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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
February 23, 2000
Optika Inc.
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(Exact name of registrant as specified in its charter)
Delaware 0-28672 95-4154552
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
7450 Campus Drive, Suite 200,
Colorado Springs, CO 80920
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (719) 548-9800
N/A
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(Former name or former address, if changed since last report)
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Item 5. Other Events.
On February 23, 2000, pursuant to a Securities Purchase Agreement dated as of
February 9, 2000 among Optika Inc. (the "Company"), Thomas Weisel Capital
Partners L.P., a Delaware limited partnership, certain of its affiliates and RKB
Capital, L.P. (the "Purchasers"), the Company completed the sale of an aggregate
of 731,851 shares of its Series A Convertible Preferred Stock, par value $.001
per share (the "Preferred Stock"), and warrants (the "Warrants") to purchase an
aggregate of 307,298 shares of the Company's common stock, par value $.001 per
share, to the Purchasers for an aggregate purchase price of $15,000,018.10.
In connection with this transaction, the Company granted the Purchasers and
certain other parties registration rights with respect to the shares of the
Company's common stock to be issued upon conversion of the Preferred Stock or
the exercise of Warrants, and certain other registration rights. These
registration rights are set forth in the Registration Rights Agreement dated
February 23, 2000, attached hereto and referenced as Exhibit 10.3.
The Securities Purchase Agreement is attached hereto and referenced as Exhibit
10.1. The terms of the Preferred Stock are set forth in the Certificate of
Designation attached hereto and referenced as Exhibit 3.1. The terms of the
Warrants are set forth in the Warrant Agreement attached hereto and referenced
as Exhibit 10.2.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits.
Exhibit No. Description
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3.1 Certificate of Designation of Optika Inc., designating the
Series A Convertible Preferred Stock.
10.1 Securities Purchase Agreement dated as of February 9,
2000, by and among Optika Inc., Thomas Weisel Capital
Partners L.P. and certain of its affiliates and RKB
Capital, L.P.
10.2 Warrant Agreement dated February 23, 2000 by and between
Optika Inc., Thomas Weisel Capital Partners, L.P. and the
other parties named therein.
10.3 Registration Rights Agreement dated February 23, 2000 by
and between Optika Inc., the Purchasers and the other
parties signatory thereto.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OPTIKA INC.
Date: February 23, 2000 /s/ Steven M. Johnson
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Steven M. Johnson, Chief Financial Officer
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EXHIBIT 3.1
OPTIKA INC.
CERTIFICATE OF DESIGNATION
OF
SERIES A CONVERTIBLE PREFERRED STOCK
Pursuant to Section 151(g) of the General Corporation Law of the State
of Delaware, Optika Inc. (the "Corporation"), a corporation organized and
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existing under the General Corporation Law of the State of Delaware ("DGCL"),
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DOES HEREBY CERTIFY that:
Pursuant to the authority conferred upon the Board of Directors of the
Corporation by Article IVB of the Second Amended and Restated Certificate of
Incorporation of the Corporation (the "Certificate of Incorporation"), and in
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accordance with the provisions of Section 151(g) of the DGCL, the Board of
Directors of the Corporation on February __, 2000, adopted the following
resolution creating a series of Preferred Stock designated as Series A
Convertible Preferred Stock.
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation in accordance with the DGCL and the provisions of
the Certificate of Incorporation, a series of the class of authorized Preferred
Stock, par value $0.001 per share, of the Corporation is hereby created and that
the designation and number of shares thereof and the voting powers, preferences
and relative, participating, optional and other special rights of the shares of
such series, and the qualifications, limitations and restrictions thereof, are
as follows (capitalized terms used herein shall have the meanings set forth in
Section 12 hereof or otherwise in this Certificate of Designation):
SECTION 1. DESIGNATION; NUMBER; RANK.
(a) Designation; Number. The shares of such series shall be
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designated "Series A Convertible Preferred Stock" (the "Series A Preferred
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Stock"). The number of shares constituting the Series A Preferred Stock shall
be 731,851.
(b) Rank. The Series A Preferred Stock shall, with respect to rights
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on liquidation, dissolution or winding up, rank senior to the Common Stock, par
value $0.001 per share, of the Corporation (the "Common Stock") and all other
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capital stock of the Corporation issued prior to or on or after the date hereof.
SECTION 2. DIVIDENDS.
So long as any shares of Series A Preferred Stock remain outstanding,
if the Corporation pays a dividend in cash, securities or other property on
shares of Common Stock then, at the same time, the Corporation shall declare and
pay a dividend on each outstanding share of Series A Preferred Stock in the same
amount and form as would be paid on the shares of
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Common Stock into which such share of Series A Preferred Stock would be
converted if such shares were converted into shares of Common Stock on the
record date for such Common Stock dividends (or if no record date is
established, at the date such dividend is declared), it being understood that
the holders of Series A Preferred Stock shall participate in Common Stock
dividends as aforesaid without having to convert to shares of Series A Preferred
Stock held by such holders.
SECTION 3. LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) (i) If the Corporation shall (A) commence a voluntary case under
the Federal bankruptcy laws or any other applicable Federal or state bankruptcy,
insolvency or similar law, or (B) consent to the entry of an order for relief in
an involuntary case under such law or to the appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or other similar
official) of the Corporation, or of any substantial part of its property, or (C)
make an assignment for the benefit of its creditors, or (D) admit in writing its
inability to pay its debts generally as they become due, or (ii)(x) if a decree
or order for relief in respect of the Corporation shall be entered by a court
having jurisdiction in the premises in an involuntary case under the Federal
bankruptcy laws or any other applicable Federal or state bankruptcy, insolvency
or similar law, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or ordering the winding up or liquidation of
its affairs, and (y) any such decree or order shall be unstayed and in effect
for a period of 60 consecutive days and on account of any such event the
Corporation shall liquidate, dissolve or wind up or (iii) if the Corporation
shall otherwise liquidate, dissolve or wind up, after payment or provision for
the payment for the debts and other liabilities of the Corporation (each, a
"Liquidation"), no distribution shall be made to the holders of shares of Junior
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Stock or Parity Stock unless, prior thereto, the holders of shares of Series A
Preferred Stock shall have received, in cash, with respect to each share of
Series A Preferred Stock, the greater of (A) the Liquidation Preference with
respect to such share of the Series A Preferred Stock; and (B) the amount which
would have been paid upon any such Liquidation in respect of the aggregate
number of shares of Common Stock into which such share of Series A Preferred
Stock is then convertible, it being understood that holders of Series A
Preferred Stock may be deemed to participate in the amount receivable by the
holders of Common Stock as aforesaid in this clause (B) without having to
convert the shares of Series A Preferred Stock held by such holders (the greater
of the amounts set forth in clause (A) and (B) above with respect to any share
of Series A Preferred Stock, the "Preference Amount," and the aggregate such
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amount for all outstanding shares of Series A Preferred Stock, the "Aggregate
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Preference Amount").
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(b) If, upon any such Liquidation, whether voluntary or involuntary,
the assets to be distributed to the holders of the Series A Preferred Stock
shall be insufficient to permit payment of the full amount of the Preference
Amount with respect to each share of Series A Preferred Stock, then the entire
assets of the Corporation to be distributed among the holders of the Series A
Preferred Stock shall be distributed ratably among such holders in accordance
with the number of shares of Series A Preferred Stock held by each such holder
in proportion to the ratio that the Preference Amount payable on each such share
bears to the Aggregate Preference Amount.
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(c) After the payment to the holders of shares of the Series A
Preferred Stock of the full amount of any liquidating distribution to which they
are entitled under this Article 3, the holders of the Series A Preferred Stock
as such shall have no right or claim to any of the remaining assets of the
Corporation.
(d) Whenever the distribution provided for in this Section 3 shall be
payable in securities or property other than cash, the value of such
distribution shall be the Fair Market Value of such securities or property.
SECTION 4. VOTING RIGHTS.
In addition to any voting rights provided by law, the holders of
shares of Series A Preferred Stock shall have the voting rights set forth in
this Section 4:
(a) (i) Right to Vote as a Single Class with Holders of Common
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Stock. So long as any of the Series A Preferred Stock is outstanding, each
share of Series A Preferred Stock shall entitle the holder thereof to vote on
all matters submitted to a vote of the stockholders of the Corporation, voting
together as a single class with the holders of Common Stock. The holders of
each share of Series A Preferred Stock shall be entitled to vote with respect to
each share of Series A Preferred Stock held by each such holder a number of
votes equal to the number of votes which could be cast in such vote by a holder
of the number of shares of Common Stock into which such share of Series A
Preferred Stock is then convertible on the record date for such vote without
such holder being required to convert such shares. Fractional votes shall not,
however, be permitted and any fractional voting rights available on an as-
converted basis (after aggregation of all shares of Common Stock into which
shares of Series A Preferred Stock held by each holder could be converted) shall
be rounded to the nearest whole number (with one-half being rounded upward).
(ii) Right to Elect a Director. On the Issue Date, the Board of
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Directors shall cause the total number of directors then constituting the whole
Board of Directors to be fixed at eight. The holders of the outstanding shares
of Series A Preferred Stock shall be entitled to designate one director for
election to the Board of Directors of the Corporation as a Class I director and,
voting separately as a series, shall have the exclusive right to vote for the
election of such designee to the Board of Directors for so long as the
Purchasers under the Securities Purchase Agreement and their affiliates own in
excess of the Ownership Threshold (as defined in the Securities Purchase
Agreement). Any such designee may be removed with or without cause by the
holders of the Series A Preferred Stock.
(iii) No Right to Class Vote on Certain Transactions. Subject to
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the rights of holders of shares of Series A Preferred Stock set forth in
Sections 4(a)(i), 8 and 10, the Corporation may, without the consent of any
holder of Series A Preferred Stock, consolidate with or merge with or into, or
convey, transfer or lease all or substantially all its assets as an entirety to,
any Person, provided that: (A) the successor, transferee or lessee (if not the
Corporation) is organized and existing under the laws of the United States of
America or any State thereof or the District of Columbia and the Series A
Preferred Stock shall be converted into or exchanged for and shall become shares
of, or interests in, such successor, transferee or lessee, having in respect
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of such successor, transferee, or lessee substantially the same powers,
preferences and relative, participating, optional or other special rights and
the qualifications, limitations or restrictions thereof, that the Series A
Preferred Stock has immediately prior to such transaction; and (B) the
Corporation delivers to the transfer agent an officers' certificate and provides
reasonable evidence that such consolidation, merger, conveyance, transfer or
lease complies with this Certificate of Designation. In the event of any
consolidation or merger or conveyance, transfer or lease of all or substantially
all of the assets of the Corporation that is permitted pursuant to this
subparagraph (iii), the successor resulting from such consolidation or into
which the Corporation is merged or the transferee or lessee to which such
conveyance, transfer or lease is made, will succeed to, and be substituted for,
and may exercise every right and power of, the Corporation with respect to the
Series A Preferred Stock (or the shares or interests into, or for which, the
Series A Preferred Stock is converted or exchanged), and thereafter, except in
the case of a lease, the predecessor (if still in existence) shall be released
from its obligations and covenants with respect to the Series A Preferred Stock.
(b) Actions Not to be Taken Without Vote of Holders of Series A
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Preferred Stock. So long as any shares of Series A Preferred Stock are
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outstanding, the affirmative vote of the holders of a majority of the shares of
Series A Preferred Stock outstanding at the time of such vote shall be required
in order to:
(i) authorize, increase the authorized number of shares of, or
issue (including on conversion, exercise or exchange of any convertible,
exercisable or exchangeable securities or by reclassification) (A) any shares of
any class or classes or series within a class of the Corporation's capital stock
ranking prior to (either as to dividends or upon Liquidation) the Series A
Preferred Stock, or (B) any Parity Stock;
(ii) increase the authorized number of shares of, or issue
(including on conversion, exercise or exchange of any convertible, exercisable
or exchangeable securities or by reclassification) any shares of, Series A
Preferred Stock other than as authorized by this Certificate of Designation; or
(iii) reclassify any shares of Series A Preferred Stock or
authorize, adopt or approve an amendment to the Certificate of Incorporation or
this Certificate of Designation which would increase or decrease the par value
of the shares of Series A Preferred Stock, or alter or change the powers,
preferences or special rights of the Series A Preferred Stock.
(c) Exercise of Voting Rights. (i) The foregoing rights of holders
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of shares of Series A Preferred Stock to take any actions (A) as provided in
Section 4(a)(i) may be exercised at any annual meeting of stockholders or at a
special meeting of stockholders held for such purpose or at any adjournment
thereof and (B) as provided in Sections 4(a)(ii) and 4(b) may be exercised at
any annual meeting of holders of Series A Preferred Stock or at a special
meeting of holders of Series A Preferred Stock held for such purpose or at any
adjournment thereof. The Chairman of the Board of the Corporation may call, and
if the holders of Series A Preferred Stock are to vote separately as a single
class, upon the written request of holders of record of
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20% of the outstanding shares of Series A Preferred Stock, addressed to the
Secretary of the Corporation, at the principal office of the Corporation, the
Chairman of the Board of the Corporation shall call, a special meeting of the
holders of shares of Series A Preferred Stock entitled to vote as provided
herein. The Corporation shall use its best efforts to hold such meeting within
10, but in any event not later than 20, days after delivery of such request to
the Secretary, upon the notice specified by the requesting holders of Series A
Preferred Stock or if not so specified as provided by law and in the By-Laws of
the Corporation for the holding of meetings of stockholders.
(ii) At each meeting of stockholders at which the holders of
shares of Series A Preferred Stock shall have the right, voting separately as a
single class, to take any action, the presence in person or by proxy of the
holders of record of one-half of the total number of shares of Series A
Preferred Stock then outstanding and entitled to vote on the matter shall be
necessary and sufficient to constitute a quorum. At any such meeting or at any
adjournment thereof, in the absence of a quorum of the holders of shares of
Series A Preferred Stock, a majority of the holders of such shares present in
person or by proxy shall have the power to adjourn the meeting as to the actions
to be taken by the holders of shares of Series A Preferred Stock from time to
time and place to place without notice other than announcement at the meeting
until a quorum shall be present.
(iii) For the taking of any action as provided in Sections
4(a)(ii) or 4(b) by the holders of shares of Series A Preferred Stock, each such
holder shall have one vote for each share of such stock standing in his name on
the transfer books of the Corporation as of any record date fixed for such
purpose or, if no such date be fixed, at the close of business on the Business
Day next preceding the day on which notice is given, or if notice is waived, at
the close of business on the Business Day next preceding the day on which the
meeting is held.
SECTION 5. RESTRICTIONS ON DISTRIBUTIONS IN RESPECT OF COMMON STOCK.
(a) For so long as any shares of Series A Preferred Stock shall remain
outstanding, (A) upon the occurrence and during the continuance of any default
by the Corporation in respect of its obligations in favor of any holders of the
Series A Preferred Stock, including any obligation to redeem shares of Series A
Preferred Stock under Section 5 or repurchase shares of Series A Preferred Stock
under Section 10 and (B) from the date of an Other Liquidation Event or Public
Company Liquidation Event to the Other Liquidation Event Payment Date, the
Corporation shall not declare or pay any dividends or make any distributions,
whether in cash, securities or other property, upon, nor shall the Corporation
redeem, purchase or otherwise acquire for consideration any shares of Parity
Stock or Junior Stock, other than the repurchase of shares of capital stock or
securities convertible into or exchangeable for capital stock of the Corporation
held by directors or employees of the Corporation pursuant to employee benefit
plans approved by the Board of Directors.
(b) The Corporation shall not permit any subsidiaries of the
Corporation to purchase or otherwise acquire for consideration any shares of
capital stock of the Corporation
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unless the Corporation could, pursuant to clause (a) of this Section 5, purchase
such shares at such time and in such manner.
SECTION 6. REDEMPTION.
(a) Optional Redemption. (i) Subject to the rights of holders of
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shares of Series A Preferred Stock set forth in Section 8 hereof, the
Corporation shall, at any time following the first anniversary of the Issue
Date, have the right, at its sole option and election made in accordance with
clause (a)(ii) below, to redeem, to the extent the Corporation shall have the
funds legally available therefor, all, but not less than all, of the then
outstanding shares of Series A Preferred Stock within 70 days following any date
(the "Redemption Trigger Date") on which the Market Price per share of Common
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Stock for each of at least 20 out of 22 consecutive Trading Days immediately
preceding such date is equal to or greater than $40.992 (subject to appropriate
adjustment for stock dividends, splits, combinations and similar events
affecting the Common Stock) (the "Trigger Price") for an amount in cash per
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share of Series A Preferred Stock equal to the Liquidation Preference of such
share (the "Optional Redemption Price") as of the Optional Redemption Date (as
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defined below).
(ii) Notice of any redemption of shares of Series A Preferred
Stock pursuant to clause (a)(i) shall be mailed, first class postage prepaid, to
each holder of shares of Series A Preferred Stock, at such holder's address as
it appears on the transfer books of the Corporation, specifying (x) the Optional
Redemption Price and (y) the redemption date (the "Optional Redemption Date");
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and calling upon such holder to surrender to the Corporation, in the manner and
at the place designated, such holder's certificate or certificates representing
the shares to be redeemed (the "Optional Redemption Notice"). The Optional
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Redemption Notice shall be mailed not more than 35 days following the applicable
Redemption Trigger Date. The Optional Redemption Date shall be determined by the
Corporation but in no event shall be earlier than the 10th day following the
date of receipt by the holders of Series A Preferred Stock of the Redemption
Notice or later than the 35th day following the Redemption Notice. The
Redemption Notice shall be revocable by the Corporation by notice to the holders
of Series A Preferred Stock received by such holders on or prior to the fifth
Business Day prior to the Optional Redemption Date.
(b) Mandatory Redemption. (i) Subject to the rights of holders of
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shares of Series A Preferred Stock set forth in Section 8 hereof, the
Corporation shall, on the eighth anniversary of the Issue Date (such date, the
"Mandatory Redemption Date"), redeem, to the extent the Corporation shall have
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the funds legally available therefor, all, but not less than all, of the then
outstanding shares of Series A Preferred Stock for an amount in cash per share
of Series A Preferred Stock equal to the Liquidation Preference of such share
(the "Mandatory Redemption Price") as of the Mandatory Redemption Date. If the
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funds of the Corporation legally available for redemption of shares of Series A
Preferred Stock on the Mandatory Redemption Date are insufficient to redeem the
total number of shares to be redeemed on such date, those funds which are
legally available will be used to redeem the maximum possible number of such
shares ratably among the holders of such shares to be redeemed based upon the
number of shares of Series A Preferred Stock held by each such holder. The
shares of Series A
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Preferred Stock not redeemed shall remain outstanding and entitled to all the
rights and preferences provided in this Certificate of Designation at any time.
Thereafter, when sufficient additional funds of the Corporation are legally
available for the redemption of shares of Series A Preferred Stock that remain
outstanding, such funds shall immediately be used to redeem the entire balance
of the shares of Series A Preferred Stock that the Corporation has become
obliged to redeem on the Mandatory Redemption Date but which the Corporation has
not redeemed.
(ii) Notice of any redemption of shares of Series A Preferred
Stock pursuant to clause (b)(i) shall be mailed, first class postage prepaid, to
each holder of shares of Series A Preferred Stock, at such holder's address as
it appears on the transfer books of the Corporation, specifying (x) the number
of shares of Series A Preferred Stock to be redeemed, (y) the Mandatory
Redemption Price and (z) the Mandatory Redemption Date; and calling upon such
holder to surrender to the Corporation, in the manner and at the place
designated, such holder's certificate or certificates representing the shares to
be redeemed (the "Mandatory Redemption Notice"). The Mandatory Redemption Notice
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shall be mailed not less than 25 and not more than 45 days prior to the
Mandatory Redemption Date.
(c) Payment of Redemption Price. On the date of any redemption
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pursuant to this Section 6, (i) the Corporation shall pay, in cash or by wire
transfer of immediately available funds to an account designated by each holder,
the Optional Redemption Price or the Mandatory Redemption Price, as the case may
be, for each of its shares of Series A Preferred Stock, and (ii) after payment
has been made in accordance with clause (i) above, all rights of the holders
thereof as holders of Series A Preferred Stock of the Corporation shall cease.
SECTION 7. STATUS OF CONVERTED OR REDEEMED STOCK.
Any shares of Series A Preferred Stock converted, redeemed, purchased
or otherwise acquired by the Corporation in any manner whatsoever shall be
retired and cancelled promptly after the acquisition thereof. All such shares
of Series A Preferred Stock shall upon their cancellation, and upon the filing
of any document required by the DGCL, become authorized but unissued shares of
Preferred Stock, $0.001 par value, of the Corporation and may be reissued as
part of another series of Preferred Stock, $0.001 par value, of the Corporation.
SECTION 8. CONVERSION.
(a) Right to Convert. Subject to the provisions for adjustment
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hereinafter set forth, the holders of Series A Preferred Stock shall have the
right following the Issue Date at any time in whole and from time to time in
part, at such holder's option, to convert any or all outstanding shares (and
fractional shares) of Series A Preferred Stock into Common Stock as set forth
hereinafter. Each share of Series A Preferred Stock shall be convertible into
such number of fully paid and nonassessable shares of Common Stock as is
determined by dividing the Liquidation Preference as of the Conversion Date by
the Conversion Price as of the Conversion Date. The Conversion Price shall be
the Initial Conversion Price (as defined in paragraph (e) below) as adjusted in
accordance with clauses (f) and (g) of this Section 8.
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(b) Mechanics of Conversion. Conversion of the Series A Preferred
-----------------------
Stock may be effected by any such holder upon the surrender to the Corporation
at the principal office of the Corporation or at the office of any agent or
agents of the Corporation, as may be designated by the Board of Directors of the
Corporation (the "Transfer Agent"), of the certificate(s) for such Series A
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Preferred Stock to be converted, accompanied by a written notice (the date of
such notice being referred to as the "Conversion Date") stating that such holder
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elects to convert all or a specified whole number of such shares in accordance
with the provisions of this Section 8 and specifying the name or names in which
such holder wishes the certificate or certificates for shares of Common Stock to
be issued. In case any holder's notice shall specify a name or names other than
that of such holder, such notice shall be accompanied by payment of all transfer
taxes payable upon the issuance of shares of Common Stock in such name or names.
Other than such taxes, the Corporation will pay any and all transfer, issue,
stamp and other taxes (other than taxes based on income) that may be payable in
respect of any issue or delivery of shares of Common Stock on conversion of
Series A Preferred Stock pursuant hereto. As promptly as practicable, and in
any event within five Business Days after the surrender of such certificate or
certificates and the receipt of such notice relating thereto and, if applicable,
payment of all transfer taxes which are the responsibility of the holder as set
forth above (or the demonstration to the satisfaction of the Corporation that
such taxes have been paid), the Corporation shall deliver or cause to be
delivered (i) certificates representing the number of validly issued, fully paid
and nonassessable full shares of Common Stock, to which the holder of shares of
Series A Preferred Stock being converted shall be entitled and (ii) if less than
the full number of shares of Series A Preferred Stock evidenced by the
surrendered certificate or certificates is being converted, a new certificate or
certificates, of like tenor, for the number of shares evidenced by such
surrendered certificate or certificates less the number of shares being
converted. Such conversion shall be deemed to have been made at the close of
business on the Conversion Date so that the rights of the holder thereof as to
the shares being converted shall cease except for the rights pursuant to Section
8(c) to receive shares of Common Stock, in accordance herewith, and payment for
any fractional share and the person entitled to receive the shares of Common
Stock shall be treated for all purposes as having become the record holder of
such shares of Common Stock at such time.
In case any shares of Series A Preferred Stock are to be redeemed
pursuant to Section 6, such right of conversion shall continue in effect through
the close of business on the Business Day preceding the applicable redemption
date and thereafter shall cease and terminate as to the shares of Series A
Preferred Stock to be redeemed unless the Corporation shall default in making
payment of the amount payable upon such redemption.
(c) Fractional Shares. In connection with the conversion of any
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shares of Series A Preferred Stock into Common Stock, no fractions of shares of
Common Stock shall be issued, but in lieu thereof the Corporation shall pay a
cash adjustment in respect of such fractional interest in an amount equal to
such fractional interest multiplied by the Market Price per share of Common
Stock on the Trading Day on which such shares of Series A Preferred Stock are
deemed to have been converted. If more than one share of Series A Preferred
Stock shall be surrendered for conversion by the same holder at the same time,
the number of full shares of Common Stock issuable on conversion thereof shall
be computed on the basis of the
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total number of shares of Series A Preferred Stock so surrendered. Promptly upon
conversion, the Corporation shall pay to the holder of shares of Series A
Preferred Stock so converted, out of funds legally available, an amount in cash,
or by wire transfer of same day funds, in lieu of any fractional interest of
such holder.
(d) Reservation of Stock Issuable Upon Conversion. The Corporation
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shall at all times reserve and keep available for issuance upon the conversion
of the Series A Preferred Stock, free from any preemptive rights, such number of
its authorized but unissued shares of Common Stock as will from time to time be
sufficient to permit the conversion of all outstanding shares of Series A
Preferred Stock issued pursuant to this Certificate of Designation into Common
Stock, and shall take all actions required to increase the authorized number of
shares of Common Stock if necessary to permit the conversion of all outstanding
shares of Series A Preferred Stock.
(e) Initial Conversion Price. The initial Conversion Price shall
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equal $20.496 (the "Initial Conversion Price").
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(f) (i) Adjustment to Conversion Price for Stock Dividends and for
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Combinations or Subdivisions of Common Stock. (i) In case the Corporation
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shall at any time or from time to time after the Issue Date (A) pay a dividend
or make a distribution on the outstanding shares of Common Stock in shares of
Common Stock, (B) subdivide or split the outstanding shares of Common Stock, (C)
combine or reclassify the outstanding shares of Common Stock into a smaller
number of shares or (D) issue by reclassification of the shares of Common Stock
any shares of capital stock of the Corporation, then, and in each such case, the
Conversion Price in effect immediately prior to such event or the record date
therefor, whichever is earlier, shall be adjusted so that the holder of any
shares of Series A Preferred Stock thereafter surrendered for conversion shall
be entitled to receive the number of shares of Common Stock or other securities
of the Corporation which after the happening of any of the events described
above such shares of Series A Preferred Stock would have been entitled had such
shares of Series A Preferred Stock been surrendered for conversion immediately
prior to the happening of such event or the record date therefor, whichever is
earlier. An adjustment made pursuant to this clause (i) shall become effective
(x) in the case of any such dividend or distribution, immediately after the
close of business on the record date for the determination of holders of shares
of Common Stock entitled to receive such dividend or distribution, or (y) in the
case of such subdivision, split, reclassification or combination, at the close
of business on the day upon which such corporate action becomes effective. Such
adjustment shall be made successively whenever an event listed above shall
occur. No adjustment shall be made pursuant to this clause (i) in connection
with any transaction to which clause (g) applies.
(ii) In case the Corporation shall issue shares of Common Stock
(or rights, warrants or other securities convertible into or exercisable or
exchangeable for shares of Common Stock) (collectively, "Additional Shares")
-----------------
after the Issue Date at a price per share (or having a conversion or exercise
price per share) less than the Current Market Price as of the date of issuance
of such shares (or, in the case of convertible or exchangeable securities, less
than the Current Market Price as of the date of issuance of the rights, warrants
or other securities in
-9-
<PAGE>
respect of which shares of Common Stock were issued), then, and in each such
case, the Conversion Price shall be reduced to an amount determined by
multiplying (A) the Conversion Price in effect on the day immediately prior to
the date of issuance of such Additional Shares by (B) a fraction, the numerator
of which shall be the sum of (1) the number of shares of Common Stock
Outstanding immediately prior to such sale or issue multiplied by the then
applicable Current Market Price per share and (2) the aggregate consideration
receivable by the Corporation for the total number of shares of Common Stock so
issued (or into or for which the rights, warrants or other convertible
securities may convert or be exercisable or exchangeable), and the denominator
of which shall be the sum of (x) the total number of shares of Common Stock
Outstanding immediately prior to such sale or issue and (y) the number of
Additional Shares issued (or into or for which the rights, warrants or
convertible securities may be converted, exercised or exchanged), multiplied by
the Current Market Price. An adjustment made pursuant to this clause (ii) shall
be made on the next Business Day following the date on which any such issuance
is made and shall be effective retroactively to the close of business on the
date of such issuance of Additional Shares. For purposes of this clause (ii),
the aggregate consideration receivable by the Corporation in connection with the
issuance of shares of Common Stock or of rights, warrants or convertible
securities shall be deemed to be equal to the sum of the aggregate offering
price (before deduction of underwriting discounts or commissions and expenses
payable to third parties) of all such Common Stock, rights, warrants and
convertible securities plus the aggregate amount (as determined on the date of
issuance), if any, payable upon exercise or conversion of any such rights,
warrants and convertible securities into shares of Common Stock. If, subsequent
to the date of issuance of such right, warrants or other convertible securities,
the exercise or conversion price thereof is reduced, such aggregate amount shall
be recalculated and the Conversion Price shall be adjusted retroactively to give
effect to such reduction. On the expiration of any option or the termination of
any right to convert or exchange any securities into Additional Shares, the
Conversion Price then in effect hereunder shall forthwith be increased to the
Conversion Price which would have been in effect at the time of such expiration
or termination (but taking into account other adjustments made following the
time of issuance of such securities) had such security, to the extent
outstanding immediately prior to such expiration or termination, never been
issued. In case any portion of the consideration to be received by the
Corporation shall be in a form other than cash, the Fair Market Value of such
non-cash consideration shall be utilized in the foregoing computation. If Common
Stock is sold as a unit with other securities, the aggregate consideration
received for such Common Stock shall be deemed to be net of the Fair Market
Value of such other securities. The issuance or reissuance of (i) any shares of
Common Stock or rights, warrants or other securities convertible into shares of
Common Stock (whether treasury shares or newly issued shares) (A) pursuant to a
dividend or distribution on, or subdivision, split, combination or
reclassification of, the outstanding shares of Common Stock requiring an
adjustment in the Conversion Price pursuant to clause (i) of this clause (f);
(B) pursuant to any restricted stock or stock option plan or stock purchase
program of the Corporation involving the grant of options or rights to acquire
Common Stock to directors, officers and employees and, in the case of options,
consultants and service providers, of the Corporation and its subsidiaries so
long as (x) the granting of such options or rights has been approved by the
Board of Directors and (y) the aggregate consideration receivable by the
Corporation in connection with such options shall be no less than fair market
value, as determined by the Board of Directors, and in connection with such
rights under the employee
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<PAGE>
stock purchase plan of the Corporation shall be no less than 85% of the fair
market value, as determined by the Board of Directors, in each case of the
Common Stock underlying such options or rights on the date of grant; (C)
pursuant to any option, warrant, right, or convertible security outstanding as
of the Issue Date, or (ii) the Series A Preferred Stock and the Warrants
issuable pursuant to the Securities Purchase Agreement and any shares of Common
Stock issuable upon conversion or exercise thereof, shall not be deemed to
constitute an issuance of Common Stock or convertible securities by the
Corporation to which this clause (f)(ii) applies; provided that, notwithstanding
clause (i)(C), the Conversion Price shall be appropriately reduced to the extent
that the number of shares into which any such security may be converted,
exercised or exchanged is increased or the price therefor is reduced after the
Issue Date. No adjustment shall be made pursuant to this clause (f)(ii) in
connection with any transaction to which clause (g) applies.
(iii) In case the Corporation shall fix a record date for the
issuance on a pro rata basis of rights, options or warrants to the holders of
its Common Stock (or other securities convertible into or exercisable or
exchangeable for shares of Common Stock) entitling such holders to subscribe for
or purchase shares of Common Stock (or securities convertible into or
exercisable or exchangeable for shares of Common Stock) at a price per share of
Common Stock (or having a conversion, exercise or exchange price per share of
Common Stock, in the case of a security convertible into, or exerciseable or
exchangeable for, shares of Common Stock) less than the Current Market Price on
such record date, the maximum number of shares of Common Stock issuable upon
exercise of such rights, options or warrants (or conversion of such convertible
securities) shall be deemed to have been issued and outstanding as of such
record date and the Conversion Price shall be adjusted pursuant to paragraph
8(f)(ii) hereof, as though such maximum number of shares of Common Stock had
been so issued for an aggregate consideration payable by the holders of such
rights, options, warrants or other securities prior to their receipt of such
shares of Common Stock. Such adjustment shall be made successively whenever
such record date is fixed; and in the event that such rights, options or
warrants are not so issued or expire in whole or in part unexercised, or in the
event of a change in the number of shares of Common Stock to which the holders
of such rights, options or warrants are entitled (other than pursuant to
adjustment provisions therein comparable to those contained in this paragraph
8(f)), the Conversion Price shall again be adjusted as follows: (A) in the event
that all of such rights, options or warrants expire unexercised, the Conversion
Price shall be the Conversion Price that would then be in effect if such record
date had not been fixed; (B) in the event that less than all of such rights,
options or warrants expire unexercised, the Conversion Price shall be adjusted
pursuant to paragraph 8(f)(ii) to reflect the maximum number of shares of Common
Stock issuable upon exercise of such rights, options or warrants that remain
outstanding (without taking into effect shares of Common Stock issuable upon
exercise of rights, options or warrants that have lapsed or expired); and (C) in
the event of a change in the number of shares of Common Stock to which the
holders of such rights, options or warrants are entitled, the Conversion Price
shall be adjusted to reflect the Conversion Price which would then be in effect
if such holder had initially been entitled to such changed number of shares of
Common Stock. Notwithstanding the foregoing, in case the Corporation shall
issue rights, options or warrants ("Stockholder Rights") to all holders of its
------------------
Common Stock entitling the holders thereof to subscribe for or purchase shares
of Common Stock, which rights or warrants (i) are deemed to
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<PAGE>
be transferred with such shares of Common Stock, (ii) are not exercisable and
(iii) are also issued in respect of future issuances of Common Stock, in each
case in clauses (i) through (iii) until the occurrence of a specified event or
event ("Trigger Event"), such Stockholder Rights shall for purposes of this
-------------
clause (iii) not be deemed issued or distributed until the occurrence of the
earliest Trigger Event and the conversion price shall not be reduced until the
occurrence of such earliest Trigger Event.
(iv) In case the Corporation shall fix a record date for the making of
a distribution to all holders of any class of Common Stock (including any such
distribution made in connection with a consolidation or merger in which the
Corporation is the continuing corporation) of evidences of indebtedness, assets
or other property, the Conversion Price to be in effect after such record date
shall be determined by multiplying the Conversion Price in effect immediately
prior to such record date by a fraction, (A) the numerator of which shall be the
Conversion Price immediately prior to such distributions less the Fair Market
Value of the portion of the assets, other property or evidence of indebtedness
so to be distributed which is applicable to one share of Common Stock and (B)
the denominator of which shall be the Conversion Price immediately prior to such
distributions. Such adjustments shall be made successively whenever such a
record date is fixed; and in the event that such distribution is not so made,
the Conversion Price shall again be adjusted to be the Conversion Price which
would then be in effect if such record date had not been fixed. An adjustment to
the Conversion Price also shall be made in respect of dividends and
distributions paid exclusively in cash to all holders of any class of Common
Stock (excluding any dividend or distribution in connection with the Liquidation
of the Corporation, whether voluntary or involuntary, and any cash that is
distributed upon a merger, consolidation or other transaction for which an
adjustment pursuant to paragraph 8(g) is made) or in the case where the
Corporation effects any repurchase of its Common Stock where the sum of (1) all
such cash dividends and distributions made within the preceding 12 months in
respect of which no adjustment has been made and (2) any cash and the Fair
Market Value of other consideration paid in respect of any repurchases of Common
Stock by the Corporation or any of its subsidiaries within the preceding 12
months in respect of which no adjustment has been made, exceeds 5% of the
Corporation's market capitalization (being the product of the then Current
Market Price of the Common Stock times the aggregate number of shares of Common
Stock then outstanding on the record date for such distribution). The Conversion
Price to be in effect after such adjustment shall be determined by subtracting
from the Conversion Price in effect prior to such adjustment an amount equal to
the quotient of (A) the sum of clause (1) and clause (2) above and (B) the
number of shares of Common Stock outstanding on the date such adjustment is to
be determined.
(v) The term "dividend," as used in this clause (f), shall mean a
dividend or other distribution upon the capital stock of the Corporation.
(vi) Anything in this clause (f) to the contrary notwithstanding, the
Corporation shall not be required to give effect to any adjustment in the
Conversion Price (x) if, in connection with any event which would otherwise
require an adjustment pursuant to this clause (f), the holders of Series A
Preferred Stock have received the dividend or distribution to which such holders
are entitled under Section 2 hereof or (y) unless and until the net effect of
one
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<PAGE>
or more adjustments (each of which shall be carried forward), determined as
above provided, shall have resulted in a change of the Conversion Price such
that the number of shares of Common Stock receivable upon conversion of each
share of Series A Preferred Stock would differ by at least one two-hundredth of
one share of Common Stock, and when the cumulative net effect of more than one
adjustment so determined shall be to change the Conversion Price by at least one
two-hundredth of one share of Common Stock, such change in Conversion Price
shall thereupon be given effect. All calculations under this Section 8 shall be
made to the nearest four decimal points.
(vii) The certificate of any firm of independent public
accountants of recognized national standing selected by the Board of Directors
of the Corporation (which may be the firm of independent public accountants
regularly employed by the Corporation) shall be presumptively correct for any
computation made under this clause (f).
(viii) If the Corporation shall take a record of the holders of
its Common Stock for the purpose of entitling them to receive a dividend or
other distribution, and shall thereafter and before the distribution to
stockholders legally abandon its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment in the number of shares of Common
Stock issuable upon exercise of the right of conversion granted by this clause
(f) or in the Conversion Price then in effect shall be required by reason of the
taking of such record.
(ix) If any event occurs as to which the provisions of this
Section 8(f) are not strictly applicable or if strictly applicable would not
fairly protect the rights of the holders of the Series A Preferred Stock in
accordance with the essential intent and principles of such provisions, the
Board of Directors shall make an adjustment in the application of such
provisions, in accordance with such essential intent and principles, so as to
protect such rights of the holders of the Series A Preferred Stock.
(g) Adjustment to Conversion Price for Reclassification and
-------------------------------------------------------
Reorganization. In the case of any consolidation or merger or reclassification
- --------------
in connection therewith of the Corporation with or into another corporation (a
"Transaction") occurring at any time, each share of Series A Preferred Stock
-----------
then outstanding shall thereafter be convertible into, in lieu of the Common
Stock issuable upon such conversion prior to consummation of such Transaction,
the kind and amount of shares of stock and other securities and property
receivable (including cash) upon the consummation of such Transaction by a
holder of that number of shares of Common Stock into which one share of Series A
Preferred Stock was convertible immediately prior to such Transaction. In case
securities or property other than Common Stock shall be issuable or deliverable
upon conversion as aforesaid, then all references in this Section 8 shall be
deemed to apply, so far as appropriate and nearly as may be, to such other
securities or property. The Corporation, or the person formed by the
consolidation or resulting from the merger or which acquires such assets or
which acquires the Corporation's shares, as the case may be, shall make
provisions in its certificate or articles of incorporation or other constituent
document to establish such rights and such rights shall be clearly provided for
in the definitive transaction documents relating to such Transaction. The
certificate or articles of incorporation or other constituent document shall
provide for adjustments, which, for events subsequent to the effective date of
the
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<PAGE>
certificate or articles of incorporation or other constituent document, shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Section 8. The provisions of this Section 8(g) shall similarly apply to
successive reclassifications, consolidations, mergers, sales, transfers or share
exchanges.
