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EXHIBIT 4.2
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CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
Between
CAYENNE SOFTWARE, INC.
and
SOUTHBROOK INTERNATIONAL INVESTMENTS, LTD.
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July 18, 1997
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CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT, dated as of
July 18, 1997 (this "Agreement"), by and among Cayenne Software, Inc., a
Massachusetts corporation (the "Company"), and Southbrook International
Investments, Ltd., a corporation organized and existing under the laws of the
British Virgin Islands (the "Purchaser").
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchaser and the
Purchaser desires to acquire shares of the Company's Series C Convertible
Preferred Stock, par value $1.00 per share (the "Series C Preferred"), the
Company's Series D Convertible Preferred Stock, par value $1.00 per share (the
"Series D Preferred"), and the Company's Series E Convertible Preferred Stock,
par value $1.00 per share (the "Series E Preferred") (the Series C Preferred,
Series D Preferred and Series E Preferred are collectively referred to herein as
the "Preferred Stock".
IN CONSIDERATION of the mutual covenants and agreements set
forth herein and for good and valuable consideration, the receipt of which is
hereby acknowledged, the parties agree as follows:
ARTICLE VIII
CERTAIN DEFINITIONS
Section 1.1. Certain Definitions. As used in this Agreement
and unless the context requires a different meaning, the following terms have
the meanings indicated:
"Affiliate" means, with respect to any Person, any Person
that, directly or indirectly, controls, is controlled by or is under common
control with such Person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlled by" and "under
common control with") shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities or by contract or
otherwise.
"Business Day" means any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other government actions
to close.
"Closing Date" means, individually, the Initial Series C
Closing Date, Subsequent Series C Closing Date, Series D Closing Date or Series
E Closing Date, as applicable.
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"Code" means the Internal Revenue Code of 1986, as amended,
and the rules and regulations thereunder as in effect on the date hereof.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's common stock, par value
$0.01 per share.
"Disclosure Materials" means, collectively, the SEC Documents,
the disclosure package delivered to the Purchaser in connection with the
offering by the Company of the Shares and the Warrants and the Schedules to this
Agreement furnished by or on behalf of the Company pursuant to Section 3.1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, encumbrance, right of first refusal, charge or security interest of any
kind in or on such asset or the revenues or income thereon or therefrom.
"Material Adverse Effect" shall have the meaning set forth in
Section 3.1(a).
"Original Issue Date" shall have the respective meanings (as
applicable) set forth in the Statements of Rights and Preferences.
"Person" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"Preferred Stock" shall have the meaning set forth in the
recitals hereto.
"Purchase Price" shall have the meaning set forth in Section
2.2.
"Registration Rights Agreement" means the registration rights
agreement, dated as of the date hereof, by and between the Company and the
Purchaser, in the form of Exhibit B, as the same may be amended, supplemented or
otherwise modified in accordance with its terms.
"Required Approvals" shall have the meaning set forth in
Section 3.1(f).
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"▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇" shall mean ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
"SEC Documents" shall have the meaning set forth in Section
3.1(l).
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means the shares of Preferred Stock purchased by the
Purchaser pursuant to this Agreement.
"Statements of Rights and Preferences" shall have the meaning
set forth in Section 2.1(b).
"Subsequent Financing Notice" shall have the meaning set forth
in Sections 2.2(b)(i).
"Subsequent Sale" shall have the meaning set forth in Section
4.12(a).
"Subsequent Sale Notice" shall have the meaning set forth in
Section 4.12(a).
"Subsidiaries" shall have the meaning set forth in Section
3.1(a).
"Trading Day" shall have the meaning set forth in the Series C
Terms.
"Underlying Securities Registration Statement" shall have the
meaning set forth in Section 3.1(f).
"Underlying Shares" means the shares of Common Stock into
which the Shares are convertible in accordance with the terms hereof and the
Statements of Rights and Preferences.
"Warrants" shall have the meaning set forth in Section 4.21.
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ARTICLE IX
PURCHASE AND SALE OF SHARES
Section 2.1. Purchase and Sale of Shares.
(a) Subject to the terms and conditions set forth herein, at
the closings referred to below, the Company shall issue and sell to the
Purchaser and the Purchaser shall purchase (i) up to 150,000 shares of Series C
Preferred, (ii) up to 50,000 shares of Series D Preferred and (iii) up to 50,000
shares of Series E Preferred.
(b) The Series C Preferred shall have the respective rights,
preferences and privileges set forth in Exhibit A attached hereto (the "Series C
Terms"), which shall be incorporated into a Statement of Rights and Preferences
to be filed on or prior to the Initial Series C Closing Date (as defined below)
by the Company with the Commonwealth of Massachusetts (the "Series C Statement
of Rights and Preferences"). The Series D Preferred and Series E Preferred, if
and when issued, shall have respective rights, preferences and privileges
identical to the Series C Terms, mutatis mutandis, except that the Conversion
Price (as defined below) for conversion of said Shares shall reset as of the
Original Issue Date (as defined below) therefor.
The Series D Preferred and Series E Preferred shall be authorized
pursuant to statements of rights and preferences to be prepared by the Company,
subject to the approval of the Purchaser, and filed on or prior to the Series D
Closing Date (as defined below) and Series E Closing Date (as defined below), as
applicable, by the Company with the Commonwealth of Massachusetts (such
statements of rights and preferences, together with the Series C Statement of
Rights and Preferences, are collectively referred to herein as the "Statements
of Rights and Preferences").
For purposes of this Agreement, "Conversion Price," "Original Issue
Date," "Conversion Date" "Trading Day" and "Per Share Market Value" shall have
the meanings set forth in the Series C Terms.
Section 2.2. Purchase Price.
The purchase price per Share shall be $20.00.
Section 2.3. The Closings.
(a) The Series C Closings. (i) (A) The closing (the "Initial
Series C Closing") of the purchase and sale of 100,000 shares of Series C
Preferred (the "Initial Series C Shares")
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shall take place at the offices of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ immediately following the
execution hereof or such later date as the parties shall agree. The date of the
Initial Series C Closing is hereinafter referred to as the "Initial Series C
Closing Date."
(B) At the Initial Series C Closing, (1) the Company
shall deliver to the Purchaser one or more stock certificates representing the
Initial Series C Shares and the Series C Warrants (as defined in Section 4.21),
each registered in the name of the Purchaser, the legal opinion of ▇▇▇▇▇, ▇▇▇▇ &
▇▇▇▇▇, counsel to the Company, substantially in the form of Exhibit C, and all
other documents, instruments and writings required to have been delivered at or
prior to the Initial Series C Closing by the Company pursuant to this Agreement,
and (2) the Purchaser shall deliver to the Company $2,000,000, in United States
dollars in immediately available funds by wire transfer to an account designated
in writing by the Company for such purpose prior to the Initial Series C Closing
Date, and all other documents, instruments and writings required to have been
delivered at or prior to the Initial Series C Closing by the Purchaser pursuant
to this Agreement.
