1
REGISTRATION RIGHTS AGREEMENT
among
POLICY MANAGEMENT SYSTEMS CORPORATION
GENERAL ATLANTIC PARTNERS 14, L.P.
and
GAP COINVESTMENT PARTNERS
___________________________________
Dated as of April 26, 1994
__________________________________
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TABLE OF CONTENTS
Page
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Securities Subject to this Agreement. . . . . . . . . . . . . 3
(a) Registrable Securities . . . . . . . . . . . . . . . . . 3
(b) Holders of Registrable Securities. . . . . . . . . . . . 3
3. Demand Registration . . . . . . . . . . . . . . . . . . . . . 4
(a) Request for Demand Registration. . . . . . . . . . . . . 4
(b) Effective Demand Registration. . . . . . . . . . . . . . 5
(c) Expenses . . . . . . . . . . . . . . . . . . . . . . . . 5
(d) Underwriting Procedures. . . . . . . . . . . . . . . . . 5
(e) Selection of Underwriters. . . . . . . . . . . . . . . . 6
4. Piggy-Back Registration . . . . . . . . . . . . . . . . . . . 6
(a) Piggy-Back Rights. . . . . . . . . . . . . . . . . . . . 6
(b) Expenses . . . . . . . . . . . . . . . . . . . . . . . . 7
5. Holdback Agreements . . . . . . . . . . . . . . . . . . . . . 7
(a) Restrictions on Public Sale by Holders . . . . . . . . . 7
(b) Restrictions on Public Sale by the Company . . . . . . . 7
6. Registration Procedures . . . . . . . . . . . . . . . . . . . 7
(a) Obligations of the Company . . . . . . . . . . . . . . . 7
(b) Seller Information . . . . . . . . . . . . . . . . . . . 11
(c) Notice to Discontinue. . . . . . . . . . . . . . . . . . 11
7. Registration Expenses . . . . . . . . . . . . . . . . . . . . 11
8. Indemnification; Contribution . . . . . . . . . . . . . . . . 12
(a) Indemnification by the Company . . . . . . . . . . . . . 12
(b) Indemnification by Holders . . . . . . . . . . . . . . . 12
(c) Conduct of Indemnification Proceedings . . . . . . . . . 12
(d) Contribution . . . . . . . . . . . . . . . . . . . . . . 13
9. Rule 144. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
10. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . 14
(a) Recapitalizations, Exchanges, etc. . . . . . . . . . . . 14
(b) Remedies . . . . . . . . . . . . . . . . . . . . . . . . 14
(c) Amendments and Waivers . . . . . . . . . . . . . . . . . 15
(d) Notices. . . . . . . . . . . . . . . . . . . . . . . . . 15
(e) Successors and Assigns . . . . . . . . . . . . . . . . . 16
(f) Counterparts . . . . . . . . . . . . . . . . . . . . . . 16
(g) Governing Law. . . . . . . . . . . . . . . . . . . . . . 16
(h) Headings . . . . . . . . . . . . . . . . . . . . . . . . 16
(i) Jurisdiction . . . . . . . . . . . . . . . . . . . . . . 17
(j) Severability . . . . . . . . . . . . . . . . . . . . . . 17
(k) Rules of Construction. . . . . . . . . . . . . . . . . . 17
(l) Headings; References . . . . . . . . . . . . . . . . . . 17
(m) Entire Agreement . . . . . . . . . . . . . . . . . . . . 17
(n) Further Assurances . . . . . . . . . . . . . . . . . . . 17
(o) Effectiveness. . . . . . . . . . . . . . . . . . . . . . 17
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REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of April 26,
1994, among POLICY MANAGEMENT SYSTEMS CORPORATION, a South
Carolina corporation (the "Company"), GENERAL ATLANTIC PARTNERS
14, L.P., a Delaware limited partnership ("GAP 14"), and GAP
COINVESTMENT PARTNERS, a New York general partnership ("GAP
Coinvestment").
Pursuant to a Stock Purchase Agreement, dated as of the
date hereof, among GAP 14, GAP Coinvestment and INTERNATIONAL
BUSINESS MACHINES CORPORATION, a New York corporation ("IBM")
(the "Stock Purchase Agreement"), GAP 14 and GAP Coinvestment
have agreed to purchase from IBM 1,519,024 shares of Common
Stock, par value $.01 per share, of the Company ("Common Stock,"
and such shares of Common Stock are referred to herein as the
"Purchased Common Stock").
In connection with the purchase of the Purchased Common
Stock by GAP 14 and GAP Coinvestment pursuant to the Stock
Purchase Agreement, each of them has entered into a Shareholders'
Agreement, dated as of the date hereof, among the Company, GAP 14
and GAP Coinvestment (the "Shareholders' Agreement"), pursuant to
which GAP 14 and GAP Coinvestment have granted to the Company
rights of first offer and certain other rights, in each case, to
the extent provided for therein.