(h) Notice of Record Date. In case at any time or from time to time
---------------------
(i) the Corporation shall pay any stock dividend or make any other non-cash
distribution to the holders of its Common Stock, or offer for subscription pro
rata to the holders of its Common Stock any additional shares of stock of any
class or any other right, or (ii) there shall be any capital reorganization or
reclassification of the Common Stock of the Corporation or consolidation or
merger of the Corporation with or into another corporation, or any sale or
conveyance to another corporation of the property of the Corporation as an
entirety or substantially as an entirety, (iii) there shall be a Liquidation of
the Corporation, or (iv) an Other Liquidation Event or Public Company
Liquidation Event shall occur, then, in any one or more of said cases the
Corporation shall give at least 20 days' prior written notice (the time of
mailing of such notice shall be deemed to be the time of giving thereof) to the
registered holders of the Series A Preferred Stock at the addresses of each as
shown on the books of the Corporation maintained by the Transfer Agent thereof
of the date on which (A) a record shall be taken for such stock dividend,
distribution or subscription rights or (B) such reorganization,
reclassification, consolidation, merger, sale or conveyance or Liquidation shall
take place, as the case may be; provided that, in the case of any Transaction to
--------
which clause (g) applies the Corporation shall give at least 30 days' prior
written notice as aforesaid. Such notice shall also specify the date as of which
the holders of the Common Stock of record shall participate in said dividend,
distribution or subscription rights or shall be entitled to exchange their
Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale or conveyance or
participate in such Liquidation, as the case may be. Failure to give such notice
shall not invalidate any action so taken.
SECTION 9. REPORTS AS TO ADJUSTMENTS.
Upon any adjustment of the Conversion Price then in effect and any
increase or decrease in the number of shares of Common Stock issuable upon the
operation of the conversion provisions set forth in Section 8, then, and in each
such case, the Corporation shall promptly deliver to the holders of the Series A
Preferred Stock and the Transfer Agent of the Common Stock, a certificate signed
by the President or a Vice President and by the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary of the Corporation, setting
forth in reasonable detail the event requiring the adjustment and the method by
which such adjustment was calculated and specifying the Conversion Price then in
effect following such adjustment and the increased or decreased number of shares
issuable upon a conversion following such adjustment, and shall set forth in
reasonable detail the method of calculation of each and a brief statement of the
facts requiring such adjustment. Where appropriate, such notice to holders of
the Series A Preferred Stock may be given in advance and included as part of the
notice required under the provisions of Section 8(h).
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<PAGE>
SECTION 10. OTHER LIQUIDATION EVENT.
(a) Offer to Repurchase. Upon the occurrence of an Other Liquidation
-------------------
Event or a Public Company Liquidation Event, the Corporation shall make an offer
(an "Other Liquidation Event Offer") to each holder of shares of Series A
-----------------------------
Preferred Stock to repurchase any and all of each such holder's shares of Series
A Preferred Stock at an offer price per share of Series A Preferred Stock in
cash equal to (i) the Liquidation Preference then in effect in the event of a
Public Company Liquidation Event or (ii) the Preference Amount in the event of
an Other Liquidation Event (calculating clause (B) of the definition of
Preference Amount for these purposes as the amount of cash and the Fair Market
Value of any other consideration which is receivable upon, and/or retained by
the holder upon, any such Other Liquidation Event in respect of the aggregate
number of shares of Common Stock into which such share of Series A Preferred
Stock is then convertible). The Corporation shall comply with the requirements
of Rule 14e-1 under the Exchange Act and any other securities laws and
regulations thereunder to the extent such laws and regulations are applicable in
connection with the repurchase of shares of Series A Preferred Stock as a result
of an Other Liquidation Event or Public Company Liquidation Event, and the
Corporation shall not be in violation of this Certificate of Designation by
reason of any act required by such rule or other applicable law.
(b) Within 20 days following any Other Liquidation Event or Public
Company Liquidation Event, the Corporation shall mail a notice to each holder of
shares of Series A Preferred Stock stating:
(i) that the Other Liquidation Event Offer is being made
pursuant to this Section 10 and that all shares of Series A Preferred Stock
tendered will be accepted for payment;
(ii) the purchase price and the purchase date, which shall be at
least 30 but no more than 60 days from the date on which the Corporation mails
notice of the Other Liquidation Event or Public Company Liquidation Event (the
"Other Liquidation Event Payment Date");
------------------------------------
(iii) that any shares of Series A Preferred Stock not accepted
for payment and purchased pursuant to the Other Liquidation Event Offer will
continue to accrue dividends as provided in this Certificate of Designation;
(iv) that, unless the Corporation defaults in the payment of the
Other Liquidation Event Payment, all shares of Series A Preferred Stock accepted
for payment pursuant to the Other Liquidation Event Offer shall cease to accrue
dividends after the Other Liquidation Event Payment Date;
(v) that holders of shares of Series A Preferred Stock electing
to have any or all shares of Series A Preferred Stock purchased pursuant to a
Other Liquidation Event Offer shall be required to surrender the shares of
Series A Preferred Stock to the Corporation or its designated agent for such
purpose, at the address specified in the notice prior to the close of business
on the third Business Day preceding the Other Liquidation Event Payment Date;
and
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<PAGE>
(vi) that holders of shares of Series A Preferred Stock will be
entitled to withdraw their election if the Corporation or its designated agent
for such purpose, receives, not later than the close of business on the second
Business Day preceding the Other Liquidation Event Payment Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the holder of
shares of Series A Preferred Stock, the number of shares of Series A Preferred
Stock delivered for purchase, and a statement that such holder is withdrawing
his election to have such shares purchased.
(c) On the Other Liquidation Event Payment Date, the Corporation
shall, to the extent lawful, (i) accept for payment all shares of Series A
Preferred Stock tendered pursuant to the Other Liquidation Event Offer and (ii)
deposit with the Paying Agent an amount equal to the payment due in accordance
with paragraph (a) of this Section 10 in respect of all shares of Series A
Preferred Stock so tendered. The Corporation shall promptly pay, in cash or by
wire transfer of immediately available funds, to each holder of shares of Series
A Preferred Stock so tendered the Other Liquidation Event Payment for such
shares. The Corporation shall publicly announce the results of the Other
Liquidation Event Offer on or as soon as practicable after the Other Liquidation
Event Payment Date.
SECTION 11. CERTAIN COVENANTS.
(a) Any registered holder of Series A Preferred Stock may proceed to
protect and enforce its rights and the rights of such holders by any available
remedy by proceeding at law or in equity to protect and enforce any such rights,
whether for the specific enforcement of any provision in this Certificate of
Designation or in aid of the exercise of any power granted herein, or to enforce
any other proper remedy.
(b) So long as any of the Series A Preferred Stock is outstanding, in
the event the Corporation is not required to file quarterly and annual financial
reports with the Commission pursuant to Section 13 or Section 15(d) of the
Exchange Act, the Corporation will furnish the holders of the Series A Preferred
Stock with reports containing the same information as would be required in such
reports.
SECTION 12. DEFINITIONS.
For the purpose of this Certificate of Designation of Series A
Convertible Preferred Stock, the following terms shall have the meanings
indicated:
"Board of Directors" shall mean the board of directors of the
------------------
Corporation.
"Business Day" shall mean any day other than a Saturday, Sunday, or a
------------
day on which banking institutions in New York City, New York are authorized
or obligated by law or executive order to close.
"Commission" shall mean the Securities and Exchange Commission.
----------
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<PAGE>
"Conversion Date" shall have the meaning as set forth in Section 8(b)
---------------
hereof.
"Conversion Price" shall mean the Initial Conversion Price, subject to
----------------
adjustment as provided in Section 8.
"Current Market Price," shall mean, as to shares of Common Stock or
--------------------
any other class of capital stock or securities of the Corporation or any
other issuer which are publicly traded, the average of the daily Market
Prices of the Common Stock for fifteen consecutive Trading Days immediately
preceding the date for which such value is to be computed.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended, or any successor federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Exchange Act shall include
reference to the comparable section, if any, of any such successor federal
statute.
"Fair Market Value" shall mean, as to shares of Common Stock or any
-----------------
other class of capital stock or securities of the Corporation or any other
issuer which are publicly traded, the Current Market Price of such shares
or securities. The "Fair Market Value" of any security which is not
publicly traded or of any other property shall mean the fair value thereof
as determined by an independent investment banking firm experienced in the
valuation of such securities or property selected in good faith by the
Board of Directors or a committee thereof and reasonably acceptable to
holders of a majority of the shares of Series A Preferred Stock.
"Initial Conversion Price" shall have the meaning as set forth in
------------------------
Section 8(e) hereof.
"Issue Date" shall mean February 23, 2000.
----------
"Junior Stock" shall mean the Common Stock and any other capital stock
------------
or any rights, warrants or other securities convertible into or exercisable
or exchangeable for Common Stock or any other capital stock of the
Corporation ranking junior upon liquidation, dissolution or winding up) to
the Series A Preferred Stock.
"Liquidation Preference" with respect to a share of Series A Preferred
----------------------
Stock shall mean (i) $20.496 (as adjusted for any stock dividends, splits,
combinations and similar events with respect to such share of Series A
Preferred Stock) (the "Initial Liquidation Preference"), plus (ii) an
------------------------------
amount equal to dividends thereon which shall be deemed to cumulate and
accrue from and after the Issue Date on the then current Liquidation
Preference of such share at a rate of 8% per annum, compounding semi-
annually on each six-month anniversary of the Issue Date, through and
including the date on which all payments required to be made hereunder on
such share are made in respect of any Liquidation or earlier redemption or
repurchase by the Corporation or conversion of such share of Series A
Preferred Stock; provided that upon the occurrence and during the
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<PAGE>
continuance of any default by the Corporation in respect of its payment
obligations in favor of the Series A Preferred Stock hereunder (including
any default arising from the Corporation not having funds legally available
to effect its obligation), the aforesaid dividend rate shall be 10% rather
than 8%.
"Market Price" when used with reference to shares of Common Stock or
------------
other securities on any date, shall mean (i) if such Common Stock or other
security is listed or authorized for trading on any national securities
exchange, the closing price of such Common Stock or other security on such
date, (ii) if such shares of Common Stock or other security are not so
listed, the price of the last trade, as reported on the Nasdaq National
Market, not identified as having been reported late to such system, or
(iii) if such shares of Common Stock or other securities are so traded as
provided in clause (ii), but not so quoted, the average of the last bid and
ask prices, as those prices are reported on the Nasdaq National Market, or
(iv) if such shares of Common Stock or other securities are not listed or
authorized for trading on a national securities exchange or the Nasdaq
National Market or any comparable system, the average of the closing bid
and asked prices as furnished by two members of the National Association of
Securities Dealers, Inc. selected from time to time by the Corporation for
that purpose. If the Common Stock or such other securities are not
publicly held or so listed or publicly traded, "Market Price" shall mean
the Fair Market Value per share of Common Stock or of such other securities
as determined in good faith by the Board of Directors based on an opinion
of an independent investment banking firm experienced in the valuation of
such securities selected in good faith by the Board of Directors or a
committee thereof and reasonably acceptable to holders of a majority of the
shares of Series A Preferred Stock.
"Other Liquidation Event" shall mean the occurrence of any of the
-----------------------
following: (i) the sale, lease, transfer, conveyance or other disposition
(other than by way of merger or consolidation and other than pursuant to a
Liquidation), in one or more related transactions, of all or substantially
all of the properties and assets of the Corporation and its subsidiaries
taken as a whole to any Person (as such term is used in Section 13(d)(3) of
the Exchange Act), (ii) the consummation of any transaction or other event
(including, without limitation, any acquisition of shares, merger or
consolidation) other than a Public Company Liquidation Event, the result of
which is that any "Person" or "Group" (as such terms are used in Sections
13(d) and 14(d) of the Exchange Act) becomes the "beneficial owner" (as
such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act,
except that a Person shall be deemed to have beneficial ownership of all
shares that such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of shares of capital stock representing or convertible,
exercisable or exchangeable for more than 50% of the voting power of the
Corporation, and (iii) any event which would result in a Conversion Price
adjustment pursuant to the third sentence of Section 8(f)(iv) assuming for
these purposes that the percentage of market capitalization referred to
therein was 25%.
"Outstanding" shall mean, when used with reference to Common Stock, at
-----------
any date as of which the number of shares thereof is to be determined,
fully diluted shares of
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<PAGE>
Common Stock (calculated as prescribed by generally accepted accounting
principles), except shares then owned or held by or for the account of the
Company or any subsidiary thereof and except options shall not be included
until the same are exercised.
"Parity Stock" shall mean any capital stock or any rights, warrants or
------------
other securities convertible into or exercisable or exchangeable for shares
of any capital stock of the Corporation ranking on a parity (upon
liquidation, dissolution or winding up) with the Series A Preferred Stock.
"Person" shall mean any individual, firm, corporation, partnership or
------
other entity, and shall include any successor (by merger or otherwise) of
such entity.
"Public Company Liquidation Event" shall mean the consummation of any
--------------------------------
transaction or other event the result of which is the same as described in
clause (ii) of the definition of Other Liquidation Event and in which the
consideration to be paid to the holders of Common Stock of the Corporation
consists solely of common shares of a corporation which has an aggregate
public float (immediately prior to such transaction) and as determined by
multiplying the Current Market Price of the common shares of such
corporation by the aggregate number of such common shares then outstanding
and not held by affiliates of such corporation) of at least $250 million,
provided that such shares are (A) either listed or authorized for trading
on a national securities exchange or on the Nasdaq National Market and (B)
freely tradeable without restriction by the holders of common shares.
"Securities Purchase Agreement" shall mean that certain agreement
-----------------------------
dated as of February 9, 2000 among the Corporation and the purchasers party
thereto.
"Trading Day" means a Business Day or, if the Common Stock is listed
-----------
or admitted to trading on any national securities exchange or the Nasdaq
National Market, a day on which such exchange or the Nasdaq National Market
is open for the transaction of business.
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<PAGE>
IN WITNESS WHEREOF, the officers named below, acting for and on behalf
of Optika Inc., have hereunto subscribed their names on this ___ day of
February, 2000.
OPTIKA INC.
By:______________________________
Name: Steven M. Johnson
Title: Vice President
Attest:
By:__________________________
Name: Mark K. Ruport
Title: President
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EXECUTION COPY
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EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
by and among
OPTIKA INC.
THOMAS WEISEL CAPITAL PARTNERS L.P.
and
The Parties Listed On The Signature Page Hereto
As of
February 9, 2000
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Table of Contents
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Page
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ARTICLE I ISSUANCE AND SALE OF PREFERRED STOCK AND WARRANTS.............. 2
1.1. Issuance, Purchase and Sale.............................. 2
1.2. The Closing; Deliveries.................................. 2
1.3. Capitalized Terms........................................ 2
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................. 3
2.1. Organization; Subsidiaries............................... 3
2.2. Due Authorization........................................ 4
2.3. Capitalization........................................... 5
2.4. SEC Reports.............................................. 7
2.5. Financial Statements..................................... 7
2.6. Absence of Certain Changes............................... 7
2.7. Litigation............................................... 8
2.8. Title to Properties; Insurance........................... 8
2.9. Consents; No Violations.................................. 10
2.10. Holding Company Act and Investment Company Act........... 10
2.11. Taxes.................................................... 10
2.12. Employee Benefit Plans................................... 11
2.13. Intellectual Property.................................... 14
2.14. Compliance with Laws..................................... 17
2.15. Commitments.............................................. 18
2.16. Brokers or Finders....................................... 19
2.17. Related Party Transactions............................... 19
2.18. Section 203 of the DGCL; Takeover Statute................ 20
2.19. Proprietary Information of Third Parties................. 20
2.20. Disclosure............................................... 21
2.21. Year 2000................................................ 21
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS............... 22
3.1. Acquisition for Investment............................... 22
3.2. Restricted Securities.................................... 22
3.3. No Brokers or Finders.................................... 22
3.4. Accredited Investor...................................... 22
3.5. Organization............................................. 23
3.6. Due Authorization........................................ 23
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3.7. Consents; No Violations................................. 23
3.8. Availability of Funds................................... 24
3.9. Trading Price........................................... 24
ARTICLE IV COVENANTS..................................................... 24
4.1. Conduct of Business by the Company Pending the Closing.. 24
4.2. No Solicitation......................................... 26
4.3. Press Releases; Interim Public Filings.................. 27
4.4. Consents; Approvals..................................... 27
4.5. Listing................................................. 28
4.6. Board Representation; VCOC.............................. 28
4.7. Committees.............................................. 30
4.8. Certificate of Designation.............................. 30
4.9. Cooperation............................................. 31
4.10. Covenants to Provide Information........................ 31
4.11. Reserve Shares.......................................... 32
4.12. Notice of Breach........................................ 32
4.13. Transfer Taxes.......................................... 32
4.14. Indemnification......................................... 33
4.15. Use of Proceeds......................................... 33
4.16. Registration Rights Agreement........................... 33
4.17. Future Issuances........................................ 33
ARTICLE V CONDITIONS.................................................... 34
5.1. Conditions to Obligations of the Purchasers and the
Company................................................. 34
5.2. Conditions to Obligations of the Purchasers............. 34
5.3. Conditions to Obligations of the Company................ 35
ARTICLE VI TERMINATION................................................... 36
6.1. Termination............................................. 36
6.2. Effect of Termination................................... 37
ARTICLE VII SURVIVAL; CERTAIN REMEDIES.................................... 37
7.1. Survival................................................ 37
7.2. Indemnification......................................... 38
ARTICLE VIII MISCELLANEOUS................................................. 39
8.1. Defined Terms; Interpretations.......................... 39
8.2. Fees and Expenses....................................... 46
8.3. Public Announcements.................................... 46
8.4. Restrictive Legends..................................... 46
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8.5. Further Assurances.......................................... 47
8.6. Successors and Assigns...................................... 47
8.7. Entire Agreement............................................ 47
8.8. Notices..................................................... 48
8.9. Amendments.................................................. 49
8.10. Counterparts................................................ 49
8.11. Headings.................................................... 50
8.12. Nouns and Pronouns.......................................... 50
8.13. Governing Law............................................... 50
8.14. Submission to Jurisdiction.................................. 50
8.15. Waiver of Jury Trial........................................ 50
8.16. Severability................................................ 51
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Exhibit 1.2(b) Form of Warrant Agreement
Exhibit 2.2 Form of Certificate of Designation
Exhibit 5.1(iii) Consents
Exhibit 5.2(iv) Form of Management Stockholders Agreement
Exhibit 5.2(v) Form of Registration Rights Agreement
Exhibit 5.2(viii) Form of Opinion of The E*Law Group
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INDEX OF DEFINED TERMS
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SECTION
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Affiliate......................................................... 8.1
Agreement......................................................... preamble
Board............................................................. 8.1
Board of Directors................................................ 8.1
Certificate of Designation........................................ 2.2
Claim Notice...................................................... 7.2(c)
Closing........................................................... 1.2(a)
Closing Date...................................................... 1.2(a)
Code.............................................................. 8.1
Commitments....................................................... 2.15
Common Stock...................................................... recitals
Company........................................................... preamble
Company Intellectual Property..................................... 8.1
Compensation and Benefit Plans.................................... 8.1
Consents.......................................................... 4.4
DGCL.............................................................. 8.1
Encumbrances...................................................... 2.1(b)
Environmental Claim............................................... 38
Environmental Laws................................................ 8.1
Environmental Permits............................................. 17
ERISA............................................................. 8.1
ERISA Affiliate................................................... 8.1
Exchange Act...................................................... 8.1
Existing Rights Agreement......................................... 4.16
GAAP.............................................................. 2.5
Governmental Entity............................................... 8.1
Hazardous Materials............................................... 39
HSR Act........................................................... 8.1
Intellectual Property............................................. 8.1
IRS............................................................... 8.1
Knowledge......................................................... 8.1
Latest Balance Sheet.............................................. 2.5
Laws.............................................................. 8.1
Leased Real Property.............................................. 8.1
Licenses.......................................................... 2.14(a)
Litigation........................................................ 2.7(a)
Losses............................................................ 8.1
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M&A Transaction................................................... 4.2
Material Adverse Effect........................................... 8.1
Multi-Employer Plan............................................... 2.12(c)
NASDAQ............................................................ 8.1
Non-Listed Commitments............................................ 2.15
Non-Voting Observer............................................... 4.6(d)
Options........................................................... 2.3
Owned Real Property............................................... 8.1
Ownership Threshold............................................... 4.6(b)
PCBs.............................................................. 39
Permitted Encumbrances............................................ 8.1
Person............................................................ 8.1
Preferred Stock................................................... recitals
Purchase Price.................................................... 1.1
Purchaser......................................................... preamble
Purchaser Indemnified Person...................................... 7.2(a)
Purchasers........................................................ preamble
Purchasers' Deductible............................................ 7.2(a)
Purchasers' Designee.............................................. 4.6(b)
Purchasers' Designee Notice....................................... 4.6(c)
Purchasers' Expenses.............................................. 8.2
Quarterly Financials.............................................. 4.10(a)
Registration Rights Agreement..................................... 5.2(a)(v)
Related Parties................................................... 8.1
Release........................................................... 8.1
Return............................................................ 8.1
SEC............................................................... 8.1
SEC Reports....................................................... 2.4
Securities Act.................................................... 8.1
Shareholders Agreements........................................... 5.2(a)(iv)
Significant Shareholders.......................................... 8.1
Subsidiaries...................................................... 2.1(b)
Subsidiary........................................................ 2.1(b)
Tax............................................................... 8.1
Taxes............................................................. 8.1
Terminating Breach................................................ 6.1(d)
Third Party....................................................... 8.1
Transaction Documents............................................. 8.1
TWCP.............................................................. preamble
Warrant Agreement................................................. 1.2(b)
Warrants.......................................................... recitals
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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of February 9, 2000 (this
"Agreement"), by and among OPTIKA INC., a Delaware corporation (the "Company"),
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Thomas Weisel Capital Partners, L.P., a Delaware limited partnership ("TWCP")
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and the entities listed on the signature pages hereto under the caption
"Purchasers" (TWCP and each such entity, a "Purchaser" and collectively with
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TWCP, the "Purchasers").
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W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions set forth in
this Agreement, the Company wishes to sell to the Purchasers, and the Purchasers
wish to purchase from the Company, (i) an aggregate of 731,851 shares of Series
A Convertible Preferred Stock, par value $0.001 per share (the "Preferred
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Stock") of the Company, the terms of which are set forth in the Certificate of
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Designation in the form of Exhibit 2.2 hereto and (ii) warrants (the "Warrants")
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to purchase an aggregate of 307,298 shares of the Company's Common Stock, par
value $0.001 per share (the "Common Stock"), the terms of which are set forth in
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the Warrant Agreement attached in the form of Exhibit 1.2(b);
WHEREAS, the Purchasers and the Company desire to provide for the
purchase and sale of the Preferred Stock and Warrants to establish certain
rights and obligations in connection therewith, including the execution and
delivery by the Company and the Purchasers of the Registration Rights Agreement
in the form of Exhibit 5.2(v); and
WHEREAS, concurrently with the execution and delivery of this
Agreement, each of the Designated Stockholders are executing and delivering a
Shareholders Agreement with the Purchasers in the form of Exhibit 5.2(iv).
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE I
ISSUANCE AND SALE OF PREFERRED STOCK AND WARRANTS
1.1. Issuance, Purchase and Sale. Upon the terms and conditions set
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forth herein, at the Closing, the Company shall sell to the Purchasers, and the
Purchasers shall purchase from the Company, the Preferred Stock and Warrants for
an aggregate
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purchase price of $15,000,018.10, (the "Purchase Price"). Each Purchaser shall,
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in exchange for the payment by such Purchaser of the portion of the Purchase
Price set forth opposite such Purchaser's name on Schedule A receive the number
of shares of Preferred Stock and Warrants to purchase the number of shares of
Common Stock set forth opposite such Purchaser's name on Schedule A. The
designations of the Purchasers hereunder are several and not joint and no
Purchaser shall have any liability to any Person for the performance or non-
performance by any other Purchaser hereunder. The parties agree that the
aggregate Purchase Price shall be allocated for income tax purposes between the
Preferred Stock and the Warrants as set forth in Schedule B hereto.
1.2. The Closing; Deliveries. (a) The closing of the purchase and
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sale of the Preferred Stock and Warrants hereunder (the "Closing") shall take
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place at the offices of the Company at 9:00 a.m. on February 23, 2000 or such
earlier date as may be specified by notice within two business days of the
Closing and mutually agreed to by the Company and the Purchasers, in each case,
subject to the satisfaction or waiver of the conditions to the Closing set forth
in Article V (other than those conditions that by their nature are to be
satisfied at such Closing, but subject to the satisfaction or waiver of those
conditions) (the date of the Closing, a "Closing Date").
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(b) At the Closing, the Company shall deliver to the Purchasers
certificates representing the shares of Preferred Stock and Warrants being
purchased by the Purchasers at the Closing, each registered in the name of the
Purchaser or its nominee or designee in such amounts as each Purchaser shall
inform the Company prior to the Closing. Delivery of such certificates shall be
made against receipt by the Company of the Purchase Price payable in connection
with the Closing, which shall be paid by wire transfer of immediately available
funds to an account designated at least three business days prior to the
applicable Closing Date by the Company. The Warrants shall be in the form
attached as an exhibit to the Warrant Agreement (the "Warrant Agreement"),
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attached in the form of Exhibit 1.2(b)
1.3 Capitalized Terms. Capitalized terms not otherwise defined
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herein shall have the meaning ascribed to such terms in Section 8.1.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchasers, as of
the date hereof and as of the Closing Date, as follows:
2.1. Organization; Subsidiaries. (a) The Company is a corporation
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duly organized, validly existing
and in good standing under the laws of the State of Delaware and has the
requisite corporate power and authority to carry on its business as it is now
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being conducted. The Company is duly qualified and licensed as a foreign
corporation to do business, and is in good standing (and has paid all relevant
franchise or analogous Taxes), in each jurisdiction where the character of its
assets owned or held under lease or the nature of its business makes such
qualification necessary, except where the failure to so qualify or be licensed
do not and could not individually or in the aggregate reasonably be expected to
have a Material Adverse Effect. The minute books (containing the records of
meetings of stockholders, the Board of Directors, and any committees of the
Board of Directors), stock record books and certificate books of the Company
contain true, complete and accurate records in all material respects of all
corporate actions taken at any such meetings and other corporate governance
matters, the stock ownership of the Company and the transfer of the shares of
its capital stock since January 1, 1997. Complete and correct copies of all of
the foregoing have previously been made available to the Purchasers.
(b) Schedule 2.1(b) sets forth a complete and correct list of each
corporation, limited liability company, partnership, business association or
other Person with respect to which the Company has, directly or indirectly,
ownership of or rights with respect to securities or other interests having the
power to elect a majority of such Person's board of directors or analogous or
similar governing body, or otherwise having the power to direct the management,
business or policies of that corporation, limited liability company,
partnership, business association or other Person (each, a "Subsidiary" and,
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collectively, the "Subsidiaries"). Except as set forth on Schedule 2.1(b), the
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Company owns, either directly or indirectly through one or more Subsidiaries,
all of the capital stock or other equity interests of the Subsidiaries free and
clear of all liens, charges, claims, security interests, restrictions, options,
proxies, voting trusts or other encumbrances ("Encumbrances"), other than
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transfer restrictions imposed by applicable federal and state securities laws.
Except as set forth on Schedule 2.1(b) all of the issued and outstanding shares
of capital stock or other equity interests of each Subsidiary held directly or
indirectly by the Company have been duly authorized and are validly issued,
fully paid and nonassessable. No shares of capital stock or other equity
interests of any Subsidiary are entitled to preemptive rights. Except as set
forth on Schedule 2.1(b) or disclosed in the SEC Reports, there are no
outstanding subscription rights, options, warrants, convertible or exchangeable
securities or other rights of any character whatsoever relating to issued or
unissued capital stock or other equity interests of any Subsidiary, or any
Commitments of any character whatsoever relating to issued or unissued capital
stock or other equity interests of any Subsidiary or pursuant to which the
Company or any Subsidiary is or may become bound to issue or grant additional
shares of its capital stock or other equity interests or related subscription
rights, options, warrants, convertible or exchangeable securities or other
rights, or to grant preemptive rights. Except as set forth on Schedule 2.1(b)
or disclosed in the SEC Reports, there are no voting trusts, stockholders
agreements, proxies or other Commitments or understandings to which any
Subsidiary is a party with respect to the voting or transfer of any capital
stock or other equity interest of any Subsidiary. Except for (i) the
Subsidiaries, (ii) assets
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held in benefit plans, (iii) corporate treasury transactions and (iv) as set
forth on Schedule 2.1(b), the Company does not own, directly or indirectly, any
interest in any corporation, limited liability company, partnership, business
association or other Person.
(c) Each Subsidiary is a corporation, limited liability company,
partnership, business association or other Person duly organized, validly
existing and in good standing under the laws of its jurisdiction of organization
and has the requisite power and authority to carry on its business as it is now
being conducted. Except as set forth on Schedule 2.1(c), each Subsidiary is
duly qualified and licensed to do business, and is in good standing (and has
paid all relevant franchise or analogous taxes), in each jurisdiction where the
character of its assets owned or held under lease or the nature of the business
conducted by it makes such qualification necessary, except where the failure of
any such Subsidiary to so qualify or be licensed individually or in the
aggregate do not and could not reasonably be expected to have a Material Adverse
Effect. The minute books or other records (containing the records of meetings
of stockholders or other holders of other equity interests, the board of
directors or other similar governing body, and any committees thereof), the
stock ownership or analogous records and the certificate books of each of the
Subsidiaries contain in all material respects true, complete and accurate
records of all actions taken at any such meetings and other governance matters,
the stock or other equity ownership of each of such Subsidiaries and the
transfer of the shares of its capital stock or other equity interest since
January 1, 1997. Complete and correct copies of all of the foregoing have
previously been made available to the Purchasers.
2.2. Due Authorization. The Company has all right, corporate power
-----------------
and authority to enter into this Agreement and each of the other Transaction
Documents to which it is a party and to consummate the transactions contemplated
hereby and thereby. The execution and delivery by the Company of this Agreement
and each of the other Transaction Documents to which it is a party, the issuance
and sale of the Preferred Stock and the Warrants by the Company and the
compliance by the Company with each of the provisions of this Agreement and each
of the other Transaction Documents to which it is a party (including the
reservation and issuance of the shares of Common Stock on any conversion of the
Preferred Stock or any exercise of the Warrants (collectively, the "Common
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Shares") and the consummation by the Company of the transactions contemplated
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hereby and thereby) (a) are within the corporate power and authority of the
Company and (b) have been duly authorized by all requisite corporate proceedings
on the part of the Board of Directors and, if applicable, to the stockholders of
the Company. This Agreement has been, and each of the other Transaction
Documents to which the Company is a party when executed and delivered by the
Company will be, duly and validly executed and delivered by the Company, and
this Agreement constitutes, and each of such other Transaction Documents (other
than the Preferred Shares) when executed and delivered by the Company will
constitute, a valid and binding agreement of the Company, enforceable against
the Company in accordance with its terms, except as
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enforceability against the Company may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar Laws now or hereafter in
effect relating to the rights of creditors generally and by legal and equitable
limitations on the enforceability of specific remedies (regardless of whether
enforcement is considered in a proceeding in equity or at law). The shares of
Preferred Stock and all Common Shares issuable upon conversion of the Preferred
Stock and exercise of the Warrants have been validly reserved for issuance, and
upon payment of the Purchase Price in the case of the Preferred Stock and
Warrants and upon conversion of the Preferred Stock or the exchange of the
Warrants in the case of the Common Shares, such shares of Preferred Stock,
Warrants and Common Shares, as the case may be, will be duly and validly issued
and outstanding, fully paid, and nonassessable and issued free of preemptive
rights. The terms, designations, powers, preferences and relative participation,
optional and other special rights, qualifications, limitations and restrictions
of the Preferred Stock will be set forth in the Certificate of Designation of
the Preferred Stock (the "Certificate of Designation"), the form of which is
--------------------------
attached as Exhibit 2.2.
2.3. Capitalization. The authorized capital stock of the Company
--------------
consists of (i) 25,000,000 shares of Common Stock, par value $0.001 per share,
and (ii) 2,000,000 shares of preferred stock, par value $0.001 per share. As of
the date hereof, (a) 7,589,129 shares of Common Stock were issued and
outstanding, (b) options ("Options") to purchase an aggregate of 2,270,437
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shares of Common Stock under the Company's 1994 Employee Stock Option Plan (the
"Company Option Plan") were outstanding, 2,270,437 shares of Common Stock were
reserved for issuance upon the exercise of outstanding Options and 57,545 shares
were reserved for future grant not authorized prior to the date of this
Agreement under the Company Option Plan, (c) warrants ("Settlement Warrants") to
purchase an aggregate of 9,738 shares of Common Stock upon exercise were
outstanding, (d) 583 shares of Common Stock ("Restricted Stock") were reserved
for issuance under the Company's Employee Stock Purchase Plan (the "Stock
Purchase Plan"), (e) no shares of Common Stock were held by the Company in its
treasury or by any of the Subsidiaries of the Company and (f) except for the
Preferred Stock designated by the Certificate of Designation, no shares of
preferred stock of the Company have been issued or are outstanding. The Company
has not adopted any shareholders rights plan with respect to its Common Stock.
The Company has no outstanding bonds, debentures, notes or other obligations or
securities entitling the holders thereof to vote (or which are convertible or
exercisable for securities having the right to vote) with the stockholders of
the Company on any matter. A complete and correct list of each outstanding
Option and Settlement Warrants, the holders and the exercise price thereof is
set forth on Schedule 2.3, and, as to each such Option, whether the same is
vested. Since December 31, 1999, the Company (i) has not issued any shares of
Common Stock other than (x) upon exercise of Options or Warrants, and (y) the
issuance of at least 85% of fair market value of 39,336 shares of Restricted
Stock under the Company's Stock Purchase Plan, (ii) has granted at fair market
value Options to purchase an aggregate of 210,500 shares of Common Stock under
the Company Option Plan and (iii) has not split, combined or
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reclassified any of its shares of capital stock. All of the issued and
outstanding shares of Common Stock have been duly authorized and are validly
issued, fully paid and nonassessable and free of preemptive rights. Except as
set forth on Schedule 2.3 or pursuant to the Transaction Documents, there are no
outstanding subscription rights, options, warrants, convertible or exchangeable
securities or other rights of any character whatsoever relating to issued or
unissued capital stock of the Company, or any Commitments of any character
whatsoever relating to issued or unissued capital stock of the Company or
pursuant to which the Company or any of the Subsidiaries is or may become bound
to issue or grant additional shares of its capital stock or related subscription
rights, options, warrants, convertible or exchangeable securities or other
rights, or to grant preemptive rights. Except as set forth on Schedule 2.3, (i)
the Company has not agreed to register any securities under the Securities Act
or under any state securities law or granted registration rights to any Person
or entity and (ii) there are no voting trusts, stockholders agreements, proxies
or other Commitments or understandings in effect to which the Company is a party
or of which it has Knowledge with respect to the voting or transfer of any of
the shares of Common Stock. To the extent that any options, warrants or any of
the other rights described above are outstanding, neither the issuance and sale
of the Preferred Stock and the Warrants, nor any issuance of Common Shares on
conversion or exercise thereof will result in an adjustment of the exercise or
conversion price or number of shares issuable upon the exercise or conversion of
any such options, warrants or other rights.
2.4. SEC Reports. The Company has timely filed all registration
-----------
statements, proxy or information statements, reports and other documents
required to be filed by it with the SEC under the Exchange Act from and after
July 25, 1996 (collectively, the "SEC Reports"). Each SEC Report was as of their
-----------
respective dates in compliance as to form in all material respects with the
applicable requirements of the Securities Act and did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
2.5. Financial Statements. Each of the consolidated balance sheets
--------------------
of the Company included or incorporated by reference into the SEC Reports
(including the related notes and schedules) fairly presents the consolidated
financial position of the Company and its consolidated Subsidiaries as of its
date, and each of the consolidated statements of earnings and cash flows of the
Company included or incorporated by references into the SEC Reports (including
any related schedules and or notes) fairly presents the results of operations,
earnings or cash flows, as the case may be, of the Company and its consolidated
Subsidiaries for the respective periods set forth therein, in each case in
accordance with generally accepted accounting principles ("GAAP") consistently
----
applied for the periods involved, except as noted therein and subject, as to
interim statements, to normal year-end audit adjustments, none of which has had
or would be reasonably expected to have a Material Adverse Effect. Except as set
forth on
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Schedule 2.5 or disclosed in the SEC Reports, neither the Company nor any
Subsidiary has any liability or obligation (whether accrued, absolute,
contingent, unliquidated or otherwise, whether known or unknown, whether due or
to become due and regardless of when asserted), except (i) liabilities and
obligations in the respective amounts reflected or reserved against in the
Company's consolidated balance sheet as of December 31, 1999 (the "Latest
------
Balance Sheet"), (ii) liabilities and obligations incurred in the ordinary
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course of business since December 31, 1999 which individually or in the
aggregate could not reasonably be expected to have a Material Adverse Effect or
(iii) under Commitments in accordance with the terms and conditions thereof
which are not required by GAAP to be reflected on the Latest Balance Sheet
except Commitments that are required to be disclosed pursuant to Section 2.15
and are not so disclosed.
2.6. Absence of Certain Changes. Except as set forth on Schedule
--------------------------
2.6, as disclosed in the SEC Reports, or pursuant to the transactions
contemplated by this Agreement and the other Transaction Documents, since
September 30, 1999: (i) the business of the Company and the Subsidiaries taken
as a whole has been conducted in the ordinary course of business consistent with
past practice, (ii) the Company and its Subsidiaries have not (a) suffered any
change, event or development or series of changes, events or developments which
individually or in the aggregate has had or could reasonably be expected to have
a Material Adverse Effect, (b) suffered any damage, destruction or casualty loss
to its physical properties (whether or not covered by insurance) which
individually or in the aggregate has resulted or could reasonably be expected to
result in a Material Adverse Effect or (c) been the subject of any material
Litigation or threatened or commenced investigation by a Governmental Entity and
(iii) there has not been (a) any declaration, setting aside or payment of any
dividend or other distribution with respect to the capital stock of the Company
or its Subsidiaries (other than wholly-owned Subsidiaries) or any repurchase,
redemption or any other acquisition by the Company or its Subsidiaries of any
outstanding shares of capital stock or other securities of, or other ownership
interests in, the Company or its Subsidiaries, (b) any material change in
accounting principles, practices or methods, (c) any entry into or amendment of
any employment agreement with, or any increase in the rate or terms (including,
without limitation, any acceleration of the right to receive payment) of
compensation payable or to become payable by the Company or any of its
Subsidiaries to, their respective directors, officers or employees, except
increases in the ordinary course of business in accordance with the past
practice of the Company, (d) any increase in the rate or terms (including,
without limitation, any acceleration of the right to receive payment) of any
bonus, insurance, pension or other employee benefit plan or arrangement covering
any such directors, officers or employees, except increases in the ordinary
course of business in accordance with the past practice of the Company, or (e)
any material revaluation by the Company or any of its Subsidiaries of any of
their respective assets, including, without limitation, write-downs of inventory
or write-offs of accounts receivable except in the ordinary course of business
in accordance with the Company's past practices prior to December 31, 1999.
