivision (f) exceed the amount that such indemnifying
party would have been obligated to pay by way of indemnification if the
indemnification provided for under subdivisions (a) or (b) of this section 2.6
had been available under the circumstances.
The Company and the Holders agree that it would not be just and
equitable if contribution pursuant to this subdivision (f) were determined by
pro rata allocation (even if the Holders and any underwriters were treated as
one entity for such purpose) or by any other method of allocation that does not
take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages and liabilities referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth in the preceding sentence and subdivision (c) of this
section 2.6, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
<PAGE>
Notwithstanding the provisions of this subdivision (f), no Holder or
underwriter shall be required to contribute any amount in excess of the amount
by which (i) in the case of any such holder, the net proceeds received by Holder
from the sale of Registrable Securities or (ii) in the case of an underwriter,
the total price at which the Registrable Securities purchased by it and
distributed to the public were offered to the public exceeds, in any such case,
the amount of any damages that the Holder or underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
2.7 Adjustments Affecting Registrable Securities. The Company will
not effect or permit to occur any combination or subdivision of shares which
would adversely affect the ability of the Holder to include such Registrable
Securities in any registration of its securities contemplated by this section 2
or the marketability of such Registrable Securities under any such registration.
3. Definitions. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:
Commission: The Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
Common Stock: As defined in section 1.
Company: As defined in the introductory paragraph of this Agreement.
Exchange Act: The Securities Exchange Act of 1934, or any similar
Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. Reference
to a particular section of the Securities Exchange Act of 1934 shall
include a reference to the comparable section, if any, of any such
similar Federal statute.
Note and Warrant Agreements: As defined in section 1.
<PAGE>
Person: A corporation, an association, a partnership, an organization,
business, an individual, a governmental or political subdivision
thereof or a governmental agency.
Registrable Securities: Any shares of Common Stock issued to Holder
pursuant to the conversion or exercise of the Preferred stock, without
par value of the Company and the Common Stock purchase warrants of the
Company issued pursuant to the Note and Warrant Agreements including
any such shares which have been assigned, sold, transferred or
otherwise disposed of to a permitted assignee of Holder, and any
securities issued or issuable with respect to any Common Stock
referred to above by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise. As to any
particular Registrable Securities, once issued such securities shall
cease to be Registrable Securities when (a) a registration statement
with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been
disposed of in accordance with such registration statement, (b) they
shall have been distributed to the public pursuant to Rule 144 (or any
successor provision) under the Securities Act, (c) subsequent
disposition of them shall not require registration or qualification of
them under the Securities Act or any similar state law then in force
pursuant to the exemption contained in Rule 144(k) or any successor
rule, or (d) they shall have ceased to be outstanding.
Registration Expenses: All expenses incident to the Company's
performance of or compliance with section 2, including, without
limitation, all registration, filing and NASD fees, all stock exchange
listing fees, all fees and expenses of complying with securities or
blue sky laws, all word processing, duplicating and printing expenses,
messenger and delivery expenses, the fees and disbursements of counsel
for the Company and of its independent public accountants, including
the expenses of any special audits or "cold comfort" letters required
by or incident to such performance and compliance, the fees and
disbursements of any single counsel and accountants retained by the
Holder, premiums and other costs of policies of insurance for the
benefit of the Company or its Board of Directors against liabilities
arising out of the public offering of the Registrable Securities being
<PAGE>
registered and any fees and disbursements of underwriters customarily
paid by issuers or sellers of securities, but excluding underwriting
discounts and commissions and transfer taxes, if any, provided that,
in any case where Registration Expenses are not to be borne by the
Company, such expenses shall not include salaries of Company personnel
or general overhead expenses of the Company, auditing fees, premiums
or other expenses relating to liability insurance required by
underwriters of the Company or other expenses for the preparation of
financial statements or other data normally prepared by the Company in
the ordinary course of its business or which the Company would have
incurred in any event.
Securities Act: The Securities Act of 1933, or any similar Federal
statute, and the rules and regulations of the Commission thereunder,
all as of the same shall be in effect at the time. References to a
particular section of the Securities Act of 1933 shall include a
reference to the comparable section, if any, of any such similar
Federal statute.