In order to induce GAP 14 and GAP Coinvestment to enter
into the Shareholders' Agreement, the Company has agreed to
provide registration rights with respect to the Registrable
Securities (as hereinafter defined) as set forth in this
Agreement.
For good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto
hereby agree as follows:
1. Definitions. As used in this Agreement, and
unless the context requires a different meaning, the following
terms have the meanings indicated:
"Act" means the Securities Act of 1933, as
amended.
"Approved Underwriter" has the meaning assigned
such term in Section 3(e).
"Business Day" means any day other than a Satur-
day, Sunday or other day on which commercial banks in the City of
New York are authorized or required by law or executive order to
close.
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"Common Stock" has the meaning assigned such term
in the second paragraph of this Agreement.
"Company" has the meaning assigned such term in
the first paragraph of this Agreement.
"Company Approved Amount" has the meaning assigned
such term in Section 4(a).
"Company Underwriter" has the meaning assigned
such term in Section 4(a).
"Demand Registration" has the meaning assigned
such term in Section 3(a).
"Exchange Act" means the Securities Exchange Act
of 1934, as amended.
"GAP 14" has the meaning assigned such term in the
first paragraph of this Agreement.
"GAP Coinvestment" has the meaning assigned such
term in the first paragraph of this Agreement.
"Holder" has the meaning assigned such term in
Section 2(b).
"Holders' Counsel" means (a) with respect to any
Demand Registration that has been requested pursuant to
Section 3, counsel selected by the Initiating Holders holding a
majority of the Registrable Securities held by all Initiating
Holders being registered in such registration, and (b) with
respect to a request for registration of Registrable Securities
pursuant to Section 4, counsel selected by the Holders holding a
majority of the Registrable Securities being registered in such
registration.
"IBM" has the meaning assigned such term in the
second paragraph of this Agreement.
"Indemnified Party" has the meaning assigned such
term in Section 8(c).
"Indemnifying Party" has the meaning assigned such
term in Section 8(c).
"Initiating Holders" has the meaning assigned to
such term in Section 3(a).
"NASD" has the meaning assigned such term in
Section 6(a)(xv).
"Person" means any individual, firm, corporation,
partnership, trust, incorporated or unincorporated association,
joint venture, joint stock company, government (or an agency or
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political subdivision thereof) or other entity of any kind, and
shall include any successor (by merger or otherwise) of any such
entity.
"Purchased Common Stock" has the meaning assigned
such term in the second paragraph of this Agreement.
"Registrable Securities" means, subject to
Section 2(a), (i) any shares of Purchased Common Stock, and
(ii) any other shares of Common Stock of the Company acquired by
GAP 14 and/or GAP Coinvestment in a manner consistent with and
subject to the Shareholders' Agreement and (iii) any shares of
capital stock issued or issuable in respect of shares of
Purchased Common Stock or any other shares of Common Stock of the
Company acquired by GAP 14 and/or GAP Coinvestment in a manner
consistent with and subject to the Shareholders' Agreement by way
of a stock dividend or stock split or in connection with a com-
bination of shares, recapitalization, merger, consolidation or
other reorganization or otherwise.
"Registration Expenses" has the meaning assigned
such term in Section 7.
"SEC" means the Securities and Exchange
Commission.
"Shareholders' Agreement" has the meaning assigned
such term in the third paragraph of this Agreement.
"Stock Purchase Agreement" has the meaning
assigned such term in the second paragraph of this Agreement.
"Total Securities" has the meaning assigned such
term in Section 4(a).
2. Securities Subject to this Agreement.
(a) Registrable Securities. For the purposes of
this Agreement, Registrable Securities will cease to be Regis-
trable Securities (i) when a registration statement covering such
Registrable Securities has been declared effective under the Act
by the SEC and such Registrable Securities have been disposed of
pursuant to such effective registration statement or (ii) if such
Registrable Securities have been sold pursuant to Rule 144 or
otherwise in a transaction in which such shares may be resold in
a transaction exempt from the registration requirements of the
Act and the legend on the certificates representing such shares
has been or is permitted to be removed.
(b) Holders of Registrable Securities. A Person
is deemed to be a holder of Registrable Securities (a "Holder")
whenever such Person (i) is a party to this Agreement or a
permitted assign under the Shareholders' Agreement (other than a
Rule 144 purchaser) who agrees to be bound in writing by the
terms and provisions of this Agreement and the Shareholders'
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Agreement and (ii) owns of record Registrable Securities. If the
Company receives conflicting instructions, notices or elections
from two or more persons with respect to the same Registrable
Securities, the Company shall act upon the basis of the
instructions, notice or election received from the registered
owner of such Registrable Securities.