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2.7. Litigation. (a) Except as set forth on Schedule 2.7(a)
----------
or as disclosed in the SEC Reports, there is no material claim, action, suit,
investigation or proceeding ("Litigation") pending or, to the Knowledge of the
----------
Company, threatened against the Company or any of the Subsidiaries or involving
any of their respective properties or assets by or before any court, arbitrator
or other Governmental Entity.
(b) Except as set forth on Schedule 2.7(b) or as disclosed in the SEC
Reports, neither the Company nor any of the Subsidiaries is in default under or
in breach of any order, judgment or decree of any court, arbitrator or other
Governmental Entity, and neither the Company nor any of the Subsidiaries is a
party or subject to any order, judgment or decree of any court, arbitrator or
other Governmental Entity.
2.8. Title to Properties; Insurance. (a) Except as set forth on
------------------------------
Schedule 2.8(a), the Company and the Subsidiaries have good and valid title to,
or, in the case of property leased by them, a valid and subsisting leasehold
interest in, their respective material properties and assets, free of all
Encumbrances except for Permitted Encumbrances.
(b) The SEC Reports list all Owned Real Property. With respect to the
Owned Real Property, (i) the Company and its Subsidiaries have good and
marketable title in fee simple to the Owned Real Property, free and clear of all
Encumbrances except for Permitted Encumbrances, (ii) there are no outstanding
options or rights of first refusal in favor of any other Person to purchase the
Owned Real Property or any portion thereof or interest therein, and (iii) there
are no leases, subleases, licenses, options, rights, concessions or other
Commitments affecting any portion of the Owned Real Property.
(c) The SEC Reports list all material Leased Real Property. With
respect to the Leased Real Property, the Company and the Subsidiaries have good
and valid leasehold estates in the Leased Real Property, free and clear of all
Encumbrances except for Permitted Encumbrances and Encumbrances set forth on
Schedule 2.8(a). Except as set forth on Schedule 2.8(c), (A) each lease or
sublease relating to the Leased Real Property is legal, valid, binding and
enforceable in accordance with its terms against the Company and to the
Company's Knowledge, against the other parties thereto, and in full force and
effect and (B) the execution and delivery of this Agreement and the consummation
of the transactions contemplated by this Agreement will not cause a breach or
require any third party consent or notification under any such lease or
sublease.
(d) Schedule 2.8(d) sets forth a complete and correct list of all
insurance coverage carried by the Company and the Subsidiaries, including for
each policy the type and scope of coverage, the carrier and the amount of
coverage, including directors' and officers' liability insurance. All of the
material assets of the Company and the Subsidiaries and all aspects of the
Company's and the Subsidiaries' businesses that are of insurable character are
covered by insurance with reputable insurers against risks of
-8-
<PAGE>
liability, casualty and fire and other losses and liabilities customarily
obtained by other similarly situated public companies to cover comparable
businesses and assets in amounts, scope and coverage (and with deductibles)
which are consistent with prudent industry practice by other similarly situated
public companies. Neither the Company nor any of the Subsidiaries is in default
in a material respect with respect to any of its obligations under any insurance
policy maintained by it. All such policies are in full force and effect and no
premiums with respect thereto are past due and owed. Except as set forth on
Schedule 2.8(d), there are no claims by the Company or any of the Subsidiaries
under any of such policies to which any insurance company is denying liability
or defending under a reservation of rights or similar clause. Except as set
forth on Schedule 2.8(d), neither the Company nor any of the Subsidiaries has
received notice of any pending or threatened termination of any of such policies
or any premium increases for the current policy period with respect to any of
such policies, and the consummation of the transactions contemplated by this
Agreement or any of the other Transaction Documents will not result in any such
termination or premium increase. The Company maintains a directors' and
officers' insurance policy with both the National Union Fire Insurance Company
and the Federal Insurance Company (complete and correct copies of which have
previously been delivered to the Purchasers), which will both, upon the election
or appointment of either the Preferred Stock Designee or the Purchaser's
Designee, include such designee as a covered person.
2.9. Consents; No Violations. Except as set forth on Schedule 2.9,
-----------------------
neither the execution, delivery or performance by the Company of this Agreement
or any of the other Transaction Documents to which it is a party nor the
consummation of the transactions contemplated hereby or thereby will (a)
conflict with, or result in a breach or a violation of, any provision of the
certificate of incorporation or by-laws of the Company or any Subsidiary; (b)
constitute, with or without notice or the passage of time or both, a breach,
violation or default, create an Encumbrance, or give rise to any right of
termination, modification, cancellation, prepayment, suspension, limitation,
revocation or acceleration, under (i) any Law or (ii) any Commitment to which
the Company or any of the Subsidiaries is a party or pursuant to which any of
them or any of their assets or properties is subject, except, with respect to
the matters set forth in this clause (b), for breaches, violations, defaults,
Encumbrances, or rights of termination, modification, cancellation, prepayment,
suspension, limitation, revocation or acceleration, which, individually or in
the aggregate, could not reasonably be expected to result in a Material Adverse
Effect or adversely affect the ability of the Company to consummate the
transactions contemplated by this Agreement or any other Transaction Document to
which it is a party; or (c) require any consent, approval or authorization of,
notification to, filing with, or exemption or waiver by, any Governmental Entity
or any other Person on the part of the Company or any of the Subsidiaries except
for filings required under the Exchange Act and, in the case of Restructuring
Rights Agreement, the Securities Act and state "blue sky" laws.
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<PAGE>
2.10. Holding Company Act and Investment Company Act. Neither the
----------------------------------------------
Company nor any of the Subsidiaries is: (i) a "public utility company" or a
"holding company," or an "affiliate" or a "subsidiary company" of a "holding
company," or an "affiliate" of such a "subsidiary company," as such terms are
defined in the Public Utility Holding Company Act of 1935, as amended, or (ii) a
"public utility," as defined in the Federal Power Act, as amended, or (iii) an
"investment company" or an "affiliated person" thereof or an "affiliated person"
of any such "affiliated person," as such terms are defined in the Investment
Company Act of 1940, as amended.
2.11. Taxes. (a) Except as disclosed in Schedule 2.11(a), the
-----
Company and each of the Subsidiaries has timely filed all Returns required by
Law to have been filed by it and has paid all Taxes required to be paid by it
including, without limitation, any Tax levied upon any of its properties,
assets, income or franchises. All such Returns were complete and correct in all
material respects. All amounts required to be collected or withheld by the
Company and each of the Subsidiaries has been collected or withheld and any such
amounts that are required to be remitted to any taxing authority have been duly
remitted. The accruals and reserves for Taxes on the Latest Balance Sheet are
complete and adequate in all material respects to cover any liability of the
Company and each of its Subsidiaries for Taxes for periods through December 31,
1999. The accruals and reserves for deferred tax liabilities on the Latest
Balance Sheet are adequate to cover any such liability in accordance with GAAP.
(b) Schedule 2.11(b) contains a list of states, territories and
jurisdictions (whether foreign or domestic) in which the Company or any of the
Subsidiaries currently files an income, franchise, sales or use Return. Except
as set forth on Schedule 2.11(b), (i) neither the IRS nor any other taxing
authority has asserted in writing any claim involving a material amount of
Taxes, or to the Knowledge of the Company, is threatening to assert any claims
involving a material amount of Taxes, against the Company or any of the
Subsidiaries, (ii) neither the Company nor any of the Subsidiaries has been a
member of a consolidated, combined or unitary group for federal or state or
foreign income Tax purposes that included any member other than the current
members of the consolidated federal income tax group of which the Company is the
common parent, (iii) there are no Returns with respect to which an audit or
examination is in progress or with respect to which a written notification of
intent to audit or examine has been received by the Company or any of the
Subsidiaries from the IRS or any other taxing authority that relate to Taxes for
which the Company or any of the Subsidiaries could be liable, (iv) neither the
Company nor any of the Subsidiaries is or has been a party to any Tax sharing
agreement (except for agreements with Subsidiaries providing for the sharing of
liabilities on a pro rata basis) that will remain in effect and under which the
Company or any such Subsidiary could have any material liability for Taxes, (v)
there are no liens for Taxes upon any assets of the Company or any of the
Subsidiaries (other than liens for Taxes not yet due and payable), except for
liens which individually or in the aggregate do not and could not reasonably be
expected to have a Material Adverse Effect,
-10-
<PAGE>
(vi) neither the Company nor any of the Subsidiaries has agreed or is required
to include in income during the current year or any future taxable period any
material adjustment pursuant to Section 481 of the Code (or similar provisions
of foreign, state or local law) by reason of a change in accounting method or
otherwise, and the IRS has not proposed any such adjustment, and (vii) complete
copies of all income Tax Returns filed by the Company and each of the
Subsidiaries for taxable periods commencing on or after January 1, 1994 have
been provided to, or made available to, the Purchasers.
2.12. Employee Benefit Plans. (a) Schedule 2.12 sets forth a
----------------------
complete and correct list of (i) all of the Compensation and Benefit Plans that
are intended to qualify with the applicable requirements of Article 401(a) of
the Code and (ii) all employment, severance and change of control agreements
with employees, former employees, officers, former officers, directors, former
directors or the beneficiaries of any of the foregoing or pursuant to which the
Company or any Subsidiary has or may have any liability in excess of $100,000.
Except with respect to any Multi-Employer Plan, the Company has heretofore
delivered or made available to the Purchasers true and complete copies of all
Compensation and Benefit Plans and any amendments thereto (or if a Compensation
and Benefit Plan is not in written form, a written description thereof), any
related trust or other funding agreement or vehicle, the most recent reports or
summaries required under ERISA or the Code and, with respect to each
Compensation and Benefit Plan intended to qualify under Article 401 of the Code,
the most recent determination letter received from the IRS.
(b) Except where the failure to do so could not individually or
in the aggregate reasonably be expected to have a Material Adverse Effect, the
Company and each Subsidiary have performed all obligations required to be
performed by them under each Compensation and Benefit Plan and neither the
Company nor any Subsidiary is in default under or in violation of, any
Compensation and Benefit Plan. Each Compensation and Benefit Plan has in all
material respects been established, operated, maintained and administered, as
the case may be, in accordance with its terms and is in compliance in all
material respects with all applicable Laws, statutes, orders, rules and
regulations, including, but not limited to, ERISA and the Code.
(c) At no time during the seven (7) year period immediately
preceding the date of this Agreement has the Company, or any ERISA Affiliate
contributed to or been required to contribute to, or incurred any withdrawal
liabilities (within the meaning of Section 4201 of ERISA) to any "Multi-Employer
Plan" within the meaning of Sections 3(37) or 4001(a)(3) of ERISA (a "Multi-
------
Employer Plan").
- -------------
(d) Neither the Company, any Subsidiary, nor any ERISA
Affiliate presently sponsors, maintains or contributes to, nor is the Company,
any Subsidiary or any ERISA Affiliate required to sponsor, maintain or
contribute to, nor has the Company, any Subsidiary or any ERISA Affiliate (other
than where the Company, such Subsidiary or such ERISA Affiliate has no
continuing material obligation or
-11-
<PAGE>
liability) ever sponsored, maintained, contributed to or been required to
contribute to, any Compensation and Benefit Plan which is an "employee pension
benefit plan" within the meaning of Article 3(2) of ERISA and which is subject
to Title IV of ERISA.
(e) Neither the Company, any Subsidiary nor any ERISA Affiliate (i)
maintains or contributes to any Compensation and Benefit Plan which provides, or
has any liability to provide, life insurance, medical or dental benefits to any
employee upon his retirement or termination of employment, except as may be
required by Article 4980B of the Code or as would not reasonably be expected to
have individually or in the aggregate a Material Adverse Effect; or (ii) has
ever represented to, promised or contracted with (whether in oral or written
form) any employee (either individually or to employees as a group) that such
employee would be provided with life insurance, medical or dental benefits upon
retirement or termination of employment, except to the extent required by
Article 4980B of the Code or as would not reasonably be expected to have
individually or in the aggregate a Material Adverse Effect.
(f) There are no pending, or to the Knowledge of the Company,
threatened claims by or on behalf of any Compensation and Benefit Plan by any
employee or beneficiary covered under any such Compensation and Benefit Plan, or
otherwise involving any such Compensation and Benefit Plan, that individually or
in the aggregate could reasonably be expected to have a Material Adverse Effect.
(g) Except as otherwise set forth on Schedule 2.12(g), there is no
Commitment covering any employee or former employee of the Company or any
Subsidiary that, individually or in the aggregate, would be reasonably likely to
give rise to the payment of any amount that would result in a material loss of
tax deductions pursuant to the terms of Article 162(m) of the Code.
(h) Except where the failure to do so could not individually or in
the aggregate reasonably be expected to have a Material Adverse Effect, the
Company and each Subsidiary (i) is in compliance with all applicable federal,
state and local laws, rules and regulations (domestic and foreign) respecting
employment, employment practices, labor, terms and conditions of employment and
wages and hours, in each case, with respect to employees; (ii) has withheld all
amounts required by Law or by Commitment to be withheld from the wages, salaries
and other payments to employees; (iii) is not liable for any arrears of wages or
any taxes or any penalty for failure to comply with any of the foregoing; and
(iv) is not liable for any payment to any trust or other fund or to any
Governmental Entity with respect to unemployment compensation benefits, social
security or other benefits for employees.
(i) No work stoppage or labor strike against the Company or any
Subsidiary by employees is pending, or to the knowledge of the Company,
threatened. Except for such matters that could not individually or in the
aggregate reasonably be expected to have a Material Adverse Effect, neither the
Company nor any Subsidiary
-12-
<PAGE>
(i) is involved in, or to the knowledge of the Company, threatened with any
labor dispute, grievance, or Litigation relating to labor matters involving any
employees, including, without limitation, violation of any federal, state or
local labor, safety or employment laws (domestic or foreign), charges of unfair
labor practices or discrimination complaints or (ii) has engaged in any unfair
labor practices within the meaning of the National Labor Relations Act or the
Railway Labor Act.
(j) Except as set forth in Schedule 2.12(j) the execution,
delivery and performance by the Company of the transactions contemplated by this
Agreement and the other Transaction Documents to which it is a party will not
(either alone or upon the occurrence of any additional or subsequent events)
constitute an event under any Compensation and Benefit Plan, trust or loan that
will or may result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any employee. No payment
or benefit which will or may be made by the Company, any Subsidiary, the
Purchasers or any of their respective Affiliates in connection with the
transactions contemplated by this Agreement or any of the other Transaction
Documents with respect to any employee will be characterized as an "excess
parachute payment" within the meaning of Article 280G(b)(1) of the Code.
2.13. Intellectual Property. (a) Each item of Company Intellectual
---------------------
Property which is a patent, patent application, trademark, trademark
application, service mark, service mark application, logo, trade name, domain
name, corporate name, copyright registration, copyright application, mask work
registration, mask work application, license, sublicense, is set forth on
Schedule 2.13(a).
(b) Except as disclosed on Schedule 2.13(b): (i) the Company or
a Subsidiary owns or has the right to use pursuant to a valid license, sub-
license or other agreement all Company Intellectual Property, except where the
absence of any thereof could not individually or in the aggregate reasonably be
expected to have a Material Adverse Effect and the consummation of the
transactions contemplated hereby will not alter or impair any such rights;
(ii) to the Company's Knowledge, neither the Company nor
any of the Subsidiaries has interfered with, infringed upon or misappropriated
any Intellectual Property rights of third parties, except for interferences,
infringements and misappropriations which could not individually or in the
aggregate reasonably be expected to have a Material Adverse Effect, and neither
the Company nor any Subsidiary has received any written claim, demand or notice
alleging any such interference, infringement or misappropriation (including any
claim that the Company must license or refrain from using any Intellectual
Property rights of any third party);
(iii) to the Company's Knowledge, no third party has
interfered with, infringed upon or misappropriated any Intellectual Property
rights of the
-13-
<PAGE>
Company or any Subsidiary, except for interferences, infringements
and misappropriations which could not individually or in the aggregate
reasonably be expected to have a Material Adverse Effect except as set forth on
Schedule 2.13(b):
(iv) each item of Company Intellectual Property will be
owned or available for use by the Company on identical terms and conditions
immediately subsequent to the Closing hereunder;
(v) all registered patents, trademarks, service marks
and copyrights listed on Schedule 2.13(a) are valid and subsisting and in full
force and effect and are not subject to any taxes or other fees except for
periodic filing and maintenance fees;
(vi) the Company is not aware of any notice, claim or
assertion that any item of Company Intellectual Property is invalid nor is the
Company aware of any facts that would cause a reasonable person to conclude that
any item of Company Intellectual Property is invalid;
(vii) Company Intellectual Property is all the
Intellectual Property that is necessary for the Company's business as currently
conducted; and
(viii) the Company has taken commercially reasonable action
to maintain and protect each item of Company Intellectual Property.
(c) With respect to each item of Company Intellectual Property,
except as set forth in Schedule 2.13(c):
(i) the Company possess all right, title and interest in
and to the item, free and clear of any Encumbrance, license or other
restriction;
(ii) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling or charge;
(iii) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim or demand is pending or, to the knowledge of the
Company, is threatened which challenges the legality, validity, enforceability,
use or ownership of the item;
(iv) the Company has never agreed to indemnify any person
for or against any interference, infringement, misappropriation or other
conflict with respect to the item;
(v) each license, sublicense, agreement or permission
disclosed on Schedule 2.13(a) is legal, valid, binding, enforceable and in full
force and effect and will continue to be legal, valid, binding, enforceable
against the Company, and,
-14-
<PAGE>
to the Company's Knowledge, the other party thereto and in full force and effect
on identical terms following the Closing;
(vi) no party to any license, sublicense, agreement or
permission disclosed on Schedule 2.13(a) is in breach or default, and no event
has occurred which with notice or lapse of time would constitute a breach or
default or permit termination, modification or acceleration thereunder;
(vii) no party to any license, sublicense, agreement or
permission disclosed on Schedule 2.13(a) has repudiated in writing any provision
thereof;
(viii) with respect to any sublicense disclosed on Schedule
2.13(a), the representations and warranties set forth in subsections (v) through
(vii) above are true and correct with respect to the underlying license;
(ix) with respect to each license, sublicense, agreement
or permission disclosed on Schedule 2.13(a), the underlying item of Intellectual
Property is not subject to any outstanding injunction, judgment, order, decree,
ruling or charge;
(x) with respect to each license, sublicense, agreement
or permission disclosed on Schedule 2.13(a), no action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand is pending or to the
Company's Knowledge is threatened which challenges the legality, validity or
enforceability of the underlying item of Intellectual Property; and
(xi) with respect to each license, sublicense, agreement
or permission disclosed on Schedule 2.13(a), the Company has not granted any
sublicense or similar right with respect to the license, sublicense, agreement
or permission.
(d) The continued operation of the Company's business as
presently conducted will not interfere with, infringe upon, misappropriate, or
otherwise come into conflict with, any Intellectual Property rights of third
parties.
(e) The Company is not aware that any of its employees is
obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with the use such
employee's best efforts to promote the interest of the Company or that would
conflict with the Company's business as presently conducted or the Company
Intellectual Property.
(f) Neither the execution nor delivery of this Agreement nor the
carrying on of the Company's business as currently conducted by the employees of
the Company, nor the conduct of the Company's business as presently conducted,
will, to the Company's knowledge, conflict with or result in a breach of the
terms, conditions of
-15-
<PAGE>
provisions of, or constitute a default under, any contract, covenant or
instrument under which any or such employees is now obligated.
(g) The Company does not and will not need, in order to conduct
the Company's business as presently conducted, to utilize any inventions of any
of its employees, former employees (or persons it currently intends to hire)
made while not employed by the Company and the rights to which have not been
fully assigned to the Company.
(h) The Company has obtained valid and effective assignments
from all of its employees, former employees, independent contractors, and former
independent contractors (collectively defined herein as "Inventors") of all of
such Inventors' rights in any Intellectual Property developed by such Inventors
while employed by or under contract with the Company.
(i) For each item of Company Intellectual Property which is an
application, including but not limited to patent applications, trademark
applications, service mark applications, copyright applications, or mask work
applications, the Company has the right to require the applicant to transfer
ownership to the Company of the application and of the registration once it
issues.
(j) The Company has taken reasonable precautions to protect the
secrecy, confidentiality, and value of its trade secrets, and has entered into
confidential information/non-disclosure agreements with each of its officers,
employees, and independent contractors.
2.14. Compliance with Laws. (a) Except as set forth on Schedule 2.14(a)
--------------------
or as disclosed in the SEC Reports, the Company and the Subsidiaries are in
compliance in all material respects with all Laws, and since September 30, 1999
neither the Company nor any Subsidiary has received any notice of any alleged
violation of Law applicable to it that could reasonably be expected to have a
Material Adverse Effect. The Company and the Subsidiaries have all material
licenses, franchise permits, consents, registrations, certificates, and other
governmental or regulatory permits, authorizations or approvals required for the
operation of the business as presently conducted and for the ownership, lease or
operation of the Company's and its Subsidiaries' properties except where the
failure to do so could not reasonably be expected to have a Material Adverse
Effect (collectively, "Licenses"). Except as set forth on Schedule 2.14(a), the
--------
Company and the Subsidiaries have all Licenses, and all of such Licenses are
valid and in full force and effect, and the Company and the Subsidiaries have
duly performed and are in compliance in all material respects with all of their
obligations under such Licenses. No event has occurred with respect to any of
such Licenses that allows, or after notice or lapse of time or both would allow,
the suspension, limitation, revocation, non-renewal or termination thereof that,
individually or in the aggregate, has had or would reasonably be expected to
have a Material Adverse Effect, and no terminations of any License or
proceedings to
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<PAGE>
suspend, limit, revoke or terminate any License have been threatened. The
Company has made available for inspection by the Purchasers copies of all
material correspondence between the Company or any of the Subsidiaries, on the
one hand, and the SEC on the other hand.
(b) Neither the Company nor any Subsidiary has offered or agreed
to offer anything of value to any government official, political party or
candidate for governmental or political office (or any person that the Company
knows, or has reason to know, will offer anything of value to any governmental
official, political party or candidate for governmental or political office),
such that the Company or any of the Subsidiaries have violated the Foreign
Corrupt Practices Act of 1977, as amended.
(c) Except as set forth on Schedule 2.14(c) and except as would
not, individually or in the aggregate, have a Material Adverse Effect:
(i) the Company and each of its Subsidiaries is in
compliance with applicable Environmental Laws;
(ii) the Company and each of its Subsidiaries has
obtained or has applied for all applicable environmental, health and safety
permits, licenses, variances, approvals and authorizations required under
Environmental Laws (collectively, the "Environmental Permits") necessary for the
---------------------
conduct of its operations;
(iii) there is no Environmental Claim pending or, to the
knowledge of the Company, threatened (A) against the Company or any of its
Subsidiaries, (B) against any Person whose liability for any Environmental Claim
has been retained or assumed contractually by the Company or any of its
Subsidiaries, or (C) against any real property which the Company or any of its
Subsidiaries owns, leases or operates; and
(iv) to the Knowledge of the Company, there have been no
Releases of any Hazardous Materials that would be reasonably likely to form the
basis of any Environmental Claim against the Company or any of its Subsidiaries.
2.15. Commitments. Schedule 2.15 sets forth a complete and correct
-----------
list of each written and, if material, oral contract, agreement, understanding,
arrangement and commitment of any nature whatsoever, including all amendments
thereof and supplements thereto ("Commitments") of the following types to which
the Company or any Subsidiary is a party or by or to which the Company or any
Subsidiary or any of their properties may be bound or subject as of the date
hereof: (i) Commitments containing covenants purporting to limit the freedom of
the Company or any Subsidiary to compete in any line of business in any
geographic area or to hire any individual or group of individuals, (ii)
Commitments or related series of Commitments relating to capital expenditures in
excess of $3,000,000, (iii) (x) Commitments or related series of Commitments
relating to the lease or sublease of or sale or purchase of personal property
-17-
<PAGE>
involving any annual expense or price in excess of $3,000,000, and (y) each
material lease or sublease of real property or Commitments relating to the sale
or purchase of material real property, (iv) Commitments relating to indentures,
mortgages, promissory notes, loan agreements, guarantees, letters of credit or
other agreements or instruments of the Company or any Subsidiary or Commitments
for or relating to the borrowing or the lending of money by or to the Company or
any Subsidiary in excess of $3,000,000 or providing for any right of first
refusal or the creation of any Encumbrance upon any of the assets or properties
of the Company or any Subsidiary, (v) Commitments relating to the acquisition or
disposition of any operating business or the capital stock of any Person that
has not been consummated or that has been consummated but contains
representations, warranties, covenants, guarantees, indemnities or other
obligations that remain in effect, (vi) Commitments relating to any material
Litigation, (vii) Commitments under which the Company or any Subsidiary agrees
to indemnify any Person, (viii) Commitments in respect of any joint venture,
partnership or other similar arrangement, (ix) Commitments with any Governmental
Entity; (x) other Commitments or related series of Commitments which involve
payments of over $3,000,000 or which are otherwise material (excluding license
and maintenance contracts entered with customers of the Company entered into in
the ordinary course of business consistent with past practice (such excluded
Commitments, "Non-Listed Commitments"). All such listed Commitments and all Non-
----------------------
Listed Commitments are valid and binding obligations of the Company and each
Subsidiary, as the case may be, and, to the Knowledge of the Company, are the
valid and binding obligation of each other party thereto except where the
failure to be so valid and binding individually or in the aggregate do not and
could not reasonably be expected to have a Material Adverse Effect. Neither the
Company nor any Subsidiary nor, to the Knowledge of the Company, any other party
is in material violation of or in material default in respect of, nor has there
occurred an event or condition which with the passage of time or giving of
notice (or both) would constitute a default under, any listed Commitment or Non-
Listed Commitment, except for default which individually and in the aggregate do
not and could not be reasonably expected to have a Material Adverse Effect.
2.16. Brokers or Finders. No agent, broker, investment banker or
------------------
other Person is or will be entitled to any broker's or finder's fee or any other
commission or similar fee in connection with any of the transactions
contemplated by this Agreement or the other Transaction Documents based on
arrangements made by or on behalf of the Company or any of the Subsidiaries, or
any Affiliate of any of the foregoing.
2.17. Related Party Transactions. Except as disclosed in the SEC
--------------------------
Reports and Schedule 2.17, there are no transactions and Commitments between or
involving the Company or any of the Subsidiaries, on the one hand, and any
Related Party, on the other hand, engaged in or entered into since December 31,
1998 (including those initiated prior to such date and continued or continuing
following such date).
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<PAGE>
2.18. Section 203 of the DGCL; Takeover Statute. The Board of
-----------------------------------------
Directors shall have adopted a resolution to the effect that the restrictions
contained in Section 203 of the DGCL applicable to a "business combination" (as
defined in such Section) will not apply to the execution, delivery or
performance of this Agreement or any of the other Transaction Documents or the
consummation of the transactions contemplated hereby or thereby. The execution,
delivery and performance of this Agreement or any of the other Transaction
Documents and the consummation of the transactions contemplated hereby or
thereby will not cause to be applicable to the Company any "fair price,"
"moratorium," "control share acquisition" or other similar antitakeover statute
or regulation enacted under state or federal laws.
2.19. Proprietary Information of Third Parties. Except as set
----------------------------------------
forth on Schedule 2.19, and except as would not, individually or in the
aggregate, have a Material Adverse Effect:
(i) to the Company's Knowledge, no Third Party has
claimed that any Person employed by or affiliated with the Company has (a)
violated or may be violating any of the terms or conditions of his employment,
non-competition or non-disclosure agreement with such Third Party, (b) disclosed
or may be disclosing or utilized or may be utilizing any trade secret or
proprietary information or documentation of such Third Party or (c) interfered
or may be interfering in the employment relationship between such Third Party
and any of its present or former employees. No Third Party has requested
information from the Company which suggests that such a claim might be
contemplated;
(ii) to the Company's Knowledge, no Person employed by or
affiliated with the Company has employed or proposes to employ any trade secret
or any information or documentation proprietary to any former employer, and to
the best of the Company's Knowledge, no Person employed by or affiliated with
the Company has violated any confidential relationship which such Person may
have had with any Third Party, in connection with the development, manufacture
or sale of any product or proposed product or the development, manufacture or
sale of any product or proposed product or the development or sale of any
service or proposed service of the Company, and the Company has no reason to
believe there will be any such employment or violation; and
(iii) none of the execution or delivery of this Agreement,
or the carrying on of the business of the Company as officers, employees or
agents by any officer, director or key employee of the Company, or the conduct
or proposed conduct of the business of the Company, will conflict with or result
in a breach of the terms, conditions or provisions of or constitute a default
under any contract, covenant or instrument under which any such Person is
obligated.
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<PAGE>
2.20. Disclosure. Neither this Agreement nor any other Transaction
----------
Document, nor any schedule or exhibit hereto or thereto, nor any certificate
furnished to the Purchasers by or on behalf of the Company in connection with
the transactions contemplated hereby and thereby, contains any untrue statement
of a material fact or omits to state a material fact necessary in order to make
the statements contained herein or therein not misleading. The financial
information disclosed by the Company to the Purchasers with respect to the
financial condition, results of operation and cash flows of the Company for the
year ending December 31, 1999 attached as Exhibit 2.20 hereto have been
reasonably prepared in accordance with GAAP consistently applied for the period
involved, and reflect the best currently available estimates and judgment of the
Company's management as to the financial performance of the Company and the
Subsidiaries for such period and to be reflected in the Company's SEC Reports
for such period and any public announcements and conferences with analysts with
respect thereto.
2.21. Year 2000. (a) The Company has conducted an inventory and
---------
assessment of all software, computers, network equipment, technical
infrastructure, production equipment and other equipment and systems that are
material to the operation of its business and that rely on, utilize or perform
date or time processing ("Systems") to insure that the Systems are Year 2000
-------
Compliant.
(b) Any failure of any of the Company's System to be Year
2000 Compliant has not had and is not reasonably expected to have a Material
Adverse Effect.
(c) In addition to upgrading its own Systems, the Company
has contacted certain significant suppliers to determine whether their Systems
are Year 2000 Compliant. The Company has not received any information which
would indicate that the Systems of its suppliers are not Year 2000 Compliant to
the extent the same could reasonably be expected to result in any significant
disruption to the Company's sources of supplies.
(d) "Year 2000 Compliant" means a System has at all times:
-------------------
(i) consistently and accurately handled and processed date and time information
and data values before, during and after January 1, 2000, including but not
limited to accepting date input, providing date output, and performing
calculations on or utilizing dates or portions of dates; (ii) function
accurately and in accordance with its specifications without interruption,
abnormal endings, degradation, change in operation or other impact, or
disruption of other systems, resulting from processing date or time data with
values, before, during and after January 1, 2000; (iii) respond to and process
two-digit date input in a way that resolves any ambiguity as to century; and
(iv) store and provide output of date information in ways that are unambiguous
as to century.
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<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
The Purchasers, severally and not jointly, hereby represent and
warrant to the Company, as of the date hereof and as of the Closing Date, as
follows:
3.1. Acquisition for Investment. Each Purchaser is acquiring the
--------------------------
Preferred Stock and the Warrants for its own account, for investment and not
with a view to the distribution thereof within the meaning of the Securities
Act.
3.2. Restricted Securities. Each Purchaser understands that (i) the
---------------------
Preferred Stock, the Warrants and any Common Shares issuable upon conversion or
exercise thereof will not be registered under the Securities Act or any state
securities Laws by reason of their issuance by the Company in a transaction
exempt from the registration requirements thereof and (ii) the shares of the
Preferred Stock, the Warrants and any Common Shares issuable upon conversion or
exercise thereof may not be sold unless such disposition is registered under the
Securities Act and applicable state securities Laws or is exempt from
registration thereunder.
3.3. No Brokers or Finders. No agent, broker, investment banker or
---------------------
other Person is or will be entitled to any broker's or finder's fee or any other
commission or similar fee in connection with the transactions contemplated by
this Agreement or the other Transaction Documents based on arrangements made by
or on behalf of the Purchasers.
3.4. Accredited Investor. Each Purchaser is an "accredited investor"
-------------------
(as defined in Rule 501(a) under the Securities Act).
3.5 Organization. Each Purchaser is a limited partnership duly
------------
organized, validly existing and in good standing under the Laws of the State of
Delaware (except for RKB Capital, L.P., which is organized, validly existing and
in good standing under the Laws of the State of Minnesota) and has the requisite
power and authority to carry on its business as it is now being conducted.
3.6. Due Authorization. Each Purchaser has all right, power and
authority to enter into this Agreement and the other Transaction Documents to
which it is a party and to consummate the transactions contemplated hereby and
thereby. The execution and delivery by each Purchaser of this Agreement and the
other Transaction Documents to which it is a party and the consummation by it of
the transactions contemplated hereby and thereby (a) are within its power and
authority and (b) have been duly authorized by all necessary action on the part
of such entity. This Agreement constitutes, and each of the other Transaction
Documents to which it is a party will constitute upon execution and delivery by
each Purchaser, a valid and binding agreement
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of such entity enforceable against such entity in accordance with their
respective terms, except as enforceability against each Purchaser may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws
now or hereafter in effect relating to the rights of creditors generally and by
legal and equitable limitations on the enforceability of specific remedies
(regardless of whether enforcement is considered in a proceeding in equity or at
law).
3.7. Consents; No Violations. Neither the execution, delivery or
-----------------------
performance by each Purchaser of this Agreement and the other Transaction
Documents nor the consummation of the transactions contemplated hereby or
thereby will (a) conflict with, or result in a breach or a violation of, any
provision of the organizational documents of such entity; (b) constitute, with
or without notice or the passage of time or both, a breach, violation or
default, create an Encumbrance, or give rise to any right of termination,
modification, cancellation, prepayment, suspension, limitation, revocation or
acceleration, under (i) any Law, or (ii) any Commitment of such entity, or to
which such entity or any of its assets or properties is subject, except, with
respect to the matters set forth in clause (ii), for breaches, violations,
defaults, Encumbrances, or rights of termination, modification, cancellation,
prepayment, suspension, limitation, revocation or acceleration, which,
individually or in the aggregate, could not have a Material Adverse Effect on
the ability of such entity to consummate the transactions contemplated hereby;
or (c) require any consent, approval or authorization of, notification to,
filing with, or exemption or waiver by, any Governmental Entity or any other
Person on the part of such entity.
3.8. Availability of Funds. The Purchasers have or will have available
---------------------
at the Closing, sufficient funds to pay the Purchase Price for the Preferred
Stock and the Warrants.
3.9 Trading Price. The Purchasers acknowledge that no representations
-------------
and warranties made by the Company in Article II herein (including, without
limitation, any reference to a Material Adverse Effect) shall be deemed a
representation as to the current or prospective trading price of the shares of
the Company's Common Stock.
ARTICLE IV
COVENANTS
4.1. Conduct of Business by the Company Pending the Closing. (a) The
------------------------------------------------------
Company covenants and agrees that, during the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
or the Closing, unless the Purchasers otherwise agree in writing, the Company
shall, and shall cause each of the Subsidiaries to, (i) conduct its business
only in the ordinary course and consistent with past practice; (ii) use
reasonable best efforts to preserve and maintain its assets and
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<PAGE>
properties and its relationships with its customers, suppliers, advertisers,
distributors, agents, officers and employees and other Persons with which it has
significant business relationships; (iii) use reasonable best efforts to
maintain all of the material assets it owns or uses in the ordinary course of
business consistent with past practice; (iv) maintain insurance in full force
and effect substantially comparable in amount, scope and coverage to that in
effect on the date of this Agreement; (v) use reasonable best efforts to
preserve the goodwill and ongoing operations of its business; (vi) maintain its
books and records in the usual, regular and ordinary manner, on a basis
consistent with past practice; (vii) perform and comply in all material respects
with its Commitments; and (viii) comply in all material respects with applicable
Laws. Except as expressly contemplated by this Agreement or as set forth on
Schedule 4.1, between the date of this Agreement and the Closing, the Company
shall not, and shall cause each of the Subsidiaries not to, do any of the
following without the prior written consent of the Purchasers:
(A) create any Encumbrance other than (i) Permitted Encumbrances and
(ii) Encumbrances securing indebtedness permitted by clause (D) of this Section
4.1(a);
(B) acquire or dispose of (by merger, consolidation, or acquisition
of stock or assets) any Person, business, business line or any material amount
of assets;
(C) (i) except as provided in Schedule 4.1(a)(C) hereto, incur any
additional indebtedness other than indebtedness incurred in the ordinary course
of business under the Company's existing revolving credit agreement and pursuant
to capital leases not exceeding $750,000 in the aggregate, or (ii) make any
loans, advances or capital contributions to, or investments in, any Person other
than (x) to a Subsidiary or (y) advances in the ordinary course of business to
Persons that are not Related Parties not exceeding $750,000 to any one such
Person;
(D) change any method of accounting or accounting practice used by
the Company or any Subsidiary, other than such changes required by GAAP;
(E) (i) except as provided in Schedule 4.1(a)(E) hereto, grant or
amend any stock-related or performance awards; (ii) except with respect to
agreements which are terminable at will by the Company without any material
penalty to the Company, enter into or amend any legally binding employment,
severance, consulting or salary continuation agreements with any officers,
directors or employees or grant any increases in compensation or benefits to
employees other than increases to officers and employees in the ordinary course
of business consistent with the past practice of the Company; (iii) adopt, amend
or terminate any employee benefit plan or arrangement;
(F) except as set forth in Schedule 2.17, enter into any transaction
or Commitment with any Related Party;
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<PAGE>
(G) allow the lapse of any of the Company's or any Subsidiary's
rights of ownership or use of any material Intellectual Property right except in
the ordinary course of business consistent with past practice;
(H) (i) repurchase, redeem or otherwise acquire or exchange any share
of Common Stock or other equity interests except for repurchases of unvested
shares pursuant to the terms of the Company's Option Plan, (ii) except as
provided in Schedule 4.1(a)(E) hereto, issue or sell any additional shares of
the capital stock of, or other equity interests in, the Company or any
Subsidiary, or securities convertible into or exchangeable for such shares or
other equity interests, or issue or grant any subscription rights, options,
warrants or other rights of any character relating to shares of such capital
stock, such other equity interests or such securities, except pursuant to the
Transaction Documents and except for issuances of Common Stock pursuant to the
exercise of Options or (iii) declare, set aside, make or pay any dividend, or
make any distribution, in respect of any shares of capital stock of the Company;
(I) amend the Company's certificate of incorporation or by-laws,
except with respect to the filing of the Certificate of Designation or for other
non-material changes, or amend any Subsidiary's charter or by-laws or other
organizational documents in any respect materially adverse to the Company;
(K) make any material change in the Company's or any Subsidiary's Tax
accounting methods, any material new election with respect to Taxes or any
material modification or revocation of any existing election with respect to
Taxes or settle or otherwise dispose of any material Tax audit, dispute, or
other Tax proceeding, except in the ordinary course of business;
(L) effect any stock split, reverse stock split, stock dividend,
subdivision, reclassification or similar transaction, or otherwise change its
capitalization as it exists on the date hereof;
(M) directly or indirectly redeem, purchase or otherwise acquire any
shares of its capital stock or the capital stock of any of its Subsidiaries;
(N) sell, lease, assign, transfer or otherwise dispose of (by merger
or otherwise) any of its property, business or assets (including, without
limitation, receivables, leasehold interests or Intellectual Property and
including any sale leaseback transaction) except for (i) the sale of inventory
in the ordinary course of business, and (ii) other asset sales for fair value in
the ordinary course of business provided that the proceeds of such other asset
sales do not exceed $3,000,000 in the aggregate prior to the Closing;
(O) make any advance, loan, extension of credit or capital
contribution to, or purchase or acquire (by merger or otherwise) any stock,
bonds, notes, debentures or
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<PAGE>
other securities of, or any assets constituting a business unit of, or make any
other investment in, any person, firm or entity, except (a) extensions of trade
credit and endorsements of negotiable instruments and other negotiable documents
in the ordinary course of business, (b) investments in cash and cash
equivalents, (c) payroll and travel advances in the ordinary course of business
and, (d) investments in wholly owned Subsidiaries; or
(P) agree or publicly announce any intention to take any of the
actions restricted by this Section 4.1.