(ii) (A) The closing (the "Subsequent Series C
Closing") of the purchase and sale of up to 50,000 shares of Series C Preferred
(the "Subsequent Series C Shares") shall take place at the offices of ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ on such date (the "Subsequent Series C Closing Date") as the Company
may designate in a written notice to the Purchaser (a "Subsequent Financing
Notice"), which the Company may deliver (x) no earlier than the date that the
Company notifies, and presents evidence reasonably satisfactory to, the
Purchaser in writing that the Company has raised at least $1,000,000 in
financing on terms substantially similar in all economic respects to the terms
hereof and the Series C Terms from sources approved by the Purchaser and (y) no
later than the 60th day after the Initial Series C Closing Date (the "Subsequent
Series C Closing Expiration Date"); provided, that in no case shall the
Subsequent Series C Closing take place unless and until the conditions set forth
in Section 5.1 have been satisfied or waived in accordance with the terms
hereof. The Subsequent Financing Notice relating to the Subsequent Series C
Shares shall specify the number of Subsequent Series C Shares to be issued and
sold thereat. Notwithstanding anything to the contrary specified in the
Subsequent Financing Notice relating to the Subsequent Series C Shares, the
Subsequent Series C Closing may not occur prior to the 15th Trading Day after
receipt by the Purchaser of such notice.
(B) At the Subsequent Series C Closing, (1) the
Company shall deliver to the Purchaser one or more stock certificates
representing the Subsequent Series C Shares to be issued and sold thereat,
registered in the name of the Purchaser and all other documents, instruments and
writings required to
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have been delivered at or prior to the Subsequent Series C Closing by the
Company pursuant to this Agreement, and (2) the Purchaser shall deliver to the
Company the purchase price for such Subsequent Series C Shares (calculated in
accordance with Section 2.2), in United States dollars in immediately available
funds by wire transfer to an account designated in writing by the Company for
such purpose prior to the Subsequent Series C Closing Date, and all other
documents, instruments and writings required to have been delivered at or prior
to the Subsequent Series C Closing by the Purchaser pursuant to this Agreement.
(b) The Series D Closing. (i) The closing (the "Series D
Closing") of the purchase and sale of up to 50,000 shares of Series D Preferred
(the "Series D Shares") to be issued and sold thereat in accordance with the
terms and conditions set forth herein, shall take place at the offices of
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ on such date (the "Series D Closing Date") as the Company may
designate in a Subsequent Financing Notice relating to the Series D Shares,
which the Company may deliver (x) no earlier than the 120th day after the
earlier to occur of the Subsequent Series C Closing Date or the Subsequent
Series C Closing Expiration Date and (y) no later than 200 days after the date
hereof (the "Series D Closing Expiration Date"); provided, that in no case shall
the Series D Closing take place unless and until the conditions set forth in
Section 5.1 have been satisfied or waived in accordance with the terms hereof.
Such Subsequent Financing Notice shall specify the number of Series D Shares
that the Company intends to sell to the Purchaser at the Series D Closing.
(ii) At the Series D Closing, (a) the Company shall
deliver to the Purchaser one or more stock certificates representing the Series
D Shares to be issued and sold thereat and the Series D Warrants (as defined in
Section 4.21), each registered in the name of the Purchaser, and all other
documents, instruments and writings required to have been delivered at or prior
to the Series D Closing by the Company pursuant to this Agreement and (b) the
Purchaser shall deliver to the Company (1) the purchase price for such Series D
Shares (calculated in accordance with Section 2.2), in United States dollars in
immediately available funds by wire transfer to an account designated in writing
by the Company for such purpose and delivered to the Purchaser prior to the
Series D Closing Date and (2) all other documents, instruments and writings
required to have been delivered at or prior to the Series D Closing by the
Purchaser pursuant to this Agreement.
(c) The Series E Closing. (i) The closing (the "Series E
Closing") of the purchase and sale of up to 50,000 shares of Series E Preferred
(the "Series E Shares") to be issued and sold thereat in accordance with the
terms and conditions set forth herein shall take place at the offices of
▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇▇▇ on such date (the "Series E Closing Date") as the Company may
designate in a Subsequent Financing Notice relating to the Series E Shares,
which the Company may deliver (x) no earlier than the 120th day after the
earlier to occur of the Series D Closing Date or the Series D Closing Expiration
Date and (y) no later than 320 days after the date hereof; provided, that in no
case shall the Series E Closing take place unless and until the conditions set
forth in Section 5.1 have been satisfied or waived in accordance with the terms
hereof. Such Subsequent Financing Notice shall specify the number of Series E
Shares that the Company intends to sell to the Purchaser at the Series E
Closing.
(ii) At the Series E Closing, (a) the Company shall
deliver to the Purchaser one or more stock certificates representing the Series
E Shares to be issued and sold thereat and the Series E Warrants (as defined in
Section 4.21), each registered in the name of the Purchaser, and all other
documents, instruments and writings required to have been delivered at or prior
to the Series E Closing by the Company pursuant to this Agreement and (b) the
Purchaser shall deliver to the Company (1) the purchase price for such Series E
Shares (calculated in accordance with Section 2.2), in United States dollars in
immediately available funds by wire transfer to an account designated in writing
by the Company for such purpose and delivered to the Purchaser prior to the
Series E Closing Date and (2) all other documents, instruments and writings
required to have been delivered at or prior to the Series D Closing by the
Purchaser pursuant to this Agreement.
ARTICLE X
REPRESENTATIONS AND WARRANTIES
Section 3.1. Representations and Warranties of the Company.
The Company hereby represents and warrants to the Purchaser as follows:
(a) Organization and Qualification. The Company is a
corporation, duly incorporated, validly existing and in good standing under the
laws of The Commonwealth of Massachusetts, with the requisite corporate power
and authority to own and use its properties and assets and to carry on its
business as currently conducted. The Company has no subsidiaries other than as
set forth in the SEC Documents or in Schedule 3.1(a) (collectively, the
"Subsidiaries"). Each of the Subsidiaries is a corporation, duly incorporated,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, with the full corporate power and authority to own and use its
properties and assets and to carry on its business as currently conducted. Each
of the Company and the Subsidiaries is duly qualified to do business and is in
good standing as a foreign
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corporation in each jurisdiction in which the nature of the business conducted
or property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, could not,
individually or in the aggregate, have a material adverse effect on the results
of operations, assets, prospects, or financial condition of the Company and the
Subsidiaries, taken as a whole (a "Material Adverse Effect").
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated hereby, by the Warrants, by the Statements of Rights and
Preferences and by the Registration Rights Agreement, and otherwise to carry out
its obligations hereunder and thereunder. This Agreement, the Registration
Rights Agreement, the Statements of Rights and Preferences and the Warrants are
collectively referred to as the "Transaction Documents." The execution and
delivery of the Transaction Documents by the Company and the consummation by it
of the transactions contemplated thereby have been duly authorized by all
necessary action on the part of the Company. Each of the Transaction Documents
has been duly executed and delivered by the Company and constitutes the legal,
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general application.
Neither the Company nor any Subsidiary is in violation of any of the provisions
of its respective articles of organization, bylaws or other charter documents.