3. Demand Registration.
(a) Request for Demand Registration. Subject to
Sections 3(b) and 3(d) hereof, the Holders holding at least a
majority of the Registrable Securities held by all of the Holders
(the "Initiating Holders") may request one registration (the
"Demand Registration") of Registrable Securities under the Act
and under the securities or blue sky laws of any United States
jurisdiction designated by the Holders that request to register
Registrable Securities in such registration. Notwithstanding the
foregoing, the Company shall not be required to effect the Demand
Registration (i) within the period beginning forty five (45) days
before the estimated filing date of a registration statement
filed by the Company on its own behalf covering a firm commitment
underwritten public offering and ending on the later of (A) one
hundred and twenty (120) days after the effective date of such
registration statement and (B) the expiration of any lock-up
period reasonably required by the underwriters, if any, in
connection therewith; (ii) if such registration is for the lesser
of 350,000 shares of Common Stock (appropriately adjusted for
stock dividends, stock splits, reverse splits, combinations,
recapitalizations and the like occurring after the date hereof)
or 25% of the total number of shares of Registrable Securities
owned by the Holders; (iii) if, in the written opinion of counsel
to the Company, the shares to be registered may be resold in a
transaction exempt from the Registration requirements of the Act,
or a no-action letter of the staff of the SEC has been obtained
to that effect, and the shares are freed from any and all
restrictions on transfer under the Shareholders' Agreement;
(iv) for a maximum of sixty (60) days if the Company is
contemplating a material plan of financing or would be required
to disclose information that it deems advisable not to disclose
in a registration statement; (v) for a maximum of sixty (60) days
if the Company cannot then comply with the financial disclosure
requirements of the SEC in connection with such registration;
provided that (recognizing that the Company is not on the date
hereof in compliance with the SEC's financial reporting
requirements) no Demand Registration will be initiated until
three years of financial statements meeting such requirements
have been filed with the SEC and the Company is otherwise in
compliance with applicable SEC requirements. Any request for the
Demand Registration by the Initiating Holders shall specify the
amount of the Registrable Securities proposed to be sold, the
intended method of disposition thereof and whether the request is
for registration on Form S-3 (or any successor form thereto).
Upon a request for the Demand Registration, the Company shall
promptly take such steps as are reasonably necessary or
appropriate to prepare for the registration of the Registrable
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Securities to be registered. Within fifteen (15) days after the
receipt of such request, the Company shall give written notice
thereof to all other Holders and include in such registration all
Registrable Securities held by a Holder from whom the Company has
received a written request for inclusion therein at least ten
(10) days prior to the filing of the registration statement.
Each such request will also specify the number of Registrable
Securities to be registered, the intended method of disposition
thereof and whether the request is for registration on Form S-3
(or any successor form thereto). Unless the Initiating Holders
holding the majority of the Registrable Securities held by all
Initiating Holders to be included in the Demand Registration
consent in writing, no other party (other than the Company or any
other Holder), shall be permitted to offer securities under the
Demand Registration. If the Company notifies the Initiating
Holders that it intends to offer securities under the Demand
Registration, the Demand Registration shall be deemed to be a
Company-initiated registration statement with the Holders
participating pursuant to their "piggy-back" rights under Section
4 hereof, and the right of the Holders to make a Demand
Registration shall be restored.
(b) Effective Demand Registration. A registra-
tion shall not constitute the Demand Registration until it has
become effective and remains continuously effective for not less
than one hundred and twenty (120) days or until the shares
registered therein have been sold, whichever is earlier. If a
requested Demand Registration does not constitute the Demand
Registration, the Holders shall continue to be entitled to
request one Demand Registration under Section 3(a) hereof. The
Company shall use its reasonable best efforts to cause the Demand
Registration to become effective not later than ninety (90) days
after it receives a request for the Demand Registration under
Section 3(a).
(c) Expenses. In any registration initiated as a
Demand Registration, the Company shall pay all reasonable
Registration Expenses in connection therewith, whether or not
such requested Demand Registration becomes effective; provided,
however, that, if a registration initiated as a Demand
Registration does not become effective or remain effective for
one hundred and twenty (120) days as provided in Section 3(b)
above for reasons beyond the Company's control and the Company
pays such Registration Expenses, the Holders of Registrable
Securities included in any subsequent registration shall be
required to pay all Registration Expenses for the next Demand
Registration.
(d) Underwriting Procedures. If the Initiating
Holders holding a majority of the Registrable Securities held by
all Initiating Holders so elect, the offering of such Registrable
Securities pursuant to the Demand Registration shall be in the
form of a firm commitment underwritten offering and the managing
underwriter or underwriters selected for such offering shall be
the Approved Underwriter selected in accordance with Sec
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tion 3(e). In such event, if the Approved Underwriter advises
the Company in writing that, in its opinion, the aggregate amount
of such Registrable Securities requested to be included in such
offering is sufficiently large to have a material adverse effect
on the success of such offering, then (i) the Company shall
include in the registration only the aggregate amount of the
Registrable Securities that in the opinion of the Approved
Underwriter may be sold without any such effect on the success of
such offering and (ii) no Registrable Securities other than those
owned by the Initiating Holders shall be included in such
registration without the written consent of the Initiating
Holders and any further reduction in the shares to be included in
such registration shall be made pro rata among the participating
Holders in proportion to the number of shares they own as of such
date.