4.2. No Solicitation. From the date of this Agreement until the
---------------
earlier of the termination of this Agreement or the Closing, other than in
connection with the transactions contemplated hereby, neither the Company nor
any of the Subsidiaries shall solicit, propose or facilitate (including by way
of providing information regarding the Company or any of the Subsidiaries or
their respective businesses to any Person), directly or indirectly, any
inquiries, discussions, offers or proposals for, continue or enter into
negotiations looking toward, or enter into or consummate any Commitment or
understanding in connection with any offer or proposal regarding, any issuance
of capital stock or securities convertible into capital stock, except as
permitted under Section 4.1. In addition, the Company agrees not to enter into,
consummate or in any way commit to any purchase or acquisition of all or any
material portion of the Company and the Subsidiaries taken as a whole, the
business or assets of the Company and the Subsidiaries taken as a whole, or any
capital stock of or equity interests in (whether newly issued or currently
outstanding) the Company or any of the Subsidiaries, and (b) any merger,
business combination or recapitalization involving the Company or any of the
material Subsidiaries or their respective businesses (each such transaction an
"M&A Transaction"). The Company agrees to promptly inform the Purchasers of the
---------------
identity of any Person making any M&A Transaction and the nature and terms of
any such M&A Transaction and to keep the Purchasers promptly and fully informed
as to the status thereof whether made before or after the date of this
Agreement.
4.3. Press Releases; Interim Public Filings. Subject to Section 8.3,
--------------------------------------
the Company shall deliver to the Purchasers complete and correct copies of all
press releases and public filings relating to the Transaction Documents, the
transactions contemplated thereby and Company corporate matters made between the
date hereof and the Closing, and shall give the Purchasers the reasonable
opportunity to review and comment on such releases and filings, in each case
prior to release in the form in which it will be issued.
4.4. Consents; Approvals. The Company shall use its reasonable best
-------------------
efforts, not requiring the expenditure of a material sum or the making of some
other material accommodation, to obtain all consents, waivers, exemptions,
approvals, authorizations or orders (collectively, "Consents") (including,
--------
without limitation (i) Consents required to avoid any breach, violation,
default, encumbrance or right of termination, modification, cancellation,
prepayment, suspension, limitation, revocation or
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<PAGE>
acceleration set forth on Schedule 2.9 or required to be set forth thereon, (ii)
all Consents pursuant to the Company's or any Subsidiary's financing documents,
including, without limitation, all indentures and credit agreements of the
Company or any Subsidiary, and (iii) all United States and foreign governmental
and regulatory rulings and approvals), and the Company shall make all filings
(including, without limitation, all filings with United States and foreign
governmental or regulatory agencies), required or desirable in connection with
the authorization, execution and delivery of this Agreement and the other
Transaction Documents and the consummation of the transactions contemplated
hereby and thereby; provided, however, no payment (other than filing fees
related to the matters contemplated hereby) or other accommodation shall be made
by the Company in connection with obtaining any of the foregoing without the
Purchasers' prior written consent. The Purchasers shall cooperate with the
Company in obtaining such Consents. The Company also shall use its reasonable
best efforts, not requiring the expenditure of a material sum or the making of
some other material accommodation, to obtain all necessary state securities laws
or blue sky permits and approvals required to carry out the transactions
contemplated hereby and shall furnish all information as may be reasonably
requested in connection with any such action.
4.5. Listing. The Company shall use its best efforts to continue to
-------
have its Common Stock quoted on the NASDAQ national market system or other
comparable national exchange prior to the Closing, and for so long as any shares
of Preferred Stock, Warrants or any Common Shares issued upon conversion or
exercise of the Preferred Stock and Warrants are outstanding. Prior to the
Closing, the Company shall prepare and submit to the NASDAQ a listing
application covering the shares of Common Stock issuable upon conversion of the
Preferred Stock and exercise of the Warrants and shall obtain approval for the
listing of such shares, subject to official notice of issuance.
4.6. Board Representation; VCOC. (a) Section 4 of the Certificate of
--------------------------
Designation provides that the holders of Preferred Stock and Warrants shall be
entitled to elect one director (the "Preferred Stock Designee") to the Board of
Directors of the Company subject to the terms set forth therein. For so long as
the Purchasers and their Affiliates, as holders of the Preferred Stock and
Warrants maintain ownership at the Ownership Threshold, shall have the right
under this Agreement and the Certificate of Designation to designate the
Preferred Stock Designee, TWCP shall have the right, separately enforceable by
it without further action required or permitted by any of the Purchasers or
their Affiliates, to designate such Preferred Stock Designee.
(b) In the event the Certificate of Designation is no longer in
effect, and so long as the Purchasers and their Affiliates beneficially own in
the aggregate Preferred Stock, Warrants and Common Shares issuable upon
conversion or exercise thereof representing (and assuming conversion and
exercise of all such Preferred Stock and Warrants) greater than 15% of the
Common Shares (assuming such conversion and exercise) acquired by the Purchasers
in the aggregate at the Closing (and adjusting for
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<PAGE>
stock splits, stock combinations and like transactions) (such ownership
threshold referred to as the "Ownership Threshold"), TWCP shall have the right
-------------------
to designate hereunder, at all times and from time to time, one director of the
Company (individuals designated pursuant to this paragraph, the "Purchasers'
-----------
Designee"). In the event of a vacancy caused by the disqualification, removal,
- --------
resignation or other cessation of service of any Purchasers' Designee from the
Board, the Board shall elect as a director (to serve until the term of such
Purchaser Designee would have expired) a new Purchasers' Designee who has been
designated by TWCP in an additional Purchasers' Designee Notice that has been
provided to the Company at least seven (7) days prior the date of a regular
meeting of the Board. TWCP shall nominate each Purchasers' Designee pursuant to
an additional Purchasers' Designee Notice in advance of each meeting of
shareholders at which such Purchasers' Designee is to be elected.
(c) TWCP shall provide notice to the Company (the "Purchasers'
-----------
Designee Notice") as required by Section 4.6(a) above for each Purchasers'
- ---------------
Designee, which notice shall contain the following information: (i) the name of
the Person it has designated to become director, and (ii) all information
required by Regulation 14A and Schedule 14A under the Exchange Act with respect
to each such Purchasers' Designee. Subject to Section 4.6(c) below, the
Purchasers' Designee may be any person designated by TWCP, including persons who
are officers, directors or employees of the Purchasers or their Affiliates.
(d) The Company agrees to include the Purchasers' Designee to be
added to or retained on the Board pursuant to this Agreement in the slate of
nominees recommended by the Board to the Company's shareholders for election as
director and shall use its reasonable efforts to cause the election or
reelection of a Purchasers' Designee to the Board at each meeting of
shareholders at which the Purchasers' Designee is up for election, including
soliciting proxies in favor of the election of such Persons, it being understood
that efforts consistent with those used for other members of the slate
recommended by the Board shall be deemed reasonable. In the event that,
notwithstanding the provisions of this Section 4.6(d), the Purchasers' Designee
is not elected to the Board then, at the written request of TWCP made within 30
days after the date of the shareholder meeting at which the Purchasers' Designee
was not elected, the Company shall cause, at the request of TWCP, the
appointment of the Purchaser's Designee or any other Person designated by TWCP,
as a non-voting observer (a "Non-Voting Observer") to the Board of the Company;
-------------------
it being understood that TWCP may from time to time change the designation of
such Non-Voting Observer. The Company shall afford to any Purchasers' Designee
who serves as a Non-Voting Observer, on as nearly equivalent basis as is
possible (other than the right to vote) as would have been the case if the
Purchasers' Designee had been elected to the Board, the opportunity to
meaningfully participate in, express views with respect to and have influence on
the deliberations of the Board, including through receipt, at the same time as
the Board receives the same, of all information and material as is distributed
to the Board.
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<PAGE>
(e) So long as the Purchasers and their Affiliates beneficially
own in the aggregate Preferred Stock, Warrants and Common Shares exceeding the
Ownership Threshold, without the prior written consent of TWCP, the Board of
Directors shall not amend the provisions of the by-laws of the Company, as
amended in accordance with Section 5.2(x) specifying that the size of the entire
Board shall consist of eight members.
(f) So long as the Purchasers and their Affiliates beneficially
own in the aggregate Preferred Stock, Warrants and Common Shares exceeding the
Ownership Threshold, TWCP shall have the right to consult with and advise
management of the Company on significant business issues, including finances and
accounts of the Company and management's proposed annual operating plans, and
meet with management at the Company's facilities at mutually agreeable times for
such consultation and advice, including to review progress in achieving said
plans subject to the execution of a mutually acceptable non-disclosure
agreement. The Company agrees to consider the advice given and any proposals
made by TWCP, provided the Company should be under no obligation to accept or
follow such advice.
(g) The rights set forth in this Section 4.6 are intended to
satisfy the requirement of contractual management rights for purposes of
qualifying TWCP's interests in the Company as venture capital investments for
purposes of the Department of Labor's "plan assets" regulations, and in the
event such rights are not satisfactory for such purpose as to TWCP, the Company
and the Purchasers shall reasonably cooperate in good faith to agree upon
mutually satisfactory management rights which satisfy such regulations.
(h) Unless otherwise agreed by the Company, the Purchasers shall
cause the Purchasers' Designee then serving on the Board or as a Non-Voting
Observer to resign from the Board or as a Non-Voting Observer immediately at any
time after the Purchasers and their Affiliates beneficially own in the aggregate
Preferred Stock, Warrants and Common Shares less than the Ownership Threshold.
4.7. Committees. (a) The Preferred Stock Designee or Purchaser's
----------
Designee, as the case may be, shall be granted representation (as of the Closing
Date) on all Board committees, including the audit and compensation committees.
In the event that a Non-Voting Observer is serving on the Board as the
representative for the Purchasers, such Non-Voting Observer shall be afforded,
on as nearly equivalent basis as is possible (other than the right to vote) the
opportunity to meaningfully participate in and express views with respect to the
deliberations of the committees.
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<PAGE>
(b) The Board will not establish an executive committee authorized
to exercise the power of the Board generally unless the Purchasers are granted
representation on such committee proportional to its representation on the
Board, nor will the Board establish or employ committees (unless the Purchasers
are granted proportional representation thereon) as a means designed to
circumvent or having the effect of circumventing the rights of the Purchasers
under this Agreement to representation on the Board.
4.8. Certificate of Designation. The Company shall, prior to or
--------------------------
concurrently with the Closing, cause the Certificate of Designation to be filed
with the Secretary of State of the State of Delaware as set forth in the form of
the Certificate of Designation attached hereto as Exhibit 2.2.
4.9. Cooperation. Each of the Purchasers and the Company agrees to
-----------
use its reasonable best efforts to take, or cause to be taken, as promptly as
practicable all such further actions as shall be necessary to make effective and
consummate the transactions contemplated by this Agreement.
4.10. Covenants to Provide Information. The Company covenants and
--------------------------------
agrees with each Purchaser that so long as the Purchasers and their Affiliates
own in the aggregate Preferred Shares, Warrants and Common Shares in excess of
the Ownership Threshold, the Company shall deliver to each Purchaser:
(a) Within 45 days after the end of each quarterly fiscal period,
(i) unaudited balance sheets and an income statement as of the end of such
period, together with statements of retained earnings and cash flow for such
period ("Quarterly Financials"), together with such analysis and comparisons to
--------------------
budget as are routinely provided to the Board.
(b) Within 90 days after the end of each fiscal year, commencing
with the first fiscal year ending after the Closing, (i) audited balance sheets
and an income statement as of the end of such fiscal year, together with
statements of retained earnings and cash flow for such fiscal year, all in
reasonable detail and certified by a recognized national firm of independent
accountants selected by the Board of Directors of the Company as presenting
fairly the financial position and results of operations of the Company and as
having been prepared in accordance with GAAP consistently applied, including
their opinion thereon in the form included in the Company's Annual Report on
Form 10-K, and (ii) the accounting firm's management letter.
(c) Promptly upon becoming available, (i) copies of all financial
statements, reports, material press releases, notices, proxy statements and
other documents sent by the Company to its shareholders or released to the
public and copies of all regular and periodic reports, if any, filed by the
Company with any securities regulatory agency or any securities exchange and
(ii) any other financial or other
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<PAGE>
information available to management of the Company as the Purchasers shall have
reasonably requested on a timely basis.
(d) If for any period the Company shall have any subsidiary or
subsidiaries whose accounts are consolidated with those of the Company, then, in
respect of such period, the financial statements and information delivered
pursuant to the foregoing paragraphs (a), (b) and (c) of this Section 4.10 shall
be the consolidated and consolidating financial statements of the Company and
all such consolidated subsidiaries.
(e) At least 30 days prior to the beginning of each fiscal year, an
annual budget for the Company for such fiscal year (displaying anticipated
statements of income and cash flows and balance sheets), and promptly upon
preparation thereof any other significant budgets prepared by the Company and
any revisions of such annual budget.
(f) Promptly (but in any event within ten business days) after the
discovery or receipt of notice of (i) any default under any material agreement
to which the Company and/or any of its Subsidiaries is a party, which default
could reasonably be expected to have a Material Adverse Effect on the Company or
any of its Subsidiaries, (ii) any other event which could reasonably be expected
to have a Material Adverse Effect on the condition (financial or otherwise),
results of operations, or business of the Company or any of its Subsidiaries
(including, without limitation, the filing of any material litigation against
the Company or any of its Subsidiaries a statement certified by a senior
executive officer of the Company specifying the nature and period of existence
thereof and what actions the Company has taken and proposes to take with respect
thereto.
(g) With reasonable promptness, such other information and financial
data concerning the Company as the Purchasers may reasonably request.
4.11. Reserve Shares. The Company will at all times reserve and keep
--------------
available, solely for issuance and delivery upon conversion of the Preferred
Stock and the exercise of the Warrants, the number of shares of Common Stock
from time to time issuable upon conversion of all shares of the Preferred Stock
and exercise of the Warrants at the time outstanding. All Common Shares issuable
upon conversion of the Preferred Stock and the exercise of the Warrants shall be
duly authorized and, when issued upon such conversion or exercise, shall be
validly issued, fully paid and nonassessable.
4.12. Notice of Breach. From the date hereof through the Closing, as
----------------
promptly as practicable, and in any event not later than two business days after
senior management of the Company becomes aware thereof, the Company shall
provide the Purchasers with written notice of (a) any representation or warranty
of the Company contained in this Agreement or any other Transaction Document
being untrue or inaccurate in any material respect at any time from the date
hereof to the Closing, or (b) any failure of the Company to comply with or
satisfy any covenant, condition or
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<PAGE>
agreement to be complied with or satisfied by the Company under this Agreement
or any other Transaction Document.
4.13. Transfer Taxes. The Company shall be responsible for liability
--------------
with respect to any transfer, stamp or similar Taxes which may be payable in
connection with the execution, delivery and performance of this Agreement
including, without limitation, any such Taxes with respect to the issuance of
the Preferred Stock, the Warrants or the Common Shares.
4.14. Indemnification. So long as a Preferred Designee is a director,
---------------
except for amendments or modifications required by Law, the Company shall not
amend or modify any rights to indemnification now existing in favor of the
present and former directors, officers or employees of the Company and its
Subsidiaries provided in the certificate of incorporation and by-laws of the
Company or any Subsidiary in a manner adverse to any such director, officer or
employee, and the Company shall maintain officers' and directors' liability
insurance carrying the directors of the Company with coverage no less favorable
than presently in effect.
4.15. Use of Proceeds. The proceeds from the sale of the Preferred
---------------
Stock and Warrants shall be used for general corporate purposes as shall be
determined by the Board of Directors.
4.16. Registration Rights Agreement. The Company will use its
-----------------------------
reasonable best efforts prior to Closing to amend and restate the Registration
Rights Agreement and the amended and restated registration rights agreement,
dated May 6, 1996, as amended (the "Existing Rights Agreement"), so that all of
-------------------------
the registrable securities under both agreements are covered by a single
agreement, the terms of which are approved by the mutual consent of the Company
and the requisite holders of registrable securities under each of the
Registration Rights Agreement and the Existing Rights Agreement.
4.17. Future Issuances. The Company agrees that it shall be a
----------------
condition of its issuance of any additional Common Stock (or securities
convertible into or exercisable or exchangeable for Common Stock) pursuant to
any employee benefit plan (other than the issuance of additional shares of
Common Stock upon exercise of options outstanding as of the date hereof) that
the person receiving such securities, if after receipt thereof such person
beneficially owns in excess of 1% of the outstanding shares, to agree not to
effect any public sale or distribution of equity securities of the Company,
including any public sale pursuant to Rule 144 under the Securities Act, or any
securities convertible into or exchangeable or exercisable for such securities,
during the period commencing thirty days prior to and ending 90 days after the
effective date of any underwritten demand registration or any underwritten
piggyback registration under the Registration Rights Agreement.
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<PAGE>
ARTICLE V
CONDITIONS
5.1. Conditions to Obligations of the Purchasers and the Company. The
-----------------------------------------------------------
respective obligations of the Purchasers and the Company to consummate the
transactions contemplated hereunder shall be subject to the satisfaction or
waiver at or prior to the Closing of each of the following conditions:
(i) No statute, rule or regulation or order of any court or
administrative agency shall be in effect which prohibits the consummation
of the transactions to be consummated at the Closing;
(ii) Any waiting period (and any extension thereof) under the
HSR Act applicable to this Agreement and the transactions contemplated
hereby shall have expired or been terminated; and
(iii) Any material required filings or Consents set forth on
Schedule 5.1(iii), if any, shall have been made or obtained.
5.2. Conditions to Obligations of the Purchasers. (a) The obligation
-------------------------------------------
of the Purchasers to consummate the transactions contemplated hereunder shall be
subject to the satisfaction or waiver by the Purchasers at or prior to the
Closing of each of the following conditions:
(i) Each of the representations and warranties of the Company
contained in this Agreement shall be true and correct (disregarding for
this purpose all references in such representations and warranties to any
materiality and Material Adverse Effect qualifications) as of the Closing
(except to the extent such representations and warranties are made as of a
particular date, in which case such representations and warranties shall
have been true and correct in all material respects as of such date),
except for failures to be true and correct which individually or in the
aggregate would not reasonably be expected to have a Material Adverse
Effect,
(ii) The Company in all material respects shall have
performed, satisfied and complied with each of its covenants and agreements
set forth in this Agreement to be performed, satisfied and complied with
prior to or at the Closing;
(iii) The Company shall have delivered to the Purchasers an
officer's certificate certifying as to the Company's compliance with the
conditions set forth in clauses (i) and (ii) of this Section 5.2;
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<PAGE>
(iv) The Designated Shareholders and the Company shall have
entered into Management Stockholders Agreements in the form of Exhibit
5.2(iv) (the "Shareholders Agreements"), with each of Mark K. Ruport,
-----------------------
Steven M. Johnson, James Hale, Thomas M. Rafferty, Marc R. Fey and Jeanne
C. Logozzo and the Shareholders Agreements shall be in full force and
effect;
(v) The Company shall have executed and delivered a
Registration Rights Agreement in the form of Exhibit 5.2(v) (the
"Registration Rights Agreement"), and the Registration Rights Agreement
-----------------------------
shall be in full force and effect;
(vi) The Certificate of Designation shall have been duly filed
with the Secretary of State of the State of Delaware and shall be in full
force and effect;
(vii) The Shares initially issuable upon conversion or
exercise, as the case may be, of the Preferred Stock and Warrants shall
have been duly authorized and reserved for issuance and such Shares shall
have been listed on the NASDAQ, subject to official notice of issuance;
(viii) The Purchaser shall have received at the Closing an
opinion of the E*Law Group, outside counsel to the Company, in the form of
Exhibit 5.2(viii);
(ix) There shall not have occurred since September 30, 1999
any change or development or series of changes or developments (including
without limitation as a result of any change in the Law) which has resulted
in or could reasonably be expected to result individually or in the
aggregate in a Material Adverse Effect; and
(x) The Board of Directors shall have amended the by-laws of
the Company to provide that (i) the Board of Directors consists of eight
directors, one of whom shall be the Preferred Designee and (ii) the
provisions of the Certificate of Designation, to the extent inconsistent
with the by-laws, shall be expressly controlling.
5.3. Conditions to Obligations of the Company. The obligation of the
----------------------------------------
Company to consummate the transactions contemplated hereunder shall be subject
to the satisfaction or waiver at or prior to the Closing of each of the
following conditions:
(a) Each of the representations and warranties of the
Purchasers contained in this Agreement shall be true and correct (disregarding
for this purpose all references in such representations and warranties to any
materiality and/or Material Adverse Effect qualifications) as of the Closing
(except to the extent such representations and warranties are made as of a
particular date, in which case such representations and
-33-
<PAGE>
warranties shall have been true and correct in all material respects as of such
date), except for failures to be true and correct which individually or in the
aggregate would not reasonably be expected to have a Material Adverse Effect on
the ability of the Purchasers to fulfill their obligations hereunder;
(b) The Purchasers in all material respects shall have
performed, satisfied and complied with each of its covenants and agreements set
forth in this Agreement to be performed, satisfied and complied with prior to or
at the Closing, disregarding for this purpose all references in such covenants
and agreements to any materiality or similar qualifications;
(c) The Purchasers shall have delivered to the Company an
officer's certificate certifying as to the Purchasers' compliance with the
conditions set forth in clauses (a) and (b) of this Section 5.3.
ARTICLE VI
TERMINATION
6.1. Termination. This Agreement may be terminated at any time prior
-----------
to the Closing, upon written notice of such termination by the terminating party
to the other party setting forth the basis for such termination:
(a) by mutual written consent of the Company and the Purchasers
at any time prior to the Closing; or
(b) by either the Purchasers or the Company if the Closing
shall not have been consummated by March 15, 2000 (provided that the right to
terminate this Agreement under this Section 6.1(b) shall not be available to any
party whose failure to fulfill any obligation under this Agreement has been the
cause of or resulted in the failure of the Closing to occur on or before such
date); or
(c) by either the Purchasers or the Company if a court of
competent jurisdiction or governmental, regulatory or administrative agency or
commission shall have issued a nonappealable final order, decree or ruling or
taken any other action having the effect of permanently restraining, enjoining
or otherwise prohibiting the transactions contemplated by this Agreement; or
(d) by the Purchaser or the Company, (i) if any representation
or warranty of the other set forth in this Agreement shall be untrue in any
material respect when made to the extent that such first party did not have
actual knowledge of such breach as of the date of this Agreement, or (ii) upon a
breach in any material respect of any covenant or agreement on the part of the
other set forth in this Agreement, in each
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<PAGE>
case which would constitute a failure of the condition to Closing of the first
party (either (i) or (ii) above being a "Terminating Breach"); provided, that,
------------------ --------
if such Terminating Breach is curable within ten business days after notice of a
party's intent to terminate this Agreement, through the exercise of reasonable
efforts, and for so long as the other party continues to exercise such
reasonable efforts during such ten business day cure period, the termination
shall be effective immediately following notice and such ten business day cure
period and only if the Terminating Breach is not cured as of such time.
6.2. Effect of Termination. In the event of the termination of this
---------------------
Agreement pursuant to Section 6.1, this Agreement shall forthwith become void
and there shall be no liability on the part of any party hereto provided that
Sections 7.2, 8.3, 8.8, 8.13, 8.14 and 8.15 and this Section 6.2 shall survive
any termination of this Agreement.
ARTICLE VII
SURVIVAL; CERTAIN REMEDIES
7.1. Survival. If the Closing shall occur, the representations and
--------
warranties of the parties hereto contained in this Agreement or in any of the
other Transaction Documents shall expire on the tenth business day following the
date the Company files with the SEC its Form 10-K for the fiscal year ended
December 31, 2000, except that the representations and warranties set forth in
Sections 2.11, 2.12 and 2.14(c), shall survive until the expiration of the
applicable statute of limitations (including any extensions thereof). After the
expiration of such periods, any claim by a party hereto based upon any such
representation or warranty shall be of no further force and effect, except to
the extent a party has asserted a claim in accordance with this Article VII for
breach of any such representation or warranty prior to the expiration of such
period, in which event any representation or warranty to which such claim
relates shall survive with respect to such claim until such claim is resolved as
provided in this Article VII. The covenants and agreements of the parties hereto
contained in this Agreement or in any of the other Transaction Documents shall
survive the Closing until performed in accordance with their terms.
7.2. Indemnification. (a) The Company shall indemnify, defend and
---------------
hold harmless the Purchasers, their Affiliates, and their respective officers,
directors, partners, members, employees, agents, representatives, successors and
assigns (each a "Purchasers' Indemnified Person") from and against all Losses
------------------------------
incurred or suffered by a Purchaser Indemnified Person arising from (i) the
breach of any of the representations or warranties made by the Company in this
Agreement or any other Transaction Document (without giving effect to any
qualification as to materiality or Material Adverse Effect contained in such
representations and warranties), (ii) the breach of any covenant or agreement
made by the Company in this Agreement or any other Transaction Document
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<PAGE>
or (iii) any claims, investigations or litigation brought by any Person or
Governmental Entity related to the transactions contemplated by this Agreement.
Notwithstanding anything to the contrary in this Agreement, no indemnification
payment by the Company to the Purchasers pursuant to this Section 7.2(a) with
respect to any Losses otherwise payable hereunder pursuant to clause (i) above
as a result of any one or more breaches of the representations made by the
Company in this Agreement or any other Transaction Document shall be payable (x)
until such time or the cumulative Losses directly or indirectly incurred or
suffered by the Purchasers shall exceed $1,000,000 (the "Purchasers'
----------
Deductible") and then, (y) only to the extent the Purchasers' Losses exceed such
- ----------
Purchasers' Deductible and (z) up to a maximum of $15,000,000.
(b) A party seeking indemnification under this Section 7.2 shall,
promptly upon becoming aware of the facts indicating that a claim for
indemnification may be warranted, give to the party from whom indemnification is
being sought a notice of claim relating to such Loss (a "Claim Notice"). Each
------------
Claim Notice shall specify the nature of the claim, the applicable provision(s)
of this Agreement or other instrument under which the claim for indemnity
arises, and, if possible, the amount or the estimated amount thereof. No failure
or delay in giving a Claim Notice (so long as the same is given prior to
expiration of the representation or warranty upon which the claim is based) and
no failure to include any specific information relating to the claim (such as
the amount or estimated amount thereof) or any reference to any provision of
this Agreement or other instrument under which the claim arises shall affect the
obligation of the party from whom indemnification is sought.
ARTICLE VIII
MISCELLANEOUS
8.1. Defined Terms; Interpretations. The following terms, as used
------------------------------
herein, shall have the following meanings:
"Affiliate" shall have the meaning ascribed to such term in
---------
Rule 12b-2 of the General Rules and Regulations under the Exchange Act.
"Agreement" shall have the meaning ascribed thereto in the
---------
preamble.
"Board" or "Board of Directors" shall mean the Board of
----- ------------------
Directors of the Company.
"Certificate of Designation" shall have the meaning ascribed
--------------------------
thereto in Section 2.2.
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<PAGE>
"Closing" shall have the meaning ascribed thereto in Section
-------
1.2(a).
"Closing Date" shall have the meaning ascribed thereto in
------------
Section 1.2(a).
"Code" shall mean the Internal Revenue Code of 1986, as
----
amended.
"Commitments" shall have the meaning ascribed thereto in
-----------
Section 2.15.
"Common Shares" shall have the meaning ascribed thereto in
-------------
Section 2.2.
"Common Stock" shall have the meaning ascribed thereto in the
------------
recitals.
"Company" shall have the meaning ascribed thereto in the
-------
preamble.
"Company Affiliates" shall have the meaning ascribed thereto in
------------------
Section 4.2.
"Company Intellectual Property" shall mean all Intellectual
-----------------------------
Property which is used or is proposed to be used by the Company in
its business as currently conducted.
"Compensation and Benefit Plans" shall mean all material bonus,
------------------------------
vacation, deferred compensation, pension, retirement, profit-sharing, thrift,
savings, employee stock ownership, stock bonus, stock purchase, restricted stock
and stock option plans, all employment or severance contracts, all medical,
dental, disability, health and life insurance plans, all other material employee
benefit and fringe benefit plans, contracts or arrangements and any applicable
"change of control" or similar provisions in any plan, contract or arrangement
sponsored, maintained or contributed to by the Company or any of its
Subsidiaries for the benefit of officers, former officers, employees, former
employees, directors, former directors, or the beneficiaries of any of the
foregoing or pursuant to which the Company or any of its Subsidiaries or ERISA
Affiliates has or may have any liability, contingent or otherwise.
"Consents" shall have the meaning ascribed thereto in Section
--------
4.4.
"Designated Shareholders" shall mean Mark K. Ruport, Steven M.
-----------------------
Johnson, James Hale, Thomas M. Rafferty, Marc R. Fey and Jeanne C. Logozzo.
"DGCL" shall mean the Delaware General Corporation Law.
----
"Encumbrances" shall have the meaning ascribed thereto in
------------
Section 2.1(b).
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<PAGE>
"Environmental Claim" shall mean any and all administrative or
-------------------
judicial actions, suits, demands, information requests, directives, claims,
liens, investigations, proceedings or notices of noncompliance, violation or
status as a potentially responsible person or otherwise liable party by any
Person (including any Governmental Entity) relating to or alleging potential
liability (including, without limitation, potential responsibility for or
liability for enforcement, investigatory costs, cleanup costs, response costs,
removal costs, natural resources damages, property damages, personal injuries,
fines or penalties) relating to (A) the presence, or Release or threatened
Release into the environment, of any Hazardous Materials at any location; or (B)
circumstances forming the basis of any violation or alleged violation of any
Environmental Law; or (C) any and all claims by any third party seeking damages,
contribution, indemnification, cost recovery, compensation or injunctive relief
relating to any Environmental Laws.
"Environmental Laws" shall mean, all applicable federal, state
------------------
and local laws, rules, requirements, regulations and judicial or administrative
opinions, orders or decrees, and any common law causes of action, in each case
relating to pollution, the environment (including, without limitation, ambient
air, surface water, groundwater, land surface or subsurface strata) or
protection of human or employee health or safety including, without limitation,
laws and regulations relating to Releases of Hazardous Materials.
"Environmental Permits" shall have the meaning ascribed thereto
---------------------
in Section 2.14(d)(ii).
"ERISA" shall mean the Employee Retirement Income Security Act
-----
of 1974, as amended.
"ERISA Affiliate" shall mean each business or entity which is a
---------------
member of a "controlled group of corporations," under "common control" or a
member of an "affiliated service group" with the Company or any of its
Subsidiaries within the meaning of Article 414(b), (c) or (m) of the Code, or
required to be aggregated with the Company under Article 414(o) of the Code, or
is under "common control" with the Company, within the meaning of Article
4001(a)(14) of ERISA, and the regulations promulgated and proposed thereunder.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
------------
as amended, or any successor federal statute, and the rules and regulations of
the SEC thereunder, all as the same shall be in effect at the time. Reference to
a particular section of the Exchange Act shall include reference to the
comparable section, if any, of any such successor federal statute.
"Existing Rights Agreement" shall have the meaning ascribed
-------------------------
thereto in Section 4.16.
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<PAGE>
"GAAP" shall have the meaning ascribed thereto in Section 2.5.
----
"Governmental Entity" shall mean any supernational, national,
-------------------
foreign, federal, state or local judicial, legislative, executive,
administrative or regulatory body or authority.
"Hazardous Materials" means (A) any petroleum or any by-
-------------------
products or fractions thereof, asbestos or asbestos-containing materials, urea
formaldehyde foam insulation, any form of natural gas, explosives,
polychlorinated biphenyls ("PCBs"), radioactive materials, ionizing radiation or
electromagnetic field radiation; (B) any chemicals, materials or substances
which are included in the definition of "wastes," "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous substances,"
"toxic substances," "toxic pollutants," "pollutants," "contaminants," or words
of similar import under any Environmental Law; and (C) any other chemical,
material or substance, regulated under any Environmental Law.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust
-------
Improvements Act of 1976, as amended, and the rules and regulations thereunder.
"Intellectual Property" shall mean (i) all inventions and
---------------------
discoveries (whether patentable or unpatentable and whether or not reduced to
practice), all improvements thereto, and all patents, patent applications and
patent disclosures, together with all reissuances, continuations, continuations-
in-part, divisions, revisions, extensions and reexaminations thereof, (ii) all
trademarks, service marks, trade dress, logos, trade names, domain names and
corporate names, together with all translations, derivations and combinations
thereof and including all goodwill associated therewith, and all applications,
registrations and renewals in connection therewith and, to the extent any
applications constitute intent-to-use applications for which no verified
statement of use has been filed, the business, or portion thereof, pertaining
thereto, (iii) all copyrightable works, all copyrights and all applications,
registrations and renewals in connection therewith, (iv) all mask works and all
applications, registrations and renewals in connection therewith, (v) all know-
how, trade secrets and confidential business information (including ideas,
research and development, formulas, compositions, manufacturing and production
process and techniques, methods, schematics, technology, flow charts, block
diagrams, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information and business and marketing plans
and proposals), (vi) all computer software (including data and related
documentation), (vii) all management information systems, (viii) all other
proprietary rights, (ix) all copies and tangible embodiments thereof (in
whatever form or medium), and (x) all licenses, sublicenses, permissions, and
agreements in connection therewith.
"IRS" shall mean the Internal Revenue Service.
---
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<PAGE>
"Knowledge", with respect to the Company, shall mean the actual
---------
knowledge of each member of the Board of Directors of the Company and the actual
knowledge, after reasonable inquiry, of each executive officer of the Company.
"Laws" shall include all foreign, federal, state, and local
----
laws, statutes, ordinances, rules, regulations, orders, judgments, decrees and
bodies of law, including, without limitation, (i) any of the foregoing
promulgated by any Governmental Entity and (ii) Environmental Laws.
"Leased Real Property" shall mean the real property leased or
--------------------
subleased by the Company or any Subsidiary, together with, to the extent leased
or subleased by the Company or any Subsidiary, all buildings and other
structures, facilities or improvements currently or hereafter located thereon,
all fixtures, systems, equipment and items of personal property of the Company
or any Subsidiary attached or appurtenant thereto, and all easements, licenses,
rights and appurtenances relating to the foregoing.
"Licenses" shall have the meaning ascribed thereto in Section
--------
2.14(a).
"Litigation" shall have the meaning ascribed thereto in Section
----------
2.7.
"Losses" shall mean each and all of the following items:
------
claims, losses, liabilities, obligations, payments, damages, charges, judgments,
fines, penalties, amounts paid in settlement, costs and expenses (including,
without limitation, interest which may be imposed in connection therewith, costs
and expenses of investigation, actions, suits, proceedings, demands, assessments
and fees, expenses and disbursements of counsel, consultants and other experts).
"M&A Transaction" shall have the meaning ascribed thereto in
---------------
Section 4.2.
"Material Adverse Effect" shall mean a material adverse effect
-----------------------
on the business, operations, results of operations, assets, financial condition
or prospects of the Company and its Subsidiaries taken as a whole, it being
understood and agreed that for purposes of this Agreement, adverse events or
circumstances which result from general economic or financial market conditions
or conditions generally affecting the industry in which the Company operates
shall not constitute a Material Adverse Effect.
"Multi-Employer Plan" shall have the meaning ascribed thereto
-------------------
in Section 2.12(c).
"NASDAQ" shall mean the National Association of Securities
------
Dealers Automated Quotation National Market System.
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<PAGE>
"Owned Real Property" shall mean the real property owned by the
-------------------
Company or any Subsidiary, together with all buildings and other structures,
facilities or improvements currently or hereafter located thereon, all fixtures,
systems, equipment and items of personal property of the Company or any
Subsidiary attached or appurtenant thereto and all easements, licenses, rights
and appurtenances relating to the foregoing.
"Permitted Encumbrances" shall mean, with respect to any asset,
----------------------
(i) any imperfection of title with respect to such asset which does not
materially interfere with the present occupancy or use of such asset and the
continuation of the present occupancy or use of such asset; (ii) such covenants,
conditions, restrictions, easements, encroachments or Encumbrances that are not
created pursuant to mortgages or other financing or security documents, and any
other state of facts, which do not, individually or in the aggregate, materially
interfere with the present occupancy or use of such asset; (iii) mechanic's,
materialmen's, landlord and similar Encumbrances with respect to amounts not yet
due and payable or which are being contested in good faith through appropriate
proceedings; (iv) Encumbrances for Taxes not yet delinquent; and (v)
Encumbrances securing rental payments under capital lease arrangements; and (vi)
Encumbrances securing the Company's indebtedness under the Loan and Security
Agreement, dated March 2, 1998, as amended and other capital leases in the
ordinary course of business.
"Person" shall mean any individual, firm, corporation, trust,
------
limited liability company, partnership, company or other entity, including any
Governmental Entity.
"Preferred Stock" shall have the meaning ascribed thereto in
---------------
the recitals.
"Preferred Stock Designee" shall have the meaning ascribed
------------------------
thereto in Section 4.6(a).
"Purchasers" shall have the meaning ascribed thereto in the
----------
preamble and, for purposes of Article II herein, any information delivered to
the representatives of such Purchaser shall be deemed received by the
Purchasers.
"Purchasers' Designee" shall have the meaning ascribed thereto
--------------------
in Section 4.6(b).
"Purchasers' Designee Notice" shall have the meaning ascribed
---------------------------
thereto in Section 4.6(c).
"Purchasers' Expenses" shall have the meaning ascribed thereto
--------------------
in Section 8.2.