(c) Capitalization. The authorized, issued and outstanding
capital stock of the Company and each of the Subsidiaries is set forth in
Schedule 3.1(c). No shares of Common Stock are entitled to preemptive or similar
rights. Except as specifically disclosed in Schedule 3.1(c), there are no
outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or, except as a result of
the purchase and sale of the Shares and Warrants hereunder, securities, rights
or obligations convertible into or exchangeable for, or giving any person any
right to subscribe for or acquire any shares of Common Stock, or contracts,
commitments, understandings, or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock.
(d) Issuance of Shares, Warrants, Warrant Shares and
Underlying Shares. The Shares and the Warrants are duly authorized and, when
paid for in accordance with the terms
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hereof, shall be validly issued, fully paid and nonassessable, free and clear of
any Liens. The Company, as at the Series C Closing Date, Series D Closing Date
and Series E Closing Date, as the case may be, will have and at all times while
the Shares and any Warrants are outstanding will maintain an adequate reserve of
shares of Common Stock to enable it to perform its conversion and other
obligations under this Agreement, the Warrants and the Statements of Rights and
Preferences with respect to the number of Shares and Warrants issued and
outstanding at such Closing Date, which reserve shall be no less than the sum of
(i) twice the number of shares of Common Stock issuable hereunder and pursuant
to the terms of the Statements of Rights and Preferences, assuming a conversion
in full of all of the Shares on the Original Issue Date thereof and (ii) the
number of shares of Common Stock issuable upon the exercise in full of the
Warrants (the "Warrant Shares") to be issued at such Closing Date. When issued
in accordance with the terms hereof and the Statements of Rights and
Preferences, and the Warrants, the Underlying Shares and the Warrant Shares will
be duly authorized, validly issued, fully paid and nonassessable, free and clear
of all Liens.
(e) No Conflicts. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of its articles of organization or bylaws (each as amended
through the date hereof) or (ii) subject to obtaining the consents specified in
Section 3.1(f), conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company is a party, or (iii) to
the knowledge of the Company result in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of any court or govern
mental authority to which the Company is subject (including Federal and State
securities laws and regulations), or by which any property or asset of the
Company is bound or affected, except in the case of each of clauses (ii) and
(iii), such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as could not, individually or in the aggregate, (x)
adversely affect the legality, validity or enforceability of the Transaction
Documents, (y) have a Material Adverse Effect or (z) adversely impair the
Company's ability to perform fully on a timely basis its obligations under the
Transaction Documents. The business of the Company is not being conducted in
violation of any law, ordinance or regulation of any governmental authority, the
violation of which would have a Material Adverse Effect.
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(f) Consents and Approvals. Except as specifically set forth
in Schedule 3.1(f), neither the Company nor any Subsidiary is required to obtain
any consent, waiver, authorization or order of, or make any filing or
registration with, any court or other federal, state, local or other govern
mental authority or other Person in connection with the execution, delivery and
performance by the Company of the Transaction Documents, except for (i) the
filings of the Statements of Rights and Preferences with respect to the Shares
with the Secretary of State of The Commonwealth of Massachusetts, which filings
shall be effected prior to the applicable Closing Date, (ii) the filing of the
registration statements covering the Underlying Shares and the Warrant Shares
(the "Underlying Securities Registration Statement") with the Commission and the
making of the applicable blue-sky filings under state securities laws, each as
contemplated by the Registration Rights Agreement and (iii) other than, in all
other cases, where the failure to obtain such consent, waiver, authorization or
order, or to give or make such notice or filing, could not, individually or in
the aggregate, (x) adversely affect the legality, validity or enforceability of
the Transaction Documents, (y) have a Material Adverse Effect or (z) adversely
impair the Company's ability to perform fully on a timely basis its obligations
under the Transaction Documents (together with the consents, waivers,
authorizations, orders, notices and filings referred to in Schedule 3.1(f), the
"Required Approvals").
(g) Litigation; Proceedings. There is no action, suit, notice
of violation, proceeding or investigation pending or, to the best knowledge of
the Company, threatened against or affecting the Company or any of its
Subsidiaries or any of their respective properties before or by any court,
governmental or administrative agency or regulatory authority (Federal, state,
county, local or foreign) which (i) relates to or challenges the legality,
validity or enforceability of the Transaction Documents or the Shares (ii)
could, individually or in the aggregate, have a Material Adverse Effect or (iii)
could, individually or in the aggregate, adversely impair the ability of the
Company to perform fully on a timely basis its obligations under the Transaction
Documents.
(h) No Default or Violation. Neither the Company nor any
Subsidiary (i) is in default under or in violation of any indenture, loan or
credit agreement or any other agreement or instrument to which it is a party or
by which it or any of its properties is bound, except such conflicts or defaults
as do not have a Material Adverse Effect, (ii) is in violation of any order of
any court, arbitrator or governmental body, except for such violations as do not
have a Material Adverse Effect, or (iii) is in violation of any statute, rule or
regulation of any governmental authority which could (individually or in the
aggregate) (x) adversely affect the legality, validity or enforceability of
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the Transaction Documents, (y) have a Material Adverse Effect or (z) adversely
impair the Company's ability or obligation to perform fully on a timely basis
its obligations under the Transaction Documents.
(i) Certain Fees. No fees or commission will be payable by the
Company to any broker, finder, investment banker or bank with respect to the
consummation of the transactions contemplated hereby.
(j) Disclosure Materials. The Disclosure Materials do not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
(k) Private Offering. Neither the Company nor any Person
acting on its behalf has taken or will take any action (including, without
limitation, any offering of any securities of the Company under circumstances
which would require the integration of such offering with the offering of the
Shares, the Warrants the Underlying Shares or the Warrant Shares under the
Securities Act) which might subject the offering, issuance or sale of the
Shares, the Warrants the Underlying Shares or the Warrant Shares to the
registration requirements of Section 5 of the Securities Act.
(l) SEC Documents. The Company has filed all reports required
to be filed by it under the Exchange Act, including pursuant to Section 13(a) or
15(d) thereof, for the three years preceding the date hereof (or such shorter
period as the Company was required by law to file such material) (the foregoing
materials being collectively referred to herein as the "SEC Documents") on a
timely basis, or has received a valid extension of such time of filing. As of
their respective dates, the SEC Documents complied in all material respects with
the requirements of the Securities Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, and none of the SEC
Documents, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the SEC Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
Commission with respect thereto. Such financial statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved, except as may be otherwise indicated in such
financial statements or the notes thereto, and fairly present in all material
respects the financial position of the Company and its consolidated
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subsidiaries as of and for the dates thereof and the results of operations and
cash flows for the periods then ended, subject, in the case of unaudited
statements, to normal year-end audit adjustments. Since the date of the
financial statements included in the Company's last filed Quarterly Report on
Form 10-Q, there has been no event, occurrence or development that has had a
Material Adverse Effect which is not specifically disclosed in any of the
Disclosure Materials.
(m) Seniority. No class of equity securities of the Company is
senior to the Shares in right of payment, whether upon liquidation, dissolution
or otherwise.