(e) Selection of Underwriters. If the Demand
Registration is in the form of an underwritten offering, the
Initiating Holders holding a majority of the Registrable
Securities held by all Initiating Holders to be included in the
Demand Registration shall select and obtain an investment banking
firm of national reputation to act as the managing underwriter of
the offering (the "Approved Underwriter"); provided, that, the
Approved Underwriter shall, in any case, be acceptable to the
Company in its reasonable judgment and shall undertake to comply
with Section 2.1(h) of the Shareholders' Agreement.
4. Piggy-Back Registration.
(a) Piggy-Back Rights. If the Company proposes
to file a registration statement under the Act with respect to an
offering by the Company for its own account of any class of
security (other than a registration statement on Form S-4 or S-8
(or any successor form thereto) under the Act), then the Company
shall give written notice of such proposed filing to each of the
Holders at least thirty (30) days before the anticipated filing
date, and such notice shall describe in detail the proposed
registration and distribution (including those jurisdictions
where registration under the securities or blue sky laws is
intended) and offer such Holders the opportunity to register the
number of Registrable Securities as each such Holder may request.
The Company shall use its reasonable best efforts to cause the
managing underwriter or underwriters of an underwritten offering
proposed by the Company (the "Company Underwriter") to permit the
Holders who have requested to participate in the registration for
such offering to include such Registrable Securities in such
offering and, if the Company proposes to register Common Stock or
any other securities of which the Registrable Securities are then
comprised, such Registrable Securities shall be included in such
offering on the same terms and conditions as the securities of
the Company included therein. The Company Underwriter shall
undertake to comply with the requirements of Section 2.1(h) of
the Shareholders' Agreement. Notwithstanding the foregoing, if
the Company Underwriter delivers a written opinion to the Company
(with a copy provided to the Holders of Registrable Securities)
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that the total amount of securities which such Holders and the
Company intend to include in such offering (the "Total
Securities") is sufficiently large so as to have a material
adverse effect on the Company's offering, then the Company shall
include in such registration the securities proposed to be
offered for the account of the Company and, to the extent
reasonably feasible, the Registrable Securities requested to be
included in such registration (any such Registrable Securities to
be registered for the accounts of the Holders are hereinafter
referred to as the "Company Approved Amount"). Each Holder shall
be entitled to have included in such registration Registrable
Securities equal to its pro rata portion of the Company Approved
Amount, as based on the amounts of Registrable Securities sought
to be registered by the Holders in their requests for participa-
tion in such registration.
(b) Expenses. The Company shall bear all
reasonable Registration Expenses in connection with any
registration pursuant to this Section 4.
5. Holdback Agreements.
(a) Restrictions on Public Sale by Holders. In
order to participate in a registration effected hereby, to the
extent not inconsistent with applicable law, each Holder agrees
not to effect any public sale or distribution of any securities
of the Company, including a sale pursuant to Rule 144 under the
Act, during the period commencing with the notice of the proposed
registration until one hundred and twenty (120) days after the
effective date of such registration statement (except as part of
such registration), if and to the extent requested by the Company
in the case of a non-underwritten public offering, or if and to
the extent requested by the Company Underwriter or the Approved
Underwriter in the case of an underwritten public offering.
(b) Restrictions on Public Sale by the Company.
The Company agrees not to effect any public sale or distribution
of any of its securities for its own account (except pursuant to
registrations on Form S-4 or S-8 (or any successor form thereto)
under the Act) during the ninety (90) day period commencing on
the effective date of any registration statement in which the
Holders are participating.