4. Rules 144 and 144A. So long as the Company shall not have filed a
registration statement pursuant to section 12 of the Exchange Act or a
registration statement pursuant to the requirements of the Securities Act, the
Company shall, at any time and from time to time, upon the request of the Holder
and upon the request of any Person designated by the Holder as a prospective
purchaser of any Registrable Securities, furnish in writing to the Holder or
such prospective purchaser, as the case may be, a statement as of a date not
earlier than 12 months prior to the date of such request of the nature of the
business of the Company and the products and services it offers and copies of
the Company's most recent balance sheet and profit and loss and retained
earnings statements, together with similar financial statements for such part of
the two preceding fiscal years as the Company shall have been in operation, all
such financial statements to be audited to the extent audited statements are
reasonably available, provided that, in any event the most recent financial
statements so furnished shall include a balance sheet as of a date less than 16
months prior to the date of such request, statements of profit and loss and
retained earnings for the 12 months preceding the date of such balance sheet,
and, if such balance sheet is not as of a date less than 6 months prior to the
date of such request, additional statements of profit and loss and retained
earnings for the period from the date of such balance sheet to a date less than
6 months prior to the date of such request. If the Company shall have filed a
registration statement pursuant to the requirements of section 12 of the
Exchange Act or a registration statement pursuant to the requirements of the
<PAGE>
Securities Act, the Company shall timely file the reports required to be filed
by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the Commission thereunder (or, if the Company is not
required to file such reports, will, upon the request of any holder of
Registrable Securities, make publicly available other information) and will take
such further action as any holder of Registrable Securities may reasonably
request, all to the extent required from time to time to enable such holder to
sell Registrable Securities without registration under the Securities Act within
the limitation of the exemptions provided by (a) Rule 144 under the Securities
Act, as such Rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Commission. Upon the request of any holder
of Registrable Securities, the Company will deliver to such holder a written
statement as to whether it has complied with the requirements of this Section 4.
5. Amendments and Waivers. This Agreement may be amended and the
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of Holder. The
Holder shall be bound by any consent authorized by this section 5, whether or
not such Registrable Securities shall have been marked to indicate such consent.
6. Nominees for Beneficial Owners. In the event that any Registrable
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election, be treated as the holder of such
Registrable Securities for purposes of any request or other action the Holder
pursuant to this Agreement or any determination of any number or percentage of
shares of Registrable Securities held by the Holder contemplated by this
Agreement. If the beneficial owner of any Registrable Securities so elects, the
Company may require assurances reasonably satisfactory to it of such owner's
beneficial ownership of such Registrable Securities.
7. Notices. Except as otherwise provided in this Agreement, all
notices, requests and other communications to any Person provided for hereunder
shall be in writing and shall be given to such Person in the manner set forth in
the applicable Note and Warrant Agreement. Each such notice, request or other
communication shall be effective (i) if given by mail, 72 hours after such
communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid or (ii) if given by any other means (including, without
limitation, by air courier), when delivered at the address specified above,
<PAGE>
provided that any such notice, request or communication to the Holder shall not
be effective until received.
8. Assignment. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their respective
successors and assigns. In addition, and whether or not any express assignment
shall have been made, the provisions of this Agreement which are for the benefit
of the parties hereto other than the Company shall also be for the benefit of
and enforceable by any subsequent holder of at least 100,000 shares of
Registrable Securities.
9. Descriptive Headings. The descriptive headings of the several
sections and paragraphs of this Agreement are inserted for reference only and
shall not limit or otherwise affect the meaning hereof.
10. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF
THE STATE OF NEW YORK WITHOUT REFERENCE TO THE PRINCIPLES OF CONFLICTS OF LAWS.
11. Counterparts. This Agreement may be executed simultaneously in
any number of counterparts, each of which shall be deemed an original, but all
such counterparts shall together constitute one and the same instrument.
12. Entire Agreement. This Agreement embodies the entire agreement
and understanding between the Company and each other party hereto relating to
the subject matter hereof and supersedes all prior agreements and understandings
relating to such subject matter.
13. SUBMISSION TO JURISDICTION. ANY LEGAL ACTION OR PROCEEDING WITH
RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK
OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND,
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE COMPANY HEREBY ACCEPTS FOR
ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS AND APPELLATE COURTS FROM ANY THEREOF. EACH
PARTY HERETO HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF
THE AFOREMENTIONED COURTS IN ANY ACTION OR PROCEEDING BY THE MAILING OF COPIES
<PAGE>
THEREOF TO SUCH PARTY BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, RETURN
RECEIPT REQUESTED, TO SUCH PARTY AT ITS ADDRESS SPECIFIED IN SECTION 7. THE
PARTIES HERETO HEREBY IRREVOCABLY WAIVE TRIAL BY JURY, AND THE COMPANY HEREBY
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION
TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN
SUCH RESPECTIVE JURISDICTIONS.
14. Severability. If any provision of this Agreement, or the
application of such provisions to any Person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to Persons or circumstances other than those to which it is held invalid, shall
not be affected thereby.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
INFORMATION MANAGEMENT
ASSOCIATES, INC.
By /s/ Albert Subbloie, Jr.
--------------------------------
Name: Albert Subbloie, Jr.
Title: President and CEO
WAND EQUITY PORTFOLIO II L.P.
By: WAND PARTNERS LLC, General Partner
By /s/ John S. Struck
--------------------------------
Name: John S. Struck
Title: Managing Member
WAND AFFILIATES FUND L.P.
By: WAF PARTNERS LLC, General Partner
By /s/ John S. Struck
--------------------------------
Name: John S. Struck
Title: Managing Member