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<PAGE>
"Purchasers' Indemnified Person" shall have the meaning
------------------------------
ascribed thereto in Section 7.2(a).
"Quarterly Financials" shall have the meaning ascribed thereto
--------------------
in Section 4.10(a).
"Related Parties" shall mean (i) Affiliates of the Company and
---------------
(ii) directors or officers of the Company and their Affiliates (including any
family members of directors and officers), but shall not include the
Subsidiaries or the directors or officers of the Subsidiaries (except for
directors or officers of the Subsidiaries who are also directors or officers of
the Company).
"Release" shall means any release, spill, emission, leaking,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata).
"Return" shall mean any report, return, statement, estimate,
declaration, notice, form or other information required to be supplied to a
taxing authority in connection with Taxes.
"SEC" shall mean the Securities and Exchange Commission.
---
"SEC Reports" shall have the meaning ascribed thereto in
-----------
Section 2.4.
"Securities Act" shall mean the Securities Act of 1933, as
--------------
amended, or any successor federal statute, and the rules and regulations of the
SEC thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Act shall include reference to the
comparable section, if any, of such successor federal statute.
"Shareholders Agreement" shall have the meaning ascribed
----------------------
thereto in Section 5.2(a)(iv).
"Subsidiaries" shall have the meaning ascribed thereto in
------------
Section 2.1(b).
"Subsidiary" shall have the meaning ascribed thereto in Section
----------
2.1(b).
"Systems" shall have the meaning ascribed thereto in Section
-------
2.21(a).
"Tax" and "Taxes" shall mean any federal, state, local or
--- -----
foreign income, gross receipts, property, sales, use, value added, license,
excise, franchise,
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capital, net worth, estimated, withholding, employment, payroll, premium,
withholding, alternative or added minimum, ad valorem, inventory, asset, gains,
transfer or excise tax, or any other tax, levy, custom, duty, impost,
governmental fee or other like assessment or charge of any kind whatsoever,
(including any taxes of any other Person owing by contract, as a transferee or
successor, under Treas. Reg. (S) 1.1502-6 or analogous state, local, or foreign
law provision, or otherwise) together with any interest, penalty or additions to
tax, imposed by any Governmental Entity.
"Terminating Breach" shall have the meaning ascribed thereto in
------------------
Section 6.1(d).
"Third Party" shall mean any Person (or group of Persons) other
-----------
than the Purchasers.
"Transaction Documents" shall mean this Agreement, the
---------------------
Shareholders Agreement, the Certificate of Designation, the Registration Rights
Agreement, the Warrant Agreement, the certificates evidencing the shares of
Preferred Stock and Warrants purchased hereunder and all other contracts,
agreements, schedules, certificates and other documents being delivered pursuant
to or in connection with this Agreement or such other documents or the
transactions contemplated hereby or thereby.
"Warrant Agreement" shall have the meaning ascribed thereto in
-----------------
Section 1.2(b).
"Warrants" shall have the meaning ascribed thereto in the
--------
recitals.
8.2. Fees and Expenses. Only in the event of and at the Closing, as
-----------------
an adjustment to the Purchase Price, the Company shall reimburse the Purchasers
in cash for its fees and expenses incurred in connection with this Agreement and
the transactions contemplated hereby (including, without limitation, the fees
and disbursements of its attorneys, accountants, consultants and other advisors)
(collectively, "Purchasers' Expenses"); provided, however, that the portion of
---------- -------- -------- -------
the Purchasers' Expenses for which Purchasers are reimbursed shall not exceed
$175,000 in the aggregate.
8.3. Public Announcements. The Purchaser and the Company shall
--------------------
consult with each other before issuing any press release with respect to this
Agreement or the transactions contemplated hereby and neither shall issue any
such press release or make any such public statement without the prior consent
of the other, which consent shall not be unreasonably withheld; provided,
--------
however, that a party may, without the prior consent of the other party, issue
- -------
such press release or make such public statement as may upon the advice of
counsel be required by Law or the rules and regulations of the NASDAQ, if it has
used reasonable efforts to consult with the other party prior thereto.
-43-
<PAGE>
8.4. Restrictive Legends. No shares of Preferred Stock, Warrants or
-------------------
Common Shares may be transferred without registration under the Securities Act
and applicable state securities laws unless counsel to the Company shall advise
the Company that such transfer may be effected without such registration. Each
certificate representing any of the foregoing shall bear legends in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE
REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS.
8.5. Further Assurances. At any time or from time to time after the
------------------
Closing, the Company, on the one hand, and the Purchasers, on the other hand,
agree to cooperate with each other, and at the request of the other party, to
execute and deliver any further instruments or documents and to take all such
further action as the other party may reasonably request in order to evidence or
effectuate the consummation of the transactions contemplated hereby or by the
other Transaction Documents and to otherwise carry out the intent of the parties
hereunder or thereunder.
8.6. Successors and Assigns. This Agreement shall bind and inure to
----------------------
the benefit of the Company and the Purchasers and the respective successors,
permitted assigns, heirs and personal representatives of the Company and the
Purchasers, provided that the Company may not assign its rights or obligations
--------
under this Agreement to any Person without the prior written consent of the
Purchasers, and provided further that the Purchasers may not assign its rights
-------- -------
or obligations under this Agreement to any Person (other than a direct or
indirect wholly-owned Affiliate of the Purchasers) without the prior written
consent of the Company, which consent shall not be unreasonably withheld or
delayed. In addition, and whether or not any express assignment has been made,
the provisions of this Agreement which are for the Purchasers' benefit as a
purchaser or holder of Preferred Stock, Warrants or Shares are also for the
benefit of, and enforceable by, any subsequent holder of such Preferred Stock,
Warrants or Shares.
8.7. Entire Agreement. This Agreement and the other Transaction
----------------
Documents and the Confidentiality Agreement contain the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
and contemporaneous arrangements or understandings with respect thereto.
-44-
<PAGE>
8.8. Notices. All notices, requests, consents and other
-------
communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person or sent by telecopy,
nationally recognized overnight courier or first class registered or certified
mail, return receipt requested, postage prepaid, addressed to such party at the
address set forth below or such other address as may hereafter be designated in
writing by such party to the other parties:
(i) if to the Company, to:
Optika Inc.
7450 Campus Drive, 2/nd/ Floor
Colorado Springs, Colorado 80920
Telecopy: (719) 531-0199
Attention: Steven Johnson
Vice President and Chief Financial Officer
with a copy to (which shall not constitute notice):
E*Law Group
3555 W. 110/th/ Place
Westminster, Colorado 80031
Telecopy: (303) 410-0468
Attention: Jeremy W. Makarechian, Esq.
and to:
Morrison & Foerster LLP
370 17/th/ Street, Suite 5200
Denver, Colorado 30202
Telecopy: (303) 592-1510
Attention: Warren L. Troupe, Esq.
(ii) if to the Purchasers,
Thomas Weisel Capital Partners, L.P.
c/o Thomas Weisel Capital Partners, L.L.C.
One Montgomery Street, Suite 3700
San Francisco, California 94104
Telecopy: (415) 364-2698
Attention: Marianne Winkler
-45-
<PAGE>
RKB Capital, L.P.
150 West Lake Street
Wayzata, Minnesota 55391
Telecopy: (612) 404-9266
Attention: Peter Schleider
with copies to (which shall not constitute notice):
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Telecopy: (212) 859-8587
Attention: F. William Reindel, Esq.
All such notices, requests, consents and other communications
shall be deemed to have been given or made if and when delivered personally or
by overnight courier to the parties at the above addresses or sent by electronic
transmission, with confirmation received, to the telecopy numbers specified
above (or at such other address or telecopy number for a party as shall be
specified by like notice).
8.9. Amendments. The terms and provisions of this Agreement may be
----------
modified or amended, or any of the provisions hereof waived, temporarily or
permanently, in a writing executed and delivered by the Company and the
Purchasers. No waiver of any of the provisions of this Agreement shall be deemed
to or shall constitute a waiver of any other provision hereof (whether or not
similar). No delay on the part of any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof. Any consent or waiver
(whether or not contemplated by this Agreement) to be made by the Purchasers
shall be made by a majority in interest of the Purchasers on behalf of all the
Purchasers.
8.10. Counterparts. This Agreement may be executed in any number of
------------
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
8.11. Headings. The headings of the sections of this Agreement have
--------
been inserted for convenience of reference only and shall not be deemed to be a
part of this Agreement.
8.12. Nouns and Pronouns. Whenever the context may require, any
------------------
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of names and pronouns shall include the
plural and vice versa.
-46-
<PAGE>
8.13. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING
EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW.
8.14. Submission to Jurisdiction. Each of the parties hereto hereby
--------------------------
irrevocably and unconditionally consents to submit to the exclusive jurisdiction
of the courts of the State of New York and of the United States of America, in
each case located in the County of New York, for any Litigation arising out of
or relating to this Agreement or the other Transaction Documents and the
transactions contemplated hereby and thereby (and agrees not to commence any
Litigation relating hereto or thereto except in such courts), and further agrees
that service of any process, summons, notice or document by U.S. registered mail
to its respective address set forth in this Agreement shall be effective service
of process for any Litigation brought against it in any such court. Each of the
parties hereto hereby irrevocably and unconditionally waives any objection to
the laying of venue of any Litigation arising out of this Agreement or the
transactions contemplated hereby in the courts of the State of New York or the
United States of America, in each case located in the County of New York, and
hereby further irrevocably and unconditionally waives and agrees not to plead or
claim in any such court that any such Litigation brought in any such court has
been brought in an inconvenient forum.
8.15. Waiver of Jury Trial. THE COMPANY AND THE PURCHASERS HEREBY
--------------------
WAIVE ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION,
PROCEEDING OR LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR THE TRANSACTION DOCUMENTS.
8.16. Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid, but
if any provision of this Agreement is held to be invalid or unenforceable in any
respect, such invalidity or unenforceability shall not render invalid or
unenforceable any other provision of this Agreement.
-47-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
OPTIKA INC.
By: ___________________________
Name:
Title:
[Optika Signature Page - Stock Purchase Agreement]
-48-
<PAGE>
PURCHASERS
- ----------
Thomas Weisel Capital Partners, L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, Its managing member
By: ___________________________________
Name:
Title:
TWP CEO Founders' Circle (AI), L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, Its managing member
By: ___________________________________
Name:
Title:
TWP CEO FOUNDERS' CIRCLE (QP), L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, Its managing member
By: ___________________________________
Name:
Title:
THOMAS WEISEL CAPITAL PARTNERS EMPLOYEE FUND, L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, Its managing member
By: ___________________________________
Name:
Title:
TWP 2000 C0-INVESTMENT FUND, L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, Its managing member
By: ___________________________________
Name:
Title:
[Purchasers Signature Page - Securities Purchase Agreement]
-49-
<PAGE>
PURCHASERS
- ----------
RKB CAPITAL, L.P.
By: ___________________________________
Name: Peter Schleider
Title: General Partner
[Purchasers Signature Page - Securities Purchase Agreement]
-50-
<PAGE>
Exhibit 5.2(iv)
---------------
FORM OF MANAGEMENT STOCKHOLDER AGREEMENT
MANAGEMENT STOCKHOLDERS AGREEMENT, dated February 9, 2000 (this
"Agreement"), among [Mark K. Ruport, Steven M. Johnson, James Hale, Thomas M.
Rafferty, Marc R. Fey and Jeanne C. Logozzo] (the "Management Stockholder") and
Thomas Weisel Capital Partners, L.P. ("TWCP"), TWP CEO Founders' Circle (AI),
L.P., CEO Founders' Circle (QP), L.P., Thomas Weisel Capital Partners Employee
Fund, L.P., TWP 2000 Co-Investment Fund, L.P. (collectively, "Purchasers").
WHEREAS, Optika Inc., a Delaware corporation (the "Company"), and
Purchasers, are contemporaneously herewith entering into a Securities Purchase
Agreement, dated as of the date hereof (the "Purchase Agreement"), which
provides, among other things, for the acquisition by Purchasers of certain
securities of the Company upon the terms and subject to the conditions set forth
therein (capitalized terms used herein and not otherwise defined have the
meaning set forth in the Purchase Agreement);
WHEREAS, as a condition to its willingness to enter into the Purchase
Agreement, Purchasers have requested that the Management Stockholder make
certain agreements with respect to the shares of Common Stock owned of record or
beneficially (including shares of Common Stock issuable upon the exercise of any
outstanding options) by the Management Stockholder as of the date hereof or
acquired hereafter (the "Shares"), upon the terms and subject to the conditions
hereof; and
WHEREAS, in order to induce Purchasers to enter into the Purchase
Agreement, the Management Stockholder is willing to make certain agreements with
respect to the Shares.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, the parties hereto agree as follows:
1. The Management Stockholder hereby represents and warrants
that the shares of Common Stock and shares of Common Stock underlying options
indicated next to the Management Stockholder's signature below are all of the
Shares owned of record or beneficially by the Management Stockholder as of the
date hereof. Except as otherwise provided herein, from the date hereof until the
[six month] [one year [only applies to Mark Ruport]] anniversary of the date
hereof, the Management Stockholder agrees not to sell, transfer, pledge, assign,
hypothecate, encumber, tender or otherwise dispose of, or enter into any
contract with respect to the sale, transfer, pledge, assignment, hypothecation,
encumbrance, tender or other disposition of, any Shares (a "Transfer") without
the consent of the Purchasers. This restriction on Transfers will terminate
automatically if the Management Stockholder's employment with the Company
terminates.
2. (a) The Purchasers hereby consent to Transfers by the
Management Stockholder to:
<PAGE>
(i) any spouse, parent, issue (in direct line of
descent), brother or sister of the Management Stockholder,
or
(ii) a trust solely for the benefit of the Management
Stockholder, any spouse, parent, issue (in direct line of
descent), brother or sister of the Management Stockholder,
or
(iii) any corporation, partnership or other entity
(other than a trust) (an "Entity") which is controlled by
the Management Stockholder, or
(iv) to any donee or donees as a bona fide gift or
gifts.
(the person or persons to which the Shares are transferred in accordance with
this Section 2[(a)] being herein referred to as the "Permitted Transferee");
provided, that, for any Transfer to the Permitted Transferee to be effective
hereunder, (1) the Permitted Transferee (which, in the case of a trust, shall
include each person having authority to sell or dispose of such Shares proposed
to be transferred to the trust) shall agree with the Purchasers in writing to be
bound by all the terms of this Agreement applicable to the Management
Stockholder as if the Permitted Transferee originally had been a party to this
Agreement; and (2) all of the holders of any interest in any Entity Permitted
Transferee shall agree with the Purchasers in writing not to transfer any
interest they then own or may hereafter acquire in the Entity Permitted
Transferee except to a person described in paragraph (i), (ii) or (iii) above
with has made the same agreement in writing to the Purchasers, so long as the
Entity Permitted Transferee shall own any shares of Shares. Any reference
herein to the Management Stockholder shall also be to the Permitted Transferee
from and after the date the transfer is effected in accordance with this Section
2.
[(b)] Limited Transfer Exemption. Notwithstanding any other
--------------------------
provision of this Agreement to the contrary, [Mark K. Ruport may Transfer up to
40,000 Shares during the six month period following the date hereof and up to an
additional 40,000 Shares within the six month period thereafter]. [Steven M.
Johnson][Marc R. Fey][may transfer up to 40,000 Shares during the six month
period following the date hereof.]
3. Holdoff Agreement. For so long as the Management
-----------------
Stockholder owns beneficially or of record 1% or more of the Common Stock of the
Company (including shares issuable upon exercise of options), the Management
Stockholder agrees not to effect any public sale or distribution of equity
securities of the Company, including any public sale pursuant to Rule 144 under
the Securities Act, or any securities convertible into or exchangeable or
exercisable for such securities, during the period commencing thirty days prior
to and ending 90 days after the effective date of any underwritten demand
registration or any underwritten piggyback registration under the Registration
Rights Agreement to be entered into among the Purchasers and the Company and the
other parties thereto.
4. Specific Performance. The Management Stockholder
--------------------
acknowledges and agrees that if the Management Stockholder fails to perform any
obligations under this Agreement, immediate and irreparable harm or injury would
be caused to the Purchasers for
-2-
<PAGE>
which money damages would not be an adequate remedy. In such event, the
Management Stockholder agrees that the Purchasers shall have the right, in
addition to any other rights they may have, to specific performance of this
Agreement. Accordingly, if the Purchasers should institute an action or
proceeding seeking specific enforcement of the provisions hereof, the Management
Stockholder hereby waives the claim or defense that the Purchasers have an
adequate remedy at law and hereby agrees not to assert in any such action or
proceeding the claim or defense that such a remedy at law exists. The Management
Stockholder further agrees to waive any requirements for the securing or posting
of any bond in connection with obtaining any such equitable relief.
5. Parties in Interest. This Agreement shall inure to the benefit
-------------------
of and be binding upon the parties named herein and their respective successors
and assigns.
6. Entire Agreement; Amendments. This Agreement contains the entire
----------------------------
agreement between the parties with respect to the subject matter hereof and
supersedes all prior and contemporaneous agreements and understandings, oral or
written, with respect to such subject matter. This Agreement may be amended
only in writing.
7. Governing Law. This agreement shall be governed by and construed
-------------
in accordance with the laws of the State of New York without giving effect to
the principles of conflicts of law.
8. Counterparts. This Agreement may be executed in any number of
------------
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, and all such counterparts together shall constitute one agreement.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly executed and delivered on the day and year first above written.
Management Stockholder Common Stock: _______________
Management Stockholder Option Shares: ______________
By: ________________________________________________
Management Stockholder
-3-
<PAGE>
THOMAS WEISEL CAPITAL PARTNERS, L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: _____________________________________________
Name:
Title:
TWP CEO FOUNDERS' CIRCLE (AI), L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: ____________________________________________
Name:
Title:
TWP CEO FOUNDERS' CIRCLE (QP), L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: ____________________________________________
Name:
Title:
THOMAS WEISEL CAPITAL PARTNERS EMPLOYEE FUND, L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: ___________________________________________
Name:
Title:
-4-
<PAGE>
TWP 2000 C0-INVESTMENT FUND, L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: __________________________________________
Name:
Title:
-5-
<PAGE>
EXECUTION COPY
--------------
EXHIBIT 10.2
WARRANT AGREEMENT
Dated as of February 23, 2000
by and between
OPTIKA INC.,
THOMAS WEISEL CAPITAL PARTNERS, L.P.
and
THE PARTIES LISTED ON THE SIGNATURE PAGE HERETO
<PAGE>
WARRANT AGREEMENT
TABLE OF CONTENTS*
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. Definitions.................................................. 1
SECTION 2. Warrant Certificates......................................... 3
SECTION 3. Issuance of Warrants......................................... 4
SECTION 4. Execution of Warrant Certificates............................ 4
SECTION 5. Registration................................................. 4
SECTION 6. Registration of Transfers and Exchanges...................... 5
SECTION 7. Terms Of Warrants; Exercise Of Warrants...................... 6
SECTION 8. Payment of Taxes............................................. 8
SECTION 9. Mutilated or Missing Warrant Certificates.................... 8
SECTION 10. Reservations of Warrant Shares............................... 8
SECTION 11. Adjustment of Number of Warrant Shares....................... 9
(a) Initial Exercise......................................... 9
(b) Adjustment to Exercise Price for Stock Dividends and for
Combinations or Subdivisions of Common Stock........... 9
(c) Adjustment in connection with Reclassification and
Reorganization........................................... 13
(d) No Amendments............................................ 14
(e) Voluntary Increases...................................... 14
(f) When Issuance or Payment May Be Deferred................. 14
(g) Form of Warrants......................................... 15
(h) Other Dilutive Events.................................... 15
(i) Adjustment in Warrant Shares............................. 15
SECTION 12. Fractional Interests........................................ 15
</TABLE>
________________________________
* This Table of Contents does not constitute a part of this Agreement or
have any bearing upon the interpretation of any of its terms or
provisions.
-i-
<PAGE>
<TABLE>
<S> <C>
SECTION 13. Notices to Warrant Holders; Rights of Warrant Holders...... 16
SECTION 14. Obtaining Stock Exchange Listings.......................... 17
SECTION 15. Notices To The Company..................................... 17
SECTION 16. Supplements And Amendments................................. 18
SECTION 17. Successors................................................. 18
SECTION 18. Termination................................................ 18
SECTION 19. Governing Law.............................................. 18
SECTION 20. Benefits of This Agreement................................. 18
SECTION 21. Headings................................................... 19
SECTION 22. Submission to Jurisdiction................................. 19
SECTION 23. Waiver of jury trial....................................... 19
SECTION 24. Service of Process......................................... 19
SECTION 25. Counterparts............................................... 19
EXHIBIT A. Form of Warrant Certificate................................ A-1
EXHIBIT B. Form of Transfer........................................... B-1
</TABLE>
-ii-
<PAGE>
WARRANT AGREEMENT, dated as of February 23, 2000, by and between
OPTIKA INC., a Delaware corporation (the "Company"), and Thomas Weisel Capital
-------
Partners, L.P., a limited partnership organized under the laws of Delaware
("TWCP") and the entities listed on the signature pagers hereto (each such
------
entity and TWCP, a "Purchaser" and collectively with TWCP, the "Purchasers").
--------- ----------
RECITALS
--------
WHEREAS, the Company has entered into a Securities Purchase Agreement,
dated as of February 9, 2000 (the "Purchase Agreement"), with the Purchasers,
------------------
pursuant to which the Company has agreed to sell to the Purchasers (i) an
aggregate of 731,851 shares of Series A Convertible Preferred Stock, par value
$0.001 per share (the "Preferred Stock") of the Company, and (ii) warrants (the
---------------
"Warrants") to purchase up to an aggregate of 307,298 shares (subject to
--------
adjustment as provided in Section 11 hereof), exercisable at any time at an
exercise price of $22.448 per share, of the Company's Common Stock, par value
$.001 per share (the "Common Stock"), and (the shares of Common Stock issuable
------------
on exercise of the Warrants being herein called the "Warrant Shares");
--------------
WHEREAS, the parties hereto desire to enter into this Agreement in
order to set forth the terms and conditions of the Warrants;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
SECTION 1. Definitions.
As used in this Agreement, the following capitalized terms will have
the respective meanings:
"Affiliate" of any specified Person means any other Person, directly
---------
or indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Agreement" and all references thereto means this Agreement as it may
---------
from time to time be amended or supplemented.
"Board of Directors" means the board of directors of the Company.
------------------
"Business Day" shall mean any day other than a Saturday, Sunday, or a
------------
day on which banking institutions in New York City, New York are authorized or
obligated by law or executive order to close.
"Commission" means the Securities and Exchange Commission.
----------
-1-
<PAGE>
"Common Stock" shall have the meaning set forth in the Recitals.
------------
"Company" shall have the meaning set forth in the first paragraph of
-------
this Agreement.
"Conversion Right" shall have the meaning set forth in Section 7
----------------
hereof.
"Current Market Price," shall mean, as to shares of Common Stock or
--------------------
any other class of capital stock or securities of the Company or any other
issuer which are publicly traded, the average of the daily Market Prices of the
Common Stock for the fifteen consecutive Trading Days immediately preceding the
date for which such value is to be computed.
"Exercise Price" shall have the meaning set forth in Section 7 hereof.
--------------
"Exercise Rate" shall have the meaning set forth in Section 11 hereof.
-------------
"Expiration Date" shall have the meaning set forth in Section 7
---------------
hereof.
"Fair Market Value" shall mean, as to shares of Common Stock or any
-----------------
other class of capital stock or securities of the Company or any other issuer
which are publicly traded, the Current Market Price of such shares or
securities. The "Fair Market Value" of any security which is not publicly
traded or of any other property shall mean the fair value thereof as determined
by an independent investment banking firm experienced in the valuation of such
securities or property selected in good faith by the Board of Directors or a
committee thereof and reasonably acceptable to holders of a majority of the
Warrant Shares.
"Issue Date" shall mean February 23, 2000.
----------
"Market Price" when used with reference to shares of Common Stock or
------------
other securities on any date, shall mean (i) if such Common Stock or other
security is listed or authorized for trading on any national securities
exchange, the closing price of such Common Stock or other security on such date,
(ii) if such shares of Common Stock or other security are not so listed, the
price of the last trade, as reported on the Nasdaq National Market, not
identified as having been reported late to such system, or (iii) if such shares
of Common Stock or other securities are so traded as provided in clause (ii),
but not so quoted, the average of the last bid and ask prices, as those prices
are reported on the Nasdaq National Market, or (iv) if such shares of Common
Stock or other securities are not listed or authorized for trading on a national
securities exchange or the Nasdaq National Market or any comparable system, the
average of the closing bid and asked prices as furnished by two members of the
National Association of Securities Dealers, Inc. selected from time to time by
the Company for that purpose. If the Common Stock or such other securities are
not publicly held or so listed or publicly traded, "Market Price" shall mean the
Fair Market Value per share of Common Stock or of such other securities as
determined in good faith by the Board of Directors based on an opinion of an
independent investment banking firm experienced in the valuation of such
securities selected in good faith by the Board of Directors or a committee
thereof and reasonably acceptable to holders of a majority of the Warrant
Shares.
-2-
<PAGE>
"Outstanding" shall mean, when used with reference to Common Stock, at
-----------
any date as of which the number of shares thereof is to be determined, fully
diluted shares of Common Stock (calculated as prescribed by generally accepted
accounting principles), except shares then owned or held by or for the account
of the Company or any subsidiary thereof and except options shall not be
included until the same are exercised.
"Person" means any individual, firm, corporation, partnership or other
------
entity and shall include any successor (by merger or otherwise of such entity).
"Purchasers" shall have the meaning set forth in the first paragraph
----------
of this Agreement.
"Register Office" shall have the meaning set forth in Section 6
---------------
hereof.
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Senior Financial Officer" means the chief financial officer,
------------------------
principal accounting officer, treasurer or controller of the Company.
"Trading Day" means a Business Day or, if the Common Stock is listed
-----------
or admitted to trading on any national securities exchange or the Nasdaq
National Market, a day on which such exchange or the Nasdaq National Market is
open for the transaction of business.
"Transfer Agent" shall have the meaning set forth in Section 10
--------------
hereof.
"Transfer Notice" shall have the meaning set forth in Section 6
---------------
hereof.
"Warrant holder(s)" or "holders of Warrant certificates" means, in
----------------- -------------------------------
each case, registered holders of Warrant certificates.
"Warrants" shall have the meaning set forth in the Recitals.
--------
"Warrant Shares" shall have the meaning set forth in the Recitals.
--------------
SECTION 2. Warrant Certificates.
The Warrant certificates to be issued and delivered pursuant to this
Agreement shall be in registered form only and shall be substantially in the
form set forth in Exhibit A attached hereto.
SECTION 3. Issuance of Warrants.
The Company, simultaneously with the Closing (as defined in the
Purchase Agreement), shall deliver to the Purchasers duly executed Warrant
certificates registered in the name of the Purchasers for the purchase of an
aggregate of 307,298 shares of Common Stock, with each Purchaser receiving
Warrant certificates for the purchase of the number of shares of
-3-
<PAGE>
Common Stock set forth opposite the name of such Purchaser on Schedule A to the
Purchase Agreement.
SECTION 4. Execution of Warrant Certificates.
Warrant certificates evidencing Warrants to purchase initially an
aggregate of up to 307,298 shares of Common Stock shall be duly executed, on the
date of this Agreement, by the Company and delivered to the registered holder of
the Warrants in accordance with the provisions of Section 3 hereof. Warrant
certificates shall be signed on behalf of the Company by any two authorized
officers. Each such signature upon the Warrant certificates may be in the form
of a facsimile signature and may be imprinted or otherwise reproduced on the
Warrant certificates and, for that purpose, the Company may adopt and use the
facsimile signature of any person who shall have been an authorized officer,
notwithstanding the fact that at the time the Warrant certificates shall be
delivered or disposed of such person shall have ceased to hold such office. In
case any officer of the Company who shall have signed any of the Warrant
certificates shall cease to hold such office before such Warrant certificates
shall have been an authorized officer delivered or disposed of by the Company,
such Warrant certificates nevertheless may be delivered or disposed of as though
such person had not ceased to hold such office. Any Warrant certificate may be
signed on behalf of the Company by any person who, at the actual date of the
execution of such Warrant certificate, shall be a proper officer of the Company
to sign such Warrant certificate, although at the date of the execution of this
Agreement such person did not hold such office.
SECTION 5. Registration.
The Company shall number and register the Warrant certificates in a
register as they are issued by the Company. The Company may deem and treat the
registered holder(s) of the Warrant certificates as the absolute owner(s)
thereof (notwithstanding any notation of ownership or other writing thereon made
by anyone), for all purposes, and the Company shall not be affected by any
notice to the contrary.
SECTION 6. Registration of Transfers and Exchanges.
The Company shall cause to be kept at its principal corporate office
(the "Register Office") a register in which, subject to such reasonable
---------------
regulations as it may prescribe, the Company shall provide for the registration
of Warrant certificates and of transfers or exchanges of Warrant certificates at
the Warrant holder's option. The Company shall from time to time register the
transfer of any outstanding Warrant certificates upon the records to be
maintained by it for that purpose, upon surrender thereof. Upon any such
registration of transfer, a new Warrant certificate shall be issued to the
transferee(s) and the surrendered Warrant certificate shall be canceled by the
Company. Canceled Warrant certificates shall thereafter be disposed of in a
manner satisfactory to the Company in accordance with any applicable laws.
Whenever any Warrant certificates are surrendered for exchange, the Company
shall execute and deliver the Warrant certificates that the Warrant holder
making the exchange is entitled to receive. All Warrant certificates issued
upon any registration of transfer or exchange of Warrant certificates shall be
the valid obligations of the Company, evidencing the same obligations, and
entitled to
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<PAGE>
the same benefits under this Agreement, as the Warrant certificates surrendered
for such registration of transfer or exchange. Every Warrant certificate
surrendered for registration of transfer or exchange shall (if so required by
the Company) be duly endorsed, or be accompanied by a written instrument of
transfer in the form of Exhibit B attached hereto, duly executed by the Warrant
holder or his attorney duly authorized in writing. No service charge will be
made for any registration of transfer or exchange upon surrender of Warrant
certificates or any issuance of Warrant certificates pursuant to Section 3 or
this Section 6, but the Company may require payment of a sum sufficient to cover
any stamp or other governmental charge or tax which may be imposed in connection
with any such transfer or exchange. Any Warrant certificate when duly endorsed
in blank (with signature guaranteed) shall be deemed negotiable. The holder of
any Warrant certificate duly endorsed in blank may be treated by the Company and
all other Persons dealing therewith as the absolute owner thereof for any
purpose and as the Person entitled to exercise the rights represented thereby,
or to the transfer thereof on the register of Warrants maintained by the
Company, any notice to the contrary notwithstanding; but until such transfer on
such register, the Company may treat the registered Warrant holder as the owner
for all purposes. In addition to any other legend which may be required by
applicable law, each Warrant certificate representing Warrants and each
certificate representing Warrant Shares issued upon exercise of the Warrant
shall have endorsed, to the extent appropriate, upon its face the following
words:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR THE SECURITIES LAWS OF ANY JURISDICTION. SUCH SECURITIES MAY NOT
BE OFFERED, SOLD, TRANSFERRED, PLEDGED, ASSIGNED, ENCUMBERED,
HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO (I) A
REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES THAT IS
EFFECTIVE UNDER SUCH ACT OR APPLICABLE STATE SECURITIES LAW, OR (II)
ANY EXEMPTION FROM REGISTRATION UNDER SUCH ACT, OR APPLICABLE STATE
SECURITIES LAW, RELATING TO THE DISPOSITION OF SECURITIES, INCLUDING
RULE 144 PROVIDED, IF SO REQUESTED BY THE COMPANY, AN OPINION OF
--------
COUNSEL IS FURNISHED TO THE COMPANY, IN FORM AND SUBSTANCE REASONABLY
SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE ACT AND/OR APPLICABLE STATE
SECURITIES LAW IS AVAILABLE.
Prior to any transfer or attempted transfer of any Warrants, the
holder of such Warrants shall give 10 days' prior written notice (a "Transfer
--------
Notice") to the Company of such holder's intention to effect such transfer,
- ------
describing the manner and circumstances of the proposed transfer, and, if
requested by the Company, obtain from counsel to such holder, who shall be
reasonably satisfactory to the Company, an opinion that the proposed transfer of
such Warrants may be effected without registration under the Securities Act.
After receipt of the
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<PAGE>
Transfer Notice and opinion, the Company shall, within five days thereof, so
notify the holder of such Warrants and such holder shall thereupon, subject to
compliance with the other restrictions on transfer contained herein, be entitled
to transfer such Warrants, in accordance with the terms of the Transfer Notice.
Each Warrant issued upon such transfer shall bear the restrictive legends set
forth above, unless, in the opinion of counsel to such holder (which opinion
must be reasonably satisfactory to the Company and its counsel), such legend is
not required in order to ensure compliance with the Securities Act. The holder
of the Warrants giving the Transfer Notice shall not be entitled to transfer
such Warrants until receipt of notice from the Company under this Section 6.
SECTION 7. Terms Of Warrants; Exercise Of Warrants.
Subject to the terms of this Agreement, the Warrants may be exercised
at any time after the date hereof in whole and from time to time in part until
5:00 p.m. (ET) on February 23, 2008 (the "Expiration Date"). Each Warrant, when
---------------
exercised in accordance with the terms hereof and upon payment in cash of the
exercise price of $22.448 per share (the "Exercise Price") will entitle the
--------------
holder thereof to acquire from the Company (and the Company shall issue to such
holder of a Warrant) one fully paid and nonassessable share of the Company's
authorized but unissued Common Stock (subject to adjustment as provided in
Section 11). No cash dividend shall be paid to a holder of Warrant Shares
issuable upon the exercise of Warrants unless such holder was, as of the record
date for the declaration of such dividend, the record holder of such Warrant
Shares.
A Warrant may be exercised upon surrender to the Company at the
Register Office of the certificate or certificates evidencing the Warrants to be
exercised with the form of election to purchase on the reverse thereof duly
filled in and signed, together with payment to the Company of the Exercise Price
for each Warrant Share then exercised.
In lieu of payment of the Exercise Price pursuant to the preceding
paragraph, the Warrant holder shall have the right to require the Company to
convert the Warrants, in whole or in part and at any time or times (the
"Conversion Right"), into shares of Common Stock by surrendering to the Company
----------------
the certificate or certificates evidencing the Warrant to be converted with the
form of notice of conversion on the reverse thereof duly filled in and signed.
Upon exercise of the Conversion Right, the Company shall deliver to the Warrant
holder (without payment by the holder of the Warrant of any Exercise Price) that
number of shares of Common Stock which is equal to the quotient obtained by
dividing (x) the value of the number of Warrants being exercised at the time the
Warrants are exercised (determined by subtracting the aggregate Exercise Price
for all such Warrants immediately prior to the exercise of the Warrants from the
aggregate Current Market Price (as defined in Section 11) of that number of
Warrant Shares purchasable upon exercise of such Warrants immediately prior to
the exercise of the Warrants (taking into account all applicable adjustments
pursuant to Section 11) by (y) the Current Market Price of one share of Common
Stock immediately prior to the exercise of the Warrants.
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<PAGE>
Subject to the provisions of Section 8 hereof, upon surrender of the
Warrant certificate or certificates, the Company shall issue and deliver with
all reasonable dispatch, to or upon the written order of the Warrant holder and
in such name or names as the Warrant holder may designate, a certificate or
certificates for the number of Warrant Shares issuable or other securities or
property to which such holder is entitled hereunder upon the exercise of such
Warrants, including, at the Company's option, any cash payable in lieu of
fractional interests as provided in Section 12 hereof. Such certificate or
certificates shall be deemed to have been issued and any Person so designated to
be named therein shall be deemed to have become a holder of record of such
Warrant Shares as of the date of the surrender of such Warrants and payment of
the Exercise Price. The Company may issue fractional shares of Common Stock
upon exercise of any Warrants in accordance with Section 12 hereof.
The Warrants shall be exercisable on or prior to the Expiration Date,
at the election of the holders thereof, either at any time in whole or from time
to time in part (in whole shares) and, in the event that a certificate
evidencing Warrants is exercised in respect of fewer than all of the Warrant
Shares issuable on exercise of such certificate at any time prior to the
Expiration Date, a new certificate evidencing the remaining Warrant or Warrants
will be issued, and the Company will duly execute and deliver the required new
Warrant certificate or certificates pursuant to the provisions of Section 4 and
this Section 7.
All Warrant certificates surrendered upon exercise of Warrants shall
be canceled by the Company. Such canceled Warrant certificates shall then be
disposed of in a manner satisfactory to the Company and in accordance with any
applicable law. The Company shall account promptly in writing with respect to
Warrants exercised and all monies received for the purchase of the Warrant
Shares through the exercise of such Warrants. In the event that the Company
shall purchase or otherwise acquire Warrants, the Company may elect to have the
Warrants canceled and retired. The Company shall keep copies of this Agreement
and any notices given or received hereunder available for inspection by the
registered Warrant holders during normal business hours and upon reasonable
notice at the Register Office.
SECTION 8. Payment of Taxes.
The Company will pay all taxes and other governmental charges
attributable to the initial issuance of Warrant Shares upon the exercise of
Warrants; provided, however, that the Company shall not be required to pay any
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such taxes or charges which may be payable in respect of any transfer involved
in the issue of any Warrant certificates or any certificates for Warrant Shares
in a name other than that of the registered holder of a Warrant certificate
surrendered upon the exercise of a Warrant, and the Company shall not be
required to issue or deliver such Warrant certificates unless or until the
Person or Persons requesting the issuance thereof shall have paid to the Company
the amount of such taxes or charges or shall have established to the
satisfaction of the Company that such taxes or charges have been paid.
SECTION 9. Mutilated or Missing Warrant Certificates.
In case any of the Warrant certificates shall be mutilated, lost,
stolen or destroyed, the Company may in its discretion issue in exchange and
substitution for and upon cancellation
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<PAGE>
of the mutilated Warrant certificate, or in lieu of and substitution for the
Warrant certificate lost, stolen or destroyed, a new Warrant certificate of like
tenor and representing an equivalent number of Warrants, but only upon receipt
of evidence reasonably satisfactory to the Company of such loss, theft or
destruction of such Warrant certificate and indemnity and security therefor, if
requested, also reasonably satisfactory to the Company. Applicants for such
substitute Warrant certificates shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Company may prescribe.
SECTION 10. Reservations of Warrant Shares.
The Company (i) shall at all times reserve and keep available, free
from preemptive rights, out of the aggregate of its authorized but unissued
Common Stock, for the purpose of enabling it to satisfy any obligation to issue
Warrant Shares upon exercise of Warrants, the maximum number of shares of Common
Stock which would then be deliverable upon the exercise of all outstanding
Warrants if all such outstanding Warrants were then exercisable and (ii) shall
not take any action which results in any adjustment of the number of Warrant
Shares if the total number of Warrant Shares issuable after the action upon the
exercise of all of the Warrant Shares would exceed the total number of shares of
Common Stock then authorized by the Company's certificate of incorporation and
available for the purpose of issue upon such exercise.