(n) Exclusivity. The Company shall not issue and sell the
Preferred Stock to any Person other than the Purchaser.
(o) Form S-3 Eligibility. The Company is, and at each Closing
Date will be, eligible to register securities for resale with the Commission
under Form S-3 promulgated under the Securities Act.
(p) Investment Company. The Company is not and is not an
Affiliate of an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
Section 3.2. Representations and Warranties of the Purchaser.
The Purchaser hereby represents and warrants to the Company as follows:
(a) Organization; Authority. The Purchaser is a corporation
duly and validly existing and in good standing under the laws of the
jurisdiction of its incorporation. The Purchaser has the requisite power and
authority to enter into and to consummate the transactions contemplated hereby
and by the other Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. The purchase of the Shares and the
Warrants by the Purchaser hereunder has been duly authorized by all necessary
action on the part of the Purchaser. Each of the Transaction Documents has been
duly executed and delivered by the Purchaser or on its behalf and constitutes
the valid and legally binding obligation of the Purchaser, enforceable against
the Purchaser in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights generally and to
general principles of equity.
(b) Investment Intent. The Purchaser is acquiring the Shares,
the Warrants, the Warrant Shares and the Underlying Shares for its own account
for investment purposes only and not with a view to or for distributing or
reselling such Shares, Warrants, Warrant Shares or Underlying Shares or any part
thereof or interest therein, without prejudice, however, to the
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Purchaser's right, subject to the provisions of the Transaction Documents, at
all times to sell or otherwise dispose of all or any part of such Shares,
Warrants, Warrant Shares or Underlying Shares under an effective registration
statement under the Securities Act and in compliance with applicable state
securities laws or under an exemption from such registration.
(c) Purchaser Status. The Purchaser was not formed for the
purpose of acquiring the Shares and the Warrants. At the time the Purchaser was
offered the Shares and the Warrants, it was, and at the date hereof, it is, and
at each Closing Date, it will be, an "accredited investor" as defined in Rule
501(a) under the Securities Act.
(d) Experience of Purchaser. The Purchaser has such knowledge,
sophistication and experience in business and financial matters so as to be
capable of evaluating the merits and risks of the prospective investment in the
Shares, the Warrants, the Underlying Shares and the Warrant Shares, and has so
evaluated the merits and risks of such investment.
(e) Ability of Purchaser to Bear Risk of Investment. The
Purchaser is able to bear the economic risk of an investment in the Shares, the
Warrants, the Underlying Shares and the Warrant Shares and is able to afford a
complete loss of such investment.
(f) Prohibited Transactions. The Shares and the Warrants are
not being acquired, directly or indirectly, with the assets of any "employee
benefit plan", within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended.
(g) Access to Information. The Purchaser acknowledges receipt
of the Disclosure Materials and further acknowledges that it has been afforded
(i) the opportunity to ask such questions as it has deemed necessary of, and to
receive answers from, representatives of the Company concerning the terms and
conditions of the offering of the Shares and the Warrants and the merits and
risks of investing in the Shares and the Warrants; (ii) access to information
about the Company and the Company's financial condition, results of operations,
business, properties, management and prospects sufficient to enable it to
evaluate its investment in the Company; and (iii) the opportunity to obtain such
additional information that the Company possesses or can acquire without
unreasonable effort or expense and that is necessary to make an informed
investment decision with respect to the Shares and the Warrants and to verify
the accuracy and completeness of the information contained in the Disclosure
Materials.
15
(h) Reliance. The Purchaser understands and acknowledges that
(i) the Shares and the Warrants are being offered and sold, and the Underlying
Shares and the Warrant Shares are being offered, to it without registration
under the Securities Act in a private placement that is exempt from the
registration provisions of the Securities Act and (ii) the availability of such
exemption depends in part on, and that the Company will rely upon the accuracy
and truthfulness of, the foregoing representations and the Purchaser hereby
consents to such reliance.
The Company acknowledges and agrees that the Purchaser makes
no representation or warranty with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 3.2.
ARTICLE XI
OTHER AGREEMENTS OF THE PARTIES
Section 4.1. Transfer Restrictions. If the Purchaser should
decide to dispose of any of the Shares or any portion of the Warrants (and upon
conversion or exercise thereof, any Underlying Shares or Warrant Shares), the
Purchaser understands and agrees that it may do so only (i) pursuant to an
effective the registration statement under the Securities Act, (ii) pursuant to
an available exemption from the registration requirements of the Securities Act
or (iii) to the Company. In connection with any transfer of any Shares,
Warrants, Underlying Shares or Warrant Shares other than pursuant to an
effective registration statement or to the Company, the Company may require that
the transferor provide to the Company an opinion of counsel experienced in the
area of United States securities laws selected by the transferor, the form and
substance of which opinion shall be reasonably satisfactory to the Company, to
the effect that such transfer does not require registration of such Shares,
Warrants, Underlying Shares or Warrant Shares under the Securities Act or any
state securities laws.
The Purchaser agrees to the imprinting, so long as is required
by this Section, of the following legend on certificates representing the
Shares, Warrants, Underlying Shares or Warrant Shares:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] HAVE BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION PROMULGATED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
16
STATEMENT UNDER THE SECURITIES ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAW.
The legend set forth above shall be removed upon the
conversion of Shares or exercise of Warrants represented by such certificates at
any time while an Underlying Securities Registration Statement is effective
under the Securities Act or sooner if, in the opinion of counsel to the Company
experienced in the area of United States securities laws such legend is no
longer required under applicable requirements of the Securities Act (including
judicial interpretations and pronouncements issued by the staff of the
Commission). The Company agrees that it will provide the Purchaser, upon
request, with a substitute stock certificate or certificates or warrant
certificates, free from such legend at such time as such legend is no longer
applicable.
Section 4.2. Stop Transfer Instruction. The Company may not
make any notation on its records or give instructions to any transfer agent of
the Company which enlarge the restrictions on transfer set forth in Section 4.1
above.
Section 4.3. Furnishing of Information. For so long as the
Purchaser owns Shares, Warrants, Underlying Shares or Warrant Shares, the
Company covenants to timely file (or obtain valid extensions in respect thereof)
all reports required to be filed by the Company after the date hereof pursuant
to Section 13(a) or 15(d) of the Exchange Act and to promptly furnish the
Purchaser with true and complete copies of all such filings. If the Company is
not at the time required to file reports pursuant to such sections, it will
prepare and furnish to the Purchaser annual and quarterly financial statements,
together with a discussion and analysis of such financial statements in form and
substance substantially similar to those that would otherwise be required to be
included in reports required by Section 13(a) or 15(d) of the Exchange Act in
the time period that such filings would have been required to have been made
under the Exchange Act.