6. Registration Procedures.
(a) Obligations of the Company. Whenever regis-
tration of Registrable Securities has been requested pursuant to
Section 3 or 4 of this Agreement, the Company shall use its
reasonable best efforts to effect the registration and sale of
such Registrable Securities in accordance with the intended
method of distribution thereof as quickly as practicable, and in
connection with any such request, the Company shall, as
expeditiously as possible:
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(i) prepare and file with the SEC (in any
event not later than sixty (60) Business Days after receipt of a
request to file a registration statement with respect to
Registrable Securities) a registration statement on Form S-3 or a
successor, or if the Company does not qualify for registration on
such form, then on any form on which registration is requested
for which the Company then qualifies, which counsel for the
Company and Holders' Counsel shall deem appropriate and which
shall be available for the sale of such Registrable Securities in
accordance with the intended method of distribution thereof, and
use its reasonable best efforts to cause such registration
statement to become effective; provided, however, that before
filing a registration statement or prospectus or any amendments
or supplements thereto, the Company shall (A) provide Holders'
Counsel with an adequate and appropriate opportunity to
participate in the preparation of such registration statement and
each prospectus included therein (and each amendment or supple-
ment thereto) to be filed with the SEC, which documents shall be
subject to the review (but not right of clearance) of Holders'
Counsel, and (B) notify Holders' Counsel and each seller of
Registrable Securities pursuant to such registration statement of
any stop order issued or to the Company's knowledge threatened by
the SEC and take all reasonable action required to prevent the
entry of such stop order or to remove it if entered;
(ii) prepare and file with the SEC 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 for a period of not
less than six (6) months or such shorter period which will
terminate when all Registrable Securities covered by such
registration statement have been sold (but not before the expira-
tion of the ninety (90) day period referred to in Section 4(3) of
the Act and Rule 174 thereunder, if applicable), and comply with
the provisions of the Act with respect to the disposition of all
Registrable Securities covered by such registration statement
during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such registration
statement;
(iii) as soon as reasonably possible and
subject to a reasonably appropriate confidentiality agreement,
furnish to each seller of Registrable Securities, prior to filing
a registration statement, copies of such registration statement
as it is proposed to be filed, and thereafter such number of
copies of such registration statement, each amendment and
supplement thereto (in each case including all exhibits thereto),
the prospectus included in such registration statement (including
each preliminary prospectus) and such other documents as each
such seller may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such seller;
(iv) use its reasonable best efforts to
register or qualify such Registrable Securities under such other
securities or blue sky laws of such jurisdictions within the
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United States as any seller of Registrable Securities may
request, and to continue such qualification in effect in each
such jurisdiction for as long as is permissible pursuant to the
laws of such jurisdiction, or for as long as any such seller
requests or until all of such Registrable Securities are sold,
whichever is shortest, and do any and all other acts and things
which may be reasonably necessary or advisable to enable any such
seller to consummate the disposition in such jurisdictions of the
Registrable Securities owned by such seller; provided, however,
that the Company shall not be required to (A) qualify generally
to do business in any jurisdiction where it would not otherwise
be required to qualify but for this Section 6(a)(iv), (B) subject
itself to taxation in any such jurisdiction or (C) consent to
general service of process in any such jurisdiction;
(v) use its reasonable best efforts to
obtain all other approvals, covenants, exemptions or
authorizations from such governmental agencies or authorities as
may be reasonably necessary to enable the sellers of such Regis-
trable Securities to consummate the disposition of such Regis-
trable Securities;
(vi) notify each seller of Registrable
Securities at any time when a prospectus relating thereto is
required to be delivered under the Act, upon discovery that, or
upon the happening of any event as a result of which, the
prospectus included in such registration statement contains 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 light of the circum-
stances under which they were made, and the Company shall
promptly prepare a supplement or amendment to such prospectus and
furnish to each such seller a reasonable number of copies of a
supplement to or amendment of such prospectus as may be necessary
so that, after delivery to the purchasers of such Registrable
Securities, such prospectus shall not contain an untrue statement
of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which they were
made;
(vii) enter into and perform customary
agreements (including an underwriting agreement in customary form
with the Approved Underwriter or Company Underwriter, if any,
selected as provided in Section 3 or 4) and take such other
actions as are reasonably required in order to expedite or
facilitate the disposition of such Registrable Securities;
(viii) subject to a reasonably appropriate
confidentiality agreement and solely for the purpose of meeting
their legally required due diligence obligations, make available
for inspection by the managing underwriter participating in any
disposition pursuant to such registration statement, Holders'
Counsel and any attorney retained by the managing underwriter,
each of which shall be reasonably acceptable to the Company, such
12
information as shall be reasonably necessary to enable them to
exercise their due diligence responsibility in connection with
such registration statement;
(ix) obtain a "cold comfort" letter from
the Company's independent public accountants in customary form
and covering such matters of the type customarily covered by
"cold comfort" letters, as Holders' Counsel or the managing
underwriter reasonably request;
(x) furnish, at the request of any seller
of Registrable Securities on the date such securities are
delivered to the underwriters for sale pursuant to such regis-
tration or, if such securities are not being sold through under-
writers, on the date the registration statement with respect to
such securities becomes effective, an opinion, dated such date,
of counsel representing the Company for the purposes of such
registration, addressed to the underwriters, if any, and to the
seller making such request, covering such legal matters with
respect to the registration in respect of which such opinion is
being given as such seller may reasonably request and as are
customarily included in such opinions;
(xi) otherwise use its reasonable best
efforts to comply with all applicable rules and regulations of
the SEC, and make available to its security holders, as soon as
reasonably practicable but no later than fifteen (15) months
after the effective date of the registration statement, an earn-
ings statement covering a period of twelve (12) months beginning
after the effective date of the registration statement, in a
manner which satisfies the provisions of Section 11(a) of the
Act;
(xii) cause all such Registrable Securities
to be listed on each securities exchange on which similar securi-
ties issued by the Company are then listed, subject to the satis-
faction of the applicable listing requirements of each such
exchange;
(xiii) keep each seller of Registrable
Securities advised as to the initiation and progress of any
registration under Section 3 or 4 hereunder;
(xiv) provide officers' certificates and
other customary closing documents;
(xv) cooperate with each seller of
Registrable Securities and each underwriter participating in the
disposition of such Registrable Securities and their respective
counsel in connection with any filings required to be made with
the National Association of Securities Dealers, Inc. (the
"NASD"); and
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(xvi) use its reasonable best efforts to
take all other steps reasonably necessary to effect the
registration of the Registrable Securities contemplated hereby.