The transfer agent for the Preferred Stock (which may be the Company
if it is acting as transfer agent) (the "Transfer Agent") and every subsequent
--------------
transfer agent for any shares of the Company's capital stock issuable upon the
exercise of any of the rights of purchase aforesaid will be irrevocably
authorized and directed at all times to reserve such number of authorized shares
as shall be required for such purpose. The Company will keep a copy of this
Agreement on file with the Transfer Agent for any shares of the Company's
capital stock issuable upon the exercise of the rights of purchase represented
by the Warrants. The Company will supply such Transfer Agent with duly executed
stock certificates for purposes of honoring all outstanding Warrants upon
exercise thereof in accordance with the terms of this Agreement and the Company
will provide or otherwise make available any cash which may be payable as
provided in Section 12 hereof. The Company will furnish such Transfer Agent a
copy of all notices of adjustments and certificates related thereto which are
transmitted to each Warrant holder pursuant to Section 13 hereof.
The Company covenants that all Warrant Shares which may be issued upon
exercise of Warrants have been duly authorized and will, upon payment of the
Exercise Price or upon the exercise of the Conversion Right and issuance, be
duly and validly issued, fully paid and nonassessable, free of preemptive rights
and free from all taxes, liens, charges and security interests with respect to
the issue thereof.
SECTION 11. Adjustment of Number of Warrant Shares.
(a) Initial Exercise. Each Warrant will initially be exercisable by
the holder thereof into one share of Common Stock at the Exercise Price.
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<PAGE>
(b) Adjustment to Exercise Price for Stock Dividends and for
Combinations or Subdivisions of Common Stock.
(i) In case the Company shall at any time or from time to time
after the Closing Date (A) pay a dividend or make a distribution on the
outstanding shares of Common Stock in shares of Common Stock, (B) subdivide or
split the outstanding shares of Common Stock, (C) combine or reclassify the
outstanding shares of Common Stock into a smaller number of shares or (D) issue
by reclassification of the shares of Common Stock any shares of capital stock of
the Company, then, and in each such case, the Exercise Price in effect
immediately prior to such event or the record date therefor, whichever is
earlier, shall be adjusted so that the holder of any Warrants thereafter
exercised shall be entitled to receive the number of shares of Common Stock or
other securities of the Company which after the happening of any of the events
described above such Warrants would have been exercisable had such Warrants been
exercised immediately prior to the happening of such event or the record date
therefor, whichever is earlier. An adjustment made pursuant to this clause (i)
shall become effective (x) in the case of any such dividend or distribution,
immediately after the close of business on the record date for the determination
of holders of shares of Common Stock entitled to receive such dividend or
distribution, or (y) in the case of such subdivision, split, reclassification or
combination, at the close of business on the day upon which such corporate
action becomes effective. Such adjustment shall be made successively whenever
an event listed above shall occur. No adjustment shall be made pursuant to this
clause (i) in connection with any transaction to which clause (c) applies.
(ii) In case the Company shall issue shares of Common Stock (or
rights, warrants or other securities convertible into or exercisable or
exchangeable for shares of Common Stock) (collectively, "Additional Shares")
-----------------
after the Closing Date at a price per share (or having a conversion or exercise
price per share) less than the Current Market Price as of the date of issuance
of such shares (or, in the case of convertible or exchangeable securities, less
than the Current Market Price as of the date of issuance of the rights, warrants
or other securities in respect of which shares of Common Stock were issued),
then, and in each such case, the Exercise Price shall be reduced to an amount
determined by multiplying (A) the Exercise Price in effect on the day
immediately prior to the date of issuance of such Additional Shares by (B) a
fraction, the numerator of which shall be the sum of (1) the number of shares of
Common Stock Outstanding immediately prior to such sale or issue multiplied by
the then applicable Current Market Price per share and (2) the aggregate
consideration receivable by the Company for the total number of shares of Common
Stock so issued (or into or for which the rights, warrants or other convertible
securities may convert or be exercisable or exchangeable), and the denominator
of which shall be the sum of (x) the total number of shares of Common Stock
Outstanding immediately prior to such sale or issue and (y) the number of
Additional Shares issued (or into or for which the rights, warrants or
convertible securities may be converted, exercised or exchanged), multiplied by
the Current Market Price. An adjustment made pursuant to this clause (ii) shall
be made on the next Business Day following the date on which any such issuance
is made and shall be effective retroactively to the close of business on the
date of such issuance of Additional Shares. For purposes of this clause (ii),
the aggregate consideration receivable by the Company in connection with the
issuance of shares of Common Stock or of rights, warrants or convertible
securities shall be deemed to be equal to the sum of the aggregate offering
price
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<PAGE>
(before deduction of underwriting discounts or commissions and expenses payable
to third parties) of all such Common Stock, rights, warrants and convertible
securities plus the aggregate amount (as determined on the date of issuance), if
any, payable upon exercise or conversion of any such rights, warrants and
convertible securities into shares of Common Stock. If, subsequent to the date
of issuance of such right, warrants or other convertible securities, the
exercise or conversion price thereof is reduced, such aggregate amount shall be
recalculated and the Exercise Price shall be adjusted retroactively to give
effect to such reduction. On the expiration of any option or the termination of
any right to convert or exchange any securities into Additional Shares, the
Exercise Price then in effect hereunder shall forthwith be increased to the
Exercise Price which would have been in effect at the time of such expiration or
termination (but taking into account other adjustments made following the time
of issuance of such securities) had such security, to the extent outstanding
immediately prior to such expiration or termination, never been issued. In case
any portion of the consideration to be received by the Company shall be in a
form other than cash, the Fair Market Value of such non-cash consideration shall
be utilized in the foregoing computation. If Common Stock is sold as a unit with
other securities, the aggregate consideration received for such Common Stock
shall be deemed to be net of the Fair Market Value of such other securities. The
issuance or reissuance of (i) any shares of Common Stock or rights, warrants or
other securities convertible into shares of Common Stock (whether treasury
shares or newly issued shares) (A) pursuant to a dividend or distribution on, or
subdivision, split, combination or reclassification of, the outstanding shares
of Common Stock requiring an adjustment in the Exercise Price pursuant to clause
(i) of this clause (b); (B) pursuant to any restricted stock or stock option
plan or stock purchase program of the Company involving the grant of options or
rights to acquire Common Stock to directors, officers and employees and, in the
case of options, consultants and service providers, of the Company and its
subsidiaries so long as (x) the granting of such options or rights has been
approved by the Board of Directors and (y) the aggregate consideration
receivable by the Company in connection with such options shall be no less than
fair market value, as determined by the Board of Directors, and in connection
with such rights under the employee stock purchase plan of the Corporation shall
be no less than 85% of the fair market value, as determined by the Board of
Directors, of the Common Stock underlying such options or rights on the date of
grant; (C) pursuant to any option, warrant, right, or convertible security
outstanding as of the Closing Date, or (ii) the Series A Preferred Stock
issuable pursuant to the Purchase Agreement and any shares of Common Stock
issuable upon conversion or exercise thereof, shall not be deemed to constitute
an issuance of Common Stock or convertible securities by the Company to which
this clause (b)(ii) applies; provided that, notwithstanding clause (i)(C), the
Exercise Price shall be appropriately reduced to the extent that the number of
shares into which any such security may be converted, exercised or exchanged is
increased or the price therefor is reduced after the Issue Date. No adjustment
shall be made pursuant to this clause (b)(ii) in connection with any transaction
to which clause (c) applies.
(iii) In case the Company shall fix a record date for the issuance on
a pro rata basis of rights, options or warrants to the holders of its Common
Stock (or other securities convertible into or exercisable or exchangeable for
shares of Common Stock) entitling such holders to subscribe for or purchase
shares of Common Stock (or securities convertible into or exercisable or
exchangeable for shares of Common Stock) at a price per share of Common
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<PAGE>
Stock (or having a conversion, exercise or exchange price per share of Common
Stock, in the case of a security convertible into, or exerciseable or
exchangeable for, shares of Common Stock) less than the Current Market Price on
such record date, the maximum number of shares of Common Stock issuable upon
exercise of such rights, options or warrants (or conversion of such convertible
securities) shall be deemed to have been issued and outstanding as of such
record date and the Exercise Price shall be adjusted pursuant to paragraph
11(b)(ii) hereof, as though such maximum number of shares of Common Stock had
been so issued for an aggregate consideration payable by the holders of such
rights, options, warrants or other securities prior to their receipt of such
shares of Common Stock. Such adjustment shall be made successively whenever such
record date is fixed; and in the event that such rights, options or warrants are
not so issued or expire in whole or in part unexercised, or in the event of a
change in the number of shares of Common Stock to which the holders of such
rights, options or warrants are entitled (other than pursuant to adjustment
provisions therein comparable to those contained in this paragraph 11(b)), the
Exercise Price shall again be adjusted as follows: (A) in the event that all of
such rights, options or warrants expire unexercised, the Exercise Price shall be
the Exercise Price that would then be in effect if such record date had not been
fixed; (B) in the event that less than all of such rights, options or warrants
expire unexercised, the Exercise Price shall be adjusted pursuant to paragraph
11(b)(ii) to reflect the maximum number of shares of Common Stock issuable upon
exercise of such rights, options or warrants that remain outstanding (without
taking into effect shares of Common Stock issuable upon exercise of rights,
options or warrants that have lapsed or expired); and (C) in the event of a
change in the number of shares of Common Stock to which the holders of such
rights, options or warrants are entitled, the Exercise Price shall be adjusted
to reflect the Exercise Price which would then be in effect if such holder had
initially been entitled to such changed number of shares of Common Stock.
Notwithstanding the foregoing, in case the Company shall issue rights, options
or warrants ("Stockholder Rights") to all holders of its Common Stock
------------------
entitling the holders thereof to subscribe for or purchase shares of Common
Stock, which rights or warrants (i) are deemed to be transferred with such
shares of Common Stock, (ii) are not exercisable and (iii) are also issued in
respect of future issuances of Common Stock, in each case in clauses (i) through
(iii) until the occurrence of a specified event or event ("Trigger Event"),
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such Stockholder Rights shall for purposes of this clause (iii) not be deemed
issued or distributed until the occurrence of the earliest Trigger Event and the
conversion price shall not be reduced until the occurrence of such earliest
Trigger Event.
(iv) In case the Company shall fix a record date for the making of a
distribution to all holders of any class of Common Stock (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing corporation) of evidences of indebtedness, assets or
other property, the Exercise Price to be in effect after such record date shall
be determined by multiplying the Exercise Price in effect immediately prior to
such record date by a fraction, (A) the numerator of which shall be the Exercise
Price immediately prior to such distributions less the Fair Market Value of the
portion of the assets, other property or evidence of indebtedness so to be
distributed which is applicable to one share of Common Stock and (B) the
denominator of which shall be the Exercise Price immediately prior to such
distributions. Such adjustments shall be made successively whenever such a
record date is fixed; and in the event that such distribution is not so made,
the Exercise Price shall again be adjusted to be the Exercise Price which would
then be in effect if such record
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<PAGE>
date had not been fixed. An adjustment to the Exercise Price also shall be made
in respect of dividends and distributions paid exclusively in cash to all
holders of any class of Common Stock (excluding any dividend or distribution in
connection with the Liquidation (as defined in the Certificate of Designation
for the Series A Convertible Preferred Stock of the Company) of the Company and
any cash that is distributed upon a merger, consolidation or other transaction
for which an adjustment pursuant to paragraph 11(c) is made) or in the case
where the Company effects any repurchase of its Common Stock where the sum of
(1) all such cash dividends and distributions made within the preceding 12
months in respect of which no adjustment has been made and (2) any cash and the
Fair Market Value of other consideration paid in respect of any repurchases of
Common Stock by the Company or any of its subsidiaries within the preceding 12
months in respect of which no adjustment has been made, exceeds 5% of the
Company's market capitalization (being the product of the then Current Market
Price of the Common Stock times the aggregate number of shares of Common Stock
then outstanding on the record date for such distribution). The Exercise Price
to be in effect after such adjustment shall be determined by subtracting from
the Exercise Price in effect prior to such adjustment an amount equal to the
quotient of (A) the sum of clause (1) and clause (2) above and (B) the number of
shares of Common Stock outstanding on the date such adjustment is to be
determined.
(v) The term "dividend," as used in this clause (b), shall
mean a dividend or other distribution upon the capital stock of the Company.
(vi) Anything in this clause (b) to the contrary
notwithstanding, the Company shall not be required to give effect to any
adjustment in the Exercise Price unless and until the net effect of one or more
adjustments (each of which shall be carried forward), determined as above
provided, shall have resulted in a change of the Exercise Price such that the
number of shares of Common Stock receivable upon the exercise of each Warrant
would differ by at least one two-hundredth of one share of Common Stock, and
when the cumulative net effect of more than one adjustment so determined shall
be to change the Exercise Price by at least one two-hundredth of one share of
Common Stock, such change in Exercise Price shall thereupon be given effect. All
calculations under this Section 11 shall be made to the nearest four decimal
points.
(vii) The certificate of any firm of independent public
accountants of recognized national standing selected by the Board of Directors
of the Company (which may be the firm of independent public accountants
regularly employed by the Company) shall be presumptively correct for any
computation made under this clause (b).
(viii) If the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or other
distribution, and shall thereafter and before the distribution to stockholders
legally abandon its plan to pay or deliver such dividend or distribution, then
thereafter no adjustment in the number of shares of Common Stock issuable upon
exercise of the right of Exercise granted by this clause (b) or in the Exercise
Price then in effect shall be required by reason of the taking of such record.
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<PAGE>
(ix) If any event occurs as to which the provisions of this
Section 11(b) are not strictly applicable or if strictly applicable would not
fairly protect the rights of the holders of the Warrants in accordance with the
essential intent and principles of such provisions, the Board of Directors shall
make an adjustment in the application of such provisions, in accordance with
such essential intent and principles, so as to protect such rights of the
holders of the Warrants
(c) Adjustment in connection with Reclassification and Reorganization.
In the case of any consolidation or merger or reclassification in connection
therewith of the Company with or into another corporation (a "Transaction")
occurring at any time, each Warrant then outstanding shall thereafter be
exercisable for, in lieu of the Common Stock issuable upon such conversion prior
to consummation of such Transaction, the kind and amount of shares of stock and
other securities and property receivable (including cash) upon the consummation
of such Transaction by a holder of that number of shares of Common Stock for
which such Warrant was exercisable immediately prior to such Transaction. In
case securities or property other than Common Stock shall be issuable or
deliverable upon conversion as aforesaid, then all references in this Section 11
shall be deemed to apply, so far as appropriate and nearly as may be, to such
other securities or property. The Company, or the person formed by the
consolidation or resulting from the merger or which acquires such assets or
which acquires the Company's shares, as the case may be, shall make provisions
in its certificate or articles of incorporation or other constituent document to
establish such rights and such rights shall be clearly provided for in the
definitive transaction documents relating to such Transaction. The certificate
or articles of incorporation or other constituent document shall provide for
adjustments, which, for events subsequent to the effective date of the
certificate or articles of incorporation or other constituent document, shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Section 11. The provisions of this Section 11(c) shall similarly apply to
successive reclassifications, consolidations, mergers, sales, transfers or share
exchanges.
(d) No Amendments. The Company will not, by amendment of its
certificate of incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Agreement, but will at all times in good faith
assist in the carrying out of all such terms and in the taking of all such
action as may be necessary or appropriate in order to protect the rights of the
Warrant holders thereof against dilution or other impairment. Without limiting
the generality of the foregoing, the Company (i) will take all such action as
may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock on the
exercise of the Warrants from time to time outstanding and (ii) will not take
any action which results in any adjustment of the number of Warrant Shares if
the total number of shares of Common Stock issuable after the action upon the
exercise of all of the Warrants would exceed the total number of shares of
Common Stock then authorized by the Company's certificate of incorporation and
available for the purposes of issue upon such exercise.
(e) Voluntary Increases. The Company may, but shall not be obligated
to, make such increases in the number of Warrant Shares, in addition to those
required by paragraphs (a) through (c) of this Section 11, as it considers to be
advisable in order that any
-13-
<PAGE>
event treated for United States federal income tax purposes as a dividend of
stock or stock rights shall not be taxable to the recipients or if that is not
possible, to diminish any income taxes that are otherwise payable because of
such event.
(f) When Issuance or Payment May Be Deferred. In any case in which
this Section 11 shall require that an adjustment in the Exercise Price be made
effective as of a record date for a specified event, the Company may elect to
defer until the occurrence of such event (i) issuing to the holder of any
Warrant exercised after such record date the Warrant Shares and other capital
stock of the Company, if any, issuable upon such exercise over and above the
Warrant Shares and other capital stock of the Company, if any, issuable upon
such exercise on the basis of the Exercise Price and (ii) paying to such holder
any amount in cash in lieu of a fractional share pursuant to Section 13 hereof;
provided, however, that the Company shall deliver to such holder a due bill or
- -------- -------
other appropriate instrument evidencing such holder's right to receive such
additional Warrant Shares, other capital stock and cash upon the occurrence of
the event requiring such adjustment.
(g) Form of Warrants. Irrespective of any adjustments in the
Exercise Price or kind of shares or other assets purchasable upon the exercise
of the Warrants, Warrants theretofore or thereafter issued may continue to
express the same price and number and kind of shares or other assets as are
stated in the Warrants initially issuable pursuant to this Agreement.
(h) Other Dilutive Events. If any corporate action shall occur as to
which the provisions of this Section 11 are not strictly applicable but as to
which the failure to make any adjustment would adversely affect the purchase
rights or value represented by the Warrants in accordance with the essential
intent and principles of such Section 11 (which are to place the Warrant holder
in a position as nearly equal as possible to the position the Warrant holder
would have occupied had the Warrant holder purchased shares of Common Stock on
the date hereof) then, in each such case, the Company shall appoint a firm of
independent certified public accountants of recognized national standing (which
may be the regular auditors of the Company) to give their opinion upon the
adjustment, if any, on a basis consistent with the essential intent and
principles established in this Section 11, necessary to preserve, without
dilution, the purchase rights represented by Warrants. Upon receipt of such
opinion, the Company will promptly mail a copy thereof to Warrant holders and
will make the adjustments described therein.
(i) Adjustment in Warrant Shares. Except in connection with an
adjustment pursuant to 11(c), upon each adjustment in the Exercise Price of
which a Warrant is exercisable pursuant to this Section 11, the number of
Warrant Shares covered by such Warrant shall be adjusted to equal a number of
shares of Common Stock equal to the number of Warrant Shares before such
adjustment multiplied by a fraction, of which the numerator is the Exercise
Price before giving effect to such adjustment and the denominator of which is
the Exercise Price immediately after giving effect to such adjustment.
-14-
<PAGE>
SECTION 12. Fractional Interests.
The Company shall not be required to issue fractional Warrant Shares
on the exercise of Warrants, although it may do so in its sole discretion. If
more than one Warrant shall be presented for exercise in full at the same time
by the same holder, the number of full Warrant Shares which shall be issuable
upon the exercise thereof shall be computed on the basis of the aggregate number
of Warrant Shares purchasable on exercise of the Warrants so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section 13,
be issuable upon the exercise of any such Warrants (or specified portion
thereof), the Company shall pay to the Warrant holder an amount in cash equal to
the Market Price per Warrant Share, as determined on the day immediately
preceding the date the Warrant is presented for exercise, multiplied by such
fraction, computed to the nearest whole cent.
SECTION 13. Notices to Warrant Holders; Rights of Warrant Holders.
Upon any adjustment of the number of Warrant Shares pursuant to
Section 11 hereof, the Company shall promptly thereafter (i) file with the
Register Office a certificate of the Senior Financial Officer of the Company
(unless the Purchasers request a certificate of a firm of independent public
accountants of recognized standing selected by the Board of Directors (who may
be the regular auditors of the Company)) setting forth the number of Warrant
Shares (or portion thereof) issuable after such adjustment, upon exercise of a
Warrant and (ii) give to each of the registered holders of the Warrant
certificates at its address appearing on the Warrant register written notice of
such adjustments by first-class mail, postage prepaid. Where appropriate, such
notice may be given in advance and included as a part of the notice required to
be mailed under the other provisions of this Section 13.
In case the Company shall authorize:
(a) the issuance of any dividend or other distribution on the Common
Stock, whether in cash, capital stock, or other securities, evidences of
indebtedness or other property; or
(b) any action which would require an adjustment of the number of
Warrant Shares pursuant to Section 11 hereof; or
(c) any tender offer or exchange offer by the Company for shares of
Common Stock, or Common Stock open market repurchase program; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall cause to be filed with the Register Office and shall give
to each of the registered holders of the Warrant certificates at the address
appearing on the Warrant register, a written notice by first-class mail, postage
prepaid, at least 20 days (or 10 days in any case specified in clause (b) above)
prior to the applicable record date hereinafter specified, or, in the
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<PAGE>
case of events for which there is no record date, at least 20 business days
before the effective date of such event or the commencement of such tender
offer, exchange offer, or repurchase program. Any written notice provided
pursuant to this Section 13 shall state (i) the date as of which the holders of
record of shares of Common Stock are entitled to receive any such rights,
options, warrants or distribution are to be determined, or (ii) the commencement
date of any tender offer, exchange offer or repurchase program for shares of
Common Stock, or (iii) the date on which any such consolidation, merger,
conveyance, transfer, reclassification, dissolution, liquidation or winding up
is expected to become effective or consummated, and the date as of which it is
expected that holders of record of shares of Common Stock shall be entitled to
exchange such shares for securities or other property, if any, deliverable upon
such consolidation, merger, conveyance, transfer, reclassification, dissolution,
liquidation or winding up. The failure to give the notice required by this
Section 13 or any defect therein shall not affect the legality or validity of
any issuance, right, option, warrant, distribution, tender offer, exchange
offer, repurchase program, consolidation, merger, conveyance, transfer,
reclassification, dissolution, liquidation or winding up, or the vote upon any
action.
Nothing contained in this Agreement or in any of the Warrant
certificates shall be construed as conferring upon the holders thereof the right
to vote or to consent or to receive notice of meetings of stockholders or the
election of Directors of the Company or any other matter, or any other rights of
stockholders of the Company, including any right to receive dividends. In
addition, the holders of Warrant certificates shall have no preemptive rights
and shall not be entitled to share in the assets of the Company in the event of
the liquidation, dissolution or winding up of the Company's affairs.
SECTION 14. Obtaining Stock Exchange Listings.
The Company shall also from time to time take all action reasonably
necessary so that the Warrant Shares, immediately upon their issuance upon the
exercise of Warrants, will be listed on or quoted on the Nasdaq National Market
or any securities exchange or interdealer quotation system within the United
States, if any, on which other shares of Common Stock are then listed or quoted.
SECTION 15. Notices To The Company.
Any notice or demand authorized by this Agreement to be given or made
by the Company or by the registered holder of any Warrant certificate to the
Company shall be sufficiently given or made when deposited in the mail, first
class or registered, postage prepaid, addressed, as follows:
Optika Inc.
7450 Campus Drive, 2/nd/ Floor
Colorado Springs, CO 80920
Attention: Chief Financial Officer
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<PAGE>
SECTION 16. Supplements And Amendments.
The Company may from time to time supplement or amend this Agreement
without the approval of any holders of Warrant certificates in order to cure any
ambiguity or to correct or supplement any provision contained herein which may
be defective or inconsistent with any other provision herein, or to make any
other provisions in regard to matters or questions arising hereunder which the
Company may deem necessary or desirable and which shall not in any way adversely
affect the interests of the holders of Warrant certificates. Any amendment or
supplement to this Agreement that has an adverse effect on the interests of
holders of Warrant certificates shall require the written consent of registered
holders of two-thirds of the then outstanding Warrants. The consent of each
holder of a Warrant affected shall be required for any amendment pursuant to
which the Exercise Price would be increased or the number of Warrant Shares for
or into which a Warrant may be exercised or convertible would be decreased.
SECTION 17. Successors.
All the covenants and provisions of this Agreement by or for the
benefit of the Company shall bind and inure to the benefit of their respective
successors and assigns hereunder.
SECTION 18. Termination.
This Agreement shall terminate on the earlier of date on which all
Warrants have been exercised or after 5:00 p.m. (ET) on the Expiration Date.
SECTION 19. Governing Law.
THIS AGREEMENT AND EACH WARRANT CERTIFICATE ISSUED HEREUNDER SHALL BE
---------------------------------------------------------------------
DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK WITHOUT
- ----------------------------------------------------------------------------
REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
- ------------------------------------------
SECTION 20. Benefits of This Agreement.
Nothing in this Agreement shall be construed to give to any Person
other than the Company and the registered holders of Warrant certificates any
legal or equitable right, remedy or claim under this Agreement; but this
Agreement shall be for the sole and exclusive benefit of the Company and the
registered holders of the Warrant certificates.
SECTION 21. Headings.
The descriptive headings of the several Sections and paragraphs of
this Agreement inserted for convenience only, do not constitute a part of this
Agreement and shall not affect in any way the meanings or interpretation of this
Agreement.
-17-
<PAGE>
SECTION 22. Submission to Jurisdiction.
If any action, proceeding or litigation shall be brought by the
Purchaser or any holder of Warrants in order to enforce any right or remedy
under this Agreement, the Company hereby consents and will submit, and will
cause each of its subsidiaries to submit, to the jurisdiction of any state or
federal court of competent jurisdiction sitting within the area comprising the
Southern District of New York on the date of this Agreement. The Company hereby
irrevocably waives any objection, including, but not limited to, any objection
to the laying of venue or based on the grounds of forum non conveniens, which it
----- --- ----------
may now or hereafter have to the bringing of any such action, proceeding or
litigation in such jurisdiction.
SECTION 23. Waiver of jury trial.
THE PARTIES TO THIS AGREEMENT HEREBY WAIVE ANY RIGHT THEY MAY HAVE TO
---------------------------------------------------------------------
A TRIAL BY JURY IN RESPECT OF ANY ACTION, PROCEEDING OR LITIGATION DIRECTLY OR
- ------------------------------------------------------------------------------
INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OF
- --------------------------------------------------------------------------------
THE WARRANTS.
- -------------
SECTION 24. Service of Process.
Nothing herein shall affect the right of any holder of a Warrant or
Warrant Share to serve process in any other manner permitted by law or to
commence legal proceedings or otherwise proceed against the Company in any other
jurisdiction.
SECTION 25. Counterparts.
This Agreement may be executed in any number of counterparts and each
of such counterparts shall for all purposes be deemed to be an original, and all
such counterparts shall together constitute but one and the same instrument.
-18-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
OPTIKA INC.
By:_______________________________
Name:
Title:
-19-
<PAGE>
PURCHASERS
- ----------
THOMAS WEISEL CAPITAL PARTNERS, L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By:_________________________________________________________
Name:
Title:
TWP CEO FOUNDERS' CIRCLE (AI), L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By:_________________________________________________________
Name:
Title:
TWP CEO FOUNDERS' CIRCLE (QP), L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By:_________________________________________________________
Name:
Title:
THOMAS WEISEL CAPITAL PARTNERS EMPLOYEE FUND, L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By:_________________________________________________________
Name:
Title:
TWP 2000 C0-INVESTMENT FUND, L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By:_________________________________________________________
Name:
Title:
[Purchasers' Signature Page -- Warrant Agreement]
-20-
<PAGE>
PURCHASERS
- ----------
RKB CAPITAL, L.P.
By:____________________________________
Name: Peter Schleider
Title: General Partner
[Purchasers Signature Page - Warrant Agreement]
-21-
<PAGE>
EXHIBIT A
Form of Warrant Certificate
[Face]
No. ____
Warrant Certificate
OPTIKA INC.
This Warrant Certificate certifies that _____________, or registered
assigns, is the registered holder of Warrants (the "Warrants") to purchase an
--------
aggregate of _________ shares of Common Stock, par value $.001 per share (the
"Common Stock"), of OPTIKA INC. a Delaware corporation (the "Company"). Each
------------ -------
Warrant entitles the holder upon exercise to purchase from the Company at any
time after the date hereof a fully paid and nonassessable share of Common Stock
(a "Warrant Share") upon surrender of this Warrant Certificate and payment in
-------------
full for such Warrant Share at the Register Office of the Company, subject to
the conditions set forth herein and in the Warrant Agreement referred to on the
reverse hereof. The number of Warrant Shares purchasable upon exercise thereof
are subject to adjustment upon the occurrence of certain events set forth in the
Warrant Agreement.
Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse hereof, which provisions shall for all
purposes have the same effect as though fully set forth at this place.
This Warrant Certificate shall not be valid unless authenticated by
countersignature of the Warrant Agent, as such term is used in the Warrant
Agreement.
THIS WARRANT CERTIFICATE SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE
----------------------------------------------------------------------
WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF
- --------------------------------------------------------------------------
CONFLICTS OF LAWS.
- ------------------
EXERCISABLE AT ANY TIME UNTIL THE EXPIRATION DATE.
-1-
<PAGE>
IN WITNESS WHEREOF, Optika Inc. has caused this Warrant Certificate to
be signed by its President and Vice President each by a facsimile of his
signature, and has caused a facsimile of its corporate seal to be affixed
hereunto or imprinted hereon.
Dated:
OPTIKA INC.
By:_________________________________
By:_________________________________
[SEAL]
-2-
<PAGE>
Form of Warrant Certificate
[Reverse]
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR THE SECURITIES LAWS OF ANY JURISDICTION. SUCH
SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED,
ASSIGNED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO (I) A REGISTRATION STATEMENT WITH RESPECT
TO SUCH SECURITIES THAT IS EFFECTIVE UNDER SUCH ACT OR
APPLICABLE STATE SECURITIES LAW, OR (II) ANY EXEMPTION FROM
REGISTRATION UNDER SUCH ACT, OR APPLICABLE STATE SECURITIES
LAW, RELATING TO THE DISPOSITION OF SECURITIES, INCLUDING
RULE 144.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants having a term of eight years and entitling the
holder on exercise to receive shares of Common Stock (the "Common Stock"), and
------------
are issued or to be issued pursuant to a Warrant Agreement, dated as of February
23, 2000 (the "Warrant Agreement"), between the Company and the other parties
-----------------
thereto, which Warrant Agreement is hereby incorporated by reference in and made
a part of this instrument and is hereby referred to for a description of the
rights, limitation of rights, obligations, duties and immunities thereunder of
the Company and the holders (the words "holders" or "holder" meaning the
registered holders or registered holder) of the Warrants. All terms not
otherwise defined herein shall have the meanings set forth in the Warrant
Agreement. A copy of the Warrant Agreement may be obtained by the holder hereof
upon written request to the Company.
Warrants may be exercised at any time after the date hereof in whole
and from time to time in part until the Expiration Date. The holder of Warrants
evidenced by this Warrant Certificate may exercise such Warrants by surrendering
this Warrant Certificate, with the form of election to purchase set forth hereon
properly completed and executed, together with payment to the Company of the
Exercise Price for each Warrant then exercised. In lieu of payment of the
Exercise Price pursuant to the preceding sentence, the holder of the Warrants
may convert the Warrants, in whole or in part and at any time or times, into
shares of Common Stock by surrendering to the Company this Warrant Certificate
with the form of notice of conversion set forth hereon properly completed and
executed. In the event that upon any exercise of Warrants evidenced hereby the
number of Warrants exercised shall be less than the total number of Warrants
evidenced hereby, there shall be issued to the holder hereof or his assignee a
new Warrant Certificate evidencing the number of Warrants not exercised.
The Warrant Agreement provides that upon the occurrence of certain
events the number of Warrant Shares may, subject to certain conditions, be
adjusted. The Company will not be required to issue fractional Warrant Shares
on the exchange of Warrants, although it may
-3-
<PAGE>
do so in its sole discretion. If fractional shares are not issued, the Company
will pay the cash value of such fractional shares as determined in accordance
with the provisions of the Warrant Agreement.
Warrant certificates, when surrendered at the office of the Company by
the registered holder thereof in person or by legal representative or attorney
duly authorized in writing, may be exchanged, in the manner and subject to the
limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant certificate or Warrant certificates of like
tenor evidencing in the aggregate a like number of Warrants.
Upon due presentation for registration of transfer of this Warrant
certificate at the office of the Company, a new Warrant certificate or Warrant
certificates of like tenor and evidencing in the aggregate a like number of
Warrants shall be issued to the transferee(s) in exchange for this Warrant
certificate, subject to the limitations provided in the Warrant Agreement,
without charge except for any tax or other governmental charge imposed in
connection therewith.
The Company may deem and treat the registered holder(s) thereof as the
absolute owner(s) of this Warrant certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, of any distribution to the holder(s) hereof, and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
Neither the Warrants nor this Warrant certificate entitles any holder hereof to
any rights of a stockholder of the Company.
-4-
<PAGE>
Form of Election to Purchase
(To Be Executed Upon Exercise of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant certificate, to receive ____________ shares of
Common Stock and hereby tenders for payment for such shares to the order of
Optika Inc. in the amount of $____________ in accordance with the terms hereof.
The undersigned requests that a certificate for such shares be
registered in the name of _____________________________________, whose address
is _________________________________ and that such shares be delivered to
______________________________ whose address is ________________________.
If said number of Warrant Shares is less than all of the shares of
Common Stock purchasable hereunder, the undersigned requests that a new Warrant
certificate representing the remaining balance of such shares be registered in
the name of _________________________, whose address is ______________________,
_____________________________ and that such Warrant certificate be delivered to
__________________________ whose address is _____________________________.
_______________________________
(Signature)
Date: _____________________
-5-
<PAGE>
Form of Notice of Conversion
(To Be Executed Upon Conversion of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant certificate, to convert Warrants represented hereby
into ________ shares of Common Stock in accordance with the terms hereof.
The undersigned requests that a certificate for such shares be
registered in the name of _____________________________________, whose address
is _________________________________ and that such shares be delivered to
______________________________ whose address is ________________________.
If said number of Warrant Shares is less than all of the shares of
Common Stock purchasable hereunder, the undersigned requests that a new Warrant
certificate representing the remaining balance of such shares be registered in
the name of _________________________, whose address is
__________________________, and that such Warrant certificate be delivered to
__________________________, whose address is _____________________________.
_______________________________
(Signature)
Date: _____________________
-6-
<PAGE>
EXHIBIT B
---------
Form of Transfer
(To Be Executed Upon Transfer of Warrant)
FOR VALUE RECEIVED, the undersigned registered holder of this Warrant
certificate hereby sells, assigns and transfers unto the Assignee(s) named below
(including the undersigned with respect to any Warrants constituting a part of
the Warrants evidenced by this Warrant certificate not being assigned hereby)
all of the rights of the undersigned under this Warrant certificate, with
respect to the number of Warrants set forth below:
Name of Assignee(s) Address Social Security or Number of Warrants
other identifying
number of assignee(s)
and does hereby irrevocably constitute and appoint the Company as the
undersigned's attorney to make such transfer on the register maintained by the
Company for that purpose, with full power of substitution in the premises.
Date:
________________________________
(Signature of Owner)
________________________________
(Street Address)
________________________________
(City) (State) (Zip Code)
Signature Guaranteed by:
________________________________
Name:
Title:
-1-
<PAGE>
EXHIBIT 10.3
------------
REGISTRATION RIGHTS AGREEMENT
Dated as of February 23, 2000
by and among
Optika Inc.
the Founders and Investors described herein
Thomas Weisel Capital Partners, L.P.
TWP CEO Founders' Circle (AI), L.P.
TWP CEO Founders' Circle (QP), L.P.
Thomas Weisel Capital Partners Employee Fund, L.P.
TWP 2000 Co-Investment Fund, L.P.
and
RKB Capital, L.P.
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of February 23, 2000 (this
"Agreement"), by and between Optika Inc., a Delaware corporation (the
"Company"), the holders of Founders Shares and Investors Shares listed on the
signature pages hereto, and Thomas Weisel Capital Partners, L.P., TWP CEO
Founders' Circle (AI), L.P., TWP CEO Founders' Circle (QP), L.P., Thomas Weisel
Capital Partners Employee Fund, L.P., RKB Capital, L.P. and TWP 2000 Co-
Investment Fund, L.P., as purchasers (together, the "Purchasers", and
individually, each a "Purchaser").
WHEREAS, the Company proposes to issue and sell (i) an aggregate of 731,851
shares of Series A Convertible Preferred Stock, par value $0.001 per share (the
"Preferred Stock") of the Company, the terms of which are set forth in the
Certificate of Designation in the form of Exhibit 2.2 to the Purchase Agreement
(as defined below) and (ii) warrants (the "Warrants"; and, together with the
Preferred Stock, the "Securities") to purchase an aggregate of 307,298 shares of
the Company's Common Stock, par value $0.001 per share (the "Common Stock"), the
terms of which are set forth in the Warrant Agreement attached in the form of
Exhibit 1.2(b) to the Purchase Agreement;
WHEREAS, as an inducement to the Purchasers to enter into the Purchase
Agreement, and as a condition to the closing of the transactions contemplated
thereby, the Company agreed to provide the Purchasers with registration rights;
WHEREAS, the Company has previously entered into that certain Amended and
Restated Registration Agreement, dated November 22, 1995, as amended by the
First Amendment thereto dated May 6, 1996 (as so amended, the "Existing
Registration Agreement") pursuant to which the Company has granted to the
holders of Founders' Shares (the "Founders") and the holders of Investors'
Shares (the "Investors") certain registration rights on the terms set forth
herein;
WHEREAS, the Company and the Founders and the Investors who are, or may
after the date hereof become, parties to the Agreement wish to effect an
amendment and restatement of their respective rights and obligations under the
Existing Registration Agreement so that, upon the effectiveness of such
amendment at the Effective Date as set forth in Section 12(m) of this Agreement
(i) the Existing Registration Agreement will terminate and be of no further
force and effect; and (ii) all of the registration rights of the Founders and
the Investors (whether or not signatories hereto) will thereafter be governed
solely by this Agreement;
NOW, THEREFORE, the parties agree as follows:
Section 1. Certain Definitions.
For purposes of this Agreement, the following terms shall have the
following respective meanings:
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<PAGE>
The term "broker-dealer" shall mean any broker or dealer registered
with the Commission under the Exchange Act.
"Closing" shall mean the date of the closing of the issuance and sale
of Securities pursuant to the Purchase Agreement.
"Commission" shall mean the United States Securities and Exchange
Commission, or any other federal agency at the time administering the
Exchange Act or the Securities Act, whichever is the relevant statute for
the particular purpose.
"Common Stock" shall have the meaning assigned thereto in the recitals
to this Agreement and shall include any equity securities issued with
respect to the Common Stock in connection with any recapitalization,
reclassification, merger, consolidation or other reorganization.
"Company" shall have the meaning assigned thereto in the first
paragraph of this Agreement.
"Controlling Person" shall have the meaning assigned thereto in
Section 8(a) hereof.
"Demand Exercise Notice" shall have meaning assigned thereto in
Section 2(a) hereof.
"Demand Registration" shall have meaning assigned thereto in Section
2(a) hereof.
"Demand Registration Request" shall have the meaning assigned thereto
in Section 2(a) hereof.
"Demand Registration Statement" shall have the meaning assigned
thereto in Section 2(a) hereof.