Section 4.4. Notice of Certain Events. The Company shall (i)
advise the Purchaser promptly after obtaining knowledge thereof, and, if
requested by the Purchaser, confirm such advice in writing, of (A) the issuance
by any state securities commission of any stop order suspending the
qualification or exemption from qualification of the Shares, Warrant Shares or
Underlying Shares or the Common Stock for offering or sale in any jurisdiction,
or the initiation of any proceeding for such purpose by any state securities
commission or other regulatory authority, or (B) any event that makes any
statement of a material fact made in the Disclosure Materials untrue or that
requires the making of any additions to or changes in the
17
Disclosure Materials in order to make the statements therein, in the light of
the circumstances under which they are made, not misleading, (ii) use its best
efforts to prevent the issuance of any stop order or order suspending the
qualification or exemption from qualification of the Shares, Warrant Shares or
Underlying Shares or the Common Stock under any state securities or Blue Sky
laws, and (iii) if at any time any state securities commission or other
regulatory authority shall issue an order suspending the qualification or
exemption from qualification of the Shares, Warrant Shares or Underlying Shares
or the Common Stock under any such laws, use its best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time.
Section 4.5. Copies and Use of Disclosure Materials. The
Company shall furnish the Purchaser, without charge, as many copies of the
Disclosure Materials, and any amendments or supplements thereto, as the
Purchaser may reasonably request. The Company consents to the use of the
Disclosure Materials, and any amendments and supplements thereto, by the
Purchaser in connection with resales of the Shares, the Warrant Shares or the
Underlying Shares other than pursuant to an effective registration statement.
Section 4.6. Modification to Disclosure Materials. If any
event shall occur as a result of which, in the reasonable judgment of the
Company, it becomes necessary or advisable to amend or supplement the Disclosure
Materials in order to make the statements therein, in the light of the
circumstances at the time the Disclosure Materials were delivered to the
Purchaser, not misleading, or if it is necessary to amend or supplement the
Disclosure Materials to comply with applicable law, the Company shall promptly
prepare an appropriate amendment or supplement to the Disclosure Materials so
that (i) as so amended or supplemented the Disclosure Materials will not include
an untrue statement of material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances
existing at the time it is delivered to Purchaser, not misleading and (ii) the
Disclosure Materials will comply in all material respects with applicable law.
Section 4.7. Blue Sky Laws. In accordance with the
Registration Rights Agreement, the Company shall qualify the Shares, the
Warrants, the Warrant Shares and the Underlying Shares under the securities or
Blue Sky laws of such jurisdictions as the Purchaser may reasonably request and
to continue such qualification at all times through the third anniversary of the
Closing Date; provided, however, that neither the Company nor its Subsidiaries
shall be required in connection therewith to qualify as a foreign corporation
where they are not now so qualified.
18
Section 4.8. Integration. The Company shall not and shall use
its best efforts to ensure that no Affiliate shall sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Shares, the Warrant Shares or the Underlying Shares in a
manner that would require the registration under the Securities Act of the sale
of the Shares, the Warrant Shares or Underlying Shares to the Purchaser.
Section 4.9. Furnishing of Rule 144A Materials. The Company
shall, for so long as any of the Shares, Warrants, Warrant Shares or Underlying
Shares remain outstanding and during any period in which it is not subject to
Section 13 or 15(d) of the Exchange Act, make available to any registered holder
of Shares or Underlying Shares in connection with any sale thereof and any
prospective purchaser of such Shares, Warrants, Warrant Shares or Underlying
Shares from such Person, the following information in accordance with Rule
144A(d)(4) under the Securities Act: a brief statement of the nature of the
business of the Company and the products and services it offers and the
Company's most recent audited balance sheet and profit and loss and retained
earnings statements, and similar audited financial statements for such part of
the two preceding fiscal years as the Company has been in operation.
Section 4.10. Solicitation Materials. The Company shall not
(i) distribute any offering materials in connection with the offering and sale
of the Shares, Warrants, Warrant Shares or Underlying Shares other than the
Disclosure Materials and any amendments and supplements thereto prepared in
compliance herewith or (ii) solicit any offer to buy or sell the Shares,
Warrants, Warrant Shares or Underlying Shares by means of any form of general
solicitation or advertising.
Section 4.11. Subsequent Financial Statements. The Company
shall furnish to the Purchaser, promptly after they are filed with the
Commission, a copy of all financial statements for any period subsequent to the
period covered by the financial statements included in the Disclosure Materials.
Section 4.12. Right of First Refusal; Certain Corporate
Actions. (a) The Company shall not, directly or indirectly, without the prior
written consent of the Purchaser, offer, sell, grant any option to purchase or
otherwise dispose (or announce any offer, sale, grant or any option to purchase
or other disposition) of any of its or its Affiliates equity or equity
equivalent securities (a "Subsequent Sale") for a period of 180 days after the
Closing Date, except (i) upon conversion of any of the Preferred Stock or
exercise of any of the Warrants and upon conversion of securities issued in
respect of the financings permitted pursuant to Section 2.3, (ii) as a stock
dividend or
19
upon any subdivision of shares of Common Stock, provided that the securities
issued pursuant to such stock dividend or subdivision are limited to additional
shares of Common Stock, (iii) pursuant to subscriptions, warrants, options,
convertible securities or other rights which are outstanding on the Closing
Date, (iv) solely in consideration for the acquisition (whether by merger or
otherwise) by the Company or any of its Subsidiaries of all or substantially all
of the stock or assets of any other entity, (v) pursuant to a primary registered
public offering under the Securities Act, (vi) pursuant to the exercise of
options or purchase rights to purchase Common Stock granted to employees,
consultants and directors of the Company pursuant to any stock purchase, stock
option or employee stock bonus plan approved by the Board of Directors, (vii)
securities issued to equipment lessors or institutional lenders in connection
with lease of corporate equipment or borrowings by the Company as approved by
the Company's Board of Directors, and (viii) upon the exercise of any right
other than a right to purchase securities which was not itself in violation of
the terms of this paragraph, unless (A) the Company delivers to the Purchaser a
written notice (the "Subsequent Sale Notice") of its intention to effect such
Subsequent Sale, which Subsequent Sale Notice shall describe in reasonable
detail the proposed terms of such Subsequent Sale, the identity of the Persons
who proposes to provide such Subsequent Sale and the amount of proceeds intended
to be raised thereunder and (B) the Purchaser shall not have notified the
Company by 5:00 p.m. (Eastern Time) on the tenth Business Day after its receipt
of the Subsequent Sale Notice of its willingness to enter into good faith
negotiations to provide (or to cause its sole designee to provide) financing to
the Company on substantially the terms set forth in the Subsequent Sale Notice.
If the Purchaser shall fail to notify the Company of its intention to enter into
such negotiations within such time period, the Company may effect the Subsequent
Sale substantially upon the terms and to the Persons (or Affiliates of such
Persons) set forth in the Subsequent Sale Notice; provided, that the Company
shall provide the Purchaser with a second Subsequent Sale Notice, and the
Purchaser shall again have the right of first refusal set forth above in this
paragraph (a), subject to the exceptions set forth above in this paragraph (a),
if the Subsequent Sale subject to the initial Subsequent Sale Notice shall not
have been consummated for any reason on the terms set forth in such Subsequent
Sale Notice within 90 days after the date of the initial Subsequent Sale Notice
with the Person (or an Affiliate of such Person) identified in the Subsequent
Sale Notice.