(b) Seller Information. As a condition to
participation in any registration statement filed hereunder, the
Company may require each seller of Registrable Securities as to
which any registration is being effected to furnish to the
Company in writing such information regarding the sellers and the
distribution of such securities as the Company may from time to
time reasonably request or as may reasonably be required by the
Approved Underwriter or the Company Underwriter as the case may
be, the SEC or applicable requirements of the Act or the Exchange
Act.
(c) Notice to Discontinue. Each Holder agrees
that, upon receipt of any notice from the Company of the happen-
ing of any event of the kind described in Section 6(a)(vi), such
Holder shall forthwith discontinue disposition of Registrable
Securities pursuant to the registration statement covering such
Registrable Securities until such Holder's receipt of the copies
of the supplemented or amended prospectus contemplated by Sec-
tion 6(a)(vi) and, if so directed by the Company, such Holder
shall deliver to the Company (at the Company's expense) by
certified or registered mail or overnight courier all copies,
other than permanent file copies then in such Holder's
possession, of the prospectus covering such Registrable Securi-
ties which is current at the time of receipt of such notice. If
the Company shall give any such notice, the Company shall extend
the period during which such registration statement shall be
maintained effective pursuant to this Agreement (including,
without limitation, the period referred to in Section 6(a)(ii))
by the number of days during the period from and including the
date of the giving of such notice pursuant to Section 6(a)(vi) to
and including the date when the Holder shall have received the
copies of the supplemented or amended prospectus contemplated by
and meeting the requirements of Section 6(a)(vi).
7. Registration Expenses. The Company shall pay all
reasonable out-of-pocket expenses (other than underwriting
discounts and commissions and the fees and charges of Holders'
Counsel) arising from or incident to the performance of, or
compliance with, this Agreement, including, without limitation,
(a) SEC, stock exchange and NASD registration and filing fees,
(b) all fees and expenses incurred in complying with securities
or blue sky laws (including, without limitation, reasonable fees,
charges and disbursements of counsel in connection with blue sky
qualifications of the Registrable Securities), (c) all printing,
messenger and delivery expenses, and (d) the fees, charges and
disbursements of counsel to the Company and of its independent
public accountants and any other accounting and legal fees,
charges and expenses incurred by the Company (including, without
limitation, any expenses arising from any special audits incident
to or required by any registration or qualification). All of the
14
expenses described in this Section 7 are referred to in this
Agreement as "Registration Expenses."
8. Indemnification; Contribution.
(a) Indemnification by the Company. In
connection with any registration pursuant to Section 3 or 4
hereof, the Company agrees to indemnify and hold harmless each
Holder, its directors, officers, partners, employees, advisors
and agents, and each Person who controls (within the meaning of
the Act or the Exchange Act) such Holder, to the extent permitted
by law, from and against any and all losses, claims, damages,
expenses (including, without limitation, reasonable costs of
investigation and fees, disbursements and other charges of
counsel) or other liabilities resulting from or arising out of or
based upon any untrue, or alleged untrue, statement of a material
fact contained in any registration statement, prospectus or
preliminary prospectus or notification or offering circular (as
amended or supplemented if the Company shall have furnished any
amendments or supplements thereto) or arising out of or based
upon 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, except insofar as the same are
caused by or contained in any information furnished in writing to
the Company by such Holder expressly for use therein. The
Company shall also indemnify any underwriters of the Registrable
Securities, their officers, directors and employees, and each
Person who controls any such underwriter (within the meaning of
the Act and the Exchange Act) to the same extent as provided
above with respect to the indemnification of the Holders of
Registrable Securities.
(b) Indemnification by Holders. In connection
with any registration in which a Holder is participating pursuant
to Section 3 or 4 hereof, each such Holder shall furnish to the
Company in writing such information with respect to such Holder
as the Company may reasonably request or as may be required by
law for use in connection with any registration statement or
prospectus to be used in connection with such registration and
each Holder agrees to indemnify and hold harmless the Company,
any underwriter retained by the Company and their respective
directors, officers, employees, advisors and agents and each
Person who controls (within the meaning of the Act and the
Exchange Act) the Company or such underwriter to the same extent
as the foregoing indemnity from the Company to the Holders
(subject to the proviso to this sentence and applicable law), but
only with respect to any such information furnished in writing by
such Holder expressly for use therein; provided, however, that
the liability of any Holder under this Section 8(b) shall be
limited to the amount of the net proceeds received by such Holder
in the offering giving rise to such liability.
(c) Conduct of Indemnification Proceedings. Any
Person entitled to indemnification hereunder (the "Indemnified
Party") agrees to give prompt written notice to the indemnifying
15
party (the "Indemnifying Party") after the receipt by the
Indemnified Party of any written notice of the commencement of
any action, suit, proceeding or investigation or threat thereof
made in writing for which the Indemnified Party intends to claim
indemnification or contribution pursuant to this Agreement;
provided, that, the failure so to notify the Indemnifying Party
shall not relieve the Indemnifying Party of any liability that it
may have to the Indemnified Party hereunder. The Indemnifying
Party shall be entitled to participate in and, to the extent it
may wish, jointly with any other Indemnifying Party similarly
notified, to assume the defense of such action at its own
expense, with counsel chosen by it and satisfactory to such
Indemnified Party. The Indemnified Party shall have the right to
employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel shall
be paid by the Indemnified Party unless (i) the Indemnifying
Party agrees to pay the same, (ii) the Indemnifying Party fails
to assume the defense of such action with counsel reasonably
satisfactory to the Indemnified Party in its reasonable judgment,
(iii) the named parties to any such action (including any
impleaded parties) have been advised by such counsel that either
(A) representation of such Indemnified Party and the Indemnifying
Party by the same counsel would be inappropriate under applicable
standards of professional conduct or (B) there may be one or more
legal defenses available to it which are different from or addi-
tional to those available to the Indemnifying Party. In either
of such cases the Indemnifying Party shall not have the right to
assume the defense of such action on behalf of such Indemnified
Party. No Indemnifying Party shall be liable for any settlement
entered into without its written consent, which consent shall not
be unreasonably withheld. The rights accorded to any Indemnified
Party hereunder shall be in addition to any rights that such
Indemnified Party may have at common law, by separate agreement
or otherwise.
(d) Contribution. If the indemnification
provided for in Section 8(a) and/or from the Indemnifying Party
is unavailable to an Indemnified Party in respect of any losses,
claims, damages, expenses or other liabilities referred to
therein, then the Indemnifying Party, in lieu of indemnifying
such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses,
claims, damages, expenses or other liabilities in such proportion
as is appropriate to reflect the relative fault of the
Indemnifying Party and Indemnified Party in connection with the
actions which resulted in such losses, claims, damages, expenses
or other liabilities, as well as any other relevant equitable
considerations. The relative faults of such Indemnifying Party
and Indemnified Party shall be determined by reference to, among
other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, was made by, or
relates to information supplied by, such Indemnifying Party or
Indemnified Party, and the Indemnifying Party's and Indemnified
Party's relative intent, knowledge, access to information and
16
opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, claims, damages,
expenses or other liabilities referred to above shall be deemed
to include, subject to the limitations set forth in
Sections 8(a), 8(b) and 8(c), any legal or other fees, charges or
expenses reasonably incurred by such party in connection with any
investigation or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 8(d) were
determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable con-
siderations referred to in the immediately preceding paragraph.
No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to
contribution pursuant to this Section 8(d).
9. Rule 144. The Holders acknowledge that the
Company is not as of the date hereof in compliance with its
reporting requirements under the Exchange Act and rules and
regulations adopted by the SEC thereunder. After the Company has
come into compliance with such reporting requirements, the
Company covenants that it shall from that date forward use its
reasonable best efforts to file any reports required to be filed
by it under the Exchange Act and the rules and regulations
adopted by the SEC thereunder, and that it shall take such
further action as each Holder may reasonably request (including,
but not limited to, providing any information necessary to comply
with Rules 144 and 144A under the Act), all to the extent
required from time to time to enable such Holder to sell
Registrable Securities without registration under the Act within
the limitation of the exemptions provided by (a) Rule 144 or
Rule 144A under the Act, as such rules may be amended from time
to time, or (b) any similar rules or regulations hereafter
adopted by the SEC. The Company shall, upon the request of any
Holder, deliver to such Holder a written statement as to whether
the Company has complied with such requirements.
10. Miscellaneous.
(a) Recapitalizations, Exchanges, etc. The
provisions of this Agreement shall apply to any and all shares of
capital stock of the Company or any successor or assign of the
Company (whether by merger, consolidation, sale of assets or
otherwise) which may be issued in respect of, in exchange for or
in substitution of, the Purchased Common Stock of any other
shares of Common Stock of the Company acquired by GAP 14 and/or
GAP Coinvestment that are acquired in a manner consistent with
and subject to the Shareholders' Agreement and that are not
freely tradeable, and shall be appropriately adjusted for any
stock dividends, splits, reverse splits, combinations,
recapitalizations and the like occurring after the date hereof.
(b) Remedies. The Company and the Holders, in
addition to being entitled to exercise all rights granted by law,
17
including recovery of damages, shall be entitled to specific
performance of their rights under this Agreement.
(c) Amendments and Waivers. Except as otherwise
provided herein, the provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to
departures from the provisions of such section may not be given
unless the Company has obtained the prior written consent of
Holders holding at least a majority of the Registrable
Securities.
(d) Notices. All notices and other communi-
cations hereunder shall be in writing and shall be deemed given
if telecopied or delivered personally or mailed by registered or
certified mail (return receipt requested) to the following
address (or at such other address as shall be specified by like
notice; provided, that notice of a change of address shall be
effective only upon receipt thereof):
(i) if to GAP 14 or GAP Coinvestment:
c/o GAP 14 Service Corporation
125 East 56th Street
New York, New York 10022
Attention: Steven A. Denning
Telephone: (212) 888-9191
Facsimile: (212) 644-8339
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Matthew Nimetz, Esq.
Telephone: (212) 373-3000
Facsimile: (212) 757-3990
(ii) if to the Company (two copies):
Policy Management Systems Corporation
One PMS Center
Blythewood, South Carolina 29016
Attention: President; General Counsel
Telephone: 803-735-4000
Facsimile: 803-735-5500
with a copy to:
Dewey Ballantine
1301 Avenue of the Americas
New York, New York 10019
Attention: Robert C. Myers, Esq.
Telephone: 212-259-8000
Facsimile: 212-259-6000
18
(iii) if to any other Holder, at its
address as it appears on the
transfer books of the Company
Any notice given by telecopier or delivered personally
shall be deemed to have been received by the recipient thereof on
the day delivered if actually received during normal business
hours on a Business Day; otherwise, such notice shall be deemed
received on the next following Business Day if actually received
on such day. All other notices in accordance herewith shall be
effective on the day actually received by the Company. Any party
hereto may, by notice to the other parties hereto, change its
address for receipt of notices hereunder.
Each Holder hereby designates General Atlantic Service
Corporation ("GASC") as its representative to receive any notice
hereunder and to communicate with the Company on its behalf. The
Company hereby acknowledges the designation of GASC as the
representative of each Holder for purposes of this Section 10(e).
Any notice given by the Company to GASC shall be deemed given to
the Party to whom it is addressed, and any notice given to the
Company by GASC on behalf of any Holder shall have the same
effect as if given to the Company by such Party.
(e) Successors and Assigns. This Agreement shall
inure to the benefit of and be binding upon the successors and
permitted assigns of the parties hereto. The registration rights
and the other obligations of the Company contained in this
Agreement shall, with respect to any Registrable Security, be
automatically transferred from a Holder to any subsequent holder
of such Registrable Security (including any pledgee), who or
which consents in writing to the terms and provisions of this
Agreement and the Shareholders' Agreement. If the Company
receives conflicting instructions, notices or elections from two
or more persons with respect to the same Registrable Securities,
the Company shall act upon the basis of the instructions, notice
or election received from the registered owner of such
Registrable Securities.
(f) Counterparts. This Agreement may be executed
simultaneously in one or more counterparts, each of which shall
be deemed to be an original, but all of which taken together
shall constitute one and the same instrument.
(g) Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the
State of New York applicable to agreements made and to be
performed entirely within such State, without regard to the
principles of conflicts of law of such State.
(h) Headings. The headings in this Agreement are
for convenience of reference only and shall not limit or
otherwise affect the meaning hereof.
19
(i) Jurisdiction. Each party to this Agreement
hereby irrevocably agrees that any legal action or proceeding
arising out of or relating to this Agreement or any agreements or
transactions contemplated hereby 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 hereby expressly submits to the
personal jurisdiction and venue of such courts for the purposes
thereof and expressly waives any claim of improper venue and any
claim that such courts are an inconvenient forum.
(j) Severability. If any one or more of the
provisions contained herein, or the application thereof in any
circumstance, is held invalid, illegal or unenforceable in any
respect for any reason, the validity, legality and enforceability
of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired, it being
intended that all of the rights and privileges of the Company and
the Holders shall be enforceable to the fullest extent permitted
by law.
(k) Rules of Construction. Unless the context
otherwise requires, "or" is not exclusive, and references to
sections or subsections refer to sections or subsections of this
Agreement.
(l) Headings; References. The headings appearing
in this Agreement are for convenience of reference only and shall
not affect the interpretation of this Agreement. Except as
otherwise indicated herein, all references herein to Sections
refer to the Sections contained in this Agreement.
(m) Entire Agreement. This Agreement embodies
the entire agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no
restrictions, promises, warranties, covenants or understanding,
other than those set forth or referred to herein. This Agreement
supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
(n) Further Assurances. Each of the parties
shall execute such documents and perform such further acts as may
be reasonably required or desirable to carry out or to perform
the provisions of this Agreement.
(o) Effectiveness. This Agreement shall be
effective upon the purchase of the Purchased Common Stock by
GAP 14 and GAP Coinvestment pursuant to the Stock Purchase
Agreement, and if such purchase does not occur or on before
September 30, 1994, this Agreement shall terminate and be of no
force or effect.
20
IN WITNESS WHEREOF, the undersigned have duly executed
this Agreement as of the date first above written.
POLICY MANAGEMENT SYSTEMS CORPORATION
By:
G. Larry Wilson
Chairman, President and Chief
Executive Officer
GENERAL ATLANTIC PARTNERS 14, L.P.
By: GENERAL ATLANTIC PARTNERS
Its General Partner
By:
Steven A. Denning
Managing General Partner
GAP COINVESTMENT PARTNERS
By:
Steven A. Denning
Managing Partner