"Effective Time" shall mean, in the case of (i) a Registration, the
time and date as of which the Commission declares the related Registration
Statement effective or as of which the related Registration Statement
otherwise becomes effective; and (iii) a Market Making Registration, the
time and date as of which the Commission declares the Market Making
Registration Statement effective or as of which time the Market Making
Registration otherwise becomes effective.
"Electing Holder" shall mean any holder of Registrable Shares, as
applicable, that has returned a completed and signed Notice and
Questionnaire to the Company in accordance with Sections 5(a)(ii) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, or any
successor thereto, as the same shall be amended from time to time.
-2-
<PAGE>
"Existing Registration Agreement" shall have the same meaning set
forth in the recitals hereto.
"Founders" shall have the meaning assigned thereto in the recitals
hereto.
"Founders' Shares" shall mean at any time (i) the shares of Common
Stock owned by each of the persons listed as a "Founder" on Schedule A
hereto; (ii) with respect to shares of Common Stock previously held by a
Founder, a transferee of such Founder who consents to be bound by this
Agreement; (iii) any shares of Common Stock then outstanding that were
issued upon exercise of the options held by such Founder; (iv) any shares
of Common Stock then issuable upon exercise of the options held by such
Founder; (v) any shares of Common Stock then outstanding which were issued
as, or were issued directly or indirectly upon the conversion or exercise
of other securities issued as, a dividend or other distribution with
respect to or in replacement of other Founders' shares and (vi) any shares
of Common Stock then issuable directly or indirectly upon the conversion or
exercise of other securities which were issued as a dividend or other
distribution with respect to or in replacement of other Founders' Shares;
provided, that Founders' Shares shall not include any shares the sale of
which has been registered pursuant to the Securities Act or sold to the
public pursuant to Rule 144 promulgated by the Commission under the
Securities Act. For purposes of this Agreement, a Person will be deemed to
be a holder of Founders' Shares whenever such Person holds a security
exercisable for or convertible into such Founders' Shares, whether or not
such exercise or conversion has actually been effected.
The term "holder" shall mean each of the Purchasers and other Persons
who acquire Registrable Shares from time to time (including any successors
or assigns), in each case for so long as such Person owns any Registrable
Shares.
"Indemnified Person" shall have the meaning assigned thereto in
Sections 8(a) and 8(b).
"Initiating Holders" shall have the meaning assigned thereto in
Section 2(a) hereof.
"Investors" shall have the meaning assigned thereto in the recitals
hereto.
"Investors' Shares" shall mean, at any time (i) the shares of Common
Stock owned by each of the persons listed as an "Investor" on Schedule B
hereto; (ii) shares of Common Stock acquired by an Investor from a Founder;
(iii) any shares of Common Stock then outstanding which were issued as, or
were issued directly or indirectly upon the conversion or exercise of other
securities issued as, a dividend or other distribution with respect to or
in replacement of other Investors' Shares; and (iv) any shares of Common
Stock then issuable directly or indirectly upon the conversion or exercise
of other securities which were issued as a dividend or other distribution
with respect to or in replacement of other Investors' Shares; provided,
that Investors' Shares shall not include any shares the sale of which has
been registered pursuant to the Securities Act or sold to
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the public pursuant to Rule 144 promulgated by the Commission under the
Securities Act. For purposes of this Agreement, a person will be deemed to
be a Holder of Investors' Shares whenever such Person holds a security
exercisable for or convertible into such Investors' Shares whether or not
such exercise or conversion has actually been effected.
"Majority Electing Holders" means, the holders of a majority in the
number of shares of Common Stock elected to be included under such
Registration Statement by the Electing Holders.
"Market Making Period" shall have the meaning assigned thereto in
Section 4(a) hereof.
"Market Making Prospectus" shall mean the prospectus included in the
Market Making Registration Statement relating to offers and sales of Market
Making Securities by TWP in secondary transactions.
"Market Making Registration" shall mean the registration of Market
Making Securities in connection with offers and sales thereof by TWP in
secondary transactions.
"Market Making Registration Statement" shall mean a shelf registration
statement on Form S-3 or other short form registration statement (which may
be the Registration Statement if permitted by the rules and regulations of
the Commission) pursuant to Rule 415 under the Securities Act or any
similar rule that may be adopted by the Commission providing for the
registration of, and the sale on a continuous or delayed basis in secondary
transactions by TWP of, the Market Making Securities.
"Market Making Request Date" shall have the meaning assigned thereto
in Section 5(a) hereof.
"Market Making Securities" shall mean any of the Common Stock issued
by the Company.
"NASD" shall have the meaning assigned thereto in Section 5(a)(xvii)
hereof.
"Notice and Questionnaire" means a Notice of Registration Statement
Selling Securityholder Questionnaire customary in form and substance and
for such a Registration.
"Person" shall mean a corporation, association, partnership, limited
liability company, trust, organization, business, individual, government or
political subdivision thereof or governmental agency or any other entity.
"Piggyback Registration" shall have the meaning assigned thereto in
Section 3(a) hereof.
"Piggyback Registration Statement" shall have the meaning assigned
thereto in Section 3(a) hereof.
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"Purchase Agreement" shall mean the Securities Purchase Agreement,
dated as of February 9, 2000, between the Company and the Purchasers.
"Purchasers" shall have the meaning assigned thereto in recitals to
this Agreement.
"Registrable Shares" shall mean, at any time, (A) the Founders'
Shares, (B) the Investors' Shares and (C) the shares of Common Stock into
or for which the Securities are than convertible or exchangeable, as the
case may be; provided, however, that any such shares of Common Stock
referred to in clauses (A) through (C) above shall cease to be Registrable
Shares when (i) in the circumstances contemplated by Section 2 (other than
Section 2(f)) or Section 3, a Demand Registration Statement or a Piggyback
Registration Statement registering such shares of Common Stock under the
Securities Act has been declared or becomes effective and such shares of
Common Stock shall have been sold or otherwise transferred by the holder
thereof pursuant to and in a manner contemplated by such effective
Registration Statement; or (ii) the Founders' Shares, the Investors' Shares
or the shares of Common Stock underlying the Founders Shares, the Investors
Shares and the Securities is sold pursuant to Rule 144 or Rule 144A under
circumstances in which any legend borne by such Common Stock relating to
restrictions on transferability thereof, under the Securities Act or
otherwise, is removed by the Company or pursuant to the Warrant Agreement.
"Registration Expenses" shall have the meaning assigned thereto in
Section 6 hereof.
"Requisite Holders" means Requisite Investor Holders or Requisite
Purchaser Holders as the context may require.
"Requisite Investor Holders" means the holders of Investors' Shares
representing at least 70% of the total number of Investors' Shares then
outstanding.
"Requisite Purchaser Holders" means the holders of Securities
representing or covering on conversion or exercise, in the aggregate, 25%
or more of the total number of shares of Common Stock issuable on
conversion or exercise of the Securities at the Closing.
"Registration" shall have the meaning assigned thereto in Section 3(a)
hereof.
"Registration Statements" shall have the meaning assigned thereto in
Section 3(a) hereof.
"Rule 144," "Rule 144A", "Rule 405" and "Rule 415" shall mean, in each
case, such rule promulgated under the Securities Act (or any successor
provision), as the same shall be amended from time to time.
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"Secondary Offer Registration Statement" shall mean (i) any
Registration Statement required to be filed by the Company pursuant to
Section 2 or 3 hereof, and/or (ii) the Market Making Registration Statement
required to be filed by the Company pursuant to Section 4 hereof, in each
case, as applicable. As used herein, references to a Secondary Offer
Registration Statement in the singular shall, if applicable, be deemed to
be in the plural.
"Securities" shall have the meaning assigned thereto in the recitals
to this Agreement.
"Securities Act" shall mean the Securities Act of 1933, or any
successor thereto, as the same shall be amended from time to time.
"TWP" shall mean Thomas Weisel Partners Group LLC and its affiliates.
"Underwriters' Representative" shall mean the managing underwriter,
or, in the case of a co-managed underwriting, the managing underwriter
designated as the Underwriters' Representative by the co-managers.
"Warrants" shall have the meaning assigned thereto in the recitals to
this Agreement.
Unless the context otherwise requires, any reference herein to a "Section"
or "clause" refers to a Section or clause, as the case may be, of this
Agreement, and the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Section or other subdivision.
Section 2. Demand Registration of the Registrable Shares under the
Securities Act.
(a) If either the Requisite Investors Holders or the Requisite Purchaser
Holders shall at any time make a written request (a "Demand Registration
Request") to the Company in compliance with this Section 2, the Company shall
cause to be filed with the Commission a registration statement (a "Demand
Registration Statement") under the Securities Act covering all or any part of
the Registrable Shares (a "Demand Registration"), as such holders (the
"Initiating Holders") shall request in writing.
(i) Any request made pursuant to this Section 2(a) by Requisite
Purchaser Holders shall be addressed to the attention of the Secretary of the
Company, and shall specify the number of Registrable Shares to be registered
(which shall result in gross proceeds of not less than $10,000,000, assuming no
reduction in the number of Registrable Shares that may be included in such
Demand Registration pursuant to Section 2(e)); provided, however, that the
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holders of the Registrable Shares (other than Founders' Shares or Investors'
Shares) may request registration of any amount of such Registrable Shares where
such holders request registration of all of the remaining such Registrable
Shares, the intended method of distribution thereof and that the request is for
a Demand Registration pursuant to this Section 2(a).
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(ii) Any request made pursuant to this Section 2(a) by the Requisite
Investor Holders shall be addressed to the Company, and shall specify the number
of Restricted Shares to be registered (which shall result in gross proceeds of
not less than (x) $750,000 if the Registration is required to be effected on
Form S-1 or any similarly long-form registration statement under the Securities
Act (a "Long-Form Registration") or (y) $250,000 if the Registration may be
effected on Form S-2 or S-3 or any similar short-form registration statement
under the Securities Act (a "Short-Form Registration").
(iii) As promptly as practicable, but no later than ten days after
receipt of a Demand Registration Request, the Company shall give written notice
(the "Demand Exercise Notice") of such Demand Registration Request to all
holders of Registrable Shares. Following a request for a Demand Registration,
the Company shall include in a Demand Registration (x) the Registrable Shares of
the Initiating Holders and (y) the Registrable Shares of any other holders of
Registrable Shares who shall have made a written request to the Company for
inclusion in such registration (which request shall specify the maximum number
of Registrable Shares intended to be disposed of by such holder) within 30 days
after the receipt of the Demand Exercise Notice. The Company shall, as
expeditiously as possible, use its best efforts to effect such registration
under the Securities Act (including, without limitation, by means of a shelf
registration pursuant to Rule 415 under the Securities Act if so requested and
if the Company is then eligible to use such registration) of the Registrable
Shares which the Company has been so requested to register, for distribution in
accordance with such intended method of distribution by the holders electing to
include Registrable Shares therein.
(b) Following receipt of a request for a Demand Registration, the Company
shall:
(i) file the Demand Registration Statement with the Commission as
promptly as reasonably practicable, and, subject to Section 2(a), shall use
all reasonable efforts to have the Demand Registration Statement declared
effective under the Securities Act as soon as reasonably practicable, in
each instance giving due regard to the need to prepare current financial
statements, conduct due diligence and complete other actions that are
reasonably necessary to effect a registered public offering; and
(ii) use all reasonable efforts to keep the relevant registration
statement continuously effective, for up to 180 days or until such earlier
date as of which all the Registrable Shares under the Demand Registration
Statement shall have been disposed of in the manner described in the
Registration Statement, or such longer period as in the judgment of counsel
for the underwriters a prospectus is required by law to be delivered in
connection with sales of Registrable Shares by an underwriter or dealer in
accordance with the plan of distribution included in such Demand
Registration Statement; provided, however, that such obligation to
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maintain the continuous effectiveness of the registration statement shall
not apply if such registration statement is on Form S-1 or an equivalent
form which does not permit incorporation by reference.
(c) (i) The Company shall not be obligated to effect more than three
Demand Registrations by Requisite Purchaser Holders pursuant to Section 2(a)
which are Long-Form Registration; provided that the Company shall be obligated
to effect an unlimited number of
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Demand Registrations by the Requisite Purchaser Holders pursuant to Section 2(c)
which are Short-Form Registrations. For purposes of the preceding sentence, a
Demand Registration shall not be deemed to have been effected (i) unless a
Demand Registration Statement with respect thereto has become effective, (ii) if
after such Demand Registration Statement has become effective, such Demand
Registration Statement or the related offer, sale or distribution of Registrable
Shares thereunder is interfered with by any stop order, injunction or other
order or requirement of the Commission or other governmental agency or court for
any reason not attributable to the holder of the Registrable Shares and such
interference is not thereafter eliminated or (iii) if the conditions to closing
specified in any underwriting agreement entered into in connection with such
registration are not satisfied or waived, other than by reason of a failure on
the part of the holder of the Registrable Shares. If the Company shall have
complied with its obligations under this Agreement, a right to demand a
registration pursuant to this Section 2 shall be deemed to have been satisfied
upon the earlier of (x) the date as of which all of the Registrable Shares
included therein shall have been distributed pursuant to the Registration
Statement, and (y) the date as of which such Demand Registration shall have been
continuously effective for a 180-day period or other period specified in Section
2(b)(ii) following the effectiveness of such Demand Registration Statement,
provided no stop order or similar order, or proceedings for such an order, is
thereafter entered or initiated.
(ii) (x) The holders of Investors' Shares may request two Long-Form
Demand Registrations pursuant to paragraph 2(a) for which the Company will pay
all Registration Expenses. A registration will not count as a Long-Form Demand
Registration under this paragraph (x) until it has become effective and will not
count as a Long-Form Demand Registration under this paragraph (i) unless the
Holders of Investors' Shares initially requesting such registration are able to
register and sell at least 50% of the Registrable Shares requested to be
included in such registration; provided that in any event the Company will pay
all Registration Expenses in connection with any such registration initiated as
a Long-Form Demand Registration.
(y) In addition to the rights provided by paragraph (x) of this
Section 2(c), if the number of prior Long-Form Demand Registrations pursuant to
such paragraph (x) equals two, the holders of Investors' Shares shall be
entitled to request pursuant to paragraph 2(a) an unlimited number of additional
Long-Form Demand Registrations provided that the holders of securities to be
registered thereunder agree to pay their pro rata share (as determined in
accordance with the number of shares requested to be registered in such
registration) of all associated Registration Expenses in connection with such
registration, whether or not such registration becomes effective.
Notwithstanding the terms of the preceding sentence, if the failure of a
registration initiated pursuant to this paragraph (y) to become effective is the
result of a breach by the Company of any of its obligations under this
Agreement, the Company shall pay all Registration Expenses in connection with
such registration.
(z) In addition to the Long-Form Demand Registrations that may
be requested pursuant to Section 2(a), the holders of Investors' Shares will be
entitled to request pursuant to paragraph 2(a) an unlimited number of Short-Form
Demand Registrations. The Corporation will pay all Registration Expenses
incurred in connection with such registration if
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the aggregate offering value of all Registrable Shares requested to be
registered in such registration pursuant to Section 2(a) is reasonably expected
to equal at least $750,000, whether or not such registration becomes effective.
If the aggregate offering value of all Registrable Shares requested to be
registered in such registration pursuant to Section 2(a) is not reasonably
expected to equal at least $750,000, the holders of securities to be registered
thereunder shall pay their pro rata share (as determined in accordance with the
percentage of shares requested to be registered in such registration) of all
associated Registration Expenses in connection with such registration, whether
or not such registration becomes effective. Notwithstanding the terms of the
preceding sentence, if the failure of such registration to become effective is
the result of a breach by the Company of any of its obligations under this
Agreement, the Company shall pay all Registration Expenses in connection with
such registration.
(d) In connection with any Demand Registration, the Majority Electing
Holders shall have the right to select the underwriter or underwriters and
manager or managers to administer such offering; provided, however, that each
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Person so selected shall be acceptable to the Company in its reasonable
judgment.
(e) If the Underwriters' Representative in connection with any
underwritten offering described in this Section 2 shall have informed the
Company that in its opinion the total number of shares of Common Stock that
the holders of the Registrable Shares, and any other Persons desiring to
participate in such registration, intend to include in such offering is such
as to materially and adversely affect the success and pricing of such offering,
then the Company shall include in such Demand Registration (a) first, all
Registrable Shares requested to be included in such registration by the
Electing Holders of Registrable Shares; provided that if the number of shares of
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Common Stock so elected to be included in such registration by all Electing
Holders of Registrable Shares exceeds the number recommended by the
Underwriters' Representative, then the number of Registrable Shares to be so
included in such registration will be reduced pro rata in accordance with the
number of shares requested to be included by each Electing Holder, to such
number recommended by the Underwriters' Representative; provided, further, that
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on no more than two occasions if the Initiating Holders are holders of
Purchasers' Shares and on no more than two occasions if the Initiating Holders
are holders of Investors' Shares, the Initiating Holders may specify that (x) if
such Initiating Holders are holders of Registrable Shares (other than Investors'
Shares or Founders' Shares) (all such non-excluded Registrable Shares, the
"Purchasers' Shares"), such reduction will be effected first by reducing the
number of Investors' Shares pro rata in accordance with the number of Investors'
Shares to be included therein until the number of Investors' Shares to be so
included are reduced to zero and then by reducing the number of Purchasers'
Shares pro rata in accordance with the number of Purchasers' Shares to be
included therein, and (y) if such Initiating Holders are holders of Investors'
Shares, such reduction will be effected first by reducing the number of
Purchasers' Shares pro rata in accordance with the number of Purchasers' Shares
to be included therein until the number of Purchasers' Shares to be so included
is reduced to zero and then by reducing the number of Investors' Shares pro rata
in accordance with the number of Investors' Shares to be included therein; and
(b) second, if all Registrable Shares so elected to be included by the Electing
Holders are so included, such additional number of shares of Common Stock that
the Company or any other Persons entitled to participate in such registration
desire to include in such
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registration and that the Underwriters' Representative has informed the Company
may be included in such registration without adversely affecting the success and
pricing of the offering of all Registrable Shares so requested to be included
therein; provided that the number of shares of Common Stock to be offered for
--------
the account of all such other Persons participating in such registration shall
be reduced or limited to the extent necessary so that the total number of shares
of Common Stock requested to be included in such offering does not exceed the
maximum number of shares of Common Stock recommended by such Underwriters'
Representative.
(f) Notwithstanding anything herein to the contrary, the Company shall not
be obligated to take any action to effect any such registration, qualification
or compliance pursuant to this Section 2 if (i) the Board of Directors
determines in the exercise of its reasonable judgment that effecting such Demand
Registration at such time would require disclosure of a material fact that the
Board determines in good faith would have a material adverse effect on any
proposal or plan by the Company or any of its subsidiaries to engage in a
significant transaction, then, in which case the Company may defer such Demand
Registration for a single period not to exceed 90 days once every 12 months and
(ii) in any particular jurisdiction in which the Company would be required to
execute a general consent to service of process in effecting such registration,
qualification or compliance unless the Company is already subject to service in
such jurisdiction and except as may be required by the Securities Act.
Section 3. Piggyback Registration.
(a) If at any time the Company proposes to register (including for this
purpose a registration effected by the Company for the account of the Company or
shareholders of the Company other than the holders of the Registrable Shares,
whether or not pursuant to the Existing Registration Agreement) shares of Common
Stock or securities convertible or exercisable into shares of Common Stock under
the Securities Act in connection with the public offering solely for cash on
Form S-1, S-2 or S-3 (or any replacement or successor forms), as soon as
practicable (but in no event less than 10 business days prior to the date of
filing any related Registration Statement), the Company shall promptly give the
holders of the Registrable Shares written notice of such registration (a
"Piggyback Registration," and, collectively with a Demand Registration, a
"Registration"). Upon the written request of the holders of the Registrable
Shares given within 10 days following the date of such notice, the Company shall
use all reasonable efforts to cause to be included in such registration
statement (a "Piggyback Registration Statement," and, collectively with the
Demand Registration Statement, the "Registration Statements"), and use all
reasonable efforts to cause to be registered under the Securities Act all the
Registrable Shares that the holders of the Registrable Shares shall have
requested to be registered. The Company shall have the absolute right to
withdraw or cease to prepare or file any Piggyback Registration Statement for
any offering referred to in this Section 3 without any obligation or liability
to the holder of the Registrable Shares; provided, that the Company shall
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promptly notify the holders of the Registrable Shares in writing of any such
action.
(b) If the Piggyback Registration Statement relates to an underwritten
offering of Common Stock or securities convertible or exercisable into shares of
Common Stock for the account of the Company and if the Underwriters'
Representative of such underwritten offering
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shall inform the Company that in its opinion the inclusion in such underwritten
distribution of all or a specified number of such Registrable Shares or of any
other shares of Common Stock requested to be included therein would materially
and adversely effect the success and pricing of such offering or of such
distribution then the Company shall include in such Piggyback Registration (a)
first, all shares of Common Stock requested to be included in such registration
for the account of the Company, (b) second, all Registrable Shares requested to
be included therein by holders of Founders Shares, and (c) third, all
Registrable Securities requested to be included therein by the holders of
Purchasers' Shares and Investors' Shares, provided that if the number of
Registrable Shares otherwise includable under clause (b) or (c) above is to be
reduced, such number shall be reduced by reducing the number of Registrable
Shares otherwise includable pro rata in accordance with the number of
Registrable Shares requested to be included by the Holders of Founders' Shares
(in the case of clause (b)), and by the holders of Purchasers' Shares and
Investors' Shares (in the case clause (c)). If the Piggyback Registration
Statement relates to an underwritten offering of Common Stock or securities
convertible or exercisable into Common Stock otherwise than for the account of
the Company and if the Underwriters' Representative of such underwritten
offering shall inform the Company that in its opinion the inclusion in such
underwritten distribution of all or a specified number of such shares of Common
Stock to be included therein would materially and adversely affect the success
and pricing of such offering or of such distribution then the Company shall
include in such Piggyback Registration (a) first, all shares of Common Stock
requested to be included in such registration for the account of the persons
(other than holders of Purchasers' Shares or Investors' Shares) who requested
such registration, (b) second, all Registrable Shares requested to be included
in such Registration by the holders of Purchasers' Shares and Investors' Shares
pro rata in accordance with the number of Registrable Shares requested be
included therein and (c) third, all shares of Common Stock requested to be
included therein for the account of the Company.
The Company may decline to file a Piggyback Registration Statement referred
to in this Section 3(b) after giving notice to the holders of the Registrable
Shares, or withdraw such a Piggyback Registration Statement after filing, or
otherwise abandon any such proposed underwritten offering; provided that the
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Company shall promptly notify the holders of the Registrable Shares in writing
of any such action.
(c) The Electing Holders with respect to any Registration may not
participate in any underwritten offering under Sections 2(a) or 3(a) hereof
unless it completes and executes all customary questionnaires (including a
Notice and Questionnaire as contemplated by Section 5(a)(ii)), powers of
attorney, custody agreements, underwriting agreements and other customary
documents required under the terms of such underwriting arrangements (if any).
In connection with any underwritten offering under Sections 2(a) or 3(a), each
of the Electing Holders and the Company shall be a party to the underwriting
agreement with the underwriters and may be required to make certain customary
representations and warranties (in the case of the Electing Holders as to the
Registrable Shares being sold by the Electing Holder in such underwritten
offering and the plan of distribution thereof) and provide certain customary
indemnifications for the benefit of the underwriters.
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(d) The holders of the Registrable Shares shall be entitled to have their
Registrable Shares included in an unlimited number of Piggyback Registrations
pursuant to this Section 3.
(e) Notwithstanding the foregoing the Company shall not be obligated to
take any action pursuant to this Section 3 in any particular jurisdiction in
which the Company would be required to execute a general consent to service of
process in effecting such registration, qualification or compliance unless the
Company is already subject to service in such jurisdiction and except as may be
required by the Securities Act.
Section 4. Registration of Registrable Shares under a Market Making
Shelf Registration Statement.
The Company agrees with TWP that if TWP and the Company mutually agree that
TWP or an affiliate should act as a market-maker with respect to Market Making
Securities,:
(a) If requested in writing by TWP, at any time that the Purchasers
determine that TWP is or may be deemed to be an affiliate (as defined under Rule
405) of the Company, the Company shall prepare the Market Making Prospectus and
Market Making Registration Statement in a form approved by TWP and file such
Market Making Prospectus and Market Making Registration Statement pursuant to
the Securities Act not later 60 days after the date of such request (the "Market
Making Request Date"), to make no further amendment or any supplement to the
Market Making Registration Statement or the Market Making Prospectus during the
Market Making Period (as defined below) which shall be disapproved by TWP
promptly after reasonable notice thereof, to use all reasonable efforts to cause
the Market Making Registration Statement to become effective under the
Securities Act 115 days after the Market Making Request Date, to advise TWP,
promptly after the Company receives notice thereof, of the time when the Market
Making Registration Statement, or any amendment thereto, has been filed or
becomes effective during the Market Making Period, or any supplement to the
Market Making Prospectus or any amended Market Making Prospectus has been filed
during such period, and to furnish TWP with copies thereof; to advise TWP,
promptly after the Company receives notice thereof during the Market Making
Period, of the issuance by the Commission of any stop order or of any order
preventing or suspending the use of any preliminary Market Making Prospectus or
Market Making Prospectus, of the suspension of the qualification of the Market
Making Securities for offering or sale in any jurisdiction, of the initiation or
threatening of any proceeding for any such purpose, or of any request by the
Commission for the amending or supplementing of the Market Making Registration
Statement or Market Making Prospectus or for additional information; and, in the
event of the issuance of any stop order or of any order preventing or suspending
the use of any preliminary Market Making Prospectus or Market Making Prospectus
or suspending any such qualification during the Market Making Period, to use
promptly its reasonable efforts to obtain the withdrawal of such order (the
period beginning on such date as the Purchasers determine that TWP is or may be
deemed to be an affiliate of the Company and continuing for as long as may be
required under applicable law, in the reasonable judgment of TWP after
consultation with the Company, in order to offer and sell Market Making
Securities as contemplated by the Market Making Prospectus, is herein called the
"Market Making Period");
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<PAGE>
(b) Promptly from time to time to take such action as TWP may reasonably
request to qualify the Market Making Securities for offering and sale during the
Market Making Period under the securities laws of such jurisdictions as TWP may
request and to comply with such laws so as to permit the continuance of sales
and dealings therein in such jurisdictions during such period, provided that in
connection therewith the Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any
jurisdiction;
(c) To furnish TWP with copies of the Market Making Prospectus in such
quantities as TWP may from time to time reasonably request during the Market
Making Period, and, if at any time during such period any event shall have
occurred as a result of which the Market Making Prospectus as then amended or
supplemented would include an untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made when such Market
Making Prospectus is to be delivered during such period, not misleading, or, if
for any other reason it shall be necessary during such period to amend or
supplement the Market Making Prospectus or to amend the Market Making
Registration Statement in order to comply with the Securities Act, to file under
the Exchange Act any document incorporated by reference in such Market Making
Prospectus in order to comply with the Securities Act or the Exchange Act, to
notify TWP immediately and upon its request to file such document and to prepare
and furnish without charge to TWP as many copies as it may from time to time
during such period reasonably request of an amended Market Making Prospectus or
a supplement to the Market Making Prospectus which will correct such statement
or omission or effect such compliance;
(d) During the Market Making Period, to furnish to TWP copies of all
reports or other communications (financial or other) furnished to shareholders
generally, and to deliver to TWP (i) as soon as they are available, copies of
any reports and financial statements furnished to or filed with the Commission
or any national securities exchange on which any class of securities of the
Company is listed; and (ii) such additional information concerning the business
and financial condition of the Company as TWP may from time to time reasonably
request (such financial statements to be on a consolidated basis to the extent
the accounts of the Company and its subsidiaries are consolidated in reports
furnished to its shareholders generally or to the Commission); and
(e) To use its reasonable efforts to furnish or cause to be furnished to
TWP upon its request at reasonable intervals, when the Market Making
Registration Statement or the Market Making Prospectus shall be amended or
supplemented during the Market Making Period, written opinions of counsel for
the Company, a letter from the independent accountants who have certified the
financial statements included in the Market Making Registration Statement as
then amended and certificates of officers of the Company, in each case in form
and substance reasonably satisfactory to TWP, all to the effect specified in
subsection (xvi) of Section 5(a) hereof (as modified to relate to the Market
Making Registration Statement and the Market Making Prospectus as then amended
or supplemented).
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Notwithstanding the foregoing provisions, if at any time the Company
determines in the exercise of its reasonable judgment that it is in possession
of material, non-public information that it would not be required to disclose
publicly in the absence of a registration of Market Making Securities under the
Securities Act, the Company may, upon 15 business days' prior written notice to
TWP, cease to comply with any of its obligations under this Section 4, whereupon
TWP shall cease using the Market Making Prospectus or any amendment or
supplement thereto until it receives notice from the Company that it may resume
using such document.
Section 5. Registration Procedures.
If the Company files a registration statement pursuant to Sections 2, 3 or
4, the following provisions shall apply:
(a) In connection with the Company's obligations with respect to any
Registration or any Market Making Registration, as applicable, the Company shall
use its best efforts to cause the applicable Secondary Offer Registration
Statement to permit the disposition (x) of Registrable Shares by the holders
thereof in the case of a Registration, and, of Market Making Securities by TWP,
in each case in accordance with the intended method or methods of disposition
thereof provided for in the applicable Secondary Offer Registration Statement.
In connection therewith, the Company shall, as soon as reasonably possible (or
as otherwise specified):
(i) (A) prepare and file with the Commission, as soon as practicable,
but in any case within the time periods specified in Sections 2, 3 or 4, as
applicable, a Secondary Offer Registration Statement on any form which may
be utilized by the Company, which shall (x) register all the Registrable
Shares, in the case of a Registration Statement, and all of the Market
Making Securities, in the case of a Market Making Registration, and in each
case to be included therein for resale (if applicable) by the holders
thereof in accordance with such method or methods of disposition as may be
specified by the holders of the applicable Registrable Shares or TWP in the
case of a Market Making Registration and (y) be, in the case of a Market
Making Registration, in a form approved by TWP, and (B) use its
commercially reasonable efforts to cause such Secondary Offer Registration
Statement to become effective as soon as practicable after such filing, but
in any case within the time periods specified in Sections 2, 3 or 4 hereof,
as applicable;
(ii) not less than 30 calendar days prior to the Effective Time of any
applicable Registration Statement, mail the Notice and Questionnaire to the
holders of the applicable Registrable Shares; no holder shall be entitled
to be named as a selling securityholder in any Registration Statement as of
the Effective Time thereof, and no holder shall be entitled to use the
prospectus forming a part thereof for resales of Registrable Shares at any
time, unless such holder has returned a completed and signed Notice and
Questionnaire to the Company by the deadline for response set forth
therein;
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provided, however, holders of Registrable Shares shall have at least 28
-------- -------
calendar days from the date on which the Notice and Questionnaire is first
mailed to such holders to return a completed and signed Notice and
Questionnaire to the Company;
(iii) as soon as practicable (A) prepare and file with the Commission
such amendments and supplements to the Secondary Offer Registration
Statement and the prospectus included therein as may be necessary to effect
and maintain the effectiveness of such Secondary Offer Registration
Statement for the period specified in Sections 2, 3 or 4 hereof, as
applicable, and as may be required by the applicable rules and regulations
of the Commission and the instructions applicable to the form of such
Secondary Offer Registration Statement, and, in the case of an amendment to
or supplement of the Market Making Registration Statement, in a form
approved by TWP and (B) furnish to the Electing Holders, in the case of any
Registration, and TWP, in the case of a Market Making Registration, copies
of any such supplement or amendment simultaneously with or prior to its
being used or filed with the Commission;
(iv) comply with the provisions of the Securities Act with respect to
the disposition of all of the Registrable Shares or Market Making
Securities, as applicable, covered by such Secondary Offer Registration
Statement in accordance with the intended methods of disposition provided
for therein by the Electing Holders, in the case of any Registration, or
TWP, in the case of a Market Making Registration;
(v) provide (A) with respect to any Registration, the Electing
Holders and not more than one counsel for all the Electing Holders; (B)
with respect to a Market Making Registration, TWP and its counsel; and (C)
in either case, the underwriters (which term, for purposes of this
Agreement shall include a Person deemed to be an underwriter within the
meaning of Section 2(11) of the Securities Act), if any, thereof, the sales
or placement agent, if any, therefor, and counsel for such underwriters or
agent, the opportunity to participate in the preparation of such Secondary
Offer Registration Statement, each prospectus included therein or filed
with the Commission and each amendment or supplement thereto;
(vi) for a reasonable period prior to the filing of such Secondary
Offer Registration Statement, and throughout the applicable periods
specified in Sections 2, 3 or 4 hereof, as applicable, make available at
reasonable times at the Company's principal place of business or such other
reasonable place for inspection by the Persons referred to in Section
5(a)(v) who shall certify to the Company that they have a current intention
to sell the Registrable Shares pursuant to any Registration, or Market
Making Securities pursuant to the Market Making Registration, as
applicable, such financial and other information and books and records of
the Company, and cause the officers, employees, counsel and independent
certified public accountants of the Company to respond to such inquiries,
as shall be reasonably necessary, in the judgment of the respective counsel
referred to in such Section 5(a)(v), to conduct a reasonable investigation
within the meaning of Section 11 of the Securities Act; provided; however,
that each such party shall be required to maintain in confidence and not to
disclose to any other Person any
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<PAGE>
information or records reasonably designated by the Company as being
confidential until such time as, (A) such information becomes a matter of
public record (whether by virtue of its inclusion in such registration
statement or otherwise), or (B) such Person shall be required so to
disclose such information pursuant to a subpoena or order of any court or
other governmental agency or body having jurisdiction over the matter or
otherwise pursuant to the request of any governmental agency (only after
such Person shall have given the Company prompt prior written notice of
such requirement), or (C) such information is required to be set forth in
such Secondary Offer Registration Statement or the prospectus included
therein or in an amendment to such Secondary Offer Registration Statement
or an amendment or supplement to such prospectus in order that such
Secondary Offer Registration Statement, prospectus, amendment or
supplement, as the case may be, complies with applicable requirements of
the federal securities laws and the rules and regulations of the Commission
and does not contain an untrue statement of a material fact or omit to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances
then existing;
(vii) promptly notify each of the Electing Holders or TWP, as
applicable, any sales or placement agent therefor and any underwriter
thereof (which notification may be made through any managing underwriter
that is a representative of such underwriter for such purpose) and confirm
such advice in writing, (A) when such Secondary Offer Registration
Statement or the prospectus included therein or any prospectus amendment or
supplement or post-effective amendment has been filed, and, with respect to
such Secondary Offer Registration Statement or any post-effective
amendment, when the same has become effective, (B) of the receipt of
written comments from the Commission and from the blue sky or securities
commissioner or regulator of any state with respect thereto or any request
by the Commission for amendments or supplements to such Secondary Offer
Registration Statement or prospectus or for additional information, (C) of
the issuance by the Commission of any stop order suspending the
effectiveness of such Secondary Offer Registration Statement or the
initiation or threatening of any proceedings for that purpose, (D) if at
any time during which such Secondary Offer Registration Statement is
effective the representations and warranties of the Company contemplated by
Section 5(a)(xv) or Section 7 cease to be true and correct in all material
respects, (E) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Registrable Shares or
the Market Making Securities, as applicable, for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose, or (F)
if at any time when a prospectus is required to be delivered under the
Securities Act, such Secondary Offer Registration Statement, prospectus,
prospectus amendment or supplement or post-effective amendment, or any
document incorporated by reference in any of the foregoing, does not
conform in all material respects to the applicable requirements of the
Securities Act and the rules and regulations of the Commission thereunder
or 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 circumstances then
existing;
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<PAGE>
(viii) use commercially reasonable efforts to obtain the withdrawal
of any order suspending the effectiveness of such Secondary Offer
Registration Statement or any post-effective amendment thereto at the
earliest practicable date;
(ix) if requested by any managing underwriter or underwriters, any
placement or sales agent, any Electing Holder or TWP, promptly incorporate
in a prospectus supplement or post-effective amendment such information as
is required by the applicable rules and regulations of the Commission and
as such managing underwriter or underwriters, such agent, such Electing
Holder or TWP specify should be included therein relating to the terms of
the sale of such Registrable Shares, or Market Making Securities, as
applicable, including information with respect to the number of Registrable
Shares or other Market Making Securities being sold by TWP, such Electing
Holder, TWP, or agent or underwriter, the offering price of such
Registrable Shares or the Market Making Securities, as applicable, and any
discount, commission or other compensation payable in respect thereof and
the purchase price being paid therefor by such underwriters, and with
respect to any other terms of the offering of the Registrable Shares, or
Market Making Securities, as applicable, to be sold by such Electing
Holder, TWP, or agent or to such underwriters, as applicable; and to make
all required filings of such prospectus supplement or post-effective
amendment promptly after notification of the matters to be incorporated in
such prospectus supplement or post-effective amendment;
(x) furnish to each Electing Holder, TWP, each placement or sales
agent, if any, therefor, each underwriter, if any, thereof and the
respective counsel referred to in Section 5(a)(v) a conformed copy of such
Secondary Offer Registration Statement, each such amendment and supplement
thereto (in each case, including all exhibits thereto (in the case of an
Electing Holder of Registrable Shares, upon request) and documents
incorporated by reference therein) and such number of copies of such
Secondary Offer Registration Statement (excluding exhibits thereto and
documents incorporated by reference therein unless specifically so
requested by such Electing Holder, TWP, or agent or underwriter, as the
case may be) and of the prospectus included in such Secondary Offer
Registration Statement (including each preliminary prospectus and any
summary prospectus), in conformity in all material respects with the
applicable requirements of the Securities Act and the rules and regulations
of the Commission thereunder, and such other documents, as TWP, such
Electing Holder, TWP, agent, if any, and underwriter, if any, may
reasonably request in order to facilitate the offering and disposition of
the Registrable Shares owned by such Electing Holder or the Market Making
Securities owned by TWP, to satisfy the prospectus delivery requirements of
the Securities Act; and the Company hereby consents to the use of such
prospectus (including such preliminary and summary prospectus) and any
amendment or supplement thereto by each such Electing Holder, TWP and any
such agent and underwriter, in each case in the form most recently provided
to such party by the Company, in connection with the offering and sale of
the Registrable Shares or the Market Making Securities covered by the
prospectus (including such preliminary and summary prospectus) or any
supplement or amendment thereto;
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<PAGE>
(xi) use commercially reasonable efforts to (A) register or qualify
the Registrable Shares, or the Market Making Securities as applicable, to
be included in such Secondary Offer Registration Statement under such
securities laws or blue sky laws of such jurisdictions as any Electing
Holder, TWP and each placement or sales agent, if any, therefor and each
underwriter, if any, thereof shall reasonably request, (B) keep such
registrations or qualifications in effect and comply with such laws so as
to permit the continuance of offers, sales and dealings therein in such
jurisdictions during the period the Market Making Registration is required
to remain effective under Section 4 or the applicable Registration
Statement is required to remain effective under Sections 2 or 3 above, as
applicable, (C) make reasonably available its employees and personnel
(including senior executive officers of the Company) and otherwise provide
reasonable assistance to the underwriters (taking into account the
requirements of the marketing process) in the marketing of Registrable
Shares in any underwritten offering, including participation in any road
show related thereto, and (D) take any and all other actions as may be
reasonable necessary or advisable to enable each such Electing Holder and
TWP, as applicable, such agent, if any, and such underwriter, if any, to
consummate the disposition in such jurisdictions of such Registrable
Shares, or the Market Making Securities, as applicable;
(xii) use commercially reasonable efforts to obtain the consent or
approval of each governmental agency or authority, whether federal, state
or local, which may be required of the Company or otherwise to effect any
Registration or the Market Making Registration or the offering or sale in
connection therewith or to enable the selling holder or holders or TWP to
offer, or to consummate the disposition of, the Registrable Shares or the
Market Making Securities, as applicable;
(xiii) cooperate with the Electing Holders and the managing
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Registrable Shares to be sold, which certificates
shall be printed, lithographed or engraved, or otherwise produced, and
which shall not bear any restrictive legends; and, in the case of an
underwritten offering, enable such Registrable Shares to be in such
denominations and registered in such names as the managing underwriters may
request at least two business days prior to any sale of the Registrable
Shares;
(xiv) enter into one or more underwriting agreements, engagement
letters, agency agreements, "best efforts" underwriting agreements or
similar agreements, as appropriate, including customary provisions relating
to indemnification and contribution, and take such other actions in
connection therewith as, in the case of a Registration, the Requisite
Holders, or, in the case of a Market Making Registration, TWP shall request
in order to expedite, or facilitate the disposition of such Registrable
Shares or the Market Making Securities, as applicable;
(xv) whether or not an agreement of the type referred to in Section
5(xiv) hereof is entered into and whether or not any portion of the
offering contemplated by such Secondary Offer Registration Statement is an
underwritten offering or is made
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<PAGE>
through a placement or sales agent or any other entity, (A) make such
representations and warranties to the Electing Holders, TWP and the
placement or sales agent, if any, therefor and the underwriters, if any,
thereof in form, substance and scope as are customarily made in connection
with an offering of common stock pursuant to any appropriate agreement or a
registration statement filed on the form applicable to the Registration or
the Market Making Registration, as applicable; (B) obtain an opinion of
counsel to the Company in customary form and covering such matters, of the
type customarily covered by such an opinion, as the managing underwriters,
if any, and in the case of a any Registration, as the Electing Holders or,
in the case of a Market Making Registration, as TWP may reasonably request,
addressed to such Electing Holders, TWP and the placement or sales agent,
if any, therefor and the underwriters, if any, thereof and dated the
effective date of such Secondary Offer Registration Statement (and if such
Secondary Offer Registration Statement contemplates an underwritten
offering of a part or all of the Registrable Shares or the Market Making
Securities, as applicable, dated the date of the closing under the
underwriting agreement relating thereto) and the date of filing of an
amendment or supplement to such Secondary Offer Registration Statement or
any other document that is incorporated in such Secondary Offer
Registration Statement by reference and includes financial data with
respect to a fiscal quarter or year, as the case may be (it being agreed
that the matters to be covered by such opinion shall include the due
incorporation and existence of the Company and its subsidiaries; the
qualification of the Company and its subsidiaries to transact business as
foreign corporations; the due authorization, execution and delivery of the
relevant agreement of the type referred to in Section 5(a)(xiv) hereof; the
due authorization, execution, authentication and issuance, and the validity
and enforceability, of the Registrable Shares or the Market Making
Securities, as applicable; the absence of material legal or governmental
proceedings involving the Company or its subsidiaries; the absence of a
breach by the Company or any of its subsidiaries of, or a default under,
material agreements binding upon the Company or any subsidiary of the
Company; the absence of governmental approvals required to be obtained by
the Company in connection with any Registration or the Market Making
Registration, as applicable, the offering and sale of the Registrable
Shares, or the Market Making Securities, as applicable, this Agreement or
any agreement of the type referred to in Section 5(a)(xiv) hereof, except
such approvals as may be required under state securities or blue sky laws;
the material compliance as to form of such Secondary Offer Registration
Statement and any documents incorporated by reference therein with the
requirements of the Securities Act and the rules and regulations of the
Commission thereunder, respectively; and, as of the date of the opinion and
of the Secondary Offer Registration Statement or most recent post-effective
amendment thereto, as the case may be, the absence from such Secondary
Offer Registration Statement and the prospectus included therein, as then
amended or supplemented, and from the documents incorporated by reference
therein (in each case other than the financial statements and other
financial information contained therein) of an untrue statement of a
material fact or the omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading (in the case of such documents, in the light of the
circumstances existing at the time that such documents were filed with the
Commission under the Exchange Act)); (C) obtain a "cold comfort" letter or
letters
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from the independent certified public accountants of the Company addressed
to the selling Electing Holders, TWP, the placement or sales agent, if any,
therefor or the underwriters, if any, thereof, dated (i) the effective date
of such Secondary Offer Registration Statement and (ii) the effective date
of any prospectus supplement to the prospectus included in such Secondary
Offer Registration Statement or amendment or supplement to such Secondary
Offer Registration Statement or any other document that is incorporated in
such Secondary Offer Registration Statement by reference and includes
unaudited or audited financial statements as of a date or for a period
subsequent to that of the latest such statements included in such
prospectus (and, if such Secondary Offer Registration Statement
contemplates an underwritten offering pursuant to any prospectus supplement
to the prospectus included in such Secondary Offer Registration Statement
or post-effective amendment to such Secondary Offer Registration Statement
which includes unaudited or audited financial statements as of a date or
for a period subsequent to that of the latest such statements included in
such prospectus, dated the date of the closing under the underwriting
agreement relating thereto), such letter or letters to be in customary form
and covering such matters of the type customarily covered by letters of
such type; (D) deliver such documents and certificates, including officers'
certificates, as may be reasonably requested, in the case of any
Registration, by the Requisite Holders or, in the case of a Market Making
Registration, by TWP, and, in either case, the placement or sales agent, if
any, therefor and the managing underwriters, if any, thereof, dated the
effective date of such Secondary Offer Registration Statement (and if such
Secondary Offer Registration Statement contemplates an underwritten
offering of a part or all of the Registrable Shares or the Market Making
Securities, as applicable, dated the date of the closing under the
underwriting agreement relating thereto) and the date of filing of an
amendment or supplement to such Secondary Offer Registration Statement or
any other document that is incorporated in such Secondary Offer
Registration Statement by reference and includes financial data with
respect to a fiscal quarter or year, as the case may be, to evidence the
accuracy of the representations and warranties made pursuant to clause (A)
above or those contained in Section 7 hereof and the compliance with or
satisfaction of any agreements or conditions contained in the underwriting
agreement or other agreement entered into by the Company; and (E) undertake
such obligations relating to expense reimbursement, indemnification and
contribution as are provided in Sections 6 and 8 hereof;
(xvi) notify in writing each holder of Registrable Shares affected
thereby and TWP, of any proposal by the Company to amend or waive any
provision of this Agreement pursuant to Section 11(j) hereof and of any
amendment or waiver effected pursuant thereto, each of which notices shall
contain the text of the amendment or waiver proposed or effected, as the
case may be;
(xvii) in the event that any broker-dealer registered under the
Exchange Act shall underwrite any Registrable Shares or the Market Making
Securities, as applicable, or participate as a member of an underwriting
syndicate or selling group or "assist in the distribution" (within the
meaning of the Rules of Fair Practice and the By-Laws of the National
Association of Securities Dealers, Inc. ("NASD") or any successor thereto,
as
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<PAGE>
amended from time to time) thereof, whether as a holder of such Registrable
Shares or the Market Making Securities, as applicable, or as an
underwriter, a placement or sales agent or a broker or dealer in respect
thereof, or otherwise, assist such broker dealer in complying with the
requirements of such Rules and By-Laws, including by (A) if such Rules or
By-Laws shall so require, engaging a "qualified independent underwriter"
(as defined in Rule 2720 (or any successor thereto)) to participate in the
preparation of the Secondary Offer Registration Statement relating to such
Registrable Shares or the Market Making Securities, as applicable, to
exercise usual standards of due diligence in respect thereto and, if any
portion of the offering contemplated by such Secondary Offer Registration
Statement is an underwritten offering or is made through a placement or
sales agent, to recommend the yield of such Registrable Shares or the
Market Making Securities, as applicable, (B) indemnifying any such
qualified independent underwriter to the extent of the indemnification of
underwriters provided in Section 8 hereof (or to such other customary
extent as may be requested by such underwriter), and (C) providing such
information to such broker-dealer as may be required in order for such
broker-dealer to comply with the requirements of the Rules of Fair Practice
of the NASD; and
(xviii) comply with all applicable rules and regulations of the
Commission, and make generally available to its securityholders as soon as
practicable but in any event not later than eighteen months after the
effective date of such Secondary Offer Registration Statement, an income
statement of the Company and its subsidiaries complying with Section 11(a)
of the Securities Act (including, at the option of the Company, Rule 158
thereunder).
(b) In the event that the Company would be required to provide notice
pursuant to Section 5(a)(vii)(F) above to the Electing Holders, TWP, the
placement or sales agent, if any, therefor and the managing underwriters, if
any, thereof, the Company shall as promptly as reasonably practicable prepare
and furnish to each such Person a reasonable number of copies of a prospectus
supplemented or amended so that, as thereafter delivered to purchasers of
Registrable Shares or Market Making Securities, as applicable, such prospectus
shall conform in all material respects to the applicable requirements of the
Securities Act and the rules and regulations of the Commission thereunder and
shall not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading. Each Electing Holder and TWP agrees, that upon receipt
of any notice from the Company pursuant to Section 5(a)(vii)(F) hereof, such
Electing Holder and TWP, shall forthwith discontinue the disposition of
Registrable Shares or Market Making Securities, as applicable, pursuant to the
Secondary Offer Registration Statement applicable to such Registrable Shares or
Market Making Securities, as applicable, until such Electing Holder or TWP, as
applicable, shall have received copies of such amended or supplemented
prospectus, and if so directed by the Company, such Electing Holder or TWP shall
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in such Electing Holder's or TWP's possession of the
prospectus covering such Registrable Shares or Market Making Securities, as
applicable, at the time of receipt of such notice.
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(c) In addition to the information required to be provided in a Notice and
Questionnaire by each Electing Holder as to which any Registration is being
effected or to be provided by TWP in connection with the Market Making
Registration pursuant to Section 4, the Company may require an Electing Holder
or TWP, as applicable, to furnish to the Company such additional information
regarding such Electing Holder or TWP and such Electing Holder's or TWP's
intended method of distribution of the applicable Registrable Shares or Market
Making Securities as applicable, as the Company may from time to time reasonably
request in writing, but only to the extent that such information is required in
order to comply with the Securities Act. Each such Electing Holder and TWP
agrees to notify the Company as promptly as practicable of any inaccuracy or
change in information previously furnished by such Electing Holder or TWP, as
the case may be, to the Company or of the occurrence of any event in either case
as a result of which any prospectus relating to such Registration or Market
Making Registration, as applicable, contains or would contain an untrue
statement of a material fact regarding such Electing Holder or TWP or such
Electing Holder's or TWP's intended method of disposition of the Registrable
Shares or Market Making Securities, as applicable, or omits to state any
material fact regarding such Electing Holder or TWP or such Electing Holder's or
TWP's intended method of disposition of the Registrable Shares or Market Making
Securities, as applicable, required to be stated therein or necessary to make
statements therein not misleading in light of the circumstances then existing,
and promptly to furnish to the Company any additional information required to
correct and update any previously furnished information or required so that such
prospectus shall not contain, with respect to such Electing Holder or TWP or the
disposition of the applicable Registrable Shares or Market Making Securities, as
applicable, an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing.
Section 6. Registration Expenses.
The Company agrees to bear and to pay or cause to be paid promptly all
expenses incident to the Company's performance of or compliance with this
Agreement, including (a) all Commission and any NASD registration, filing and
review fees and expenses, (b) all fees and expenses in connection with the
qualification of the Registrable Shares and the Market Making Securities, as
applicable, for offering and sale under the State securities and blue sky laws
referred to in Section 5(a)(xi) hereof and determination of their eligibility
for investment under the laws of such jurisdictions as any managing underwriters
or the Electing Holders or TWP may designate, including any fees and
disbursements of counsel for the Electing Holders, TWP or the underwriters in
connection with such qualification and determination, (c) all expenses relating
to the preparation, printing, production, distribution and reproduction of each
registration statement required to be filed hereunder, each prospectus included
therein or prepared for distribution pursuant hereto, each amendment or
supplement to the foregoing, the expenses of preparing the Registrable Shares or
Market Making Securities, as applicable, for delivery and the expenses of
printing or producing any underwriting agreements, agreements among
underwriters, selling agreements and blue sky or legal investment memoranda and
all other documents in connection with the offering, sale or delivery of
Registrable Shares or Market Making Securities, as applicable, to be disposed of
(including certificates representing the Registrable Shares or the
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Market Making Securities), as applicable, (d) messenger, telephone and delivery
expenses relating to the offering, sale or delivery of Registrable Shares or
Market Making Securities, as applicable, and the preparation of documents
referred in clause (c) above, (e) internal expenses (including all salaries and
expenses of the Company's officers and employees performing legal or accounting
duties), (f) fees, disbursements and expenses of counsel and independent
certified public accountants of the Company (including the expenses of any
opinions or "cold comfort" letters required by or incident to such performance
and compliance), (g) fees, disbursements and expenses of any "qualified
independent underwriter" engaged pursuant to Section 5(a)(xviii) hereof, (h)
fees, disbursements and expenses of one counsel for the Electing Holders
retained in connection with any Registration, as selected by the Majority
Holders and one counsel for TWP retained in connection with a Market Making
Registration, as selected by TWP; (i) fees, expenses and disbursements of any
other Persons, including special experts, retained by the Company in connection
with such registration (collectively, the "Registration Expenses"). To the
extent that any Registration Expenses are incurred, assumed or paid by any
holder of Registrable Shares, TWP or any placement or sales agent therefor or
underwriter thereof, the Company shall reimburse such Person for the full amount
of the Registration Expenses so incurred, assumed or paid promptly after receipt
of a request therefor. Notwithstanding the foregoing, the holders of the
Registrable Shares being registered or TWP, as applicable, shall pay agency fees
and commissions and underwriting discounts and commissions attributable to the
sale of the applicable Registrable Shares, or Common Stock and the fees and
disbursements of any counsel or other advisors or experts retained by such
holders (severally or jointly), other than the counsel and experts specifically
referred to above.
Section 7. Representations and Warranties.
The Company represents and warrants to, and agrees with, each Purchaser
each of the holders from time to time of Registrable Shares and TWP that:
(a) Each registration statement covering Registrable Shares or Market
Making Securities, as applicable, and each prospectus (including any preliminary
or summary prospectus) contained therein or furnished pursuant to Section 5(a)
hereof and any further amendments or supplements to any such registration
statement or prospectus, when it becomes effective or is filed with the
Commission, as the case may be, and, in the case of an underwritten offering of
Registrable Shares or Market Making Securities, as applicable, at the time of
the closing under the underwriting agreement relating thereto, will conform in
all material respects to the applicable requirements of the Securities Act and
the rules and regulations of the Commission thereunder and will not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading;
and at all times subsequent to the Effective Time when a prospectus would be
required to be delivered under the Securities Act, other than (A) from (i) such
time as a notice has been given to the Purchasers, the holders of Registrable
Shares or TWP, as applicable, pursuant to Section 5(a)(vii)(F) hereof until (ii)
such time as the Company furnishes an amended or supplemented prospectus
pursuant to Section 5(b) hereof, or (B) during any suspension of offering and
sale pursuant hereto, each such registration statement, and each prospectus
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(including any preliminary or summary prospectus) contained therein or furnished
pursuant to Section 5(a) hereof, as then amended or supplemented, will conform
in all material respects to the applicable requirements of the Securities Act
and the rules and regulations of the Commission thereunder and will not contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
in the light of the circumstances then existing; provided, however, that this
representation and warranty shall not apply to any statements or omissions made
in reliance upon and in conformity with information furnished in writing to the
Company by a holder of Registrable Shares or TWP, as applicable, expressly for
use therein.
(b) Any documents incorporated by reference in any prospectus referred to
in Section 7(a) hereof, when they become or became effective or are or were
filed with the Commission, as the case may be, will conform or conformed in all
material respects to the requirements of the Securities Act or the Exchange Act,
as applicable, and none of such documents will contain or contained an untrue
statement of a material fact or will omit or omitted to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading.
Section 8. Indemnification.
(a) Indemnification by the Company. The Company agrees to indemnify and
------------------------------
hold harmless (i) each of the Electing Holders of Registrable Shares included in
a Registration Statement and TWP as holders of Market Making Securities included
in a Market Making Registration Statement and each Person who participates as a
placement or sales agent or as an underwriter in any offering or sale of such
Registrable Shares or Market Making Securities, as applicable, (ii) each Person,
if any, who controls (within the meaning of Section 15 or Section 20 of the
Exchange Act) any such Person referred to in clause (i) (any of the Persons
referred to in this clause (ii) being referred to herein as a "Controlling
Person") and (iii) the respective officers, directors, partners, employees,
representatives and agents of any Person referred to in clause (i) or any such
Controlling Person (any such Person referred to in clause (i), (ii) or (iii)
referred to for purposes of this Section 8(a) and Sections 8(c) through 8(e) as
an "Indemnified Person"), against any losses, claims, damages or liabilities,
joint or several, to which or such Indemnified Person may become subject, under
the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Secondary Offer Registration Statement, or any preliminary, final or summary
prospectus contained therein, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading; and will reimburse each such Indemnified Person for any
legal and other expenses reasonably incurred by such Indemnified Person in
connection with investigating or defending any such action or claims as such
expenses are incurred; provided, however, that the Company shall not be liable
-------- -------
in any such case (i) to the extent that any such loss, claim, damage or
liability arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in any such Registration
Statement, or any preliminary, final or summary prospectus contained therein, or
any amendment or
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<PAGE>
supplement thereto, in reliance upon and in conformity with written information
furnished to the Company by any Indemnified Person expressly for use therein or
(ii) from the use or delivery by such Indemnified Person, Controlling Person or
underwriter of a prospectus other than the most current prospectus made
available to such Holder, Controlling Person or underwriter by the Company.
(b) Indemnification by the Holders and any Agents and Underwriters in
-----------------------------------------------------------------
Connection with any Registration. The Company may require, as a condition to
- --------------------------------
including any Registrable Share in any Registration Statement and to entering
into any underwriting agreement with respect thereto, that the Company shall
have received an undertaking reasonably satisfactory to it from each Electing
Holder of such Registrable Shares and from each underwriter named (if any) in
any such underwriting agreement, severally and not jointly, to indemnify and
hold harmless (i) the Company and all other holders of Registrable Shares, (ii)
each Controlling Person of any Person referred to in clause (i), and (iii) the
respective officers, directors, partners, employees, representatives and agents
of any Person referred to in clause (i) or any such Controlling Person (any
Person referred to in clause (i), (ii) or (iii), referred to for purposes of
this Section 8(b) and Sections 8(c) through 8(e) as an "Indemnified Person")
against any losses, claims, damages or liabilities, joint or several, to which
such Indemnified Person may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereof) arise out of or are based upon any untrue or alleged untrue
statement of a material fact contained in such Registration Statement, or any
preliminary, final or summary prospectus contained therein, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in such Registration
Statement, or any preliminary, final or summary prospectus contained therein, or
any amendment or supplement thereto, in reliance upon and in conformity with
written information furnished to the Company by such Indemnified Person
expressly for use therein; and will reimburse the Company for any legal and
other expenses reasonably incurred by the Company in connection with
investigating or defending any such actions or claims as such expenses are
incurred; provided, however, that the liability of any Electing Holder pursuant
-------- -------
to this subsection (b) shall not exceed the product of the number of Registrable
Shares sold by such Electing Holder and the initial offering price therefor as
set forth in the prospectus therefor.
(c) Notifications and Other Indemnification Procedures. Promptly after
--------------------------------------------------
receipt by an Indemnified Person (as defined under each of subsections (a) and
(b) of this Section 8) of notice of the commencement of any action, such
Indemnified Person shall, if a claim in respect thereof is to be made against an
indemnifying party under such clause, notify such indemnifying party in writing
of the commencement thereof; but the omission so to notify the indemnifying
party will not relieve it from any liability which it may have to any
Indemnified Person otherwise than under such subsection or to the extent it is
not prejudiced as a proximate result of such failure. In case any such action
is brought against any Indemnified Person and it shall notify an indemnifying
party of the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party
-25-
<PAGE>
similarly notified, to assume the defense thereof, with counsel satisfactory to
such Indemnified Person (who shall not, except with the consent of the
Indemnified Person, be counsel to the indemnifying party), and, after notice
from the indemnifying party to such Indemnified Person of its election so to
assume the defense thereof, the indemnifying party shall not be liable to such
Indemnified Person under such subsection for any legal expenses of other counsel
or any other expenses, in each case subsequently incurred by such Indemnified
Person, in connection with the defense thereof other than reasonable costs of
investigation. Notwithstanding the foregoing, any Indemnified Person 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 at the
expense of the Indemnified Person unless the Indemnified Person shall have been
advised by counsel that representation of the Indemnified Person by counsel
provided by the indemnifying party would be inappropriate due to actual or
potential conflicting interests between the indemnifying party and the
Indemnified Person, including situations in which there are one or more legal
defenses available to the Indemnified Person that are different from or
additional to those available to the indemnifying party; provided, however, that
-------- -------
the indemnifying party shall not, in connection with any one such action or
proceeding or separate but substantially similar actions or proceedings arising
out of the same general allegations, be liable for the fees and expenses of more
than one separate firm of attorneys at any time for all Indemnified Parties,
except to the extent that local counsel, in addition to its regular counsel, is
required in order to effectively defend against such action or proceeding. No
indemnifying party shall, without the written consent of the Indemnified Person,
effect the settlement or compromise of, or consent to the entry of any judgment
with respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
Indemnified Person is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (i) includes an unconditional
release of the Indemnified Person from all liability arising out of such action
or claim and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of any Indemnified Person.
(d) Contribution. If the indemnification provided for in this Section 8
------------
is unavailable to or insufficient to hold harmless an Indemnified Person under
subsection (a), (b) or (c) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
Indemnified Person as a result of such losses, claims, damages or liabilities
(or actions in respect thereof) in such proportion as is appropriate to reflect
the relative fault of the indemnifying party on the one hand and the Indemnified
Person on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
indemnifying party on the one hand or the Indemnified Person on the other and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The parties agree that it
would not be just and equitable if contributions pursuant to this subsection (d)
were determined by pro rata allocation (even if the Indemnified Persons were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to above in
this
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<PAGE>
subsection (d). The amount paid or payable by an Indemnified Person as a result
of the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in this subsection (d) shall be deemed to include any legal or
other expenses reasonably incurred by such Indemnified Person in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), no Electing Holder shall be required to
contribute any amount in excess of the amount by which the product of number of
Registrable Shares sold by such Electing Holder and the initial offering price
therefor as set forth in the prospectus therefor exceeds the amount of any
damages which such Electing Holder has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission, and
no underwriter or sales agent shall be required to contribute any amount in
excess of the amount by which the total price at which the shares of Common
Stock underwritten or placed by it and distributed to the public were offered to
the public exceeds the amount of any damages which such underwriter or sales
agent has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(e) The obligations of the Company and the Electing Holders under this
Section 9 shall be in addition to any liability which the Company and the
respective Electing Holders may otherwise have.
Section 9. Underwritten Offerings.
(a) Selection of Underwriters. If any of the Registrable Shares covered by
-------------------------
the Registration are to be sold pursuant to an underwritten offering, the
managing underwriter or underwriters thereof shall be designated by Majority
Holders, provided that such designated managing underwriter or underwriters is
--------
or are reasonably acceptable to the Company.
(b) Participation by Holders. Each holder of Registrable Shares hereby
------------------------
agrees with each other such holder that no such holder may participate in any
underwritten offering hereunder unless such holder (i) agrees to sell such
holder's Registrable Shares on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
Section 10. Rule 144 and Rule 144A.
The Company covenants to the holders of Registrable Shares and the
Purchasers that to the extent it shall be required to do so under the Exchange
Act, the Company shall timely file the reports required to be filed by it under
the Exchange Act or the Securities Act (including the reports under Sections 13
and 15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144
adopted by the Commission under the Securities Act) and the rules and
regulations adopted by the Commission thereunder, shall make available to each
holder of Registrable
-27-
<PAGE>
Shares and the Purchasers the information required by Rule 144A(d)(4), and shall
take such further action as any holder of Registrable Shares or the Purchasers
may reasonably request, all to the extent required from time to time to enable
such holder to sell Registrable Shares or the Purchasers to sell Common Stock
without registration under the Securities Act within the limitations of the
exemptions provided by Rule 144 or Rule 144A under the Securities Act, as such
Rules may be amended from time to time, or any similar or successor rule or
regulation hereafter adopted by the Commission. Upon the request of any holder
of Registrable Shares or the Purchasers in connection with that holder's or the
Purchasers' sale pursuant to Rule 144 or Rule 144A, the Company shall deliver to
such holder or the Purchasers a written statement as to whether it has complied
with such requirements.
Section 11. Holdoff Agreement.
(a) The Company agrees not to effect any public sale or distribution of
equity securities of the Company, including any public sale pursuant to Rule 144
under the Securities Act, or any securities convertibles into or exchangeable or
exercisable for such securities, (a "Public Sale"), during the period commencing
-----------
30 days prior to and ending 90 days after the effective date of any underwritten
Demand Registration or any underwritten Piggyback Registration (except as part
of such underwritten registration or pursuant to registration on Form S-8 or any
successor form), unless the underwriters managing the offering otherwise agree.
(b) Each holder of Registrable Shares agrees not to effect any Public Sale
(and in the case of Investors and Purchasers, such holders agree not to effect a
distribution to their respective partners in connection with an underwritten
demand registration in which the Purchasers (in the case of Investors) or the
Investors (in the case of Purchasers) are participating under this Agreement,
provided that the party agreeing not to distribute shall have received notice of
such Registration at least 45 days prior to the effective date thereof) during
the period commencing 30 days prior to and ending 90 days after the effective
date of any underwritten registration for the account of the Company (except as
part of such underwritten registration or pursuant to registration on Form S-8
or any successor form) or any Demand Registration, unless, in any such case, the
underwriters managing the offering otherwise agree; provided that the holders of
Investors' Shares shall not be subject to the agreement set forth in this
subsection 11(b) until the first anniversary of the date hereof; provided
further that nothing in this subsection 11(b) shall be deemed to restrict any
distribution by the Investors or Purchasers to their respective partners of such
securities otherwise than as expressly set forth above or to restrict the sale
of such securities by the partners of the Investors or Purchasers after any such
distribution.
(c) The Company agrees to use its commercially reasonable efforts to cause
any underwriters managing an offering referred to in the Existing Registration
Agreement or otherwise to release the holders of Registrable Shares from any
resale restrictions managed by such underwriters with respect to such offerings
no later than and on terms no less favorable to the holders of Registrable
Shares than imposed on other holders of shares of Common Stock who are so
released from such resale restrictions.
-28-
<PAGE>
Section 12. Miscellaneous.
(a) No Inconsistent Agreements. The Company represents, warrants,
--------------------------
covenants and agrees that it has not granted, and shall not grant, registration
rights with respect to Registrable Shares, Common Stock or any other securities
which would be inconsistent with the terms contained in this Agreement.
(b) Specific Performance. The parties hereto acknowledge that there would
--------------------
be no adequate remedy at law if the Company fails to perform any of its
obligations hereunder and that the Purchasers, the holders from time to time of
the Registrable Shares and TWP may be irreparably harmed by any such failure,
and accordingly agree that the Purchasers, such holders and TWP, in addition to
any other remedy to which they may be entitled at law or in equity, shall be
entitled to compel specific performance of the respective obligations of the
Company under this Agreement in accordance with the terms and conditions of this
Agreement, in any court of the United States or any State thereof having
jurisdiction.
(c) Notices. All notices and communications provided for hereunder shall
-------
be in writing and sent (i) by telecopy if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid); or (ii) by registered or certified mail with return receipt
requested (postage prepaid); or (iii) by a recognized overnight delivery service
(with charges prepaid). Any such notice must be sent:
If to the Purchasers:
Thomas Weisel Capital Partners, L.P.,
TWP CEO Founders' Circle (AI), L.P.,
TWP CEO Founders' Circle (QP), L.P.,
Thomas Weisel Capital Partners Employee Fund, L.P.,
TWP 2000 Co-Investment Fund, L.P.
c/o Thomas Weisel Capital Partners, L.P.
One Montgomery Street, Suite 3700
San Francisco, CA 95104
Facsimile: (415) 364-2698
Attention: Marianne Winkler
RKB Capital, L.P.
150 West Lake Street
Wayzata, Minnesota 55391
Telecopy: (612) 404-9266
Attention: Peter Schleider
-29-
<PAGE>
with copies to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, NY 10004-1980
Facsimile: (212) 859-8000
Attention: F. William Reindel, Esq.
If to the Company:
Optika Inc.
7450 Campus Drive, 2/nd/ Floor
Colorado Springs, CO 80920
Facsimile: (719) 531-0199
Attention: Steven Johnson
Vice President and Chief Financial Officer
with copies to:
E* Law Group
3555 W. 110/th/ Place
Westminster, Colorado 80031
Telecopy: (303) 410-0468
Attention: Jeremy W. Makarechian, Esq.
and to:
Morrison & Foerster LLP
370 17th Street, Suite 5200
Denver, Colorado 30202
Telecopy: (303) 592-1510
Attention: Warren Troupe, Esq.
If to any Investor or Founder:
At the address specified for such
Investor or Founder in the Existing
Registration Agreement.
Any party hereto may change the address for receipt of communications by giving
written notice to the others.
(d) Parties in Interest. All the terms and provisions of this Agreement
-------------------
shall be binding upon, shall inure to the benefit of and shall be enforceable by
the parties hereto and the holders from time to time of the Registrable Shares
and the respective successors and assigns of the parties hereto and such
holders. In the event that any transferee of any holder of Registrable
-30-
<PAGE>
Shares shall acquire Registrable Shares, in any manner, whether by gift,
bequest, purchase, operation of law or otherwise, such transferee shall, without
any further writing or action of any kind, be deemed a beneficiary hereof for
all purposes and such Registrable Shares shall be held subject to all of the
terms of this Agreement, and by taking and holding such Registrable Shares such
transferee shall be entitled to receive the benefits of, and be conclusively
deemed to have agreed to be bound by all of the applicable terms and provisions
of this Agreement. If the Company shall so request, any such successor, assign
or transferee shall agree in writing to acquire and hold the Registrable Shares
subject to all of the applicable terms hereof.
(e) Survival. The respective indemnities, agreements, representations,
--------
warranties and each other provision set forth in this Agreement or made pursuant
hereto shall remain in full force and effect regardless of any investigation (or
statement as to the results thereof) made by or on behalf of the Purchasers or
any holder of Registrable Shares, any director, officer or partner of the
Purchasers or such holder, any agent or underwriter or any director, officer or
partner thereof, or any Controlling Person of any of the foregoing, and shall
survive delivery of and payment for the Securities pursuant to the Purchase
Agreement and the transfer and registration of Common Stock by such holder or
the Purchasers.
(f) Governing Law. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
-------------
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF
THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
(g) Waiver of Jury Trial. THE ISSUER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO
--------------------
A TRIAL BY JURY IN RESPECT OF ANY ACTION, PROCEEDING OR LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OF
THE SECURITIES OR EXCHANGE NOTES.
(h) Submission to Jurisdiction. If any action, proceeding or litigation
--------------------------
shall be brought by the Purchasers or any holder of the Registrable Shares in
order to enforce any right or remedy under this agreement or any of the Shares,
the Company hereby consents and will submit, and will cause each of its
subsidiaries to submit, to the jurisdiction of any state or federal court of
competent jurisdiction sitting within the area comprising the Southern District
of New York on the date of this Agreement. The Company hereby irrevocably
waives any objection, including, but not limited to, any objection to the laying
of venue or based on the grounds of forum non conveniens, which it may now or
----- --- ----------
hereafter have to the bringing of any such action, proceeding or litigation in
such jurisdiction.
(i) Headings. The descriptive headings of the several Sections and
--------
paragraphs of this Agreement are inserted for convenience only, do not
constitute a part of this Agreement and shall not affect in any way the meaning
or interpretation of this Agreement.
(j) Entire Agreement; Amendments. This Agreement and the other writings
----------------------------
referred to herein or delivered pursuant hereto which form a part hereof contain
the entire understanding of the parties with respect to its subject matter.
This Agreement supersedes all prior agreements
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<PAGE>
and understanding between the parties with respect to its subject matter. This
Agreement may be amended and the observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively) only by a written instrument duly executed by the Company and the
holders of at least, in the case of an amendment that could reasonably be viewed
as adversely affecting the rights of the holders of (A) Purchasers' Shares, then
a majority in number of Purchasers' Shares and (B) Investors' Shares, then 70%
of the Investors' Shares and (C) Founders' Shares, then a majority of Founders'
Shares; provided, however, that any such amendment or waiver affecting solely
provisions of this Agreement relating to the Market Making Registration may be
effected by a written instrument duly executed solely by the Company and TWP.
Each holder of any Registrable Shares at the time or thereafter outstanding
shall be bound by any amendment or waiver effected pursuant to this Section
11(j), whether or not any notice, writing or marking indicating such amendment
or waiver appears on such Registrable Shares or is delivered to such holder.
(k) Inspection. For so long as this Agreement shall be in effect, this
----------
Agreement and a complete list of the names and addresses of all the holders of
Registrable Shares and the addresses of the Purchasers shall be made available
for inspection and copying on any business day to the Purchasers or any holder
of Registrable Shares for proper purposes only (which shall include any purpose
related to the rights of the holders of Registrable Shares under the Securities
and this Agreement) at the offices of the Company at the address thereof set
forth in Section 11(c) above.
(l) Counterparts. This agreement may be executed in any number of
------------
counterparts, each of which shall be an original but all of which together shall
constitute one instrument. Each counterpart may consist of a number of copies
hereof, each signed by less than all, but together signed by all, of the parties
hereto.
(m) Effective Date. This Agreement shall become effective as between the
--------------
Company, the Founders and the Investors upon the execution of the Agreement as
of such date (the "Effective Date") on which the Agreement (which has already
been executed by the Company) shall have been executed by Investors who hold at
least 70% of the Investors' Shares and Founders who hold at least a majority of
the Founders' Shares, whereupon this Agreement shall be binding upon all
Investors and Founders, whether or not they have executed this Agreement.
Notwithstanding anything to the contrary, regardless of whether or when the
Effective Date shall occur, this Agreement shall be a valid and binding
agreement of the Company and the Purchasers (and any subsequent of holder
Registrable Shares which are not Founders' Shares or Investors' Shares), and
until the Effective Date shall occur, this Agreement shall be deemed to exclude
all rights and obligations of the holders of Founders' Shares and Investors'
Shares. As of the Effective Date, with respect to Frontenac VI Limited
Partnership and JMI Equity Fund L.P. (the "Funds"), that certain Letter
Agreement, dated as of February 8, 2000, by and among the Company, the Funds and
the Purchasers shall terminate.
(n) Future Registration Rights. Except for the registration rights granted
--------------------------
hereunder, the Company will not grant registration rights as to any equity
securities of the Company, or any securities convertible or exchangeable into or
exercisable for such securities, without the written
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<PAGE>
consent of the holders of at least (A) a majority in number of Purchasers'
Shares and (B) 70% of the Investors' Shares unless (i) any such registration
rights that may be initiated at the demand of the holders of such rights (each
such holder a "New Investor") shall include in such demand Registrable Shares
requested to be included by holders of Purchasers' Shares and Investors' Shares
pro rata in accordance with the number of shares requested to be included
therein by each of the holders of Purchasers' Shares and Investors' Shares and
each of the New Investors, so long as the holders of a majority of the
Purchasers' Shares and 70% of the Investors' Shares agree to include on a pro
rata basis any shares requested to be included by such New Investor in any
Demand Registration of Registrable Shares initiated by either holders of
Purchasers' Shares or Investors' Shares under Section 2(a) herein (other than a
Demand Registration as to which the holders of Purchasers' Shares or Investors'
Shares, as the case may be, have made the election contemplated by clause (x) or
clause (y) of the second proviso to the first sentence of Section 2(e) not to
have any Investors' Shares or Purchasers' Shares, respectively, included therein
on a pro-rata basis), (ii) in the case of any such registration rights relating
to the registration of Common Stock for the account of the Company, the holders
of Registrable Shares hereunder shall have priority over the holders of any such
registration rights and (iii) any such registration rights granted shall not be
any more favorable to the holders of such registration rights as compared to, or
otherwise be inconsistent with, the rights granted to the holders of Purchasers'
Shares and Investors' Shares hereunder.
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<PAGE>
Agreed to and accepted as of the date first above written.
OPTIKA INC.
By:________________________________
Name:
Title:
[Company's Signature Page - Registration Rights Agreement]
-1-
<PAGE>
PURCHASERS
- ----------
THOMAS WEISEL CAPITAL PARTNERS, L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: __________________________________________
Name:
Title:
TWP CEO FOUNDERS' CIRCLE (AI), L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: __________________________________________
Name:
Title:
TWP CEO FOUNDERS' CIRCLE (QP), L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: __________________________________________
Name:
Title:
THOMAS WEISEL CAPITAL PARTNERS EMPLOYEE FUND, L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: __________________________________________
Name:
Title:
TWP 2000 CO-INVESTMENT FUND, L.P.
By: Thomas Weisel Capital Partners LLC, its general partner
By: Thomas Weisel Partners Group LLC, its managing member
By: __________________________________________
Name:
Title:
[Purchasers' Signature Page - Registration Rights Agreement]
-2-
<PAGE>
PURCHASERS
- ----------
RKB CAPITAL, L.P.
By:__________________________________
Name: Peter Schleider
Title: General Partner
[Purchasers Signature Page - Registration Rights Agreement]
-3-
<PAGE>
INVESTORS
- ---------
Frontenac VI Limited Partnership
By: Frontenac Company
Its: General Partner
By: _______________________________
Name:
Title:
JMI Equity Fund, L.P.
By: JMI Partners, L.P.
Its: General Partner
By: _______________________________
Name:
Title:
-4-
<PAGE>
FOUNDERS:
- --------
-5-
<PAGE>
SCHEDULE A
SCHEDULE OF FOUNDERS
Paul Carter
Harvey Jeane
Malcolm Thomson
Steven Johnson
Mark Ruport
Linda E. Boguslav
Lisa M. Hardiman
Russell A. Johnson
James T. Schuster
David Holzman
Richard Holzman
Kevin Ilsen
Eric Brown
IPRS Asia (s) Pte Ltd
Intuit Development Limited
Gillespie Limited
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SCHEDULE B
SCHEDULE OF INVESTORS
Frontenac VI Limited Partnership
JMI Equity Fund, L.P.
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