(b) For as long as Preferred Stock or Warrants outstanding,
the Company shall not and shall cause the Subsidiaries not to, without the
consent of the Purchaser, (i) amend its Restated Articles of Organization,
bylaws or other charter documents so as to adversely affect any rights provided
in the Transaction Documents to the Preferred Stock and the
20
Warrants; (ii) split, combine or reclassify its outstanding capital stock; (iii)
redeem, repurchase or offer to repurchase or otherwise acquire shares of its
Junior Securities (as defined in the Statements of Rights and Preferences); or
(iv) enter into any agreement with respect to any of the foregoing.
Section 4.13. Intentionally Omitted.
Section 4.14. Availability of Common Stock. The Company has
duly reserved a sum of 2,700,000 shares of authorized and unissued Common Stock
for issuance upon the conversion of Series C Shares and the exercise all of the
Series C Warrants. If at any time the Company does not have reserved sufficient
shares of Common Stock to enable it to perform its conversion and exercise
obligations hereunder it shall, at the option of the holders of Preferred Stock,
shall redeem all Shares and Underlying Shares then held by such holders,
pursuant to Section 4.16 hereto.
Section 4.15. Listing of Underlying Shares and Warrant Shares.
Prior to the Closing, the Company shall have filed an additional listing
application with the Nasdaq National Market (and each other national securities
exchange on which the Common Stock is then listed) for the listing of the
Underlying Shares and the Warrant Shares. The Company shall, as promptly as
possible, take all steps necessary to cause the Underlying Shares and Warrant
Shares to be approved for listing in the Nasdaq National Market (and each other
national securities exchange or market on which the Common Stock is then
listed), and shall provide to the Purchaser evidence of such listing when
approved and shall maintain the listing of its Common Stock on such exchange.
Section 4.16. Purchaser's Rights if Trading in Common Stock is
Suspended or Delisted. In the event that at any time within the three-year
period after the Closing Date trading in the shares of the Common Stock is
suspended, or if the Common Stock shall not listed for trading, on the Nasdaq
National Market (other than as a result of the suspension of trading in
securities on such market or exchange generally or temporary suspensions pending
the release of material information and other than a suspension of trading on
the Nasdaq National Market if the Common Stock is listed for trading, and not
suspended, on the Nasdaq SmallCap Market within one Business Day after such
suspension) for more than ten days, at the Purchaser's option exercisable by
written notice to the Company, the Company shall redeem all Shares and all
Underlying Shares then held by such Purchaser, at an aggregate purchase price
equal to (A) the product of the average Per Share Market Value for the five
Trading Days immediately preceding the day of such notice multiplied by the
number of shares of Common Stock into which the Shares to be purchased are then
convertible and exercisable (or
21
in the case of Underlying Shares, the number of Underlying Shares to be
purchased), plus (B) interest on such amount accruing from the 7th day after
such notice at the rate of 15% per annum.
Section 4.17. No Violation of Applicable Law. Notwithstanding
any provision of this Agreement to the contrary, if any redemption of Shares or
Underlying Shares otherwise required under the Transaction Documents or the
Statements of Rights and Preferences would be prohibited by the relevant
provisions of the Massachusetts Business Corporation Law, such redemption shall
be effected as soon as it is permitted under such law; provided, however, that,
interest payable by the Company with respect to any such redemption shall
continue to accrue in accordance with Section 4.16 during any such period.
Section 4.18. Redemption Restrictions. Notwithstanding any
provision of this Agreement to the contrary, if any redemption of Shares or
Underlying Shares otherwise required under this Agreement would be prohibited in
the absence of consent from any lender of the Company or of any Subsidiary, or
by the holders of any class of securities of the Company, the Company shall use
its best efforts to obtain such consent as promptly as practicable after the
redemption is required. Interest payable by the Company with respect to any such
redemption shall continue to accrue in accordance with Section 4.16 until such
consent is obtained. Nothing contained in this Section shall be construed as a
waiver by the Purchaser of any rights it may have by virtue of any breach of any
representation or warranty of the Company herein as to the absence of any
requirement to obtain any such consent.
Section 4.19. Notice of Breaches. Each of the Company and the
Purchaser shall give prompt written notice to the other of any breach of any
representation, warranty or other agreement contained in the Transaction
Documents, as well as any events or occurrences arising after the date hereof
and prior to, with respect to the Series C Closing Date, the Series C Closing,
with respect to the Series D Closing, the Series D Closing Date, or with respect
to the Series E Closing, the Series E Closing Date, which could reasonably be
likely to cause any representation or warranty or other agreement of such party,
as the case may be, contained herein or therein to be incorrect or breached as
of such Closing Date. However, no disclosure by either party pursuant to this
Section shall be deemed to cure any breach of any representation, warranty or
other agreement contained herein or in the other Transaction Documents. Neither
the Company, any Subsidiary nor the Purchaser will take, or agree to commit to
take, any action that is intended to make any representation or warranty of the
Company or the Purchaser, as the case may be, contained herein or in the other
Transaction Documents or in the Statements of Rights and Preferences inaccurate
in any respect at such Closing Date.
22
Notwithstanding the generality of the foregoing, the Company shall
promptly notify the Purchaser of any notice or claim (written or oral) that it
receives from any lender of the Company to the effect that the consummation of
the transactions contemplated by the Transaction Documents violates or would
violate any written agreement or understanding between such lender and the
Company, and the Company shall promptly furnish by facsimile to the holders of
the Shares and Warrants a copy of any written statement in support of or
relating to such claim or notice.
Section 4.20. Conversion Procedures. Exhibit D attached hereto
sets forth the procedures with respect to the conversion of the Shares,
including the forms of conversion notice to be provided upon conversion,
instructions as to the procedures for conversion, the form of legal opinion, if
necessary, that shall be rendered to the Company's transfer agent and such other
information and instructions as may be reasonably necessary to enable the
Purchaser to exercise its right of conversion smoothly and expeditiously.
Section 4.21. The Warrants.
(a) The Series C Warrants. At the Initial Series C Closing,
the Company shall issue to the Purchaser three Common Stock purchase warrants
(the "Series C Warrants"), in accordance with the following terms: (i) one
Series C Warrant shall entitle the Purchaser to acquire 66,666 shares of Common
Stock at a price per share equal to 125% of the Per Share Market Value on the
Initial Series C Closing Date in accordance with the terms thereof, (ii) one
Series C Warrant shall entitle the Purchaser to acquire 66,666 shares of Common
Stock at a price per share equal to 135% of the Per Share Market Value on the
Initial Series C Closing Date in accordance with the terms thereof and (iii) one
Series C Warrant shall entitle the Purchaser to acquire 100,000 shares of Common
Stock at a price per share equal to 150% of the Per Share Market Value on the
Initial Series C Closing Date in accordance with the terms thereof.
(b) The Subsequent Warrants. At each of the Series D Closing
and Series E Closing the Company shall issue to the Purchaser three Common Stock
purchase warrants in accordance with the following terms: (i) one such warrant
shall entitle the Purchaser to acquire a number of shares of Common Stock equal
to the product of 66,666 and the Applicable Percentage (as defined below), at a
price per share equal to 125% of the Per Share Market Value on the Series D
Closing Date or Series E Closing Date (as applicable) in accordance with the
terms thereof, (ii) one such warrant shall entitle the Purchaser to acquire a
number of shares of Common Stock equal to the product of 66,666 and the
Applicable Percentage, at a price per share equal to 135% of the Per Share
Market Value on the Series D Closing Date or Series E
23
Closing Date (as applicable) in accordance with the terms thereof and (iii) one
such warrant shall entitle the Purchaser to acquire a number of shares of Common
Stock equal to the product of 100,000 and the Applicable Percentage, at a price
per share equal to 150% of the Per Share Market Value on the Series D Closing
Date or Series E Closing Date (as applicable) in accordance with the terms
thereof. The "Applicable Percentage" shall equal the quotient (expressed as a
percentage) of the purchase price paid for the Series D Shares or the Series E
Shares (as applicable) over the aggregate of the purchase price paid for the
Series C Shares at the Series C Closings.
(c) The Warrants shall be substantially in the form of Exhibit
E.
ARTICLE XII
CONDITIONS PRECEDENT TO CLOSING
Section 5.1. Conditions Precedent to Obligation of the
Purchaser to Purchase the Subsequent Series C Shares, Series D Shares and the
Series E Shares. The obligation of the Purchaser to purchase the Series D Shares
and the Series E Shares is subject to the satisfaction or waiver by the
Purchaser, at or prior to the Series D Closing and the Series E Closing, as
applicable, of each of the following conditions:
(a) Prior Closings. The Initial Series C Closing and, in the
case of the Series E Closing, the Series D Closing, shall have occurred;
(b) Accuracy of the Company's Representations and Warranties.
The representations and warranties of the Company contained herein shall be true
and correct in all material respects as of the date when made and as of the
Series D Closing Date and the Series E Closing Date, as applicable, as though
made on such date;
(c) Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by the Transaction Documents to be performed,
satisfied or complied with by the Company at or prior to the Series D Closing or
the Series E Closing, as applicable;
(d) Underlying Securities Registration Statements. With
respect to the Series D Closing, the Underlying Securities Registration
Statement with respect to the Underlying Shares issuable on conversion of all
outstanding Series C Shares and with respect to the Warrant Shares issuable upon
exercise of the Series C Warrants shall have been declared effective under the
Securities Act by the Commission at least 90 Trading Days prior
24
to the Series D Closing Date (provided that any Trading Days that the Purchaser
is prohibited by, on behalf of, or at the direction of, the Company from trading
under such registration statement shall be added to such 90 Trading Day period);
and with respect to the Series E Closing, the Underlying Securities Registration
Statement with respect to the Underlying Shares issuable on conversion of all
outstanding Series D Shares and with respect to the Warrant Shares issuable upon
exercise of the Series D Warrants shall have been declared effective under the
Securities Act by the Commission for at least 90 Trading Days prior to the
Series E Closing Date (provided that any Trading Days that the Purchaser is
prohibited by, on behalf of, or at the direction of, the Company from trading
under such registration statement shall be added to such 90 Trading Day period);
and in each such case such Underlying Securities Registration Statement shall
have remained effective and shall not be subject to any stop order;
(e) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court of governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by the Transaction Documents;
(f) No Material Adverse Effect. Since the date of the
financial statements included in the Company's last filed Quarterly Report on
Form 10-Q, no event which could have a Material Adverse Effect and no material
adverse change in the financial condition or business of the Company shall have
occurred which is not disclosed in the Disclosure Materials;
(g) No Prohibitions. The purchase of and payment for the
Shares (and upon conversion thereof, the Underlying Shares) shall not (i) be
prohibited or enjoined (temporarily or permanently) by any applicable law or
governmental regulation not in effect in such form at the date of this Agreement
or (ii) subject the Purchaser to any penalty or other onerous condition under or
pursuant to any applicable law or governmental regulation not in effect in such
form at the date of this Agreement that would materially reduce the benefits to
the Purchaser of the purchase of the Shares at issue (or, upon conversion
thereof, the Underlying Shares);
(h) No Suspensions of Trading in Common Stock. Trading in the
Common Stock shall not have been suspended by the Commission or on the Nasdaq
National Market or any other national securities exchange or market on which the
Common Stock is listed or quoted (except for any suspension of trading of
limited duration at the direction of the Company solely to permit dissemination
of material information regarding the Company);
25
(i) Listing of Common Stock. The Common Stock shall have been
at all times between the Series C Closing Date, the Series D Closing Date and
the Series E Closing Date, as applicable, and on the applicable Closing Date be,
listed for trading on the Nasdaq National Market, the New York Stock Exchange or
the American Stock Exchange;
(j) Change of Control. No Change of Control in the Company
shall have occurred. "Change of Control" means the occurrence of any of (i) an
acquisition after the date hereof by an individual or legal entity of in excess
of 50% of the voting securities of the Company, (ii) a replacement of more than
one-half of the members of the Company's board of directors which is not
approved by those individuals who are members of the board of directors on the
applicable Closing Date in one or a series of related transactions, (iii) the
merger of the Company with or into another entity, consolidation or sale of all
or substantially all of the assets of the Company in one or a series of related
transactions or (iv) the execution by the Company of an agreement to which the
Company is a party or by which it is bound, providing for any of the events set
forth above in (i), (ii) or (iii);
(k) Market Price of Common Stock. The average of the Per Share
Market Value for the Common Stock for the twenty (20) Trading Days prior to the
applicable Closing Date shall not have been less than $2.00;
(l) Legal Opinion. The Company shall have delivered to the
Purchaser an opinion of outside legal counsel to the Company (and reasonably
acceptable to the Purchaser) in substantially the form attached hereto as
Exhibit D and dated the applicable Closing Date;
(m) Required Approvals. All Required Approvals shall have been
obtained;
(n) Delivery of Stock Certificates and Warrants. The Company
shall have delivered to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, to hold in escrow pending the
applicable Closing, stock certificate(s) representing the Shares and the
Warrants being purchased at such Closing, registered in the name of the
Purchaser, each in form satisfactory to the Purchaser;
(o) Shares of Common Stock. On each applicable Closing Date
the Company shall have duly reserved for issuance to the Purchaser the sum of
(i) two times the number of Underlying Shares which would be issuable upon
conversion in full of the Shares being issued and sold at such Closing, assuming
such conversion occurred on the Original Issue Date for such Shares and (ii) the
number of Warrant Shares issuable upon exercise in full of the Warrants to be
issued at such Closing; and
26
(p) Performance of Conversion/Exercise Obligations. The
Company shall have timely performed its conversion and exercise obligations in
respect of the conversion or exercise (as the case may be) of previously issued
Shares and Warrants.
ARTICLE XIII
MISCELLANEOUS
Section 6.1. Fees and Expenses. Each party shall pay the fees
and expenses of its advisers, counsel, accountants and other experts, if any,
and all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement, except as
provided in the Registration Rights Agreement. The Company shall pay all stamp
and other taxes and duties levied in connection with the issuance of the Shares
(and upon conversion thereof, the Underlying Shares) and the Warrants (and upon
exercise thereof, the Warrant Shares) pursuant hereto. The Purchaser shall be
responsible for its own tax liability that may arise as a result of the
investment hereunder or the transactions contemplated by this Agreement. Whether
or not the transactions contemplated by this Agreement are consummated or this
Agreement is terminated, the Company shall pay (i) all costs, expenses, fees and
all taxes incident to and in connection with: (A) the preparation, printing and
distribution of the Disclosure Materials and all amendments and supplements
thereto (including, without limitation, financial statements and exhibits), and
all preliminary and final Blue Sky memoranda and all other agreements,
memoranda, correspondence and other documents prepared and delivered in
connection herewith (B) the issuance and delivery of the Shares and the Warrants
and, upon conversion of the Shares, the Underlying Shares and upon exercise of
the Warrants, the Warrant Shares, (C) the qualification of the Shares and the
Warrants and, upon conversion of the Shares, the Underlying Shares and upon
exercise of the Warrants, the Warrant Shares for offer and sale under the
securities or Blue Sky laws of the several states (including, without
limitation, the fees and disbursements of the Purchasers' counsel relating to
such registration or qualification), (D) furnishing such copies of the
Disclosure Materials and all amendments and supplements thereto, as may
reasonably be requested for use in connection with resales of the Shares and the
Warrants and, upon conversion of the Shares, the Underlying Shares and upon
exercise of the Warrants, the Warrant Shares, and (E) the preparation of
certificates for the Shares and the Warrants and, upon conversion of the Shares,
the Underlying Shares and upon exercise of the Warrants, the Warrant Shares
(including, without limitation, printing and engraving thereof), (ii) all fees
and expenses of the counsel and accountants of the Company and (iii) all
expenses and listing fees in connection with the application for quotation of
the Underlying Shares and the Warrant Shares in the Nasdaq National Market.
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Section 6.2. Entire Agreement; Amendments. This Agreement,
together with the Exhibits, and Schedules hereto, and the Registration Rights
Agreement, the Statement of Rights and Preferences and the Warrants contain the
entire understanding of the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings, oral or written, with
respect to such matters.
Section 6.3. Notices. Any notice or other communication
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been received (a) upon hand delivery (receipt acknowledged) or
delivery by telex (with correct answer back received), telecopy or facsimile
(with transmission confirmation report) at the address or number designated
below (if delivered on a Business Day during normal business hours where such
notice is to be received), or the first Business Day following such delivery (if
delivered other than on a business day during normal business hours where such
notice is to be received) or (b) on the second Business Day following the date
of mailing by express courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first occur. The
addresses for such communications shall be:
If to the Company: Cayenne Software, Inc.
▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.:
Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
With copies to: ▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
If to the Purchaser: Southbrook International
Investments, Ltd.
c/o Trippoak Advisors, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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With copies to: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
& ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇
or such other address as may be designated in writing hereafter, in the same
manner, by such person.
Section 6.4. Amendments; Waivers. No provision of this
Agreement may be waived or amended except in a written instrument signed, in the
case of an amendment, by both the Company and the Purchaser, or, in the case of
a waiver, by the party against whom enforcement of any such waiver is sought. No
waiver of any default with respect to any provision, condition or requirement of
this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right accruing to it thereafter.
Section 6.5. Headings. The headings herein are for convenience
only, do not constitute a part of this Agreement and shall not be deemed to
limit or affect any of the provisions hereof.
Section 6.6. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties and their successors and
permitted assigns. The Company may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Purchaser. The
Purchaser may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Company, except that the Purchaser may
assign its rights hereunder and under the Transaction Documents without the
consent of the Company as long as the assignee demonstrates to the reasonable
satisfaction of the Company its satisfaction of the representations and
warranties set forth in Section 3.2. This provision shall not limit the
Purchaser's right to transfer securities or transfer or assign rights hereunder
or under the Registration Rights Agreement.
Section 6.7. No Third Party Beneficiaries. This Agreement is
intended for the benefit of the parties hereto and their respective permitted
successors and assigns and, other than with respect to permitted assignees under
Section 6.6, is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
Section 6.8. Governing Law; Arbitration. (a) This Agreement
shall be governed by and construed and enforced in
29
accordance with the internal laws of the State of New York without regard to the
principles of conflicts of law thereof.
(b) All disputes between the parties hereto
arising under the terms of this Agreement and the other Transaction Documents
shall be arbitrated in New York City under the rules of the American Arbitration
Association then in effect in the City of New York. Judgment on any award made
by the arbitrators hereunder may be rendered in any court having jurisdiction.
The parties consent to the nonexclusive jurisdiction of the State and Federal
Courts sitting in New York County, New York, in connection with the enforcement
of such award. The parties agree to keep confidential any materials, documents
and other information that is disclosed in connection with any arbitration
proceeding.
Section 6.9. Survival. The representations and warranties of
the Company and the Purchaser contained in Article III and the agreements and
covenants of the parties contained in Article IV and this Article VI shall
survive the Closing (or any earlier termination of this Agreement) and any
conversion of Shares and exercise of Warrants hereunder.
Section 6.10. Counterpart Signatures. This Agreement may be
executed in two or more counterparts, all of which when taken together shall be
considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party, it
being understood that both parties need not sign the same counterpart. In the
event that any signature is delivered by facsimile transmission, such signature
shall create a valid and binding obligation of the party executing (or on whose
behalf such signature is executed) the same with the same force and effect as if
such facsimile signature page were an original thereof.
Section 6.11. Publicity. The Company and the Purchaser shall
consult with each other in issuing any press releases or otherwise making public
statements with respect to the transactions contemplated hereby and neither
party shall issue any such press release or otherwise make any such public
statement without the prior written consent of the other, which consent shall
not be unreasonably withheld or delayed, except that no prior consent shall be
required if such disclosure is required by law, in which such case the
disclosing party shall provide the other party with prior notice of such public
statement.
Section 6.12. Severability. In case any one or more of the
provisions of this Agreement shall be invalid or unenforceable in any respect,
the validity and enforceability of the remaining terms and provisions of this
Agreement shall not in any way be affected or impaired thereby and the parties
will
30
attempt to agree upon a valid and enforceable provision which shall be a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.
Section 6.13. Remedies. In addition to being entitled to
exercise all rights provided herein or granted by law, including recovery of
damages, the Purchaser will be entitled to specific performance of the
obligations of the Company under this Agreement and the Company will be entitled
to specific performance of the obligations of the Purchaser hereunder with
respect to the subsequent transfer of Shares, Warrants, Warrant Shares and
Underlying Shares. Each of the Company and the Purchaser agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of
any breach of its obligations described in the foregoing sentence and hereby
agrees to waive in any action for specific performance of any such obligation
the defense that a remedy at law would be adequate.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first indicated above.
Company:
CAYENNE SOFTWARE, INC.
By:_____________________________________
Name:
Title:
Purchaser:
SOUTHBROOK INTERNATIONAL
INVESTMENTS, LTD.
By:_____________________________________
Name:
Title: