<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 5, 1997
REGISTRATION NO. 333-31271
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 4
TO FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
SYSTEM SOFTWARE ASSOCIATES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 36-3144515
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
500 WEST MADISON STREET, 32ND FLOOR
CHICAGO, ILLINOIS 60661
(312) 641-2900
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
MR. JOSEPH J. SKADRA
CHIEF FINANCIAL OFFICER
SYSTEM SOFTWARE ASSOCIATES, INC.
500 WEST MADISON STREET, 32ND FLOOR
CHICAGO, ILLINOIS 60661
(312) 641-2900
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
DOUGLAS R. NEWKIRK, ESQ. WILLIAM J. GRANT, JR., ESQ.
SACHNOFF & WEAVER, LTD. WILLKIE FARR & GALLAGHER
30 SOUTH WACKER DRIVE, 29TH FLOOR 153 EAST 53RD STREET
CHICAGO, ILLINOIS 60606 NEW YORK, NY 10022
(312) 207-1000 (212) 821-8000
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
ITEM 16. EXHIBITS.
<TABLE>
<C> <S>
1 Form of Underwriting Agreement*
3.1 Certificate of Incorporation (incorporated by reference into the
Company's Annual Report on Form 10-K for the fiscal year ended
October 31, 1987)
3.2 Amendment to Certificate of Incorporation filed June 6, 1997*
3.3 By-laws of the Company (incorporated by reference into the Company's
Annual Report on Form 10-K for the fiscal year ended October 31,
1989)
3.4 Certificate of Designations for Series A Preferred Stock
4.1 Form of Indenture between the Company and Harris Trust and Savings
Bank, as Trustee*
4.2 Form of Note (included in Exhibit 4.1)
4.3 Securities Purchase Agreement for the Series A Preferred Stock and
the New Private Warrants between the Company and the Private Investor
4.4 New Private Warrant
4.5 Registration Rights Agreement between the Company and the Private
Investor
4.6 Form of Representative's Warrant Agreement (including form of
Representative's Warrants)
4.7 Form of Registration Rights Agreement between the Company and the
Representative
5 Opinion of Sachnoff & Weaver, Ltd. regarding the legality of the
securities being registered*
12 Statement re: computation of ratios*
23.1 Consent of Price Waterhouse LLP*
23.2 Consent of KPMG Peat Marwick LLP*
23.3 Consent of Sachnoff & Weaver, Ltd. (included in Exhibit 5)*
24 Powers of attorney*
25 Statement of eligibility of trustee*
99.1 Note Purchase Agreement, dated March 27, 1997, for purchase of $12
million Floating Rate Convertible Notes due 2000*
99.2 Form of Floating Rate Convertible Note due 2000*
99.3 Amended and Restated Secured Credit Agreement, dated as of February
28, 1997, among the Company, Bank of America National Trust & Savings
Association and certain financial institutions*
99.4 Amended and Restated Note Agreement, dated as of February 28, 1997,
for the purchase of $26 million Senior Secured Notes due November 1,
1997 among the Company, Principal Mutual Life Insurance Company and
Massachusetts Mutual Life Insurance Company*
</TABLE>
- ---------------------
* Previously filed.
** To be filed by amendment.
II-2
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 4
TO THE REGISTRATION STATEMENT ON FORM S-3 TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF CHICAGO, STATE OF
ILLINOIS, ON SEPTEMBER 5, 1997.
System Software Associates, Inc.
/s/ Joseph J. Skadra
By___________________________________
Joseph J. Skadra, Vice
Presidentand Chief Financial
Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Roger E. Covey* Chief Executive Officer and September 5, 1997
____________________________________ Chairman of the Board of
Roger E. Covey Directors (Principal
Executive Officer)
/s/ Joseph J. Skadra Chief Financial Officer, September 5, 1997
____________________________________ Vice President--Finance
Joseph J. Skadra and Secretary (Principal
Financial and Accounting
Officer)
/s/ Andrew J. Filipowski* Director September 5, 1997
____________________________________
Andrew J. Filipowski
/s/ John W. Puth* Director September 5, 1997
____________________________________
John W. Puth
/s/ William N. Weaver, Jr.* Director September 5, 1997
____________________________________
William N. Weaver, Jr.
</TABLE>
/s/ Joseph J. Skadra
*By____________________________
Joseph J. Skadra,Attorney-in-
fact
II-4
<PAGE>
EXHIBIT 3.4
CERTIFICATE OF DESIGNATION OF
SERIES A PREFERRED STOCK OF
SYSTEM SOFTWARE ASSOCIATES, INC.
(Pursuant to Section 151 of the
General Corporation Law of the State of Delaware)
Roger E. Covey and Joseph J. Skadra, President and Secretary,
respectively, of System Software Associates, Inc., a corporation organized and
existing under the laws of the State of Delaware (the "Corporation"), in
accordance with Section 151 of the Delaware General Corporation Law, hereby
certify that:
FIRST: The Certificate of Incorporation of the Corporation authorizes
the issuance of up to 100,000 shares of preferred stock, par value $0.01 per
share, in one or more series, with such dividend rate, interest rate,
preferences, relative, participating and special rights, and qualifications,
limitations or restrictions thereof, as may be stated and expressed in a
resolution or resolutions providing for the creation and issuance of any such
series adopted by the Board of Directors of the Corporation (the "Board of
Directors") at the time of issuance of any shares of such series, pursuant to
authority expressly vested in the Board of Directors by the Certificate of
Incorporation of the Corporation.
SECOND: The Board of Directors desires, pursuant to its authority
aforesaid, to determine and fix the rights, preferences, privileges and
restrictions relating to a series of preferred stock and the number of shares
constituting, and the designation of, said series of preferred stock.
BE IT RESOLVED, that the Board of Directors hereby fixes and
determines the designation of, the number of shares constituting and the rights,
preferences, privileges and restrictions relating to said series of preferred
stock as follows:
Section 1. Designation and Number. The designation of the first
series of the authorized preferred stock, par value $0.01 per share, of the
Corporation shall be Series A Preferred Stock (the "Series A Preferred Stock").
The number of shares constituting the Series A Preferred Stock shall be 10,000.
Section 2. Dividends.
2A. Initial Dividend Rate. From and after the date of issuance
of each share of Series A Preferred Stock, the holder thereof shall be entitled
to receive prior and in preference to any distribution of any of the assets of
the Corporation to the holders of any Junior Securities, by virtue of their
ownership thereof, cumulative dividends at the rate of 12% per annum, compounded
annually, on the Holder's Redemption Price (the "Initial Dividend Rate"). Such
dividends shall accrue and compound annually whether or not they have been
declared and whether or not there are profits, surplus or other funds of the
Corporation legally available for the payment of dividends, and such dividends
shall be cumulative such that all accrued and unpaid
<PAGE>
dividends shall be fully paid, or shall be declared with funds irrevocably set
apart for payment or before any cash dividends may be paid with respect to any
Junior Securities.
2B. Adjusted Dividend Rate. From and after the date of a
Company Redemption Event, the Initial Dividend Rate shall be adjusted such that
the holder of each share of Series A Preferred Stock shall be entitled to
receive prior and in preference to any distribution of any of the assets of the
Corporation to the holders of any Junior Securities, by virtue of their
ownership thereof, cumulative dividends at the per share rate of 14% per annum,
compounded annually, on the Company Redemption Price (the "Adjusted Dividend
Rate"). Such dividends shall accrue and compound annually whether or not they
have been declared and whether or not there are profits, surplus or other funds
of the Corporation legally available for the payment of dividends, and such
dividends shall be cumulative such that all accrued and unpaid dividends shall
be fully paid, or shall be declared with funds irrevocably set apart for payment
before any cash dividends may be paid with respect to any Junior Securities.
2C. Adjustment Upon Default. The Initial Dividend Rate or the
Adjusted Dividend Rate, whichever shall then be in effect, shall be adjusted
upward by a per share amount equal to 4% per annum upon the occurrence of and
during the continuance of any Event of Default.
2D. Dividend Payment Dates. Dividends on the Series A Preferred
Stock shall be payable quarterly and in arrears on each of the last business day
of November, February, May and August of each year (each such date a "Dividend
Payment Date") commencing on the last business day of November 1997. Dividends
shall be payable as declared, provided that the failure to declare for payment
dividends on the Series A Preferred Stock in accordance with Section 2A, Section
2B and Section 2C on each quarterly payment date shall constitute an Event of
Default.
2E. Distribution of Partial Dividend Payments. Except as
otherwise provided herein, if at any time the Corporation pays less than the
total amount of dividends then accrued with respect to the Series A Preferred
Stock, such payment shall be distributed pro rata among the holders thereof
based upon the aggregate accrued but unpaid dividends on the Series A Preferred
Stock held by each such holder.
2F. Common Stock Dividends. Notwithstanding Section 2A, Section
2B and Section 2C, if greater (as determined on an as converted basis for the
Series A Preferred Stock), the holders of the Series A Preferred Stock shall be
entitled to receive, when as and if declared by the Board of Directors, out of
any assets of the Corporation legally available therefor, such dividends as may
be declared from time to time by the Board of Directors on any Junior Securities
of the Corporation.
2G. Date of Issuance. The "date of issuance" of any share of
Series A Preferred Stock shall be the date on which the Corporation initially
issues such share regardless of the number of times transfer of such share is
made on the stock records maintained by or for the Corporation and regardless of
the number of certificates which may be issued to evidence such share of Series
A Preferred Stock.
2
<PAGE>
Section 3. Liquidation.
3A. Series A Preferred Stock Preference. Upon any liquidation,
dissolution or winding up of the Corporation (whether voluntary of involuntary)
(a "Liquidation Event"), each holder of Series A Preferred Stock shall be
entitled to be paid, before any distribution or payment is made to the holders
of Junior Securities, by virtue of their ownership thereof, an amount in cash
per share equal to the greater of: (i) the Company Redemption Price of such
share of Series A Preferred Stock; and (ii) the amount that would have been
payable with respect to the Common Stock issuable upon the conversion of such
share of Series A Preferred Stock had all outstanding shares of Series A
Preferred Stock been converted immediately prior to such Liquidation Event. The
holders of the Series A Preferred Stock shall not be entitled to any further
payment in respect of the Series A Preferred Stock held by such holders. If upon
any Liquidation Event the Corporation's assets to be distributed among the
holders of the Series A Preferred Stock are insufficient to permit payment to
such holders of the aggregate amount which they are entitled to be paid under
this Section 3A, then the entire assets available to be distributed to the
holders of the Series A Preferred Stock shall be distributed pro rata among such
holders based upon the aggregate Company Redemption Price of the Series A
Preferred Stock held by each such holder.
3B. Valuation of Non-Cash Consideration. With respect to any
Liquidation Event, if the consideration received by the Corporation is other
than cash, its value will be deemed its fair market value. Any securities shall
be valued as follows:
(i) Securities not subject to restrictions on free
marketability covered by (ii) below:
A. If traded on a securities exchange or through the Nasdaq
National Market, the value shall be deemed to be the average of the closing
prices of the securities on such exchange or system over the thirty (30) day
period ending three (3) days prior to the Liquidation Event;
B. If actively traded over-the-counter, the value shall be
deemed to be the average of the closing bid or sale prices (whichever is
applicable) over the thirty (30) day period ending three (3) days prior to the
Liquidation Event; and
C. If there is no active public market, the value shall be
the fair market value thereof, as mutually determined by the Corporation and the
holders of a majority of the then outstanding Series A Preferred Stock.
(ii) The method of valuation of securities subject to
restrictions on free marketability (other than restrictions arising solely by
virtue of a stockholder's status as an affiliate or former affiliate) shall be
to make an appropriate discount from the market value determined as above in
3B(i)(A)-(C) to reflect the approximate fair market value thereof, as mutually
determined by the Corporation and the holders of a majority of the then
outstanding Series A Preferred Stock.
3
<PAGE>
3C. Notice of Liquidation Event. The Corporation shall give
each holder of record of Series A Preferred Stock written notice of any
Liquidation Event not later than twenty (20) days prior to the stockholders'
meeting called to approve such Liquidation Event (if any), or twenty (20) days
prior to such Liquidation Event, whichever is earlier, and shall also notify
such holders in writing of the final consummation or approval of such
Liquidation Event. The first of such notices shall describe the material terms
and conditions of the impending Liquidation Event and the provisions of this
Section 3, including the amount of proceeds to be paid with respect to each
Series A Preferred Stock, each share of Common Stock and each other equity
security of the Corporation in connection with such Liquidation Event, and the
Corporation shall thereafter give such holders prompt notice of any material
changes. If voluntary, the Liquidation Event shall in no event take place sooner
than twenty (20) days after the Corporation has given the first notice provided
for herein or sooner than ten (10) days after the Corporation has given notice
of any material changes provided for herein; provided, however, that such
periods may be shortened upon the written consent of the holders of a majority
of the then outstanding Series A Preferred Stock.
Section 4. Redemptions.
4A. Redemption at the Option of the Holders of Series A
Preferred Stock. At any time after (i) August 31, 2003, or (ii) an Event of
Default, within thirty (30) days after the receipt by the Corporation of a
written request from any holder of Series A Preferred Stock given after such
date, that all or, if less than all, a specified percentage of such holders'
Series A Preferred Stock be redeemed, and concurrently with surrender by such
holder of the certificate(s) representing such shares, the Corporation shall, to
the extent it may lawfully do so, redeem (each such payment date being referred
to herein as a "Redemption Date") the shares specified in such request by paying
in cash therefor a sum per share equal to $1,000 (as adjusted for any stock
splits, stock dividends, recapitalizations or the like) plus all accrued but
unpaid dividends on such share (collectively, the "Holder's Redemption Price").
Any redemption of Series A Preferred Stock effected pursuant to this Section 4A
shall be made on a pro rata basis among the holders of the Series A Preferred
Stock in proportion to the number of shares of Series A Preferred Stock proposed
to be redeemed by such holders.
4B. Redemption at the Option of the Corporation. At any time on
or after the earliest of (i) August 31, 2003, (ii) a Change in Control, and
(iii) a Bankruptcy Event (any of the foregoing, a "Company Redemption Event")
the Corporation may, to the extent it may lawfully do so, redeem (each such
payment date being referred to herein as a "Redemption Date") all or any portion
of the outstanding shares of Series A Preferred Stock by paying in cash therefor
a sum per share equal to $3,500 (as adjusted for any stock splits, stock
dividends, recapitalizations or the like) plus all accrued but unpaid dividends
thereon (collectively, the "Company Redemption Price"). Any redemption of Series
A Preferred Stock effected pursuant to this Section 4B shall be made on a pro
rata basis among the holders of the Series A Preferred Stock in proportion to
the number of shares of Series A Preferred Stock proposed to be redeemed by the
Corporation.
4
<PAGE>
4C. Notice of Redemption. At least fifteen (15) but no more
than thirty (30) days prior to each Redemption Date, written notice shall be
mailed, first class postage prepaid, to each holder of record (at the close of
business on the business day next preceding the day on which notice is given) of
the Series A Preferred Stock to be redeemed, at the address last shown on the
records of the Corporation for such holder, notifying such holder of the
redemption to be effected on the applicable Redemption Date, specifying the
number of shares to be redeemed from such holder, the Redemption Date, the
Holder's Redemption Price or the Company Redemption Price, as applicable, the
place at which payment may be obtained and calling upon such holder to surrender
to the Corporation, in the manner and at the place designated, his, her or its
certificate or certificates representing the shares to be redeemed (the
"Redemption Notice"). Except as provided in Section 4D, on or after each
Redemption Date, each holder of Series A Preferred Stock to be redeemed on such
Redemption Date shall surrender to the Corporation the certificate or
certificates representing such shares, in the manner and at the place designated
in the Redemption Notice, and thereupon the Holder's Redemption Price or the
Company Redemption Price, as applicable, of such shares shall be payable to the
order of the person whose name appears on such certificate or certificates as
the owner thereof and each surrendered certificate shall be canceled. In the
event less than all the shares represented by any such certificate are redeemed,
a new certificate shall be issued representing the unredeemed shares.
4D. Rights Upon Redemption. From and after each Redemption
Date, unless there shall have been a default in payment of the Holder's
Redemption Price or the Company Redemption Price, as applicable, all rights of
the holders of shares of Series A Preferred Stock designated for redemption on
such Redemption Date in the Redemption Notice as holders of Series A Preferred
Stock (except the right to receive the Holder's Redemption Price or the Company
Redemption Price, as applicable, with interest thereon from the Redemption Date
at the Initial Dividend Rate or the Adjusted Dividend Rate, as applicable, upon
surrender of their certificate or certificates) shall cease with respect to such
shares, and such shares shall not thereafter be transferred on the books of the
Corporation or be deemed to be outstanding for any purpose whatsoever. If the
funds of the Corporation legally available for redemption of shares of Series A
Preferred Stock on a Redemption Date are insufficient to redeem the total number
of shares of Series A Preferred Stock to be redeemed on such date, those funds
that 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 such that
each holder of a share of Series A Preferred Stock receives the same percentage
of the Holder's Redemption Price or the Company Redemption Price, as applicable.
The shares of Series A Preferred Stock not redeemed shall remain outstanding and
entitled to all the rights and preferences provided herein. At any time
thereafter when additional funds of the Corporation are legally available for
the redemption of shares of Series A Preferred Stock, such funds will
immediately be used to redeem the balance of the shares that the Corporation has
become obliged to redeem on any Redemption Date but that it has not redeemed.
Section 5. Conversion. The holders of the Series A Preferred Stock
shall have conversion rights as follows (the "Conversion Rights"):
5
<PAGE>
5A. Right to Convert. Each share of Series A Preferred Stock
shall be convertible, at the option of the holder thereof, at any time after the
date of issuance of such share at the office of the Corporation or any transfer
agent for such stock, into 80.4 shares (the "Conversion Rate") of Common Stock;
provided, however, that the Conversion Rate shall be subject to adjustment as
set forth in this Section 5. Each share of Common Stock issued upon conversion
of the Series A Preferred Stock shall be fully paid and nonassessable.
5B. Mechanics of Conversion. Before any holder of Series A
Preferred Stock shall be entitled to convert the same into shares of Common
Stock, such holder shall surrender the certificate or certificates therefor,
duly endorsed, at the office of the Corporation or of any transfer agent for the
Series A Preferred Stock, and shall give written notice to the Corporation at
its principal corporate office, of the election to convert the same and shall
state therein the name or names in which the certificate or certificates for
shares of Common Stock are to be issued. The Corporation shall, as soon as
practicable thereafter, issue and deliver at such office to such holder of
Series A Preferred Stock, or to the nominee or nominees of such holder, a
certificate or certificates for the number of shares of Common Stock to which
such holder shall be entitled as aforesaid. Such conversion shall be deemed to
have been made immediately prior to the close of business on the date of such
surrender of the shares of Series A Preferred Stock to be converted, and the
person or persons entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock as of such date.
5C. Conversion Rate Adjustments of Series A Preferred Stock for
Certain Dilutive Issuances, Splits and Combinations. The Conversion Rate of the
Series A Preferred Stock shall be subject to adjustment from time to time as
follows:
(i) A. If this corporation shall issue, after the date
upon which any shares of Series A Preferred Stock were first issued (the
"Purchase Date"), any Additional Stock (as defined below) without consideration
or for a consideration per share less than the Effective Price (the "Effective
Price" shall initially be $12.44, as adjusted from time to time, the "Effective
Price") in effect immediately prior to the issuance of such Additional Stock,
then: (x) the Conversion Rate in effect immediately prior to each such issuance
shall forthwith (except as otherwise provided in this clause (i)) be adjusted by
multiplying such Conversion Rate by a fraction, the numerator of which shall be
the number of
6
<PAGE>
shares of Common Stock outstanding immediately prior to such issuance (including
shares of Common Stock deemed to be issued pursuant to Section 5C(i)(E)(1) or
(2)) (but not including shares excluded from the definition of Additional Stock
by Section 5C(ii)(B)) plus the number of shares of such Additional Stock; and
the denominator of which shall be the number of shares of Common Stock
outstanding immediately prior to such issuance (including shares of Common Stock
deemed to be issued pursuant to Section 5C(i)(E)(1) or (2)) (but not including
shares excluded from the definition of Additional Stock by Section 5C(ii)(B))
plus the number of shares of Common Stock that the aggregate consideration
received by this corporation for such issuance would purchase at the Effective
Price; and (y) the Effective Price in effect immediately prior to each such
issuance shall forthwith (except as otherwise provided in this clause (i)) be
adjusted to a price determined by multiplying such Effective Price by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such issuance (including shares of Common Stock
deemed to be issued pursuant to Section 5C(i)(E)(1) or (2)) (but not including
shares excluded from the definition of Additional Stock by Section 5C(ii)(B))
plus the number of shares of Common Stock that the aggregate consideration
received by this corporation for such issuance would purchase at the Effective
Price; and the denominator of which shall be the number of shares of Common
Stock outstanding immediately prior to such issuance (including shares of Common
Stock deemed to be issued pursuant to Section 5C(i)(E)(1) or (2)) (but not
including shares excluded from the definition of Additional Stock by Section
5C(ii)(B)) plus the number of shares of such Additional Stock. However, the
foregoing calculation shall not take into account shares deemed issued pursuant
to Section 5C(i)(E) on account of options, rights or convertible or exchangeable
securities (or the actual or deemed consideration therefor), except to the
extent the consideration to be paid upon such exercise, conversion or exchange
per share of underlying Common Stock is less than or equal to then Effective
Price.
B. No adjustment of the Conversion Rate and Effective Price
for the Series A Preferred Stock shall be made in an amount less than one one-
hundredth of a share, in the case of the Conversion Rate, or in an amount less
that one cent per share, in the case of the Effective Price, provided that any
adjustments that are not required to be made by reason of this sentence shall be
carried forward and shall be either taken into account in any subsequent
adjustment made prior to three (3) years from the date of the event giving rise
to the adjustment being carried forward, or shall be made at the end of three
(3) years from the date of the event giving rise to the adjustment being carried
forward. Except to the limited extent provided for in Sections (E)(3) and
(E)(4), no adjustment of such Conversion Rate pursuant to this subsection 5C(i)
shall have the effect of decreasing the Conversion Rate below the Conversion
Rate in effect immediately prior to such adjustment and no adjustment of such
Effective Price pursuant to this subsection 4(d)(i) shall have the effect of
increasing the Effective Price above the Effective Price in effect immediately
prior to such adjustment.
C. In the case of the issuance of Common Stock for cash,
the consideration shall be deemed to be the amount of cash paid therefor before
deducting any reasonable discounts, commissions or other expenses allowed, paid
or incurred by this corporation for any underwriting or otherwise in connection
with the issuance and sale thereof.
D. In the case of the issuance of the Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair value thereof as determined by the Board of
Directors irrespective of any accounting treatment.
E. In the case of the issuance (whether before, on or after
the applicable Purchase Date) of options to purchase or rights to subscribe for
Common Stock, securities by their terms convertible into or exchangeable for
Common Stock or options to purchase or rights to subscribe for such convertible
or exchangeable securities, the following provisions shall apply for all
purposes of this Section 5C(i) and Section 5C(ii):
7
<PAGE>
(1) The aggregate maximum number of shares of Common
Stock deliverable upon exercise of such options to purchase or rights to
subscribe for Common Stock shall be deemed to have been issued at the time such
options or rights were issued and for a consideration equal to the consideration
(determined in the manner provided in Section 5C(i)(C) and Section 5C(i)(D)), if
any, received by this corporation upon the issuance of such options or rights
plus the minimum exercise price provided in such options or rights for the
Common Stock covered thereby.
(2) The aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange for any such convertible or
exchangeable securities or upon the exercise of options to purchase or rights to
subscribe for such convertible or exchangeable securities and subsequent
conversion or exchange thereof shall be deemed to have been issued at the time
such securities were issued or such options or rights were issued and for a
consideration equal to the consideration, if any, received by this corporation
for any such securities and related options or rights (excluding any cash
received on account of accrued interest or accrued dividends), plus the minimum
additional consideration, if any, to be received by this corporation upon the
conversion or exchange of such securities or the exercise of any related options
or rights (the consideration in each case to be determined in the manner
provided in Section 5C(i)(C) and Section 5C(i)(D)).
(3) In the event of any change in the number of shares
of Common Stock deliverable or in the consideration payable to this corporation
upon exercise of such options or rights or upon conversion of or in exchange for
such convertible or exchangeable securities, including, but not limited to, a
change resulting from the antidilution provisions thereof (unless such options
or rights or convertible or exchangeable securities were merely deemed to be
included in the numerator and denominator for purposes of determining the number
of shares of Common Stock outstanding for purposes of Section 5C(i)(A)), the
Conversion Rate of the Series A Preferred Stock, to the extent in any way
affected by or computed using such options, rights or securities, shall be
recomputed to reflect such change, but no further adjustment shall be made for
the actual issuance of Common Stock or any payment of such consideration upon
the exercise of any such options or rights or the conversion or exchange of such
securities.
(4) Upon the expiration of any such options or rights,
the termination of any such rights to convert or exchange or the expiration of
any options or rights related to such convertible or exchangeable securities,
the Conversion Rate of the Series A Preferred Stock, to the extent in any way
affected by or computed using such options, rights or securities or options or
rights related to such securities (unless such options or rights were merely
deemed to be included in the numerator and denominator for purposes of
determining the number of shares of Common Stock outstanding for purposes of
Section 5C(i)(A)), shall be recomputed to reflect the issuance of only the
number of shares of Common Stock (and convertible or exchangeable securities
that remain in effect) actually issued upon the exercise of such options or
rights, upon the conversion or exchange of such securities or upon the exercise
of the options or rights related to such securities.
8
<PAGE>
(5) The number of shares of Common Stock deemed issued
and the consideration deemed paid therefor pursuant to Section 5C(i)(E)(1) and
(2) shall be appropriately adjusted to reflect any change, termination or
expiration of the type described in either Sections 5C(i)(E)(3) or (4).
(6) With respect to any options to purchase or rights
to subscribe for Common Stock, securities by their terms convertible into or
exchangeable for Common Stock or options to purchase or rights to subscribe for
such convertible or exchangeable securities that are deemed issued pursuant to
Section 5C(i)(E) hereof, no further adjustment shall be made for the actual
issuance of Common Stock or any payment of such consideration upon the exercise
of any such options or rights or the conversion or exchange of such securities;
provided, however, that notwithstanding any other provision of this Section 5,
the issuance of Common Stock, securities by their terms convertible into or
exchangeable for Common Stock or options to purchase or rights to subscribe for
such convertible or exchangeable securities, that are outstanding on the
Purchase Date shall be deemed to be Additional Stock except to the extent that
such shares of Common Stock, securities by their terms convertible into or
exchangeable for Common Stock or options to purchase or rights to subscribe for
such convertible or exchangeable securities, are excluded from the definition of
Additional Stock pursuant to Section 5C(ii) hereof.
(ii) "Additional Stock" shall mean any shares of Common
Stock issued (or deemed to have been issued pursuant to Section 5C(i)(E)) by
this corporation after the Purchase Date other than:
A. Common Stock issued pursuant to a transaction
described in Section 5C(iii) hereof;
B. Common Stock issued or issuable pursuant to the
exercise of options outstanding as of the Purchase Date granted to employees,
directors, consultants and other persons under any Company stock option, bonus
or other incentive plan and any options issued after the Purchase Date to any
such persons under such plans; provided, that the aggregate number of such
shares of Common Stock shall not exceed 6,000,000; or
C. Warrants, issued as of March 3, 1997, and the
Common Stock issuable or issued upon the exercise thereof, to certain lenders
for an aggregate of 775,000 shares of Common Stock.
(iii) In the event the Corporation should at any time or
from time to time after the Purchase Date fix a record date for the effectuation
of a split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock or other securities or
rights convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of
9
<PAGE>
such dividend distribution, split or subdivision if no record date is fixed),
the Conversion Rate of the Series A Preferred Stock shall be appropriately
increased so that the number of shares of Common Stock issuable on conversion of
each share of such series shall be increased in proportion to such increase of
the aggregate of shares of Common Stock outstanding and those issuable with
respect to such Common Stock Equivalents and the Effective Price shall be
appropriately decreased so that the number of shares of Common Stock issuable on
conversion of each share of Series A Preferred Stock shall be increased in
proportion to such increase of the aggregate of shares of Common Stock
outstanding and those issuable with respect to such Common Stock Equivalents.
(iv) If the number of shares of Common Stock outstanding at
any time after the Purchase Date is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of such
combination, the Conversion Rate for the Series A Preferred Stock shall be
appropriately decreased so that the number of shares of Common Stock issuable on
conversion of each share of such series shall be decreased in proportion to such
decrease in outstanding shares and the Effective Price shall be appropriately
increased so that the number of shares of Common Stock issuable on conversion of
each share of Series A Preferred Stock shall be decreased in proportion to such
decrease in outstanding shares.
5D. Other Distributions. In the event the Corporation shall
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by the Corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in Section 5C(i), then, in each
such case for the purpose of this Section 5D, the holders of the Series A
Preferred Stock shall be entitled to a proportionate share of any such
distribution as though they were the holders of the number of shares of Common
Stock of the Corporation into which their shares of Series A Preferred Stock are
convertible as of the record date fixed for the determination of the holders of
Common Stock of the Corporation entitled to receive such distribution.
5E. Recapitalizations. If at any time or from time to time
there shall be a recapitalization of the Common Stock (other than a subdivision
or combination provided for elsewhere in this Section 5) provision shall be made
so that the holders of the Series A Preferred Stock shall thereafter be entitled
to receive upon conversion of the Series A Preferred Stock the number of shares
of stock or other securities or property of the Corporation or otherwise, to
which a holder of Common Stock deliverable upon conversion would have been
entitled on such recapitalization. In any such case, appropriate adjustment
shall be made in the application of the provisions of this Section 5 with
respect to the rights of the holders of the Series A Preferred Stock after the
recapitalization to the end that the provisions of this Section 5 (including
adjustment of the Conversion Rate then in effect and the Effective Price then in
effect and the number of shares purchasable upon conversion of the Series A
Preferred Stock) shall be applicable after that event as nearly equivalent as
may be practicable.
5F. No Impairment. The Corporation will not, by amendment of
its Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid
10
<PAGE>
or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Corporation, but will at all times in
good faith assist in the carrying out of all the provisions of this Section 5
and in the taking of all such action as may be necessary or appropriate in order
to protect the Conversion Rights of the holders of the Series A Preferred Stock
against impairment.
5G. No Fractional Shares and Certificate as to Adjustments.
(i) No fractional shares shall be issued upon the
conversion of any share or shares of the Series A Preferred Stock, and the
number of shares of Common Stock to be issued shall be rounded to the nearest
whole share. Whether or not fractional shares are issuable upon such conversion
shall be determined on the basis of the total number of shares of Series A
Preferred Stock the holder is at the time converting into Common Stock and the
number of shares of Common Stock issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment
of the Conversion Rate of Series A Preferred Stock pursuant to this Section 5,
the Corporation, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Series A Preferred Stock a certificate setting forth such adjustment
or readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of any holder of Series A Preferred Stock, furnish or cause to be furnished
to such holder a like certificate setting forth (A) such adjustment and
readjustment, (B) the Conversion Rate and the Effective Price for the Series A
Preferred Stock at the time in effect, and (C) the number of shares of Common
Stock and the amount, if any, of other property that at the time would be
received upon the conversion of a share of Series A Preferred Stock.
5H. Notices of Record Date. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, the Corporation
shall mail to each holder of Series A Preferred Stock, at least twenty (20) days
prior to the date specified therein, a notice specifying the date on which any
such record is to be taken for the purpose of such dividend, distribution or
right, and the amount and character of such dividend, distribution or right.
5I. Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series A Preferred Stock, such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Series A Preferred Stock; and if at
any time the number of authorized but unissued shares of Common Stock shall not
be sufficient to effect the conversion of all then outstanding shares of the
Series A Preferred Stock, in addition to such other remedies as shall be
available to the holder of Series A Preferred Stock, the Corporation
11
<PAGE>
will take such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purposes, including, without
limitation, engaging in best efforts to obtain the requisite shareholder
approval of any necessary amendment to this Certificate of Designation or the
Corporation's Certificate of Incorporation.
5J. Notices. Any notice required by the provisions of this
Section 5J to be given to the holders of shares of Series A Preferred Stock
shall be deemed given if and when deposited in the United States mail, postage
prepaid, and addressed to each holder of record at his address appearing on the
books of the Corporation.
Section 6. Voting Rights. The Series A Preferred Stock shall not be
entitled to vote except as provided by law.
Section 7. Protective Provisions. So long as at least two thousand
five hundred (2,500) share of Series A Preferred Stock are outstanding, the
Corporation shall not, nor shall it permit any Subsidiary to, without first
obtaining the written consent of the holders of at least a two-thirds of the
then outstanding Series A Preferred Stock:
(i) amend this Certificate of Designation, the
Corporation's Certificate of Incorporation or the Corporation's Bylaws, or take
any other action, in any case so as to alter or change the rights, preferences
or privileges of the shares of Series A Preferred Stock;
(ii) increase or decrease (other than by redemption or
conversion) the total number of authorized shares of Series A Preferred Stock;
(iii) authorize or issue, or obligate itself to issue, any
other equity security, including any other security convertible into or
exercisable for any equity security, having a preference over, or being on a
parity with, the Series A Preferred Stock with respect to dividends,
liquidation, redemption or voting; or
(iv) redeem, purchase or otherwise acquire (or pay into or
set aside for a sinking fund for such purpose) any share or shares of Junior
Securities; provided, however, that this restriction shall not apply to (i) the
repurchase of shares of Common Stock from employees, officers, directors,
consultants or other persons performing services for the Corporation or any
subsidiary pursuant to agreements under which the Corporation has the option to
repurchase such shares at cost or at cost upon the occurrence of certain events,
such as the termination of employment or (ii) the redemption of any share or
shares of Series A Preferred Stock in accordance with Section 4.
Section 8. Status of Redeemed or Converted Stock. In the event any
shares of Series A Preferred Stock shall be redeemed or converted pursuant to
Section 4 or Section 5 hereof, the shares so redeemed or converted shall be
canceled, retired and shall revert to the status of authorized, but not
designated, preferred stock which the Corporation shall be
12
<PAGE>
authorized to issue subject to applicable protective provisions and the terms of
this Certificate of Designation and the Corporation's Certificate of
Incorporation.
Section 9. Registration of Transfer. The Corporation shall keep at
its principal office a register for the registration of Series A Preferred
Stock. Upon the surrender of any certificate representing Series A Preferred
Stock at such place, the Corporation shall, at the request of the record holder
of such certificate, execute and deliver (at the Corporation's expense) a new
certificate or certificates in exchange therefor representing in the aggregate
the number of share of Series A Preferred Stocks represented by the surrendered
certificate. Subject to any stockholder or other agreements between the
Corporation and the holders of Series A Preferred Stock, each such new
certificate shall be registered in such name and shall represent such number of
share of Series A Preferred Stocks as is requested by the holder of the
surrendered certificate and shall be substantially identical in form to the
surrendered certificate, and dividends shall accrue on the Series A Preferred
Stock represented by such new certificate from the date to which dividends have
been fully paid on such Series A Preferred Stock represented by the surrendered
certificate.
Section 10. Replacement. Upon receipt of evidence reasonably
satisfactory to the Corporation of the ownership and the loss, theft,
destruction or mutilation of any certificate evidencing Series A Preferred
Stock, and in the case of any such loss, theft or destruction, upon receipt of
indemnity reasonably satisfactory to the Corporation, or, in the case of any
such mutilation upon surrender of such certificate, the Corporation shall (at
its expense) execute and deliver in lieu of such certificate a new certificate
of like kind representing the number of share of Series A Preferred Stocks of
such class represented by such lost, stolen, destroyed or mutilated certificate
and dated the date of such lost, stolen, destroyed or mutilated certificate, and
dividends shall accrue on the Series A Preferred Stock represented by such new
certificate from the date to which dividends have been fully paid on such lost,
stolen, destroyed or mutilated certificate.
Section 11. Definitions.
"Bankruptcy Event" shall mean (i) any insolvency or bankruptcy case or
proceeding, or any receivership, liquidation, reorganization, adjustment,
composition or other similar case or proceeding in connection therewith,
relative to the Corporation or its creditors, as such, or to its assets whether
voluntary or involuntary (and not dismissed within 60 days), (ii) any
liquidation, dissolution or other winding up of the Corporation whether
voluntary or involuntary and whether or not involving insolvency or bankruptcy
(and not dismissed within 60 days), or (iii) any assignment for the benefit of
creditors or any other marshaling of assets and liabilities of the Corporation.
"Change in Control" shall mean any transaction or series of
transactions (including, without limitation, a merger, consolidation, sale of
stock or sale of assets, but excluding any assignment as security for
indebtedness) after which any Person (or group of Persons acting in concert)
other than the Management Investor (as defined in the Purchase Agreement) shall
(i) own in excess of 35% of the voting stock of the Corporation (or the Person
13
<PAGE>
into which the Corporation shall have been merged or consolidated), (ii) have
the right to elect a majority of the members of the Board of Directors, or (iii)
shall have acquired all or substantially all of the consolidated assets of the
Corporation and its Subsidiaries.
"Common Stock" shall mean, the Corporation's common stock, par value
$.0033 per share.
"Event of Default" shall have the meaning assigned to such term in
Section 2D hereof and in the Purchase Agreement.
"Junior Securities" shall mean any Common Stock, any options or
warrants to subscribe for, purchase or otherwise acquire Common Stock or any
other equity securities of the Corporation which rank junior as to liquidation
rights, dividend rights, redemption rights or other rights to the Series A
Preferred Stock.
"Person" shall mean an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Purchase Agreement" shall mean that certain Amended and Restated
Securities Purchase Agreement dated as of September __, 1997 by and between the
Corporation and the Purchaser named therein, a copy of which is kept on file by
the Secretary of the Corporation and a copy of which may be obtained upon
request.
"Subsidiary" shall mean, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by any Person or one or more
Subsidiaries of that person or a combination thereof. For purposes hereof, a
Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business entity if
such Person or Persons shall be allocated a majority of limited liability
company, partnership, association or other business entity gains or losses or
shall be or control the manager or managing general partner of such limited
liability company, partnership, association or other business entity.
Section 12. Amendment and Waiver. No amendment, modification or
waiver shall be binding or effective with respect to any provision hereof
without the prior written consent of the holders of at least two-thirds of the
Series A Preferred Stock outstanding at the time such action is taken; provided
that no such action shall change (a) the rate at which or the manner in which
dividends on the Series A Preferred Stock accrue or the times at which or the
manner in which such dividends are payable or the amount payable on redemption
of the
14
<PAGE>
Series A Preferred Stock or the times at which redemption of Series A
Preferred Stock is to occur or (b) the percentage required to approve any change
described in clause (a) above, without the prior written consent of the holders
of at least 70% of the Series A Preferred Stock then outstanding; and provided
further that no change in the terms of the Series A Preferred Stock may be
accomplished by merger or consolidation of the Corporation with another
corporation or entity unless the Corporation has obtained the prior written
consent of the holders of the applicable percentage of the Series A Preferred
Stock then outstanding.
Section 13. Notices. Except as otherwise expressly provided
hereunder, all notices referred to herein shall be in writing and shall be
delivered by registered or certified mail, return receipt requested and postage
prepaid, or by reputable overnight courier service, charges prepaid, and shall
be deemed to have been given when so mailed or sent (i) to the Corporation, at
its principal executive offices and (ii) to any holder of shares of Series A
Preferred Stock, at such holder's address as it appears in the Purchase
Agreement (unless otherwise indicated by any such holder).
Section 14. Adjustments. All numbers and amounts set forth herein
which refer to share prices or amounts or liquidation preference related
amounts, shall be appropriately adjusted (as determined by the Board of
Directors) to reflect any stock splits, stock dividends, combinations of shares
and other recapitalizations affecting the Series A Preferred Stock in accordance
herewith.
15
<PAGE>
IN WITNESS WHEREOF, said System Software Associates, Inc. has caused
this Certificate of Designation to be signed by its President, Roger E. Covey,
and its Secretary, Joseph J. Skadra, this ______ day of September, 1997.
SYSTEM SOFTWARE ASSOCIATES, INC.
By ______________________________________________
Title: President
Attest:
By:______________________________
Title: Secretary
<PAGE>
EXHIBIT 4.3
S&W
DRAFT
9/4/97
AMENDED AND RESTATED
SECURITIES PURCHASE AGREEMENT
Dated as of September __, 1997
Between
SYSTEM SOFTWARE ASSOCIATES, INC.,
as Issuer of the Series A Preferred Stock,
and
H&Q SSA INVESTORS, L.P.
__________________________________________________________________
$10,000,000 IN AGGREGATE STATED VALUE
OF
SERIES A PREFERRED STOCK
*********************
WARRANTS TO PURCHASE COMMON STOCK
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<C> <S> <C>
1. DEFINITIONS...............................................................2
1.1. Certain Defined Terms..............................................2
1.2. Accounting Terms..................................................14
2. PURCHASE AND SALE OF SECURITIES..........................................15
2.1. Amendment and Restatement.........................................15
2.2. Purchase and Sale of Notes........................................15
2.3. Purchase and Sale of Warrants.....................................15
2.4. Purchase Price for Purchaser Securities...........................15
2.5. Allocation of Purchase Price......................................15
2.6. The Closing.......................................................15
2.7. Payment of Purchase Price.........................................15
2.8. Purchase of Additional Notes; Issuance of Additional Warrants.....15
2.9. Use of Proceeds...................................................16
2.10. Brokerage Fees, etc...............................................16
2.11. Private Offering..................................................16
3. TERMS OF THE NOTES.......................................................17
4. REPRESENTATIONS AND WARRANTIES...........................................17
4.1. Legal Capacity; Due Authorization.................................17
4.2. Restrictions on Transfer..........................................17
4.3. Accredited Investor, Etc..........................................17
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................18
5.1. Corporate Existence and Power.....................................18
5.2. Corporate Authority...............................................18
5.3. Binding Effect....................................................18
5.4. Litigation........................................................18
5.5. No Legal Obstacle to Agreements...................................18
5.6. No Default........................................................19
5.7. Contractual Obligations...........................................19
5.8. Operations in Conformity with Law.................................19
5.9. Capitalization....................................................19
5.10. Title to Properties; Liens........................................20
5.11. Financial Information.............................................20
5.12. Use of Proceeds; Margin Stock.....................................21
5.13. No Financing of Registered Securities.............................21
5.14. Licenses, Trademarks, etc.........................................21
5.15. Permits and Licenses..............................................22
5.16. ERISA.............................................................22
5.17. Investment Company Act............................................22
</TABLE>
<PAGE>
<TABLE>
<C> <C> <S> <C>
5.18. Public Utility Holding Company Act................................22
5.19. Environmental and Safety Matters..................................22
5.20. Solvency..........................................................23
5.21. Taxes.............................................................23
5.22. Indebtedness......................................................23
5.23. Disclosure........................................................23
6. CLOSING CONDITIONS.......................................................24
6.1. Representations and Warranties; No Default........................24
6.2. Delivery of Documents.............................................24
6.3. No Material Misstatements.........................................25
6.4. Consents..........................................................25
6.5. Board of Directors................................................25
6.6. Preferred Stock...................................................26
6.7. No Material Adverse Change........................................26
6.8. Litigation........................................................26
6.9. Certain Fees......................................................26
6.10. [Intentionally Omitted]...........................................26
6.11. No Violation of Regulations G, T, U or X..........................26
6.12. Additional Notes; Warrants........................................26
7. COVENANTS APPLICABLE WHILE NOTES ARE OUTSTANDING.........................27
7.1. Payment of Notes..................................................27
7.2. Taxes and Other Charges; Accounts Payable.........................27
7.3. Taxes and Other Charges...........................................27
7.4. Accounts Payable..................................................27
7.5. Conduct of Business, etc..........................................27
7.6. Types of Business.................................................28
7.7. Maintenance of Properties.........................................28
7.8. Statutory Compliance..............................................28
7.9. Compliance with Material Agreements...............................28
7.10. Certain Financial Tests...........................................29
7.11. Indebtedness......................................................30
7.12. Guarantees; Letters of Credit.....................................31
7.13. Liens.............................................................31
7.14. Investments and Acquisitions......................................32
7.15. Distributions.....................................................33
7.16. Asset Dispositions and Mergers....................................33
7.17. Voluntary Prepayments of Other Indebtedness.......................34
7.18. Derivative Contracts..............................................34
7.19. Negative Pledge Clauses...........................................34
7.20. ERISA.............................................................34
7.21. Transactions with Affiliates......................................35
7.22. Notice of Default.................................................35
7.23. Insurance.........................................................35
</TABLE>
ii
<PAGE>
<TABLE>
<C> <C> <S> <C>
7.24. Performance of Preferred Stock Documents..........................35
8. COVENANTS APPLICABLE SO LONG AS PURCHASER SECURITIES
REMAIN OUTSTANDING.......................................................35
8.1. Financial Statements and Reports..................................36
8.2. Annual Reports....................................................36
8.3. Quarterly Reports.................................................37
8.4. Monthly Reports...................................................38
8.5. Other Reports.....................................................38
8.6. Notice of Litigation, etc.........................................39
8.7. ERISA Reports.....................................................39
8.8. Other Information; Audit..........................................40
8.9. Books, records and inspections....................................40
9. EVENTS OF DEFAULT.........................................................40
9.1. Payment Default...................................................40
9.2. Default under other Indebtedness..................................40
9.3. Certain Covenants.................................................41
9.4. Other Covenants...................................................41
9.5. Breach of Representations or Warranties...........................41
9.6. Involuntary Bankruptcy, Appointment of Receiver, etc..............41
9.7. Voluntary Bankruptcy, Appointment of Receiver, etc................42
9.8. Judgments and Attachments.........................................42
9.9. ERISA.............................................................42
9.10. Change of Control.................................................42
10. SUBORDINATION TO EXISTING SENIOR INDEBTEDNESS............................43
11. SUBORDINATION TO PUBLIC NOTES............................................46
11.1. Obligations Subordinate to Senior Indebtedness....................46
11.2. Payment Over of Proceeds Upon Dissolution.........................47
11.3. No Payment in Certain Circumstances...............................48
11.4. Payments Otherwise Permitted......................................49
11.5. Subrogation to Rights of Holders of Senior Indebtedness...........49
11.6. Provisions Solely to Define Relative Rights.......................50
11.7. Effect of Failure to Pay Note Obligations.........................50
11.8. No Waiver of Subordination Provisions.............................50
11.9. Reliance on Judicial Order or Certificate of Liquidating Agent....51
11.10. Reinstatement.....................................................51
11.11. Amendment.........................................................51
11.12. Remedies..........................................................51
12. RESTRICTIONS ON TRANSFER; LEGENDS........................................51
12.1. Assignments of Purchaser Securities...............................52
12.2. Restrictive Securities Legend.....................................52
</TABLE>
iii
<PAGE>
<TABLE>
<C> <C> <S> <C>
12.3. Termination of Restrictions.......................................53
12.4. Note Legend relating to Subordination.............................53
13. MISCELLANEOUS............................................................54
13.1. Expenses..........................................................54
13.2. Indemnity.........................................................54
13.3. Amendments and Waivers............................................55
13.4. Independence of Covenants.........................................55
13.5. Notices...........................................................56
13.6. Survival of Warranties and Certain Agreements.....................57
13.7. Failure or Indulgence Not Waiver Remedies Cumulative..............57
13.8. Severability......................................................57
13.9. Headings..........................................................57
13.10. Applicable Law....................................................57
13.11. Successors and Assigns. Subsequent Holders........................57
13.12. Consent to Jurisdiction...........................................58
13.13. Waiver of Jury Trial..............................................58
13.14. Counterparts; Effectiveness.......................................59
13.15. Entirety..........................................................59
</TABLE>
iv
<PAGE>
SCHEDULE 5.4 Litigation
SCHEDULE 5.9.2 Options, Warrants, etc.
SCHEDULE 5.22 Existing Indebtedness
SCHEDULE 7.8.1 Existing Investments
SCHEDULE 11.1.1 Competitors
EXHIBIT A Certificate of Designations of Series A Preferred Stock
EXHIBIT B Form of Registration Rights Agreement
EXHIBIT C Form of Warrants
v
<PAGE>
AMENDED AND RESTATED
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT is made as of September __, 1997 between
System Software Associates, Inc., a Delaware corporation (the "Company"), and
H&Q SSA Investors, L.P. (the "Purchaser").
RECITALS
WHEREAS, pursuant to that certain Securities Purchase Agreement dated as of
August 22, 1997 between the Company and the Purchaser (the "Original SPA") (i)
the Company has issued and sold to the Purchaser its Junior Subordinated Notes
due August 31, 2003 (herein, called the "Notes" and each individually, a "Note")
in the aggregate principal amount of $10,000,000 and (ii) the Company has issued
and sold to the Purchaser pursuant to the Original SPA warrants (the "Original
Warrants" and, together with the Notes purchased thereunder, the "Original
Purchaser Securities") for the purchase of 2,000,000 shares of its Common Stock,
par value $.0033 per share (the "Common Stock") or 2,000 shares of its newly
designated Series A Preferred Stock, par value $.01 per share (the "Original
Preferred Stock") in accordance with the terms set forth therein; and
WHEREAS, the certificate of designations relating to the Original Preferred
Stock was never filed and the Original Preferred Stock was never issued;
WHEREAS, the Company and the Purchaser desire to amend and restate the
Original SPA to cancel the Notes and the Original Warrants and in exchange
therefor the Company has resolved to issue and sell to the Purchaser 10,000
shares of its newly designated Series A Preferred Stock, par value $.01 per
share (the "Preferred Stock") and Warrants in the form attached hereto as
Exhibit C (the "Warrants" and, together with the Preferred Stock to be purchased
hereunder, the "Purchaser Securities") for the purchase of 600,000 shares of the
Company's Common Stock in accordance with the terms set forth therein;
WHEREAS, pursuant to the Preferred Stock Documents (as defined herein), the
transactions described above, and such other transactions as are contemplated by
the Preferred Stock Documents to occur on the Closing Date, will occur
substantially contemporaneously, at the closing (the "Closing") to be held on
September ___, 1997, at 2:45 p.m., at the offices of Sachnoff & Weaver, Ltd., or
at such other date, time and/or location as may be agreed upon by the parties
hereto, and the Company and the Purchaser will take such other actions in
connection therewith as may be necessary to consummate the transactions
contemplated hereunder;
WHEREAS, on or before September 15, 1997 the Company plans to issue and
sell not less than $100,000,000 in principal amount of Convertible Subordinated
Notes due 2002 (the "Public Securities") in an underwritten public offering (the
"Public Offering"); and
WHEREAS, the Company will use a portion of the proceeds of the sale of the
Public Securities to repay all amounts due under its multi-bank credit facility
(the "Existing Credit
<PAGE>
Facility") and its Senior Secured Notes due November 1, 1997 (the "Senior
Notes") and, if necessary, its Convertible Floating Rate Notes due 2000 (the
"Existing Subordinated Debt").
AGREEMENT
In consideration of the foregoing, and the representations, warranties,
covenants and conditions set forth below, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. DEFINITIONS.
1.1. Certain Defined Terms. The following terms used in this Agreement
shall have the meanings set forth below.
"Accumulated Benefit Obligations" means the actuarial present value of the
accumulated benefit obligations under any Plan, calculated in accordance with
Statement No. 87 of the Financial Accounting Standards Board.
"Affiliate," as applied to any Person, means any other Person directly or
indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including with
correlative meanings, the terms "controlling," "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly,
indirectly or beneficially, of the power to vote 35% or more of the Voting Stock
of such Person, or to direct or cause the direction of the management and
policies of such Person, whether through the ownership of Voting Stock, by
contract or otherwise.
"Applicable Dividend Rate" means 12% per annum from and after the Closing
Date to be increased to 14% per annum of the Company Redemption Price on or
after a Company Redemption Event.
"Bankruptcy Code" means Title 11 of the United States Code, as now and
hereafter in effect, or any successor statute.
"Bankruptcy Events" has the meaning set forth in Section 10B.2 hereof.
"Blockage Notice" has the meaning set forth in Section 10B.3.1 hereof.
"Blockage Period" has the meaning set forth in Section 10B.3.1 hereof.
"Business Day" means any day excluding Saturday, Sunday and any day which
is a legal holiday under the laws of the States of Illinois or California or is
a day on which banking institutions located in Chicago, Illinois and San
Francisco, California are authorized or required by law or other governmental
action to close.
2
<PAGE>
"By-laws" means all written by-laws, rules, regulations and all other
documents relating to the management, governance or internal regulation of any
Person other than an individual, or interpretive of the Charter of such Person,
all as from time to time in effect.
"Capitalized Lease" means any lease which is required to be capitalized on
the balance sheet of the lessee in accordance with GAAP, including Statement
Nos. 13 and 98 of the Financial Accounting Standards Board.
"Capitalized Lease Obligations" means, with respect to any Person, the
amount of the liability reflecting the aggregate discounted amount of future
payments under all Capitalized Leases of such Person calculated in accordance
with GAAP, including Statement Nos. 13 and 98 of the Financial Accounting
Standards Board.
"Capitalized Software" means research and development expenditures of the
Company and its Subsidiaries on a Consolidated basis which have been capitalized
in accordance with GAAP.
"Cash Equivalents" means:
(i) negotiable certificates of deposit, time deposits
(including sweep accounts), demand deposits and bankers' acceptances
having a maturity of one year or less and issued by any United States
financial institution having capital and surplus and undivided profits
aggregating at least $100,000,000 and rated at least Prime-1 by
Moody's or A-1 by S&P;
(ii) corporate obligations having a maturity of one year or
less and rated at least Prime-1 by Moody's or A-1 by S&P;
(iii) any direct obligation of the United States of America or
any agency or instrumentality thereof, or of any state or municipality
thereof, (i) which has a remaining maturity at the time of purchase of
not more than one year and (ii) which, in the case of obligations of
any state or municipality, is rated at least Aaa by Moody's or AAA by
S&P;
(iv) any mutual fund or other pooled investment vehicle rated
at least Aa by Moody's or AA by S&P which invests principally in
obligations described above; and
(v) any Investment by a Foreign Subsidiary in its local
jurisdiction comparable to the items described above.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended from time to time, or any successor federal
statute.
"CERCLIS" means the Comprehensive Environmental Response, Compensation and
Liability Inventory System maintained by the U.S. Environmental Protection
Agency.
3
<PAGE>
"Certificate of Designations" means the Certificate of Designations of
Series A Preferred Stock in the form of Exhibit A attached hereto.
"Change of Control Event" means a transaction or series of
transactions (including, without limitation, a merger, consolidation, sale of
stock or sale of assets, but excluding any assignment as security for
indebtedness) after which any Person (or group of Persons acting in concert)
other than the Purchaser and the Management Investor shall (i) own in excess of
35% of the Voting Stock of the Company (or the Person into which the Company
shall have been merged or consolidated), or (ii) have the right to elect a
majority of the members of the Board of Directors of the Company, or (iii) shall
have acquired all or substantially all of the consolidated assets of the Company
and its Subsidiaries.
"Charter" of a Person shall mean, as to a corporation, its Charter or
Certificate of Incorporation, and as to Persons who are neither corporations nor
individuals, the partnership or members agreement or similar organizational
documents.
"Closing" has the meaning set forth in the Recitals hereto.
"Closing Date" means the date upon which the conditions precedent to
the purchase and sale of the Purchaser Securities from the Company hereunder
shall have been satisfied and the Purchaser Securities have been purchased by
the Purchaser in accordance with this Agreement.
"Code" means the Internal Revenue Code of 1986.
"Common Stock" has the meaning set forth in the Recitals hereto.
"Company Redemption Event" shall have the meaning assigned to such term in
the Certificate of Designations.
"Company Redemption Price" shall have the meaning assigned to such term in
the Certificate of Designations.
"Company" has the meaning set forth in the preamble hereto.
"Consolidated" refers, with respect to any Person, to the consolidation of
accounts of such Person and its Subsidiaries in accordance with GAAP.
"Consolidated Interest Expense" means for any period the sum of (a)
the aggregate amount of all interest expense including in any event commitment
fees, payments in the nature of interest under Capitalized Leases, net payments
under Interest Rate Protection Agreements and letter of credit fees and
expenses, accrued by the Company and its Subsidiaries in accordance with GAAP on
a Consolidated basis, minus (b) to the extent included in the foregoing clause
(a), amortization of Indebtedness financing costs and any accretion relating to
the valuation of the Warrants.
4
<PAGE>
"Consolidated Net Income" means, for any period, the net income (or loss)
of the Company and its Subsidiaries, determined in accordance with GAAP on a
Consolidated basis; provided, however, that Consolidated Net Income shall not
include:
(vi) the income (or loss) of any Person accrued prior to the
date such Person becomes a Subsidiary or is merged into or
consolidated with the Company or any of its Subsidiaries;
(vii) the income (or loss) of any Person (other than a
Subsidiary) in which the Company or any of its Subsidiaries has an
ownership interest; provided, however, that (i) Consolidated Net
Income shall include amounts in respect of the income of such Person
when actually received in cash by the Company or such Subsidiary in
the form of dividends or similar Distributions and (ii) Consolidated
Net Income shall be reduced by the aggregate amount of all
Investments, regardless of the form thereof, made by the Company or
any of its Subsidiaries in such Person for the purpose of funding any
deficit or loss of such Person;
(viii) all amounts included in computing such net income (or
loss) in respect of (i) the write-up of any asset on or after October
31, 1996, or (ii) the retirement of any Indebtedness or equity at less
than face value after October 31, 1996; and
(ix) extraordinary and nonrecurring gains and losses.
"Consolidated Revenues" means for any period the operating revenues
(after reductions for returns, discounts, and additions to or decreases in bad
debt reserves) of the Company and its Subsidiaries determined in accordance with
GAAP on a Consolidated basis.
"Contractual Obligation" means, with respect to any Person, any
contract, agreement, understanding, deed, mortgage, lease, license, commitment,
undertaking, arrangement or understanding, written or oral, or other document or
instrument including, without limitation, any document or instrument evidencing
or otherwise relating to any Indebtedness but excluding the Charter and By-laws
of such Person, to which or by which such Person is a party or otherwise subject
or bound or to which or by which any property or right of such Person is subject
or bound.
"Conversion Price" has the meaning set forth in the Public
Securities Indenture.
"Covenant Default" has the meaning set forth in Section 10B.3.1
hereof.
"Credit Agreement" means an agreement for a new revolving credit
facility to be entered into by the Company in an amount not in excess of
$40,000,000.
"Default" means any event, act or condition which with notice or lapse
of time, or both, would constitute an Event of Default.
5
<PAGE>
"Distribution" means, with respect to the Company (or other specified
Person):
(i) the declaration or payment of any dividend or distribution
on or in respect of any shares of any class of capital stock of or
other equity interests in the Company (or such specified Person);
(ii) the purchase, redemption or other retirement of any shares
of any class of capital stock of or other equity interest in the
Company (or such specified Person) or of options, warrants or other
rights for the purchase of such shares, directly, indirectly through a
Subsidiary or otherwise;
(iii) any other distribution on or in respect of any shares of
any class of capital stock of or equity or other beneficial interest
in the Company (or such specified Person);
(iv) any payment of principal or interest with respect to, or
any purchase, redemption or defeasance of, any Financing Debt of the
Company (or such specified Person) which by its terms or the terms of
any agreement is subordinated to the payment of the Preferred Stock;
or
(v) any payment, loan or advance by the Company (or such
specified Person) to, or any other Investment by the Company (or such
specified Person) in, the holder of any shares of any class of capital
stock of or equity interest in the Company (or such specified Person),
or any Affiliate of such holder (including the payment of management
and transaction fees and expenses);
provided, however, that the term "Distribution" shall not include (i) dividends
payable in perpetual common stock of or other similar equity interests in the
Company (or such specified Person) or (ii) payments in the ordinary course of
business in respect of (A) reasonable compensation paid to employees, officers
and directors, (B) advances and reimbursements to employees for travel expenses,
drawing accounts, reasonable loans approved by the Board of Directors (which
shall include the approval of at least one Fund Designated Director) and similar
expenditures, or (C) rent paid to, or accounts payable for services rendered or
goods sold by, non-Affiliates that own capital stock of or other equity
interests in the Company (or such specified Person).
"Environmental Action" means any action, suit, demand, demand letter,
claim, notice of non-compliance or violation, notice of liability or potential
liability, investigation, proceeding, consent order or consent agreement
relating in any way to any Environmental Law, any Environmental Permit or
Hazardous Material or arising from alleged injury or threat to health, safety or
the environment, including, without limitation, (a) by any governmental or
regulatory authority for enforcement, cleanup, removal, response, remedial or
other actions or damages and (b) by any governmental or regulatory authority or
third party for damages, contribution, indemnification, cost recovery,
compensation or injunctive relief.
6
<PAGE>
"Environmental Law" means any and all federal, state, local or foreign
statute, law, ordinance, rule, regulation, code, order, writ, judgment,
injunction, decree or judicial or agency interpretation, policy or guidance
relating to pollution or protection of the environment, health safety or natural
resources, including without limitation, those relating to the use, handling,
transportation, treatment, storage, disposal, release or discharge of Hazardous
Materials.
"Environmental Permit" means any permit, approval, identification number,
license or other authorization required under any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, or any successor statute, and the regulations
promulgated and filings issued thereunder.
"ERISA Affiliate" means any Person that for the purposes of Title IV of
ERISA is a member of the controlled group of the Company, or under common
control with the Company within the meaning of Section 414 of the Code.
"Event of Default" has the meaning set forth in Article 9 hereof.
"Exchange Act" means the Securities and Exchange Act of 1934, as amended.
"Exercise Shares" has the meaning set forth in Section 2.3 hereof.
"Existing Credit Facility" has the meaning set forth in the Recitals
hereto.
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries outstanding immediately prior to the consummation of the
transactions contemplated herein.
"Existing Subordinated Debt" has the meaning set forth in the Recitals
hereto.
"Financial Officer" of the Company (or other specified Person) means its
chief executive officer, chief financial officer, chief operating officer,
chairman, president, treasurer or any of its vice presidents whose primary
responsibility is for its financial affairs, in each case whose incumbency and
signatures have been certified to the Purchaser by the Secretary or other
appropriate attesting officer of the Company (or such specified Person).
"Financing Debt" means each of the items described in clauses (i) through
(vi) of the definition of the term "Indebtedness" and, without duplication, any
Guarantees of such items.
"Foreign Subsidiary" means each Subsidiary that is organized under the laws
of, and conducting its business primarily in a jurisdiction outside of, the
United States of America.
"GAAP" means generally accepted accounting principles as from time to time
in effect, including the statements and interpretations of the United States
Financial Accounting Standards Board.
7
<PAGE>
"Guarantee" means, with respect to the Company (or other specified Person):
(i) any guarantee by the Company (or such specified Person) of
the payment or performance of, or any contingent obligation by the
Company (or such specified Person) in respect of, any Indebtedness or
other obligation of any primary obligor;
(ii) any other arrangement whereby credit is extended to a
primary obligor on the basis of any promise or undertaking of the
Company (or such specified Person), including any binding "comfort
letter" or "keep well agreement" written by the Company (or such
specified Person), to a creditor or prospective creditor of such
primary obligor, to (i) pay the Indebtedness of such primary obligor,
(ii) purchase an obligation owed by such primary obligor, (iii) pay
for the purchase or lease of assets or services regardless of the
actual delivery thereof or (iv) maintain the capital, working capital,
solvency or general financial condition of such primary obligor;
(iii) any liability of the Company (or such specified Person),
as a general partner of a partnership in respect of Indebtedness or
other obligations of such partnership;
(iv) any liability of the Company (or such specified Person) as
a joint venturer of a joint venture in respect of Indebtedness or
other obligations of such joint venture;
(v) any liability of the Company (or such specified Person) with
respect to the tax liability of others as a member of a group (other
than a group consisting solely of the Company and its Subsidiaries)
that is consolidated for tax purposes; and
(vi) reimbursement obligations, whether contingent or matured,
of the Company (or such specified Person) with respect to letters of
credit, bankers acceptances, surety bonds, other financial guarantees
and Interest Rate Protection Agreements,
in each case whether or not any of the foregoing are reflected on the balance
sheet of the Company (or such specified Person) or in a footnote thereto;
provided, however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The amount of any
Guarantee and the amount of Indebtedness resulting from such Guarantee shall be
the maximum amount that the guarantor may become obligated to pay in respect of
the obligations (whether or not such obligations are outstanding at the time of
computation).
"Hazardous Materials" means (a) petroleum or petroleum products,
by-products or breakdown products, radioactive materials, asbestos-containing
materials, polychlorinated biphenyls and radon gas and (b) and any other
chemicals, materials or substances designated,
8
<PAGE>
classified or regulated as hazardous or toxic or as a pollutant or contaminant
under any Environmental Law.
"Holder Redemption Event" shall have the meaning assigned to such term in
the Certificate of Designations.
"Holder Redemption Price" shall equal $1,000 per share of Preferred Stock
plus accrued but unpaid dividends.
"Indebtedness" means all obligations, contingent or otherwise, which
in accordance with GAAP are required to be classified upon the balance sheet of
the Company (or other specified Person) as liabilities, but in any event
including (without duplication):
(i) borrowed money;
(ii) indebtedness evidenced by notes, debentures or similar
instruments;
(iii) Capitalized Lease Obligations;
(iv) the deferred purchase price of assets, services or
securities, including related noncompetition, consulting and stock
repurchase obligations (other than ordinary trade accounts payable
within six months after the incurrence thereof in the ordinary course
of business);
(v) mandatory redemption or dividend rights on capital stock (or
other equity);
(vi) reimbursement obligations, whether contingent or matured,
with respect to letters of credit, bankers acceptances, surety bonds,
other financial guarantees and Interest Rate Protection Agreements
(without duplication of other Indebtedness supported or guaranteed
thereby);
(vii) unfunded pension liabilities;
(viii) obligations that are immediately and directly due and
payable out of the proceeds of or production from property;
(ix) liabilities secured by any Lien existing on property owned
or acquired by the Company (or such specified Person), whether or not
the liability secured thereby shall have been assumed; and
(x) all Guarantees in respect of Indebtedness of others.
"Indemnified Liabilities" has the meaning set forth in Section 12.2 hereof.
"Indemnitees" has the meaning set forth in Section 12.2 hereof.
9
<PAGE>
"Indemnitor" has the meaning set forth in Section 12.2 hereof.
"Interest Rate Protection Agreement" means any interest rate swap, interest
rate cap, interest rate hedge or other contractual arrangement that converts
variable interest rates into fixed interest rates, fixed interest rates into
variable interest rates or other similar arrangements.
"Investment" means, with respect to the Company (or other specified
Person):
(i) any share of capital stock, partnership or other equity
interest, evidence of Indebtedness or other security issued by any
other Person;
(ii) any loan, advance or extension of credit to, or
contribution to the capital of, any other Person;
(iii) any Guarantee of the Indebtedness of any other Person;
(iv) any acquisition of all, or any division or similar
operating unit of, the business of any other Person or the assets
comprising such business, division or unit; and
(v) any other similar investment;
provided, however, that the term "Investment" shall not include (i) trade and
customer accounts receivable for property leased, goods furnished or services
rendered in the ordinary course of business and payable within one year of
incidence in accordance with past practice and customary trade terms, (ii)
deposits, advances or prepayments to suppliers for property leased or licensed,
goods furnished and services rendered in the ordinary course of business, (iii)
advances to employees for relocation and travel expenses, drawing accounts and
similar expenditures, or (iv) demand deposits in banks or similar financial
institutions.
"Legal Requirement" means any present or future requirement imposed on the
Company or its Subsidiaries by any law, statute, rule, regulation, directive,
order, decree or guideline (or any interpretation thereof by courts or of
administrative bodies) of the United States of America or any state or political
subdivision thereof, or by any board, governmental or administrative agency.
"Lien" means any lien, security interest, or other change or encumbrance of
any kind, including, without limitation, the lien or retained security title of
a conditional vendor and any easement, right of way or other encumbrance on
title to real property.
"Management Investor" means Roger E. Covey.
"Margin Stock" has the meaning assigned to that term in Regulation U of the
Board of Governors of the Federal Reserve System as in effect from time to time.
10
<PAGE>
"Material Adverse Change" means any material adverse change in (a) the
business, condition (financial or otherwise), operations, performance,
properties or prospects of the Company and its Subsidiaries, calculated on a
Consolidated basis, (b) the rights and remedies of the Purchasers under the
Preferred Stock Documents or (c) the ability of the Company to perform its
obligations under the Preferred Stock Documents.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means a single-employer plan, as defined in Section
4001(a)(3) of ERISA, to which the Company or any ERISA Affiliate is making or
accruing an obligation to make contributions, or has within any of the preceding
five plan years made or accrued an obligation to make contributions.
"Multiple Employer Plan" means a single-employer plan, as defined in
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of the
Company or any ERISA Affiliate and at least one Person other than the Company
and the ERISA Affiliates or (b) was so maintained and in respect of which the
Company or any ERISA Affiliate could have liability under Section 4064 or
Section 4069 of ERISA in the event such plan has been or were to be terminated.
"Net Cash Proceeds" means, with respect to any sale, lease, transfer or
other disposition of any asset or the sale or issuance of any Indebtedness or
capital stock or other ownership or profit interest, any securities convertible
into or exchangeable for capital stock or other ownership or profit interest or
any warrants, rights, options or other securities to acquire capital stock or
other ownership or profit interest by any Person, the aggregate amount of cash
received from time to time (whether as initial consideration or through payment
or disposition of deferred consideration) by or on behalf of such Person from
such sale, lease, transfer or other disposition, after deducting therefrom only
(without duplication) (a) brokerage commissions, underwriting fees and
discounts, legal fees, finder's fees and other similar fees and commissions, (b)
the amount of taxes payable in connection with or as a result of such
transaction and (c) the amount of any Indebtedness secured by a Lien on such
asset that, by the terms of such transaction, is required to be repaid upon such
disposition, in each case to the extent, but only to the extent, that the
amounts so deducted are properly attributable to such transaction or to the
asset that is the subject thereof.
"NPL" means the National Priorities List under CERCLA.
"Note" and "Notes" shall have the meaning set forth in the Recitals to this
Agreement.
"Noteholders" means the holders of the Notes pursuant to the Original SPA.
"Obligations" means all obligations for principal, premium, interest
(including any interest accruing subsequent to the institution by or against the
Company or any of its Subsidiaries of proceedings under the Bankruptcy Code,
whether or not such interest is an allowed claim under applicable law),
penalties, fees, indemnifications, reimbursements,
11
<PAGE>
damages and other liabilities payable under the documentation governing any
Indebtedness, including any guarantees of the foregoing obligations or
liabilities.
"Officer's Certificate" means, as applied to any corporation, a certificate
executed on behalf of such corporation by the chairman of its board of directors
(if an officer), its chief executive officer, its president or one of its vice
presidents or its chief financial officer or its treasurer.
"Original Preferred Stock" has the meaning set forth in the Recitals
hereto.
"Original SPA" has the meaning set forth in the Recitals hereto.
"Original Warrants" has the meaning set forth in the Recitals hereto.
"Payment Default" has the meaning set forth in Section 10B.3 hereof.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
entity.
"Permits" has the meaning set forth in Section 5.15 hereof.
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, joint stock companies, joint ventures,
associations, companies, trusts, banks, trust companies, land trusts, business
trusts or other organizations, whether or not legal entities, and governments
and agencies and political subdivisions thereof.
"Plan" shall mean any Single Employer Plan or Multiple Employer Plan.
"Preferred Holder" means a Holder of Series A Preferred Shares.
"Preferred Stock" has the meaning set forth in the Recitals hereto.
"Preferred Stock Documents" means, collectively, this Agreement, the
Purchaser Securities, the Registration Rights Agreement, the Certificate of
Designations, the Warrant and the other documents effecting the transactions
contemplated hereunder.
"Preferred Stock Obligations" mean all amounts, direct or indirect,
contingent or absolute, of every type or description, and at any time existing,
owing to the Purchaser or the holders of the Preferred Stock, from time to time
including, without limitation, the redemption amount on the Preferred Stock
(whether such amount accrues before or after the institution by or against the
Company or any of its Subsidiaries of proceedings under the Bankruptcy Code,
whether or not such interest is an allowed claim under applicable law), the
liquidation preferences, charges, expenses, fees, attorneys' fees and
disbursements, indemnities and other amounts payable by the Company, in each
case under the specific terms of this Agreement and the Certificate of
Designations.
"Prospectus" means the prospectus in the form included in the
Registration Statement, or if the prospectus included in the Registration
Statement omits information in reliance on
12
<PAGE>
Rule 430A under the Securities Act and such information is included in a
prospectus filed with the Securities and Exchange Commission pursuant to Rule
424(b) under the Securities Act, the prospectus in the form included in the
Registration Statement as supplemented by the addition of the Rule 430A
information contained in the Prospectus filed with the Commission pursuant to
Rule 424(b), in either case including the documents incorporated by reference
therein.
"Public Offering" has the meaning set forth in the Recitals hereto.
"Public Securities" has the meaning set forth in the Recitals hereto.
"Public Securities Indenture" means the Indenture to be entered into
between the Company and Harris Trust & Savings Bank, as Trustee, relating to the
Public Securities.
"Purchaser Securities" has the meaning set forth in the Recitals hereto.
"Purchaser" has the meaning set forth in the preamble hereto, and shall
mean and include the Purchaser and any assignees of any or all of the Purchaser
Securities pursuant to Article 11 hereof.
"Registration Rights Agreement" has the meaning set forth in Section 6.2
hereof.
"Registration Statement" means the registration statement on Form S-3 (File
NO. 333-31271) filed by the Company with the Securities and Exchange Commission
on July 15, 1997, as amended from time to time, registering the Public
Securities, including the documents incorporated by reference therein.
"Required Preferred Holders" means the holders of more than 50% of the
aggregate number of Series A Preferred Shares then outstanding.
"Rights Agreement" means the Rights Agreement dated as of May 3, 1988, as
amended, between the Company and The First National Bank of Chicago, as Rights
Agent.
"S&P" means Standard & Poor's Ratings Group, a division of The McGraw
Companies, Inc.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Credit Documents" means, collectively, the Credit Agreement and the
related security agreements, guarantees, pledge agreements, notes and the other
documents executed in connection therewith.
"Senior Indebtedness" means all Obligations now or hereafter owing pursuant
to the Senior Credit Documents and the Public Securities Indenture.
"Senior Notes" has the meaning set forth in the Recitals hereto.
13
<PAGE>
"Single Employer Plan" means a single-employer plan as defined in Section
4001(a)(15) of ERISA, that (a) is maintained for employees of the Company and
the ERISA Affiliates or (b) was so maintained and in respect of which the
Company or any ERISA Affiliate could have liability under Section 4069 of ERISA
in the event that such plan has been or were to be terminated.
"Solvent" and "Solvency" mean, with respect to any Person on a particular
date, that on such date (a) the fair value of the property of such Person is
greater than the total amount of liabilities, including, without limitation,
contingent liabilities, of such Person, (b) the present fair salable value of
the assets of such Person is not less than the amount that will be required to
pay the probable liability of such Person on its debts as they become absolute
and matured, (c) such Person does not intend to, and does not believe that it
will, incur debts or liabilities beyond such Person's ability to pay such debts
and liabilities as they mature and (d) such Person is not engaged in business or
a transaction, and is not about to engage in business or a transaction, for
which such Person's property would constitute an unreasonably small capital. The
amount of contingent liabilities at any time shall be computed as the amount
that, in the light of all the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an actual or
matured liability.
"Subsidiary" of any Person means and includes (i) any corporation more than
50% of whose stock of any class or classes having by the terms thereof ordinary
voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person directly or
indirectly through Subsidiaries and (ii) any partnership, association, joint
venture or other entity in which such Person directly or indirectly through
Subsidiaries has more than a 50% equity interest at the time.
"Voting Stock" means capital stock issued by a corporation, or equivalent
interests in any other Person, the holders of which are ordinarily, in the
absence of contingencies, entitled to vote for the election of directors (or
persons performing similar functions) of such Person, even if the right so to
vote has been suspended by the happening of such a contingency.
"Warrants" has the meaning set forth in the Recitals hereto.
"Welfare Plan" means a welfare plan, as defined in Section 3(1) of ERISA,
that is maintained for employees of the Company in respect of which the Company
could have a liability.
"Wholly Owned Subsidiary" of any Person means any Subsidiary of such Person
to the extent all of the capital stock or other ownership interests in such
Subsidiary, other than directors' or nominees' qualifying shares, is owned
directly or indirectly by such Person.
1.2. Accounting Terms. All accounting terms not specifically defined herein
shall be construed, all accounting determinations hereunder shall be made, and
all financial statements
14
<PAGE>
required to be delivered hereto shall be prepared, in accordance with GAAP. No
changes in GAAP shall affect the financial covenants, standards or terms
contained in this Agreement.
2. AMENDMENT AND RESTATEMENT; PURCHASE AND SALE OF SECURITIES.
2.1. Amendment and Restatement. The Original SPA is hereby amended and
restated and superseded in all respects by this Agreement.
2.2. Purchase and Sale of Preferred Stock. Subject to the terms and
conditions of this Agreement and on the basis of the representations and
warranties set forth herein, the Company hereby agrees to sell to the Purchaser,
and by its acceptance hereof the Purchaser agrees to purchase from the Company
for investment, at the Closing, 10,000 shares of Preferred Stock.
2.3. Purchase and Sale of Warrants. Subject to the terms and conditions of
this Agreement and on the basis of the representations and warranties set forth
herein, the Company agrees to issue and sell to the Purchaser, and by its
acceptance hereof, the Purchaser agrees to purchase from the Company for
investment, at the Closing, the Warrants. All of the Warrants to be issued and
sold hereunder shall, taken in aggregate, initially represent the right to
acquire, on the terms and conditions specified therein, 600,000 shares of Common
Stock (such shares of Common Stock are herein referred to as the "Exercise
Shares"), subject to the terms and conditions described therein.
2.4. Purchase Price for Purchaser Securities. The aggregate purchase
price to the Purchaser for the Purchaser Securities is the Notes and Original
Warrants.
2.5. Allocation of Purchase Price. The Company and the Purchaser agree
that, for purposes of Sections 1271 through 1275 of the Code, the aggregate
original purchase price for the Purchaser Securities shall be allocated mutually
agreed by the parties, and that such allocation shall be used by the Company and
Purchaser for financial reporting and income tax purposes.
2.6. The Closing. The purchase and sale of the Purchaser Securities will
take place on the Closing Date.
2.7. Payment of Purchase Price. At the Closing, against delivery of the
Notes and Original Warrants for cancellation, the Company will deliver a
certificate representing 10,000 shares of Preferred Stock and Warrants
registered in the name of the Purchaser.
2.8. Purchase of Additional Preferred Stock; Issuance of Additional
Warrants At any time prior to the January 31, 1998, upon the mutual agreement of
the Company and the Purchaser, the Company will issue and sell to the Purchaser
and the Purchaser will purchase from the Company, up to $2,500,000 of stated
value of additional Preferred Stock at a rate of 1 share for each $1,000
invested together with 60 additional Warrants for each additional share of
Preferred Stock issued. Such additional Preferred Stock and additional Warrants
will be
15
<PAGE>
delivered by the Company against payment to the Company by wire transfer of
immediately available federal funds.
2.9. Use of Proceeds.
2.9.1. The proceeds of the sale by the Company of the Notes and
Original Warrants (which will be cancelled in exchange for the Preferred Stock)
have been or shall be used for: (a) fees and expenses related to this sale
(including a fee of $1 million paid to the lenders under the Company's Existing
Credit Facility and holders of its Senior Notes); (b) general working capital
purposes, and (c) repayment of $3 million of the amounts outstanding under the
Company's Existing Credit Facility and its Senior Notes; and
2.9.2. No portion of the proceeds of the sale of the Preferred Stock
hereunder have been or shall be used, directly or indirectly, for the purpose,
whether immediate, incidental or ultimate, of buying or carrying any "margin
stock" within the meaning of any regulation, interpretation or ruling of the
Board of Governors of the Federal Reserve System, all as from time to time in
effect, refunding of any indebtedness incurred for such purpose, or making any
investment prohibited by foreign trade regulations. Without limiting the
foregoing, the Company agrees that in no event shall any proceeds of the sale of
the Purchaser Securities hereunder be used in any manner which might cause the
Purchaser Securities or the application of such proceeds to violate any of
Regulations G, T, U or X of the Board of Governors of the Federal Reserve System
or any other regulation of the Board of Governors of the Federal Reserve System,
or to violate the Exchange Act, in each case as in effect as of the Closing and
as of such use of proceeds.
2.10. Brokerage Fees, etc. Each party hereto represents and warrants to
each other party that, except as contemplated by the Preferred Stock Documents,
no broker's, finder's or placement fee or commission will be payable to any
Person alleged to have been retained by such representing and warranting party
with respect to any of the transactions contemplated by this Agreement or any of
the other Preferred Stock Documents. Each party hereto hereby indemnifies each
other party against and agrees that it will hold each other party harmless from
any claim, demand or liability, including reasonable attorneys' fees, for any
broker's, finder's or placement fee or commission alleged to have been incurred
by such indemnifying party.
2.11. Private Offering. The Company has not, directly or indirectly,
offered any of the Purchaser Securities for sale to, or solicited offers to buy
any such security from, or otherwise approached or negotiated with respect
thereto with, any prospective purchaser, other than the Purchaser who was
offered securities at private sale for investment. The Company agrees that
neither of the Company nor anyone acting on the Company's behalf will offer the
Purchaser Securities or any part thereof or any similar securities for issue or
sale to, or solicit any offer to acquire any of the same from, anyone so as to
bring the issuance and sale of any of the Purchaser Securities within the
provisions of Section 5 of the Securities Act or the provisions of any
securities or blue sky law of any applicable jurisdiction.
16
<PAGE>
3. TERMS OF THE PREFERRED STOCK
The relative rights and preferences of the Preferred Stock shall be as set
forth in the Certificate of Designations.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
Purchaser individually represents and warrants that:
4.1. Legal Capacity; Due Authorization. The Purchaser has full legal
capacity, power and authority to execute and deliver this Agreement and any
other Preferred Stock Document to which it is a party and to perform its
obligations thereunder, and that each such Preferred Stock Document has been
duly executed and delivered by the Purchaser and is the legal, valid and binding
obligation of the Purchaser enforceable against it in accordance with the terms
thereunder.
4.2. Restrictions on Transfer. The Purchaser has been advised that the
Purchaser Securities have not been registered under the Securities Act or any
state securities laws and, therefore, cannot be resold unless they are
registered under the Securities Act and applicable state securities laws or
unless the Purchaser provides the Company with an opinion of counsel reasonably
satisfactory to the Company to the effect that an exemption from such
registration requirements is available. Other than certain registration rights,
as described in the Registration Rights Agreement and the Warrants, the
Purchaser is aware that the Company is under no obligation to effect any such
registration with respect to the Purchaser Securities or to file for or comply
with any exemption from registration. The Purchaser is purchasing the Purchaser
Securities to be acquired by the Purchaser hereunder for its own account and not
with a view to, or for resale in connection with, the distribution thereof in
violation of the Securities Act; provided, however that except as provided in
Article 11 of this Agreement, the disposition of the Purchaser's property shall
at all times be and remain in its control. The Purchaser acknowledges and
agrees that the certificates representing the Purchaser Securities shall bear
the restrictive securities legend set forth in Section 11.2 hereof.
4.3. Accredited Investor, Etc. The Purchaser has such knowledge and
experience in financial and business matters so as to be capable of evaluating
the merits and risks of its investment in the Purchaser Securities, is able to
incur a complete loss of such investment and to bear the economic risk of such
investment for an indefinite period of time. The Purchaser is an "accredited
investor" as that term is defined in Regulation D under the Securities Act.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
In order to induce the Purchaser to enter into this Agreement and to
purchase the Purchaser Securities to be purchased by the Purchaser hereunder,
the Company represents, warrants and agrees for the benefit of the Purchaser
that as of the date hereof:
5.1. Corporate Existence and Power. The Company (i) is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, (ii) is
17
<PAGE>
duly qualified to do business in each additional jurisdiction where the failure
to so qualify would cause a Material Adverse Change, and (iii) has all requisite
power to own its properties and to carry on its business as now being conducted
and as currently proposed by the Company to be conducted, and to execute,
deliver and perform its obligations under this Agreement and the other Preferred
Stock Documents.
5.2. Corporate Authority. The execution, delivery and performance by the
Company of this Agreement and the other Preferred Stock Documents are within the
powers of the Company and have been duly authorized by all necessary corporate
action on the part of the Board of Directors and stockholders of the Company.
5.3. Binding Effect. This Agreement and each other Preferred Stock
Document to which it is a party, including each Purchaser Security, is the
legal, valid and binding obligation of the Company, enforceable against it in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
relative to or affecting the enforcement of creditors' rights generally in
effect from time to time and by general principles of equity.
5.4. Litigation. Except as disclosed in the Registration Statement and as
set forth on Schedule 5.4 hereto, there are no actions, suits, proceedings or
governmental investigations pending or, to the knowledge of the Company,
threatened against or affecting the Company or against any officer or director
of the Company which are reasonably likely to cause, individually or in the
aggregate, a Material Adverse Change, or which seek to enjoin, or otherwise
prevent the consummation of, the transactions contemplated hereunder or under
the Public Securities or to recover any damages or obtain any relief as a result
of any of the transactions in any court or before any arbitrator of any kind or
by any government agency.
5.5. No Legal Obstacle to Agreements.
5.5.1. Neither the execution and delivery of this Agreement or any
other Preferred Stock Document nor the consummation of any transaction referred
to in or contemplated by this Agreement or any other Preferred Stock Document,
nor the fulfillment of the terms hereof or thereof or of any other agreement,
instrument, deed or lease referred to in this Agreement or any other Preferred
Stock Document, has constituted or resulted in or will constitute or result in:
(i) any breach or termination of the provisions of any material
agreement, instrument, deed or lease to which the Company or any
Subsidiary is a party or by which it is bound or of the Charter or By-
laws of the Company or any Subsidiary;
(ii) the violation of any law, statute, judgment, decree or
governmental order, rule or regulation applicable to the Company or
any Subsidiary; (iii)
18
<PAGE>
(iii) the creation under any agreement, instrument, deed or lease
of any Lien upon any of the assets of the Company or any Subsidiary;
or
(iv) any redemption, retirement or other repurchase obligation of
the Company or any Subsidiary under any Charter, by-law, agreement,
instrument, deed or lease.
5.5.2. No approval, authorization or other action by, or declaration
to or filing with, any governmental or administrative authority or any other
Person is required to be obtained or made by the Company in connection with the
execution, delivery and performance of this Agreement or any other Preferred
Stock Document or the transactions contemplated hereby or thereby, other than
the filing of the Certificate of Designations of the Preferred Stock with the
Delaware Secretary of State.
5.6. No Default. Neither the Company nor any of its Subsidiaries is in
default under its Charter or By-laws and no event has occurred and is continuing
which constitutes a Default or an Event of Default hereunder.
5.7. Contractual Obligations. Neither the Company nor any of its
Subsidiaries is in default under any Contractual Obligations to which it is a
party or by which its property is bound, in each case, where such default could
(assuming the consummation of the transactions contemplated hereby and by the
Registration Statement) reasonably be expected to cause a Material Adverse
Change.
5.8. Operations in Conformity with Law. The operations of the Company and
its Subsidiaries as now conducted or currently proposed by the Company to be
conducted are not in violation of, nor is the Company or its Subsidiaries in
default under, any applicable Legal Requirement, except for such violations and
defaults that do not and will not, in the aggregate, result, or create a
material risk of resulting, in any Material Adverse Change. The Company has
received no notice of any such violation or default and has no knowledge of any
basis on which the operations of the Company or its Subsidiaries, as now
conducted and as currently proposed to be conducted after the date hereof, would
be held so as to violate or to give rise to any such material violation or
default.
5.9. Capitalization.
5.9.1. Capital Stock of the Company. The authorized capital stock of
the Company consists of 250,000,000 shares of Common Stock and 100,000 shares of
preferred stock, of which 10,000 shares have been designated as the Preferred
Stock. 42,652,200 shares of Common Stock, and no shares of preferred stock are
outstanding as of the date hereof. All of the Company's outstanding capital
stock has been validly issued and fully paid and is nonassessable and subject to
no Lien or restriction, except restrictions on transfer imposed by this
Agreement and the other Preferred Stock Documents and applicable securities
laws. Upon the consummation of the transactions contemplated hereby, the
Purchaser Securities shall be subject to no restrictions on transfer except for
those restrictions which are imposed by the terms of the Preferred Stock
Documents or by applicable securities laws.
19
<PAGE>
5.9.2. Options, Etc. Except as set forth on Schedule 5.9.2 hereto,
or as created by or pursuant to this Agreement, the Preferred Stock Documents,
the Existing Subordinated Debt or the Public Securities, neither the Company nor
any Subsidiary has outstanding (a) any rights (either preemptive or other) or
options to subscribe for or purchase, or any warrants or other agreements
providing for or requiring the issuance of, any capital stock, or any securities
convertible into or exchangeable for its capital stock, or (b) any obligation to
repurchase or otherwise acquire or retire any shares of its capital stock, or
any securities convertible into or exchangeable for its capital stock, or any
rights, options or warrants with respect to its capital stock.
5.10. Title to Properties; Liens. Except for the Liens created under the
Senior Credit Documents or otherwise permitted hereunder, after giving effect to
the repayment of the Indebtedness under the Existing Credit Agreement and the
Senior Notes, all of the assets owned or leased by the Company and its
Subsidiaries shall be free and clear of all Liens, the Company has good and
marketable title to, or valid and subsisting interests in, all real property
included in such assets and good and valid title to, or valid and subsisting
interests in, all personal property included in such assets, and there shall be
no presently effective financing statements, deeds of trust, mortgages and
similar documents or instruments of record in any jurisdiction covering any
material tangible or intangible assets of the Company.
5.11. Financial Information.
5.11.1. The Consolidated balance sheets of the Company and its
Subsidiaries as at October 31, 1996, and the related Consolidated statements of
income and cash flows of the Company and its Subsidiaries for the fiscal year
then ended, and the Consolidated balance sheets of the Company and its
Subsidiaries as at July 31, 1997, and the related Consolidated statements of
income and cash flows of the Company for the nine months then ended, copies of
which have been furnished to Purchaser in the Registration Statement, fairly
present, subject, in the case of said balance sheets as at July 31, 1997 and
said statements of income and cash flows for the nine-month period then ended,
to year-end audit adjustments and the absence of financial statement footnotes,
the financial condition of the Company as at such dates and the results of the
operations of the Company for the periods ended on such dates, all in accordance
with GAAP applied on a consistent basis. Other than transactions contemplated by
this Agreement and the other Preferred Stock Documents or as disclosed in the
Registration Statement, the Company's other filings with the Securities and
Exchange Commission or otherwise disclosed to the Purchaser in writing, since
October 31, 1996 there has been no Material Adverse Change and neither the
Company nor any Subsidiary has entered into any material transaction outside the
ordinary course of business.
5.11.2. [Intentionally Omitted]
5.11.3. The Registration Statement has been prepared by the Company
in conformity with the Securities Act and the rules and regulations of the
Securities and Exchange Commission thereunder and has been filed with the
Securities and Exchange Commission under the Act. The Company has complied with
the conditions for the use of
20
<PAGE>
Form S-3. Copies of the Registration Statement, including any amendments
thereto, the Prospectus contained therein, and the exhibits, financial
statements and schedules, as finally amended and revised, have been delivered by
the Company to the Purchaser.
5.11.4. The Securities and Exchange Commission has not issued an
order preventing or suspending the use of any Prospectus relating to the
proposed offering of the Public Securities nor instituted proceedings for that
purpose. When the Registration Statement becomes effective and at all times
subsequent thereto up to and at the date on which Public Securities are to be
purchased, (i) the Registration Statement and Prospectus, and any amendments or
supplements thereto, will conform in all material respects to the requirements
of the Securities Act and the rules and regulations thereunder, and (ii) neither
the Registration Statement nor the Prospectus, nor any amendment or supplement
thereto, will include any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which made, not misleading.
5.12. Use of Proceeds; Margin Stock. The proceeds of the Preferred Stock
will be used solely for the purposes specified herein. None of such proceeds
will be used to, or to reduce or retire any Indebtedness which was originally
incurred to, purchase or carry any Margin Stock, or for any other purpose which
might constitute this transaction a "purpose credit" within the meaning of
Regulations G, T, U or X. The Company has not taken or will take any action
which might cause any of the Preferred Stock Documents to violate Regulations G,
T, U or X, or any other regulations of the Board of Governors of the Federal
Reserve System or to violate Section 8 of the Exchange Act or any rule or
regulation thereunder, in each case as now in effect or as the same may
hereafter be in effect.
5.13. No Financing of Registered Securities. No proceeds of the Preferred
Stock will be used to acquire any equity security of a class that is registered
pursuant to Section 12 of the Exchange Act.
5.14. Licenses, Trademarks, etc.. The Company and each Subsidiary owns or
holds valid licenses in all material trademarks, copyrights, patents, patent
rights and licenses necessary to conduct their respective businesses as operated
on the date thereof and as proposed to be conducted. Neither the Company nor
any Subsidiary has been charged or, to its knowledge, threatened to be charged
with any infringement of, nor, to its knowledge, have they infringed on, any
unexpired trademark, patent, patent registration, copyright, copyright
registration or other proprietary right of any other Person which could
reasonably be expected to cause a Material Adverse Change.
5.15. Permits and Licenses. All permits, licenses and other governmental
authorizations ("Permits") needed by the Company and each Subsidiary to carry on
its businesses have been obtained and are in full force and effect, except for
such Permits the failure of which to have could not reasonably be expected to
cause a Material Adverse Change. Neither the Company nor any Subsidiary is in
material breach of any such Permits
21
<PAGE>
except for breaches which, individually or in the aggregate, would not cause a
Material Adverse Change.
5.16. ERISA. Each Plan (other than a Multiemployer Plan) and, to the
knowledge of the Company and its Subsidiaries, each Multiemployer Plan, is in
material compliance with the applicable provisions of ERISA and the Code. Each
ERISA Affiliate has met all of the funding standards applicable to all Plans
that are not Multiemployer Plans, and no condition exists which would permit the
institution of proceedings to terminate any Plan that is not a Multiemployer
Plan under Section 4042 of ERISA. To the knowledge of the Company and each
Subsidiary, no Plan that is a Multiemployer Plan is currently insolvent or in
reorganization or has been terminated within the meaning of ERISA.
5.17. Investment Company Act. The Company is not an "investment company,"
or a company "controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended.
5.18. Public Utility Holding Company Act. The Company is not a "holding
company," or an "affiliate" of a "holding company" or a "subsidiary company" of
a "holding company," within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
5.19. Environmental and Safety Matters.
5.19.1. The operations and properties of the Company and its
Subsidiaries comply in all material respects with all applicable Environmental
Laws and Environmental Permits, all past claims of non-compliance with such
Environmental Laws and Environmental Permits have been resolved without ongoing
obligations or costs, and no circumstances exist that could (i) form the basis
of an Environmental Action against the Company or any of its Subsidiaries or any
of their respective properties that could cause a Material Adverse Change or
(ii) cause any such property to be subject to any material restrictions on
ownership, occupancy, use or transferability under any Environmental Law.
5.19.2. To the Company's knowledge, (i) none of the material
properties currently or formerly owned or operated by the Company is listed or
proposed for listing on the NPL or on the CERCLIS or any analogous foreign,
state or local list or is adjacent to any such property; (ii) there are no and
never have been any underground or aboveground storage tanks or any surface
impoundments, septic tanks, pits, sumps or lagoons in which Hazardous Materials
are being or have been treated, stored or disposed on any material property
current owned or operated by the Company or, to its knowledge, or any material
property formerly owned or operated by the Company; (iii) there is no asbestos
or asbestos-containing material on any material property currently owned or
operated by the Company; and (iv) Hazardous Materials have not been released,
discharged or disposed of on any property currently or formerly owned or
operated by the Company or any of its Subsidiaries.
5.19.3. Neither the Company nor any Subsidiary of the Company is
undertaking, and has not completed, either individually or together with other
potentially
22
<PAGE>
responsible parties, any investigation or assessment or remedial or response
action relating to any actual or threatened release, discharge or disposal of
Hazardous Materials at any site, location or operation, either voluntarily or
pursuant to the order of any governmental or regulatory authority or the
requirements of any Environmental Law; and all Hazardous Materials generated,
used, treated, handled or stored at, or transported to or from, any property
currently or formerly owned or operated by the Company or its Subsidiaries have
been disposed of in a manner not reasonably expected to result in material
liability to the Company or its Subsidiaries.
5.20. Solvency. The Company is, individually and together with its
Subsidiaries, Solvent.
5.21. Taxes.
5.21.1. The Company and each of its Subsidiaries and Affiliates has
filed, has caused to be filed or has been included in all tax returns (Federal,
state, local and foreign) required to be filed and has paid or made provision
for all taxes shown thereon to be due, together with applicable interest and
penalties.
5.21.2. There is no unpaid amount, as of the date hereof, of
adjustments to the state, local and foreign tax liability of the Company or any
Subsidiary proposed by any state, local or foreign taxing authorities (other
than amounts arising from adjustments to Federal income tax returns, if any). No
issues have been raised by such taxing authorities that, in the aggregate, could
cause a Material Adverse Change.
5.22. Indebtedness. Set forth on Schedule 5.22 hereto is a complete and
accurate list of all Existing Indebtedness, showing as of the date hereof
(without giving effect to the application of proceeds hereunder) the principal
amount outstanding or liability or Obligations thereunder.
5.23. Disclosure. Neither this Agreement, nor the Registration Statement
nor any other Preferred Stock Document to be furnished by or on behalf of the
Company contains any untrue statement of material fact or omits to state a
material fact necessary in order to make the statements contained herein or
therein not misleading in light of the circumstances under which they were made.
No fact is actually known to the Company or any of its Subsidiaries which has
resulted, or in the future (so far as the Company or any of its Subsidiaries can
reasonably foresee) will result, or creates a material risk of resulting, in any
Material Adverse Change, except to the extent that present or future general
economic conditions may result in a Material Adverse Change.
6. CLOSING CONDITIONS
The obligation of the Purchaser to purchase and pay for the Purchaser
Securities provided for hereunder is subject to the satisfaction or written
waiver of the following conditions, each as of the Closing Date:
23
<PAGE>
6.1. Representations and Warranties; No Default. All representations and
warranties of the Company contained in this Agreement shall be true and correct
in all respects, including, without limitation, that there shall be no Default
or Event of Default hereunder, as though such representations and warranties
were made on and as of the Closing Date, except where such representations and
warranties speak as to a specific date.
6.2. Delivery of Documents. The Purchaser shall have received the
following items, each of which shall be dated the Closing Date unless otherwise
noted:
(i) Executed copies of this Agreement, Certificate(s)
representing 10,000 shares of Preferred Stock and the Warrants issued
in the name of the Purchaser pursuant to Sections 2.2 and 2.3 hereof.
(ii) An executed copy of a Registration Rights Agreement dated as
of the Closing Date between the Company and the Purchaser, in
substantially the form of Exhibit B hereto (the "Registration Rights
Agreement").
(iii) Resolutions of the Company's board of directors approving
the transactions contemplated hereunder, approving and authorizing the
execution, delivery and performance of the this Agreement and each
other Preferred Stock Document to which it is a party, approving and
authorizing the issuance and sale of the Purchaser Securities,
adopting the Certificate of Designations of the Series A Preferred
Stock substantially in the form of Exhibit A hereto in each case,
certified as of the Closing Date by the secretary or an assistant
secretary of the Company as being in full force and effect without
modification or amendment.
(iv) A copy of a certificate of the secretary of the state of the
State of Delaware, dated a recent date prior to the Closing Date,
listing the Charter of the Company and any amendment thereto on file
in his office (including the Certificate of Designations referred to
in Section 6.2(iii) hereof) and certifying that (A) such Charter is a
true and correct copy thereof, (B) such amendments are the only
amendments to such Charter on file in his office, (C) the Company has
paid all franchise taxes to the date of such certificate and (D) the
Company is duly incorporated and in good standing under the laws of
such state.
(v) A copy of a certificate of the Secretary of State of
Illinois, dated a recent date prior to the Closing Date, stating that
the Company is duly qualified and in good standing as a foreign
corporation in such State and has filed all annual reports required to
be filed to the date of such certificate.
(vi) A certificate of the Company, signed on its behalf by an
officer duly authorized, dated the Closing Date (the statements made
in which certificate shall be true on and as of such date) certifying
as to the completeness and accuracy of the representations and
warranties contained in this Agreement as of the Closing Date,
including the absence of any event occurring and
24
<PAGE>
continuing, or resulting from the transactions contemplated hereunder,
that constitutes a Default or Event of Default hereunder and the
absence of any Material Adverse Change.
(vii) A certificate of the secretary of the Company certifying as
to (A) the names and true signatures of the officers of the Company
executing the Preferred Stock Documents, (B) the absence of any
amendment to the Charter of the Company since the date of the
Secretary of State's certificate referred to in subsection (iv) above,
(C) a true and correct copy of the By-laws of the Company as in effect
on the Closing Date, and (D) the due incorporation and good standing
of the Company as a corporation organized under the laws of the
jurisdiction of its incorporation.
(viii) A favorable opinion of Sachnoff & Weaver, Ltd., counsel
for the Company, addressed to the Purchaser and in form and substance
satisfactory to them; and
(ix) Such other documentation as the Purchaser shall require in
its sole discretion.
6.3. No Material Misstatements. There shall be no material misstatements
or material omissions from the materials which have been provided to the
Purchaser for their review.
6.4. Consents. The Company shall have received the consent or approval of
any and all governmental authorities, stockholders or other third parties, the
consent or approval of which is necessary to consummate the transactions
contemplated hereby, and the Company shall have provided copies of all such
consents or approvals to the Purchaser.
6.5. Board of Directors. Purchaser shall have the right to elect a
director to the Board of Directors of the Company or, at the Purchaser's
election, the right to elect a representative with observation rights to the
Board of Directors of the Company.
6.6. Preferred Stock. The Board of Directors shall have adopted the
Certificate of Designations of Series A Preferred Stock substantially in the
form of Exhibit B hereto, and the Company shall have filed such Certificate of
Designations with the Secretary of State of the State of Delaware.
6.7. No Material Adverse Change. There shall not have occurred (and the
Purchaser shall not have become aware of any facts or conditions not previously
represented to it) which the Purchaser in its sole discretion and judgment shall
determine has or reasonably could be expected to cause, a Material Adverse
Change, and there shall not have occurred in the sole judgment and discretion of
the Purchaser any material adverse change in the Company's ability to operate in
accordance with the financial projections previously furnished to the Purchaser.
25
<PAGE>
6.8. Litigation. Except as described in the Registration Statement or in
Schedule 5.4, there shall exist no action, suit, investigation, litigation or
proceeding affecting the Company or any of its Subsidiaries or any of its
properties pending or threatened before any court, governmental agency or
arbitrator that (i) could reasonably be expected to cause a Material Adverse
Change or (ii) purports to affect the legality, validity or enforceability of
this Agreement, any Purchaser Security, any other Preferred Stock Document or
the consummation of the transactions contemplated hereby and thereby. No order,
judgment or decree of any court, arbitrator or governmental authority shall
enjoin or restrain the Purchaser from acquiring the Purchaser Securities.
6.9. Certain Fees. On the Closing Date, all expenses of the Purchaser
(including, without limitation, reasonable legal fees and expenses) incurred in
connection with the negotiation and execution of this Agreement and the other
Preferred Stock Documents shall have been paid by the Company to the extent due.
6.10. [Intentionally Omitted].
6.11. No Violation of Regulations G, T, U or X. The issuance of the
Preferred Stock shall not violate Regulations G, T, U or X of the Board of
Governors of the Federal Reserve Board.
6.12. Additional Preferred Stock; Warrants. In the event the Company
sells and the Purchaser purchases additional Preferred Stock and Warrants
pursuant to Section 2.8 hereof, as a condition to the Purchaser's obligation to
chose such a transaction that the Purchaser receive the following items: (i)
certificates representing the additional shares of Preferred Stock and Warrants
issued in the name of the Purchaser; (ii) a Certificate of the Company, signed
on its behalf by an officer duly authorized, dated the date of issuance of such
Purchaser Securities (the statements made in which certificate shall be true on
and as of such date) certifying as to the completeness and accuracy of the
representations and warranties contained in this Agreement as of such date,
including the absence of any event occurring and continuing, or resulting from
the transactions contemplated hereunder, that constitutes a Default or Event of
Default hereunder and the absence of any Material Adverse Change; (iii) a
favorable opinion of Sachnoff & Weaver, Ltd., counsel for the Company, addressed
to the Purchaser and in form and substance satisfactory to it; and (iv) such
other documentation as the Purchaser shall require in its sole discretion.
7. COVENANTS APPLICABLE WHILE PREFERRED STOCK IS OUTSTANDING
The Company covenants and agrees that, so long as at least 2,500 shares of
Preferred Stock remains outstanding, it will comply and will cause any of its
Subsidiaries to comply with the covenants set forth in this Article 7:
7.1. Payment of Dividends. The Company will duly and punctually pay the
dividends and redemption amount, if any, on the Preferred Stock in accordance
with the terms thereof and of this Agreement, in each case when due under the
terms of this Agreement and the other Preferred Stock Documents.
26
<PAGE>
7.2. Taxes and Other Charges; Accounts Payable.
7.2.1. Taxes and Other Charges. Each of the Company and its
Subsidiaries shall duly pay and discharge, or cause to be paid and discharged,
before the same becomes in arrears, all taxes, assessments and other
governmental charges imposed upon such Person and/or its properties, sales or
activities, or upon the income or profits therefrom, as well as all claims for
labor, materials or supplies which if unpaid might by law become a Lien upon any
of its property; provided, however, that any such tax, assessment, charge or
claim need not be paid if the validity or amount thereof shall be contested in
good faith by appropriate and timely proceedings and if such Person shall, in
accordance with GAAP, have set aside on its books adequate reserves with respect
thereto; and provided, further, that each of the Company and its Subsidiaries
shall pay or bond, or cause to be paid or bonded, all such taxes, assessments,
charges or other governmental claims immediately upon the commencement of
proceedings to foreclose any Lien which may have attached as security therefor
(except to the extent such proceedings have been dismissed or stayed).
7.2.2. Accounts Payable. Each of the Company and its Subsidiaries
shall promptly pay when due, or in conformity with customary trade terms or
other terms agreed to by the holders of such obligation, all accounts payable
incident to the operations of such Person not referred to in Section 7.2.1;
provided, however, that any such accounts payable need not be paid if the
validity or amount thereof shall at the time be contested in good faith and if
such Person shall, in accordance with GAAP, have set aside on its books adequate
reserves with respect thereto.
7.3. Conduct of Business, etc.
7.3.1. Types of Business. The Company and its Subsidiaries shall
engage only in the business of computer software development, marketing, sales
and service and other activities reasonably incident thereto.
7.3.2. Maintenance of Properties. Each of the Company and its
Subsidiaries:
(i) shall keep its properties in such repair, working order and
condition, and shall from time to time make such repairs,
replacements, additions and improvements thereto as are necessary for
the efficient operation of its business in all material respects and
shall comply at all times in all material respects with all
franchises, licenses and leases to which it is party so as to prevent
any loss or forfeiture thereof or thereunder, except where (i)
compliance is at the time being contested in good faith by appropriate
proceedings and (ii) failure to comply with the provisions being
contested has not had, and does not create a reasonable risk of
having, a material adverse effect on the business, condition or
operations of the Company and its Subsidiaries, calculated on a
Consolidated basis; and
(ii) shall do all things necessary to preserve, renew and keep in
full force and effect and in good standing its legal existence and
authority necessary
27
<PAGE>
to continue its business; provided, however, that this Section 7.3.2
shall not prevent the merger, consolidation or liquidation of
Subsidiaries permitted by Section 7.10.
7.3.3. Statutory Compliance. Each of the Company and its
Subsidiaries shall comply in all material respects with all valid and applicable
statutes, laws, ordinances, zoning and building codes and other rules and
regulations of the United States of America, of the states and territories
thereof and their counties, municipalities and other subdivisions and of any
foreign country or other jurisdictions applicable to such Person, except where
(a) compliance therewith shall be contested in good faith by appropriate and
timely proceedings and (b) failure so to comply with the provisions being
contested has not had, and does not create a reasonable risk of having, a
material adverse effect on the business, condition or operations of the Company
and its Subsidiaries, calculated on a Consolidated basis.
7.3.4. Compliance with Material Agreements. Each of the Company and
its Subsidiaries shall comply in all material respects with each of its material
Contractual Obligations, including the Existing Credit Facility, the Senior
Notes, the Senior Credit Documents and the Public Securities (to the extent not
in violation of the other provisions of this Agreement or any of the other
Preferred Stock Documents). Without the prior written consent of the Required
Preferred Holders, no material Contractual Obligation, including the Senior
Credit Documents and the Public Securities, shall be amended, modified, waived
or terminated in any manner that would have in any material respect an adverse
effect on the rights of the Preferred Holders under the Preferred Stock
Documents, as holders of securities that are junior in right of payment to the
Public Securities.
7.4. Certain Financial Tests. At any time after the Existing Credit
Facility and Senior Notes are no longer in full force and effect:
7.4.1. Fixed Charge Coverage Ratio. The Company will not permit the
Company's Fixed Charge Coverage Ratio at the end of each fiscal quarter for the
four most recent consecutive fiscal quarters of the Company ending on or prior
to the date of determination to be less than:
<TABLE>
<CAPTION>
Date of Determination Ratio
--------------------- -----
<S> <C>
October 31, 1998 2.9 : 1.00
January 31, 1999 2.9 : 1.00
April 30, 1999 2.9 : 1.00
July 31, 1999 2.9 : 1.00
October 31, 1999 2.9 : 1.00
January 31, 2000 2.9 : 1.00
April 30, 2000 2.1 : 1.00
July 31, 2000 2.1 : 1.00
October 31, 2000 2.2 : 1.00
January 31, 2001 2.2 : 1.00
April 30, 2001 3.1 : 1.00
</TABLE>
28
<PAGE>
<TABLE>
<S> <C>
July 31, 2001 3.1 : 1.00
October 31, 2001 3.1 : 1.00
January 31, 2002 3.1 : 1.00
April 30, 2002 3.1 : 1.00
July 31, 2002 3.1 : 1.00
October 31, 2002 0.8 : 1.00
January 31, 2003 0.8 : 1.00
April 30, 2003 0.8 : 1.00
July 31, 2003 0.8 : 1.00
October 31, 2003 3.9 : 1.00
</TABLE>
"Fixed Charge Coverage Ratio" shall mean, for any period, the
ratio of (i) Consolidated EBITDA to (ii) the sum of (A) Consolidated Interest
Expense (including without limitation interest expense under all Senior
Indebtedness), (B) taxes actually paid by the Company in cash and (C) the
aggregate of regularly scheduled principal payments of all long-term
indebtedness made or scheduled to have been made by the Company and its
subsidiaries during such period, determined on a Consolidated basis in
accordance with GAAP.
"Consolidated EBITDA" shall mean, for any period, the sum of (i)
Consolidated Net Income, (ii) Consolidated Interest Expense, (iii) depreciation
and amortization (including, without limitation, acquisition costs), and (iv)
federal, state and local taxes, in each case of the Company and its subsidiaries
for such period determined on a Consolidated basis, computed and calculated in
accordance with GAAP.
7.4.2. Debt to Capital Ratio. The Company will not permit the
Company's Total Debt at any time to exceed (i) 75% of its Total Capitalization
from the date hereof to and including October 31, 1998, (ii) 65% from November
1, 1998 to and including April 30, 1999 and (iii) 60% from and after May 1,
1999. "Total Debt" shall mean the sum of short-term borrowings, current portion
of long-term debt and long-term debt of the Company and its subsidiaries; "Total
Capitalization" shall mean the sum of short-term borrowings, current portion of
long-term debt, long-term debt, preferred stock, common stock, additional paid-
in capital and retained earnings of the Company and its subsidiaries; both Total
Debt and Total Capitalization shall be determined in accordance with GAAP.
7.5. Indebtedness. Neither the Company nor any of its Subsidiaries shall
create, incur, assume, permit to exist or otherwise become or remain liable with
respect to any Indebtedness ranking senior to or pari passu with the Series A
Preferred (or become contractually committed to do so), except the following:
7.5.1. Indebtedness in respect of (i) the Series A Preferred, (ii)
the Public Securities, (iii) the Existing Credit Facility, (iv) the Senior Notes
and (v) other Senior Indebtedness (including revolving loans under the Senior
Credit Documents); provided, however, that the aggregate amount of the
Indebtedness under clause (v) shall not exceed the sum of (A) $40,000,000 less
(B) the amount of the underwriters' over-allotment option, if
29
<PAGE>
exercised, with respect to the Public Securities; provided further, that
notwithstanding the foregoing, the aggregate amount of such permitted Senior
Indebtedness shall not be less than $30,000,000.
7.5.2. Liabilities incurred in the ordinary course of business,
consisting of current liabilities, deferred revenues, accrued commissions and
accrued compensation.
7.5.3. Indebtedness with respect to intercompany loans and advances
from any Subsidiary to the Company permitted by Section 7.8.3.
7.5.4. To the extent that payment thereof shall not at the time be
required by Section 7.2.1, Indebtedness in respect of taxes, assessments,
governmental charges and claims for labor, materials and supplies.
7.5.5. Indebtedness secured by Liens of carriers, warehouses,
mechanics and landlords permitted by Sections 7.7.4 and 7.7.6.
7.5.6. Indebtedness in respect of judgments or awards (a) which have
been in force for less than the applicable appeal period or (b) in respect of
which the Company or any Subsidiary shall at the time in good faith be
prosecuting an appeal or proceedings for review and, in the case of each of
clauses (a) and (b), the Company or such Subsidiary shall have taken appropriate
reserves therefor in accordance with GAAP and execution of such judgment or
award shall not be levied.
7.5.7. Indebtedness in respect of deferred taxes arising in the
ordinary course of business.
7.5.8. To the extent permitted by Section 7.7.6, Indebtedness in
respect of Capitalized Lease Obligations or secured by purchase money security
interests; provided, however, that the aggregate principal amount of
Indebtedness permitted by this Section 7.5.8 shall not exceed $5,000,000
outstanding at any time;
7.5.9. Unfunded pension liabilities and obligations with respect to
Plans so long as the Company and all other ERISA Affiliates are in compliance
with Section 7.14.
7.5.10. Guarantees permitted by Section 7.6.
7.5.11. Other Indebtedness outstanding on the date hereof and
described in Schedule 5.22 (other than as described in Section 7.5.1 hereof) and
all renewals and extensions thereof not in excess of the amount thereof
outstanding immediately prior to such renewal or extension.
7.6. Guarantees; Letters of Credit. Except as required under the Senior
Credit Documents, neither the Company nor any of its Subsidiaries shall become
or remain liable with respect to any Guarantee, including reimbursement
obligations, whether contingent or
30
<PAGE>
matured, under letters of credit or other financial guarantees by third parties
(or become contractually committed do to so).
7.7. Liens. Except as required under the Existing Credit Facility, the
Senior Notes or the Senior Credit Documents, neither the Company nor any of its
Subsidiaries shall create, incur or enter into, or suffer to be created or
incurred or to exist, any Lien (or become contractually committed to do so),
except the following:
7.7.1. Liens to secure taxes, assessments and other governmental
charges, to the extent that payment thereof shall not at the time be required by
Section 7.2.1.
7.7.2. Deposits or pledges made (a) in connection with, or to secure
payment of, workers' compensation, unemployment insurance, old age pensions or
other social security, (b) in connection with casualty insurance maintained in
accordance with Section 7.17, (c) to secure the performance of bids, tenders,
contracts (other than contracts relating to Financing Debt) or leases, (d) to
secure statutory obligations or surety or appeal bonds, (e) to secure indemnity,
performance or other similar bonds in the ordinary course of business or (f) in
connection with contested amounts to the extent that payment thereof shall not
at that time be required by Section 7.2.1.
7.7.3. Liens in respect of judgments or awards, to the extent that
such judgments or awards are permitted by Section 7.5.6.
7.7.4. Liens of carriers, warehouses, mechanics and similar Liens, in
each case (a) in existence less than 90 days from the date of creation thereof
or (b) being contested in good faith by the Company or any Subsidiary in
appropriate proceedings (so long as the Company or such Subsidiary shall, in
accordance with GAAP, have set aside on its books adequate reserves with respect
thereto).
7.7.5. Encumbrances in the nature of (a) zoning restrictions, (b)
easements, (c) restrictions of record on the use of real property, (d)
landlords' and lessors' Liens on rented premises and (e) restrictions on
transfers or assignment of leases, which in each case do not materially detract
from the value of the encumbered property or impair the use thereof in the
business of the Company or any Subsidiary.
7.7.6. Liens constituting (a) purchase money security interests
(including mortgages, conditional sales, Capitalized Leases and any other title
retention or deferred purchase devices) in real property, interests in leases or
tangible personal property (other than inventory) existing or created on the
date on which such property is acquired, and (b) the renewal, extension or
refunding of any security interest referred to in the foregoing clause (a) in an
amount not to exceed the amount thereof remaining unpaid immediately prior to
such renewal, extension or refunding; provided, however, that (i) each such
security interest shall attach solely to the particular item of property so
acquired, and the principal amount of Indebtedness (including Indebtedness in
respect of Capitalized Lease Obligations) secured thereby shall not exceed the
cost (including all such Indebtedness secured thereby, whether or not assumed)
of such item of property; and (ii) the aggregate principal amount of all
31
<PAGE>
Indebtedness secured by Liens permitted by this Section 7.7.6 shall not exceed
the amount permitted by Section 7.5.8.
7.7.7. Restrictions under federal and state securities laws on the
transfer of securities.
7.8. Investments and Acquisitions. Neither the Company nor any of its
Subsidiaries shall have outstanding, acquire or hold any Investment (including
any Investment consisting of the acquisition of any business) (or become
contractually committed to do so), except the following:
7.8.1. Investments outstanding on the Closing Date as set forth on
Schedule 7.8.1 hereto, provided that in the case of any such Investment
consisting of a partnership, joint venture or similar agreement, the terms of
such Investment shall not be amended, modified or waived without the written
consent of the Required Preferred Holders.
7.8.2. Investments of the Company in Wholly-Owned Subsidiaries;
provided, however, that (i) no such Investment shall involve the transfer by the
Company of any material assets other than cash or Common Stock and (ii)
Investments by the Company made pursuant to this Section shall not exceed
$70,000,000 at any one time outstanding.
7.8.3. Intercompany loans and advances from any Subsidiary to the
Company in the ordinary course of business.
7.8.4. Investments in Cash Equivalents.
7.8.5. Capital contributions by the Company in any Subsidiary
consisting of the reclassification of royalty amounts owed by such Subsidiary to
the Company to the extent necessary to maintain such Subsidiary in compliance
with all minimum capitalization requirements under the laws of the jurisdiction
where such Subsidiary is incorporated or is qualified to do business; provided,
however, that the Company's direct or indirect capital contributions in its
subsidiary's organized in Italy may take a modified form without violating this
Section 7.8.
7.8.6. So long as immediately before and after giving effect thereto
no Default exists, the Company and its Subsidiaries may make Investments
consisting of acquisitions of businesses of the type described in Section 7.3.1
in an aggregate amount not exceeding $5,000,000 payable in cash in any fiscal
year and such acquisitions shall only be of businesses and assets related to the
Company's current lines of business, and shall be approved by the board of
directors, shareholders, members or partners as applicable, of the Person whose
stock or assets are being acquired prior to the consummation of such
acquisition.
7.9. Distributions. Neither the Company nor any of its Subsidiaries shall
make any Distribution (or become contractually committed to do so), except the
following:
32
<PAGE>
7.9.1. So long as immediately before and after giving effect thereto
no Default exists, Subsidiaries of the Company may make Distributions to the
Company or any Subsidiary of the Company and the Company and its Subsidiaries
may make Investments permitted by Sections 7.8.2 and 7.8.3.
7.9.2. So long as immediately before and after giving effect thereto
no Default exists, repayment or repurchase pursuant to their terms of the Public
Securities, the Warrants or the Existing Subordinated Debt.
7.9.3. So long as immediately before and after giving effect thereto
no Default exists, the Company may make Distributions up to $500,000 per year to
repurchase Company stock and options to acquire such stock owned by employees
whose employment with the Company and its Subsidiaries has then terminated.
7.10. Asset Dispositions and Mergers. Neither the Company nor any of its
Subsidiaries shall merge or enter into a consolidation or sell, lease, exchange,
sell and lease back, sublease or otherwise dispose of any of its assets (or
become contractually committed to do so), except the following:
7.10.1. The Company and any of its Subsidiaries may sell, license or
otherwise dispose of (a) inventory, intellectual property (including licenses of
the BPCS (Business Planning and Control System) Client/Server product line) and
Cash Equivalents in the ordinary course of business, (b) tangible assets (i)
that will be replaced in the ordinary course of business within 12 months by
other tangible assets of equal or greater value or (ii) that are no longer used
or useful in the business of the Company or such Subsidiary; provided, however
that the aggregate fair market value (or book value, if greater) of all assets
sold under this clause (b) in any fiscal year shall not exceed $2,000,000 and
(c) accounts receivable for collection purposes in the ordinary course of
business or pursuant to accounts receivable financing programs customary in the
software industry.
7.10.2. Any Wholly Owned Subsidiary of the Company may merge or be
liquidated into the Company or any other Wholly Owned Subsidiary of the Company
so long as after giving effect to any such merger to which the Company is a
party the Company shall be the surviving or resulting Person.
7.10.3. The Company and its Subsidiaries may sell for fair value
assets during any fiscal year constituting not more than 10% of the aggregate
fair value of all of the Company's assets on a Consolidated basis.
7.11. Voluntary Prepayments of Other Indebtedness. Neither the Company nor
any of its Subsidiaries shall make any voluntary prepayment of principal of or
interest on any Indebtedness (other than, subject to Section 2.8.1, as permitted
or required pursuant to the Existing Credit Facility, the Senior Notes, the
Senior Credit Documents and the Public Securities) or make any voluntary
redemptions or repurchases of Indebtedness (other than, subject to Section
2.8.1, pursuant to the Existing Credit Facility, the Senior Notes, the Senior
Credit Documents and the Public Securities).
33
<PAGE>
7.12. Derivative Contracts. Neither the Company nor any of its
Subsidiaries shall enter into any Interest Rate Protection Agreement, foreign
currency exchange contract or other financial or commodity derivative contracts
except to provide hedge protection for an underlying economic transaction in the
ordinary course of business.
7.13. Negative Pledge Clauses. Neither the Company nor any of its
Subsidiaries shall enter into any agreement, instrument, deed or lease which
prohibits or limits the ability of the Company or any of its Subsidiaries to
create, incur, assume or suffer to exist any Lien upon any of their respective
properties, assets or revenues, whether now owned or hereafter acquired, or
which requires the grant of any collateral for such obligation if collateral is
granted for another obligation, except the following:
(i) This Agreement, the Existing Credit Facility, the Senior
Notes, and the Senior Credit Documents.
(ii) Covenants in documents creating Liens permitted by Section
7.7 prohibiting further Liens on the assets encumbered thereby.
7.14. ERISA. Each of the Company and its Subsidiaries shall comply, and
shall cause all ERISA Affiliates to comply, in all material respects, with the
provisions of ERISA and the Code applicable to each Plan. Each of the Company
and its ERISA Affiliates shall meet all minimum funding requirements applicable
to them with respect to any Plan pursuant to Section 302 of ERISA or Section 412
of the Code, without giving effect to any waivers of such requirements or
extensions of the related amortization periods which may be granted. At no time
shall the Accumulated Benefit Obligations under any Plan that is not a
Multiemployer Plan exceed the fair market value of the assets of such Plan
allocable to such benefits by more than $1,000,000. The Company and its ERISA
Affiliates shall not withdraw in whole or in part, from any Multiemployer Plan
so as to give rise to withdrawal liability exceeding $1,000,000 in the
aggregate. At no time shall the actuarial present value of unfunded liabilities
for post-employment health care benefits (other than COBRA continuation coverage
benefits), whether or not provided under a Plan, calculated in a manner
consistent with Statement No. 106 of the Financial Accounting Standards Board,
exceed $1,000,000.
7.15. Transactions with Affiliates. Neither the Company nor any of its
Subsidiaries shall effect any transaction with any of their respective
Affiliates (except for the Company and its Subsidiaries) on a basis less
favorable to the Company and its Subsidiaries than would be the case if such
transaction had been effected with a non-Affiliate.
7.16. Notice of Default. The Company will promptly provide to the
Purchasers any notice of default received by it under the Existing Credit
Facility, the Senior Notes, the any Senior Credit Documents or the Public
Securities.
7.17. Insurance. The Company will, and will cause each of its
Subsidiaries to, at all times from and after the Closing Date, maintain in full
force and effect insurance with reputable and solvent insurance carriers in such
amounts, covering such risks and liabilities
34
<PAGE>
and with such deductibles or self-insured retentions as are in accordance with
normal industry practice in such entity's business.
7.18. Performance of Preferred Stock Documents. The Company will use its
best efforts to bring about the fulfillment of each of the conditions contained
in Article 6 and will comply with all of the covenants and agreements contained
in this Agreement and the other Preferred Stock Documents to which it is party.
8. COVENANTS APPLICABLE SO LONG AS PURCHASER SECURITIES REMAIN OUTSTANDING.
The Company covenants and agrees that, so long as at least twenty-five
percent (25%) of any class of Purchaser Securities originally issued hereunder
remain outstanding (provided that any shares or Warrants which have been
exercised, sold or otherwise distributed in a public offering or pursuant to
Rule 144 under the Securities Act or other comparable rule shall not be deemed
to be "outstanding" for purposes of this Article 8):
8.1. Financial Statements and Reports. Each of the Company and its
Subsidiaries shall maintain a system of accounting in which correct entries
shall be made of all transactions in relation to their business and affairs in
accordance with GAAP. The fiscal year of the Company and its Subsidiaries shall
end on October 31 in each year and the fiscal quarters of the Company and its
Subsidiaries shall end on January 31, April 30, July 31 and October 31 in each
year.
8.1.1. Annual Reports. The Company shall furnish to the Purchaser
as soon as available, and in any event within 90 days after the end of each
fiscal year, the Consolidated balance sheets of the Company and its Subsidiaries
as at the end of such fiscal year, the Consolidated statements of income and
consolidated statements of changes in shareholders' equity and of cash flows of
the Company and its Subsidiaries for such fiscal year (all in reasonable detail)
and together, in the case of Consolidated financial statements, with comparative
figures for the immediately preceding fiscal year, all accompanied by:
(i) Reports of KPMG Peat Marwick (or, if they cease to be
auditors of the Company and its Subsidiaries, other independent
certified public accountants of recognized national standing
reasonably satisfactory to the Purchaser), containing no material
qualification, to the effect that they have audited the foregoing
Consolidated financial statements in accordance with generally
accepted auditing standards and that such Consolidated financial
statements present fairly, in all material respects, the financial
position of the Company and its Subsidiaries covered thereby at the
dates thereof and the results of their operations for the periods
covered thereby in conformity with GAAP.
(ii) The statement of such accountants that they have caused this
Agreement to be reviewed and that in the course of their audit of the
Company and its Subsidiaries no facts have come to their attention
that cause them to
35
<PAGE>
believe that any Default exists and in particular that they have no
knowledge of any Default under Section 7.1 and Sections 7.4 through
7.20 or, if such is not the case, specifying such Default and the
nature thereof. Such statement shall be furnished by such accountants
with the understanding that the examination of such accountants cannot
be relied upon to give such accountants knowledge of any such Default
except as it relates to accounting or auditing matters within the
scope of their audit.
(iii) A certificate of the Company signed by a Financial Officer
to the effect that such officer has caused this Agreement to be
reviewed and has no knowledge of any Default, or if such officer has
such knowledge, specifying such Default and the nature thereof, and
what action the Company has taken, is taking or proposes to take with
respect thereto.
(iv) Computations by the Company comparing the financial
statements referred to above with the most recent budget for such
fiscal year furnished to the Purchaser.
(v) Computations by the Company demonstrating, as of the end of
such fiscal year, compliance with Sections 7.4, 7.5.1, 7.5.8, 7.8.6,
7.9.3, 7.10.1, 7.10.3 and 7.14 certified by a Financial Officer.
(vi) Calculations, as at the end of such fiscal year, of (i) the
Accumulated Benefit Obligations for each Plan (other than
Multiemployer Plans) and (ii) the fair market value of the assets of
such Plan allocable to such benefits.
(vii) A certificate of the Company signed by a Financial Officer
indicating any material information about the Company not previously
furnished to the Purchaser in writing, as well as any changes in the
Company's Charter, By-laws or incumbency of officers of the Company
from those previously certified to the Purchaser.
(viii) In the event of a change in GAAP after October 31, 1996,
computations by the Company, certified by a Financial Officer,
reconciling the financial statements referred to above with financial
statements prepared in accordance with GAAP as applied to the other
covenants in Article 7 and related definitions.
(ix) In reasonable detail, management's discussion and analysis
of the results of operations and the financial condition of the
Company and its Subsidiaries as at the end of and for the year covered
by such financial statements. The management's discussion and analysis
of results set forth in the Company's annual report on Form 10-K shall
satisfy the obligations of this Section 8.1.1(ix).
36
<PAGE>
8.1.2. Quarterly Reports. The Company shall furnish to the Purchaser
as soon as available and, in any event, within 45 days after the end of each of
the first three fiscal quarters of the Company, the internally prepared
Consolidated balance sheets of the Company and its Subsidiaries as of the end of
such fiscal quarter, the Consolidated statements of income, of changes in
shareholders' equity and of cash flows of the Company and its Subsidiaries for
such fiscal quarter and for the portion of the fiscal year then ended (all in
reasonable detail) and together with comparative figures for the same period in
the preceding fiscal year, all accompanied by:
(i) A certificate of the Company signed by a Financial Officer to
the effect that such financial statements have been prepared in
accordance with GAAP and present fairly, in all material respects, the
financial position of the Company and its Subsidiaries covered thereby
at the dates thereof and the results of their operations for the
periods covered thereby, subject only to normal year-end audit
adjustments and the addition of footnotes.
(ii) A certificate of the Company signed by a Financial Officer
to the effect that such officer has caused this Agreement to be
reviewed and has no knowledge of any Default, or if such officer has
such knowledge, specifying such Default and the nature thereof and
what action the Company has taken, is taking or proposes to take with
respect thereto.
(iii) Computations by the Company comparing the financial
statements referred to above with the most recent budget for the
period covered thereby furnished to the Purchaser.
(iv) Computations by the Company demonstrating, as of the end of
such quarter, compliance with Sections 7.4, 7.5.1, 7.5.8, 7.8.6,
7.9.3, 7.10.1, 7.10.3 and 7.14, certified by a Financial Officer.
(v) A certificate of the Company signed by a Financial Officer
indicating any material information about the Company not previously
furnished to the Purchaser in writing, as well as any changes in the
Company's Certificate of Incorporation, By-laws or incumbency of
officers of the Company from those previously certified to the
Purchaser.
(vi) In reasonable detail, management's discussion and analysis
of the results of operations and financial condition of the Company
and its Subsidiaries as at the end of and for the fiscal period
covered by the financial statements referred to above. The
management's discussion and analysis of results set forth in the
Company's quarterly report on Form 10-Q shall satisfy the obligations
of this Section 8.1.2(vi).
8.1.3. Monthly Reports. The Company shall furnish to the Purchaser
as soon as available and, in any event, within 30 days after the end of each
month, the internally prepared Consolidated balance sheet of the Company and its
Subsidiaries as at the end of such
37
<PAGE>
month and the Consolidated statement of income of the Company and its
Subsidiaries for such month (all in reasonable detail), all accompanied by a
certificate of the Company signed by a Financial Officer to the effect that such
financial statements were prepared in accordance with GAAP and present fairly,
in all material respects, the financial position of the Persons covered thereby
at the dates thereof and the results of their operations for the periods covered
thereby, subject only to normal year-end audit adjustments and the addition of
footnotes.
8.1.4. Other Reports. The Company shall promptly furnish to the
Purchaser:
(i) As soon as prepared and in any event within 15 days of the
beginning of each fiscal year, an annual budget, operating projections
and forecasts for such fiscal year of the Company and its
Subsidiaries, prepared in a manner consistent with the manner in which
the financial projections described in Section 5.11.2 were prepared.
(ii) Any updates of such budget, projections and forecasts.
(iii) As soon as prepared and in any event on a monthly basis, a
copy of the Company's Sales Pipeline Report.
(iv) Any management letters furnished to the Company or any of
its Subsidiaries by the Company's auditors.
(v) All budgets, projections, statements of operations and other
reports furnished generally to the shareholders of the Company.
(vi) Such registration statements, proxy statements and reports,
including Forms S-1, S-2, S-3, S-4, 10-K, 10-Q and 8-K, as may be
filed by the Company or any of its Subsidiaries with the Securities
and Exchange Commission.
(vii) Any 90-day letter or 30-day letter from the federal
Internal Revenue Service (or the equivalent notice received from state
or other taxing authorities) asserting tax deficiencies against the
Company or any of its Subsidiaries.
8.1.5. Notice of Litigation, etc.. The Company shall promptly
furnish to the Purchaser notice of any litigation or any administrative or
arbitration proceeding (a) which creates a material risk of resulting, after
giving effect to any applicable insurance, in the payment by the Company and its
Subsidiaries of more than $2,000,000 or (b) which has, or creates a material
risk of having, a material adverse effect on the business, condition or
operations of the Company and its Subsidiaries, calculated on a Consolidated
basis. Promptly upon acquiring knowledge thereof, the Company shall notify the
Purchaser of the existence of any Default or Material Adverse Change, specifying
the nature thereof and what action the Company or any Subsidiary has taken, is
taking or proposes to take with respect thereto.
38
<PAGE>
8.1.6. ERISA Reports. The Company shall furnish to the Purchaser as
soon as available the following items with respect to any Plan:
(i) any request for a waiver of the funding standards or an
extension of the amortization period,
(ii) any reportable event (as defined in Section 4043 of
ERISA), unless the notice requirement with respect thereto has been
waived by regulation,
(iii) any notice received by any ERISA Affiliate that the PBGC
has instituted or intends to institute proceedings to terminate any
Plan, or that any Multiemployer Plan is insolvent or in
reorganization,
(iv) notice of the possibility of the termination of any Plan
by its administrator pursuant to Section 4041 of ERISA, when such
termination would result in a Material Adverse Change, and
(v) notice of the intention of any ERISA Affiliate to
withdraw, in whole or in part, from any Multiemployer Plan when such
withdrawal would result in a Material Adverse Change.
8.1.7. Other Information; Audit. From time to time at reasonable
intervals upon request of the authorized officer of the original Purchaser, each
of the Company and its Subsidiaries shall furnish to such Purchaser such other
information regarding the business, assets, financial condition, income or
prospects of the Company and its Subsidiaries as such officer may reasonably
request, including copies of all tax returns, licenses, agreements, leases and
instruments to which any of the Company or its Subsidiaries is party.
8.2. Books, records and inspections. From time to time at reasonable
intervals, each of the Company and its Subsidiaries shall permit any authorized
agent of the original Purchaser to visit and inspect the properties and the
properties of its Subsidiaries, to examine its books of account and records, to
discuss its affairs, finances and accounts with, and to be advised as to the
same by, its officers and its independent public accountants (whose reasonable
fees and expenses shall be paid by the requesting Purchaser), all upon
reasonable prior notice to the Company and at such reasonable times (during
normal business hours) and intervals as such Purchaser reasonably request.
9. EVENTS OF DEFAULT
If one or more of the following events (herein referred to as "Events of
Default") shall occur and be continuing:
9.1. Payment Default. The Company shall fail to pay (i) any redemption
price of the Preferred Stock when the same becomes due and payable (including
any premium thereon) or (ii) any dividend on the Preferred Stock, for a period
of five Business Days after the same
39
<PAGE>
shall become due and payable or (iii) any other amount due hereunder within 30
days after demand therefor; or
9.2. Default under other Indebtedness. Any default or event of default
shall have occurred (after expiration of all applicable notice and cure periods)
under any Indebtedness of the Company or any Subsidiary in excess of $5,000,000
in the aggregate resulting in the acceleration of such Indebtedness, whether by
having become due and payable by its terms or having been declared due and
payable prior to its stated maturity; or
9.3. Certain Covenants. The Company shall fail to perform or comply with
any covenant contained in Sections 7.2.1, 7.3.1, 7.5, 7.8 through 7.12, 7.15 or
7.16 of this Agreement and such default shall continue for more than five
Business Days after the first to occur of (i) the president, chief executive
officer or chief financial officer of the Company shall obtain actual knowledge
of such default or (ii) the Company's receipt of written notice of such default
from the Required Preferred Holders; or
9.4. Other Covenants. The Company shall default in the performance or
observance of any other covenant (other than that contained in Section 7.19)
contained in Article 7 of this Agreement or (provided that in the case of any
breach of the covenant contained in Section 7.2.2, the total accounts payable
giving rise to the breach exceed $7,500,000 in the aggregate) any other
covenant, agreement or condition of this Agreement (other than those described
or referred to in any other paragraph of this Article 9) and such default shall
continue for more than 30 days after the first to occur of (i) the president or
chief executive officer of the Company shall obtain actual knowledge of such
default or (ii) the Company's receipt of written notice of such default from the
Required Preferred Holders; provided, however, that if the Company notifies the
Preferred Holders that such default is susceptible of being cured but not within
the time period of 30 days, and that the Company is undertaking diligent efforts
to cure such default, then the cure period will be extended to not more than 90
days, provided further, that the ongoing existence of such default has not
caused, and during such extended cure period such default does not cause, a
Material Adverse Change; or
9.5. Breach of Representations or Warranties. Any representation or
warranty made by the Company in this Agreement, in the other Preferred Stock
Documents or any material representation of warranty made in any statement or
certificate at any time given by it in writing pursuant hereto or in connection
herewith or therewith shall (taken as a whole) be false in any material respect
on the date it is made; or
9.6. Involuntary Bankruptcy, Appointment of Receiver, etc.. (a) A court
having jurisdiction in the premises shall enter a decree or order for relief in
respect of the Company or any of its Subsidiaries in an involuntary case under
the Bankruptcy Code or any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, which decree or order is not stayed; or any
other similar relief shall be granted and remain unstayed under any applicable
federal or state law; or (b) an involuntary case is commenced against the
Company or any of its Subsidiaries under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect; or a decree or order of a court
having jurisdiction in the premises
40
<PAGE>
for the appointment of a receiver, liquidator, sequestrator, trustee, custodian
or other officer having similar powers over the Company or any of its
Subsidiaries or over all or a substantial part of any of their respective
properties, shall have been entered, or an interim receiver, trustee or other
custodian of the Company or any of its Subsidiaries for all or a substantial
part of their respective properties is involuntarily appointed; or a warrant of
attachment, execution or similar process is issued against any substantial part
of the property of the Company or any such Subsidiary, and the continuance of
any such events in this clause (b) for 90 days unless dismissed, bonded, stayed,
vacated or discharged; or
9.7. Voluntary Bankruptcy, Appointment of Receiver, etc.. The Company or
any of its Subsidiaries shall have an order for relief entered with respect to
it or commence a voluntary case under the Bankruptcy Code or any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or shall
consent to the entry of an order for relief in an involuntary case, or to the
conversion of an involuntary case to a voluntary case, under any such law, or
shall consent to the appointment of or taking possession by a receiver, trustee
or other custodian for all or a substantial part of its property; the making by
the Company or any such Subsidiary of any assignment for the benefit of
creditors; or the board of directors of the Company or any such Subsidiary (or
any committee thereof) adopts any resolution or otherwise authorizes action to
approve any of the foregoing; or
9.8. Judgments and Attachments. One or more judgments or decrees shall be
entered against the Company or any of its Subsidiaries involving a liability (to
the extent not paid or fully covered by insurance) in excess of $3,000,000 for
all such judgments and decrees and all such judgments or decrees shall not have
been vacated, discharged or stayed or bonded pending appeal within 60 days from
the entry thereof; or
9.9. ERISA. Any "reportable event" (as defined in 4043 of ERISA) shall
have occurred that reasonably could be expected to result in termination of a
Plan or the appointment by the appropriate United States District Court of a
trustee to administer any Plan or the imposition of a Lien in favor of a Plan;
or any ERISA Affiliate shall fail to pay when due amounts aggregating in excess
of $2,000,000 which it shall have become liable to pay to the PBGC or to a Plan
under Title IV of ERISA; or notice of intent to terminate a Plan shall be filed
under Title IV of ERISA by any ERISA Affiliate or administrator; or the PBGC
shall institute proceedings under Title IV of ERISA to terminate or to cause a
trustee to be appointed to administer any Plan or a proceeding shall be
instituted by a fiduciary of any Plan against any ERISA Affiliate to enforce 515
or 4219(c)(5) of ERISA and such proceeding shall not have been dismissed within
30 days thereafter; or a condition shall exist by reason of which the PBGC would
be entitled to obtain a decree adjudicating that any Plan must be terminated.
9.10. Change of Control. A Change of Control Event shall have occurred
and the Preferred Stock Obligations shall not have been paid in full on or
before the occurrence of such Change of Control Event.
41
<PAGE>
THEN, (i) upon the occurrence of any Event of Default described in the
foregoing Sections 9.6 or 9.7 with respect to the Company, the Holder Redemption
Price plus accrued but unpaid dividends shall automatically become immediately
due and payable, without presentment, demand, protest or other requirements of
any kind, all of which are hereby expressly waived by the Company, and (ii) upon
the occurrence of any other Event of Default, the Required Preferred Holders may
declare the entire Holder Redemption Price to be due and payable, whereupon the
Holder Redemption Price, shall automatically become due and payable, such
without any other notice of any kind, and without presentment, demand, protest,
or other requirements of any kind all of which are hereby waived by the Company.
10A. SUBORDINATION TO EXISTING SENIOR INDEBTEDNESS
10A.1. The Company, for itself its successors and assigns, covenants and
agrees, and the Purchaser by its acceptance hereof likewise covenants and
agrees, that the Preferred Stock shall be subordinated, to the extent set forth
below, to the prior payment in full of all Existing Senior Indebtedness (as
hereinafter defined).
10A.2. During the period referred to in Section 10A.8, the Company shall
not make or agree to make, and the Purchaser will not, demand, sue for, take, or
retain, any direct or indirect payment (in cash, property, securities, by set-
off or otherwise) on account of the Redemption Price or dividends on the
Preferred Stock, provided, however, that the Company may pay and the Purchaser
may demand, sue for, take and retain any payments of dividends and the
Redemption Price, including, without limitation, under the terms and conditions
of the Preferred Stock made or due prior to the date on which the Purchaser
shall have received written notice (by registered mail, overnight courier or
confirmed facsimile) of any Subordination Event (as hereinafter defined).
Nothing in this Article 10A shall be deemed to prevent the accrual of dividends
on outstanding shares of Preferred Stock, contemplated by the provisions of this
Agreement. Nothing in this Article 10A shall be deemed to prevent the Purchaser
from demanding, suing for, taking or retaining any payments on account of the
Preferred Stock after the earlier of (i) the date on which the Existing Senior
Indebtedness has been paid in full and (ii) either (y) 180 days after the
occurrence of an Event of Default (other than an Event of Default under Section
9.4 or an Event of Default under Section 9.2) shall have occurred, or (z) 270
days after an Event of Default under Section 9.4 shall have occurred, provided
that in all cases in which more than one Event of Default is outstanding at one
time, the applicable period for purposes of this clause (ii) shall be the
shortest period possible. Notwithstanding the preceding sentence, if at the time
of receipt by the Purchaser of any payment on account of the Preferred Stock (w)
any Existing Senior Indebtedness shall have reached final maturity (whether by
acceleration or otherwise), (x) the holders of such Existing Senior Indebtedness
referred to in clause (w) above shall have previously commenced proceedings to
enforce payment of such Existing Senior Indebtedness, (y) such proceedings shall
be continuing and (z) prior to the Purchaser's receipt of such payment, the
holders of such Existing Senior Indebtedness shall have notified the Purchaser
of the commencement of such proceedings, then no such payment shall be made on
account of the Preferred Stock until the Existing Senior Indebtedness described
in clause (w) is paid in full and if any such payment is received by the
Purchaser it shall be paid over to the holder of the Existing Senior
42
<PAGE>
Indebtedness referred to in clause (w) above in an amount equal to the lesser of
(A) the outstanding amount of such Existing Senior Indebtedness and (B) the
amount of such payment.
10A.3. In the event of the occurrence of an event of default under any
agreement that includes the Company's obligation to pay Existing Senior
Indebtedness of the Company, the failure to repay any Existing Senior
Indebtedness upon the final maturity thereof or otherwise upon any payment or
distribution, whether of cash, securities, or other property, to creditors of
the Company in a total or partial liquidation, reorganization or dissolution of
the Company, whether voluntary or involuntary, or in a bankruptcy,
reorganization, insolvency, receivership, assignment for the benefit of
creditors, marshaling of assets, or similar proceeding relating to the Company
or its property (the existence of such acceleration, failure to pay upon final
maturity or proceeding being herein referred to as a "Subordination Event"),
then except as set forth in the proviso set forth in the first sentence of
Section 10A.2, all Existing Senior Indebtedness (including any interest thereon
accruing after the occurrence of any such event) shall first be paid in full
before any payment or distribution, whether in cash, securities or other
property other than Subordinated Securities (as hereinafter defined), shall be
made to the Purchaser on account of the Preferred Stock. Any payment or
distribution, whether in cash, securities, or other property (other than the
Subordinated Securities), which would otherwise (but for these subordination
provisions) be payable or deliverable in respect of the Preferred Stock shall be
paid or delivered directly to the holder of the Existing Senior Indebtedness
until all Existing Senior Indebtedness (including any interest thereon accruing
after the occurrence of any such event) shall have been paid in full.
"Subordinated Securities" shall mean any securities of the Company or any other
corporation provided for by a plan of reorganization or readjustment, the
payment of which is subordinate, at least to the extent provided in these
subordination provisions with respect to the Preferred Stock, to the payment of
all Existing Senior Indebtedness at the time outstanding or to any securities
issued in respect thereof under any such plan of reorganization or readjustment.
10A.4. In the case of a happening of any Event of Default other than any
of the Event of Default specified in Section 9.6 or 9.7, the Purchaser will not
declare any redemption on the Preferred Stock until the earliest of (x) the
final maturity of any Existing Senior Indebtedness, (y) the acceleration of the
maturity of any Existing Senior Indebtedness and (z) either (A) 180 days after
the occurrence of an Event of Default (other than an Event of Default under
Section 9.4 or an Event of Default under Section 9.2) shall have occurred or (B)
270 days after an Event of Default under Section 9.4 shall have occurred,
provided that in all cases in which more than one Event of Default is
outstanding at one time, the applicable period for purposes of this clause (z)
shall be the shortest period possible.
10A.5. The provisions of this Article 10A constitute a continuing
subordination agreement, and any holder of Existing Senior Indebtedness may
continue, without notice to the Purchaser, to extend credit and make loans and
advances to or for the account of the Company in reliance hereon; provided that
such loans and advances are not prohibited by the provisions of Section 7.5. Any
holder of Existing Senior Indebtedness may, at any time and from time to time,
without consent or notice to the Purchaser, without incurring responsibility to
the Purchaser, and without impairing or releasing any rights of the holder of
Existing Senior
43
<PAGE>
Indebtedness or any obligations of the Purchaser hereunder: (i) change the
manner, place or terms of payment or change or extend the time of payment of, or
renew or alter any of the Existing Senior Indebtedness, or otherwise amend in
any manner any of the Existing Senior Indebtedness or any instrument evidencing
the same or any agreement under which any of the Existing Senior Indebtedness is
outstanding; (ii) require such additional collateral from the Company or others
to secure any of the Existing Senior Indebtedness as it may deem necessary or
desirable, (iii) sell, exchange, release or otherwise deal with any collateral
for the Existing Senior Indebtedness; (iv) release any person (other than the
Company) liable in any manner for the payment or collection of any of the
Existing Senior Indebtedness; and (v) exercise or refrain from exercising any
right against the Company and any other person.
10A.6. The holders of Existing Senior Indebtedness shall not be
prejudiced in the right to enforce subordination of the Preferred Stock by any
act or failure to act on the part of the Company or of the holder of Existing
Senior Indebtedness.
10A.7. Except as otherwise expressly agreed to or undertaken by the
Purchaser herein, nothing contained herein shall be deemed to impose upon the
Purchaser any liability or obligation of the Company to the holder of Existing
Senior Indebtedness or shall be construed as implying any guarantee, warranty,
undertaking or representation on the part of the Purchaser as to the discharge
by the Company of any liability or obligation of the Company to the holder of
Existing Senior Indebtedness.
10A.8. As long as any Existing Senior Indebtedness is outstanding, the
Purchaser shall not commence, or join with any creditor other than the holder of
Existing Senior Indebtedness in commencing, any proceeding referred to in
Section 10A.2 (which shall be deemed to include an involuntary bankruptcy
proceeding against the Company) until the earlier of (i) the date on which the
Existing Senior Indebtedness has been paid in full and (ii) either (x) 180 days
after the occurrence of an Event of Default (other than an Event of Default
under Section 9.2 or an Event of Default under Section 9.4) shall have occurred
or (y) 270 days after an Event of Default under Section 9.4 shall have occurred,
provided that in all cases in which more than one Event of Default is
outstanding at one time, the applicable period for purposes of this clause (ii)
shall be the shortest period possible.
10A.9. If the Purchaser receives any payment or distribution of any
character in contravention of any of the terms hereof, it shall hold such
payment or distribution in trust for the benefit of, and shall promptly pay over
or deliver and transfer such payment or distribution to, the holders of the
Existing Senior Indebtedness.
10A.10. As used in this Article 10A, "Existing Senior Indebtedness" shall
mean any Indebtedness of the Company, other than the Preferred Stock, permitted
to be issued under Section 7.5, provided that in each case the terms of any such
Existing Senior Indebtedness do not prohibit (except on the terms set forth in
this Agreement) the payment of the Redemption Price of and dividends on the
Preferred Stock (including, without limitation, upon redemption by the Company).
"Existing Senior Indebtedness" shall expressly include the Indebtedness under
(A) the Existing Credit Facility, as such agreement may be amended from time to
time,
44
<PAGE>
except to the extent that the Indebtedness thereunder is increased in a manner
not permitted under Section 7.5, (B) the Senior Notes, as such agreement may be
amended from time to time, except to the extent that the Indebtedness thereunder
is increased in a manner not permitted under Section 7.5 and (C) the Existing
Subordinated Debt, as such agreement may be amended from time to time, except to
the extent that the Indebtedness thereunder is increased in a manner not
permitted under Section 7.5.
10A.11. The provisions of this Article 10A are for the purpose of defining
the relative rights of the holders of Existing Senior Indebtedness on the one
hand, and the Purchaser on the other hand, against the Company and its property,
and nothing herein shall impair, as between the Company and the Purchaser, the
obligation of the Company, which is unconditional and absolute, to pay to the
Purchaser hereof the Redemption Price and dividends hereon in accordance with
the terms and provisions hereof, nor shall anything herein prevent the Purchaser
from exercising all remedies otherwise permitted by applicable law hereunder
upon default under this Agreement, subject to the limitations set forth in
Section 10A.2, 10A.4 and 10A.8 and to the rights, if any, under this Article
10A, of holders of Existing Senior Indebtedness to receive cash, property, stock
or obligations otherwise payable or deliverable to the Purchaser.
10A.12. After the payment in full of all amounts payable with respect to
Existing Senior Indebtedness, the Purchaser shall be subrogated to the rights of
the holders of Existing Senior Indebtedness to receive payments or distributions
of cash, property, stock or obligations applicable to Existing Senior
Indebtedness until the Redemption Price of and dividends on the Preferred Stock
shall be paid in full, and, for the purposes of such subrogation, no payments or
distributions to the holders of Existing Senior Indebtedness of any cash,
property, stock, or obligations to which the Purchaser would be entitled except
for the provisions of this Article 10A, and no payment pursuant to the
provisions of this Article 10A to the holders of Existing Senior Indebtedness by
the Purchaser, shall, as between the Company, its creditors other than holders
of Existing Senior Indebtedness and the Purchaser, be deemed to be a payment by
the Company to or on account of Existing Senior Indebtedness. Nothing contained
in this Agreement shall prevent the Company from making payments at any time of
the Redemption Price of or dividends on the Preferred Stock except under the
conditions described in Section 10A.2, 10A.3 or 10A.4.
10A.13. The Parties agree that the foregoing provisions of this Article
10A shall be amended from time to time so that in no case shall the terms of the
subordination of the Purchaser's Preferred Stock to the Existing Subordinated
Debt or other Senior Indebtedness be less favorable to the Purchaser than the
terms of the subordination of the Existing Subordinated Debt to any other Senior
Indebtedness are to the holder of the Existing Subordinated Debt.
10B. SUBORDINATION TO PUBLIC NOTES
10B.1. Obligations Subordinate to Senior Indebtedness. The Company
covenants and agrees, and the Purchaser and any other holders of the Preferred
Stock by their acceptance
45
<PAGE>
thereof, likewise covenant and agree, that all Preferred Stock shall be issued
and all Preferred Stock Obligations incurred hereunder subject to the provisions
of this Article 10B; and each Purchaser and each Person holding any Preferred
Stock, whether upon original issue or upon transfer, assignment or exchange
thereof, accepts and agrees that the payment of all Preferred Stock Obligations
shall, to the extent and in the manner hereinafter set forth, be subordinated
and junior in right of payment to the prior payment in cash in full of all
Senior Indebtedness from time to time outstanding incurred in compliance with
Sections 7.5.1 and 7.8 hereof; that the subordination is for the benefit of, and
shall be enforceable directly by, each holder of such Senior Indebtedness or any
trustee acting on behalf of the holders of such Senior Indebtedness, and that
each holder of such Senior Indebtedness, whether now outstanding or hereafter
created, assumed or guaranteed, shall be deemed to have acquired its Senior
Indebtedness in reliance upon the covenants and provisions contained in this
Agreement.
10B.2. Payment Over of Proceeds Upon Dissolution. In the event of (i) any
insolvency or bankruptcy case or proceeding, or any receivership, liquidation,
reorganization, adjustment, composition or other similar case or proceeding in
connection therewith, relative to the Company or to its creditors, as such, or
to its assets, or (ii) any liquidation, dissolution or other winding up of the
Company whether voluntary or involuntary and whether or not involving insolvency
or bankruptcy, or (iii) any assignment for the benefit of creditors or any other
marshaling of assets and liabilities of the Company (collectively, "Bankruptcy
Events"), then and in any such event:
10B.2.1. All Obligations due or to become due under or with respect
to all Senior Indebtedness in such proceeding shall be paid in full in cash
before the holders of the Preferred Stock are entitled to receive any payment or
distribution, whether in cash, securities or other property, on account of the
Preferred Stock Obligations;
10B.2.2. Any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities, by set-off or
otherwise, to which the holders of the Preferred Stock would be entitled but for
the provisions of this Article 10B, including any such payment or distribution
which may be payable or deliverable by reason of the payment of any other
Indebtedness of the Company being subordinated to the payment of the Preferred
Stock Obligations (except for any such payment or distribution of (x) equity
securities of the Company and/or (y) unsecured debt securities of the Company
which are subordinated to at least the same extent as such Preferred Stock
Obligations to the payment of all Senior Indebtedness then outstanding and
which, in any case, do not mature or become subject to a mandatory redemption
obligation prior to the maturity of the Preferred Stock Obligations) shall be
paid by the liquidating trustee or agent or other Person making such payment or
distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee
or otherwise, directly to the holders of such Senior Indebtedness or their
representative or representatives or to the trustee or trustees under any
indenture under which any instruments evidencing any of such Senior Indebtedness
may have been issued, ratably according to the aggregate amounts remaining
unpaid on account of the principal of, and interest on, such Senior Indebtedness
held or represented by each, to the extent necessary to make payment in
46
<PAGE>
cash in full of all such Senior Indebtedness remaining unpaid, after giving
effect to any concurrent payment or distribution to the holders of such Senior
Indebtedness, and
10B.2.3. In the event that, notwithstanding the foregoing provisions
of this 10, the holders of the Preferred Stock shall have received any such
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, including any such payment or
distribution which may be payable or deliverable by reason of Indebtedness being
subordinated to the payment of the Preferred Stock Obligations (but excluding
any payment of the character described in the parenthetical clause in the
foregoing paragraph 10B.2.2) before all such Senior Indebtedness is paid in full
in cash, then and in such event such payment or distribution shall be paid over
or delivered forthwith to the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee, agent or other Person making payment or
distribution of assets of the Company for application to the payment of all such
Senior Indebtedness remaining unpaid, to the extent necessary to pay all such
Senior Indebtedness in full in cash, after giving effect to any concurrent
payment or distribution to or for the holders of such Senior Indebtedness.
10B.2.4. The holders of Senior Indebtedness shall have the right to
request the holders of the Preferred Stock to file and, in the event a Preferred
Holder fails to do so within 10 days prior to any deadline fixed in such
proceeding for the filing of such a claim, is hereby authorized to file a proof
of claim in the form required in any Bankruptcy Event for and on behalf of that
holder to accept and receive any payment or distribution which may be payable or
deliverable at any time upon or in respect of the Preferred Stock Obligations
(other than any payment or distribution which the Preferred Holders are entitled
to retain pursuant to the parenthetical clause in the foregoing paragraph
10B.2.3) in an amount not in excess of the Senior Indebtedness then outstanding
and to take such other action as may be reasonably necessary to effectuate the
foregoing. Each Preferred Holder shall provide to the holders of the Senior
Indebtedness all information and documents reasonably necessary to present
claims or seek enforcement as aforesaid.
10B.2.5. If, notwithstanding the provisions of this Agreement, there
shall occur any consolidation of the Company with, or any merger of the Company
into, another corporation or the liquidation or dissolution of the Company
following any conveyance, transfer or lease of its properties and assets
substantially as an entirety to another corporation, such consolidation, merger
or liquidation, to the extent permitted under the terms of any outstanding
Senior Indebtedness, or permitted by the holders thereof, shall not be deemed a
dissolution, winding up, liquidation, reorganization, assignment for the benefit
of creditors or marshaling of assets and liabilities of the Company for the
purposes of this Article 10B.
10B.3. No Payment in Certain Circumstances.
10B.3.1. In the event that (i) the Company shall fail to
pay when due, upon acceleration or otherwise, any principal, interest, fees or
reimbursement obligations under letters of credit with respect to Senior
Indebtedness (a "Payment Default") which Payment Default shall not have been
cured or waived, or (ii) the Company shall fail to comply
47
<PAGE>
with any of the other covenants contained in the Senior Credit Documents or the
Public Securities Indenture, which default shall not have been cured or waived
(a "Covenant Default"), and the Company receives written notice of such Covenant
Default from a holder of the Senior Indebtedness or any trustee acting for the
holders of such Senior Indebtedness (a "Blockage Notice"), then no payment shall
be made by, or on behalf of, the Company on account of the Preferred Stock
Obligations (x) in the case of any Payment Default, unless and until such Senior
Indebtedness shall have been paid in full in cash or until such Payment Default
shall have been cured or waived, or (y) in the case of any such Covenant
Default, from the date the Company shall have received such Blockage Notice
until the earlier of (1) 179 days after such date and (2) the date, if any, on
which the Senior Indebtedness to which such Covenant Default relates is paid in
full in cash or such Covenant Default is waived by the required percentage of
holders of such Senior Indebtedness or otherwise cured (a "Blockage Period");
and, upon the termination of such Blockage Period, any amounts which have become
due and payable under the Preferred Stock or under this Agreement with respect
to the Preferred Stock Obligations before or during such Blockage Period
(including, if applicable, interest at a default rate from and after the date on
which any payment of principal or interest would have been payable if not for
operation of this 10) shall be immediately due and payable (subject to the
provisions of this 10); provided, that (A) only one Blockage Notice may be given
in any 360-day period, and (B) no Covenant Default that previously served as the
basis for a Blockage Notice or that was in existence during a prior Blockage
Period may serve as the basis for a Blockage Notice unless such Covenant Default
was subsequently cured for a period of at least 90 consecutive days (it being
acknowledged that any subsequent action, or any breach of any financial
covenants for a period commencing after the date of commencement of such
Blockage Period that, in either case, would give rise to any event of default
pursuant to any provisions under which an event of default previously existed or
was continuing shall constitute a new event of default for this purpose).
10B.3.2. In the event that any payment shall be received by any
Preferred Holder which is prohibited by the foregoing provisions of this Section
10B.3, then and in such event such payment shall be held in trust by each
Preferred Holder for the benefit of the holders of Senior Indebtedness. The
provisions of this Section 13.3 shall not apply to any payment with respect to
which Section 10B.2 would be applicable.
10B.4. Payments Otherwise Permitted. Nothing contained in this Section 10B
or elsewhere in this Agreement or in the Certificate of Designations shall
prevent the Company, at any time except during a Bankruptcy Event as set forth
in Section 10B.2 or under the conditions described in Section 10B.3, from making
payments at any time of the Redemption Price of and dividends on the Preferred
Stock or any other amount payable by the Company under the Preferred Stock or
this Agreement with respect to the Preferred Stock Obligations.
10B.5. Subrogation to Rights of Holders of Senior Indebtedness. Subject to
the payment in full in cash of all Senior Indebtedness, the Preferred Holders
shall be subrogated to the rights of the holders of such Senior Indebtedness to
receive payments and distributions of cash, property and securities applicable
to such Senior Indebtedness until the principal of and interest on the Preferred
Stock shall be paid in full in cash. For purposes of such subrogation,
48
<PAGE>
no payments or distributions to the holders of such Senior Indebtedness of any
cash, property or securities to which the Preferred Holders would be entitled
except for the provisions of this Article 10B, and no payments pursuant to the
provisions of this Article 10B to the holders of such Senior Indebtedness by the
Preferred Holders shall, as among the Company, its creditors (other than holders
of such Senior Indebtedness) and the Preferred Holders be deemed to be a payment
or distribution by the Company to or on account of such Senior Indebtedness.
10B.6. Provisions Solely to Define Relative Rights. The provisions of
this Article 10B are and are intended solely for the purpose of defining the
relative rights of the holders of the Preferred Stock on the one hand and the
holders of Senior Indebtedness on the other hand. Nothing contained in this
Article 10B or elsewhere in this Agreement or in the Preferred Stock is intended
to or shall (i) impair, as among the Company, its creditors (other than holders
of Senior Indebtedness) and the Preferred Holders, the obligation of the
Company, which is absolute and unconditional, to pay to the Preferred Holders
the Redemption Price of, and dividends on, and any other amount payable by the
Company under, the Preferred Stock or this Agreement as and when the same shall
become due and payable in accordance with its terms; or (ii) affect the relative
rights against the Company of the Preferred Holders and its creditors (other
than the holders of Senior Indebtedness); or (iii) prevent the Preferred Holders
from accelerating the redemption of the Preferred Stock and exercising all other
remedies otherwise permitted by applicable law upon default under this
Agreement, and to the rights, if any, under this Article 10B of the holders of
Senior Indebtedness with respect to the turnover of assets (whether in the form
of cash, property or securities) received upon the exercise of such remedy.
10B.7. Effect of Failure to Pay Preferred Stock Obligations. The fact
that failure to make any payment on account of the Preferred Stock Obligations
is by reason of the operation of any provision of this Article 10B shall not be
construed as preventing the occurrence of an Event of Default under this
Agreement.
10B.8. No Waiver of Subordination Provisions. No right of any present or
future holder of any Senior Indebtedness to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of the Company or by any act or failure to act, in
good faith, by any such holder, or by any noncompliance by the Company with the
terms, provisions and covenants of this Agreement, regardless of any knowledge
thereof any such holder may have or be otherwise charged with. Without in any
way limiting the generality of the foregoing, the holders of Senior Indebtedness
may at any time and from time to time, without the consent of or notice to the
Purchaser, without incurring responsibility to the Preferred Holders and without
impairing or releasing the subordination provided in this Article 10B or the
obligations hereunder of the Preferred Holders to the holders of Senior
Indebtedness, do any one or more of the following: (i) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, Senior
Indebtedness or any instrument evidencing the same or any agreement under which
Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise
deal with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (iii) release any Person liable in any manner for the collection
of Senior Indebtedness; and (iv) exercise or
49
<PAGE>
refrain from exercising or waiving any rights, powers or remedies against the
Company or any other Person.
10B.9. Reliance on Judicial Order or Certificate of Liquidating Agent.
Upon any payment or distribution of assets of the Company referred to in this
Article 10B, the Preferred Holders shall be entitled to rely upon any order or
decree entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit
of creditors, agent or other Person making such payment or distribution,
delivered to the Preferred Holders for the purpose of ascertaining the Persons
entitled to participate in such payment or distribution, the holders of Senior
Indebtedness and other Indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article 10B.
10B.10. Reinstatement. The provisions of this Article 10B shall continue
to be effective or be reinstated, as the case may be, if at any time any payment
of any of the Senior Indebtedness is rescinded or must otherwise be returned by
any holder of Senior Indebtedness upon the occurrence of a Bankruptcy Event or
otherwise, all as though such payment had not been made.
10B.11. Amendment. The subordination provisions of this Article 10B are
solely for the benefit of the holders of the Senior Indebtedness and may not be
rescinded, canceled, amended or modified with respect to any class or category
of Senior Indebtedness without the prior written consent of the holders of at
least a majority in principal amount of such class or category of Senior
Indebtedness to be affected by such rescission, cancellation, amendment or
modification.
10B.12. Remedies. The holders of Senior Indebtedness shall be entitled to
enforce their rights under this Article 10B specifically, to recover damages by
reason of any breach of any provision of this Article 10B and to exercise all
other rights existing in their favor. The Preferred Holders acknowledge and
agree that money damages may not be an adequate remedy for any breach of the
provisions of this Article 10B and that holders of Senior Indebtedness may apply
to any court of law or equity of competent jurisdiction for specific performance
and/or injunctive relief (without posting bond or other security) in order to
enforce or prevent any violation of the provisions of this Article 10B.
11. RESTRICTIONS ON TRANSFER; LEGENDS.
11.1. Assignments of Purchaser Securities.
11.1.1. The Purchaser shall have the right at any time from and after
the effectiveness of the registration required by the Registration Statement, to
sell, assign, transfer or negotiate all or any part of the Purchaser Securities
to one or more Persons. In the case of any such sale, assignment, transfer or
negotiation, the assignee, transferee or recipient shall have, to the extent of
such sale, assignment, transfer or negotiation, the same rights, benefits
50
<PAGE>
and obligations as it would if it were a Purchaser with respect to such
Purchaser Securities. Notwithstanding the foregoing, the Purchaser shall not be
permitted to transfer any Purchaser Securities to any "competitor" of the
Company, as listed on Schedule 11.1.1 hereto (except for transfer of the
Warrants and Preferred Stock following the registration of the Purchaser
Securities pursuant to the Securities Act).
11.1.2. The Company shall keep at its principal office a register in
which the Company shall provide for the registration of the Purchaser Securities
and for the transfer of the same. Upon surrender for registration of transfer of
any such Purchaser Security at the principal office of the Company, together
with payment of any and all applicable transfer taxes, the Company shall, at its
expense, promptly execute and deliver one or more Warrants or certificates
evidencing Preferred Stock, as applicable, of like tenor and of a like aggregate
number or principal amount, registered in the name of such transferee or
transferees.
11.1.3. In connection with any sales, assignments or transfers of any
Purchaser Securities, the transferor shall give notice to the Company of the
identity of such parties and obtain agreements from the transferees that all
nonpublic information given to such parties pursuant to this Agreement will be
held in strict confidence pursuant to a confidentiality agreement reasonably
satisfactory to the Company.
11.2. Restrictive Securities Legend.
11.2.1. The Preferred Stock. Each Certificate representing shares of
Preferred Stock shall bear a legend in substantially the following form:
"THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
PRIVATE PLACEMENT, WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT") OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT
BE SOLD, ASSIGNED, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT COVERING THE TRANSFER OR AN
OPINION OF COUNSEL ACCEPTABLE TO THE ISSUER THAT SUCH REGISTRATION UNDER
THE ACT IS NOT REQUIRED."
11.2.2. The Conversion Shares. Each certificate representing
Conversion Shares shall initially bear a legend in substantially the following
form:
"THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
PRIVATE PLACEMENT, WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT") OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT
BE SOLD, ASSIGNED, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION UNDER THE ACT COVERING THE TRANSFER OR A LEGAL
OPINION OF COUNSEL
51
<PAGE>
ACCEPTABLE TO THE ISSUER THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED."
11.2.3. The Warrants. Each Warrant shall initially bear a legend in
substantially the following form:
"THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
("ACT"), AND APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE TRANSFERRED,
SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE SUCH A REGISTRATION IS IN EFFECT
OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUCH STATE
SECURITIES LAWS."
11.3. Termination of Restrictions. The restrictions imposed by Section
11.2 hereof upon the transferability of Purchaser Securities shall cease and
terminate as to any particular Purchaser Securities (i) when, in the written
opinion of Gunderson Dettmer Stough or other counsel reasonably acceptable to
the Company and addressed to the Company, such restrictions are no longer
required in order to assure compliance with the Securities Act or (ii) when such
Purchaser Securities shall have been registered under the Securities Act or
transferred pursuant to Rule 144 thereunder. Whenever such restrictions shall
cease and terminate as to any Purchaser Securities or such Purchaser Securities
shall be transferable under paragraph (k) of Rule 144, the holder thereof shall
be entitled to receive from the Company, without expense, new certificates not
bearing the legend set forth in Section 11.2 hereof.
11.4. Preferred Stock Legend relating to Subordination. Each Certificate
representing shares of Preferred Stock shall bear a legend in substantially the
following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBORDINATED TO THE
PRIOR PAYMENT AND SATISFACTION IN CASH OF ALL SENIOR INDEBTEDNESS, AS
DEFINED IN THE SECURITIES PURCHASE AGREEMENT DATED AS OF SEPTEMBER ___,
1997 AS THE SAME MAY BE AMENDED, MODIFIED, RESTATED OR SUPPLEMENTED FROM
TIME TO TIME (THE "SECURITIES PURCHASE AGREEMENT") TO THE EXTENT, AND IN
THE MANNER PROVIDED IN THE SECURITIES PURCHASE AGREEMENT.
12. MISCELLANEOUS
12.1. Expenses. Whether or not the transactions contemplated hereby shall
be consummated, the Company agrees to promptly pay (i) all the actual and
reasonable costs and expenses of preparation of this Agreement and related
documents and all costs of furnishing all opinions by counsel for the Company
(including, without limitation, any opinions requested by the Purchaser as to
any legal matters arising hereunder), and of the Company's performance of
52
<PAGE>
and compliance with all agreements and conditions contained herein on its part
to be performed or complied with; (ii) all actual, reasonable out-of-pocket and
third party expenses of the Purchaser in connection with the negotiation,
preparation, and execution of the Preferred Stock Documents and otherwise in
connection with the transactions contemplated hereunder, including without
limitation the fees and disbursements of its lawyers and accountants; provided,
however, that the aggregate amount of such fees and expenses shall not exceed
$250,000, and (iii) after the occurrence of an Event of Default, all costs and
expenses (the Purchaser and all Preferred Holders) incurred by the Purchaser or
Preferred Holders in enforcing any obligations of or in collecting any payments
due hereunder or under the Certificate of Designations by reason of such Event
of Default or in connection with any refinancing or restructuring of the credit
arrangements provided under this Agreement in the nature of a workout, or any
insolvency or bankruptcy proceedings.
12.2. Indemnity. In addition to the payment of expenses pursuant to
Section 12.1, whether or not the transactions contemplated hereby shall be
consummated, the Company (as "Indemnitor") agrees to indemnify, pay and hold the
Purchaser, and the officers, directors, employees, agents, and Affiliates of the
Purchaser (collectively called the "Indemnitees") harmless from and against any
and all other liabilities, costs, expenses liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims and disbursements of any
kind or nature whatsoever (including, without limitation, (i) any of the
foregoing that result from any lawsuits or other proceedings brought by third
parties with whom the Company has existing or future contractual or other
business relationships and (ii) the reasonable fees and disbursements of one
counsel for such Indemnitees in connection with any investigative,
administrative or judicial proceeding commenced or threatened, whether or not
such Indemnitee shall be designated a party thereto), which may be imposed on,
incurred by, or asserted against that Indemnitee, in any manner relating to or
arising out of this Agreement, the Purchaser Securities or the other Preferred
Stock Documents related to the transactions contemplated hereunder, the
Purchaser's agreement to purchase the Purchaser Securities or the use or
intended use of the proceeds of any of the proceeds thereof to the Company (the
"Indemnified Liabilities"); provided, that the Indemnitor shall not have any
obligation to an Indemnitee hereunder with respect to an Indemnified Liability
to the extent that such Indemnified Liability arises from the gross negligence
or willful misconduct of that Indemnitee or out of a claim brought by the
Company against such Indemnitee. Each Indemnitee shall give the Indemnitor
prompt written notice of any claim that might give rise to Indemnified
Liabilities setting forth a description of those elements of such claim of which
such Indemnitee has knowledge; provided, that any failure to give such notice
shall not affect the obligations of any Indemnitor unless (and then solely to
the extent) such Indemnitor is materially prejudiced thereby. The Indemnitor
shall have the right at any time during which such claim is pending to select
counsel to defend and control the defense thereof and settle any claims for
which they are responsible for indemnification hereunder (provided that no
Indemnitor will settle any such claim without the appropriate Indemnitee's prior
written consent, which consent shall not be unreasonably withheld, if the
settlement does not contain an unconditional release of the appropriate
Indemnitee from all claims arising out of or in any way relating to the
circumstances involving such claim) so long as in any such event the Indemnitor
shall have stated in a writing delivered to the Indemnitee that, as between the
Indemnitor and the
53
<PAGE>
Indemnitee, the Indemnitor is responsible to the Indemnitee with respect to such
claim to the extent and subject to the limitations set forth herein; provided,
that the Indemnitor shall not be entitled to control the defense of any claim in
the event that in the reasonable opinion of counsel for the Indemnitee there are
one or more material defenses available to the Indemnitee which are not
available to the Indemnitor; provided further, that with respect to any claim as
to which the Indemnitee is controlling the defense, the Indemnitor will not be
liable to any Indemnitee for any settlement of any claim pursuant to this
Section 12.2 that is effected without its prior written consent. To the extent
that the undertaking to indemnify, pay and hold harmless set forth in the
preceding sentence may be unenforceable because it is violative of any law or
public policy, the Company shall contribute the maximum portion which it is
permitted to pay and satisfy under applicable law, to the payment and
satisfaction of all Indemnified Liabilities incurred by the Indemnities or any
of them.
12.3. Amendments and Waivers. No amendment, modification, termination or
waiver of any provision of this Agreement, shall in any event be effective
without the written consent of the Required Preferred Holders and the Company;
provided that no amendment, modification, waiver or consent shall, unless in
writing and signed by each Preferred Holder, do any of the following: (a)
reduce the stated value, or dividends on the Preferred Stock or any fees,
premiums or other amounts payable hereunder; or (b) postpone any date fixed for
any payment of principal of, or premium or interest on, the Preferred Stock or
any fees or other amounts payable hereunder (other than as a result of waiving a
Default or Event of Default giving rise to a right of acceleration hereunder),
or (c) amend this Section 12.3. Any waiver or consent shall be effective only
in the specific instance and for the specific purpose for which it was given.
No notice to or demand on the Company in any case shall entitle the Company to
any further notice or demand in similar or other circumstances. Any amendment,
modification, termination, waiver or consent effected in accordance with this
Section 12.3 shall be binding upon each holder of the Purchaser Securities at
the time outstanding and each future holder thereof.
12.4. Independence of Covenants. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or be otherwise within the limitation of, another covenant shall not avoid
the occurrence of an Event of Default or Default if such action is taken or
condition exists.
12.5. Notices. All notices, demands or other communications to be given
or delivered under or by reason of the provisions of this Agreement shall be in
writing and delivered personally, mailed by certified or registered mail, return
receipt requested and postage prepaid, sent via a nationally recognized
overnight courier, or via facsimile. Such notices, demands and other
communications will be sent to the address indicated below:
54
<PAGE>
If to the Company:
System Software Associates, Inc.
500 West Madison, 32nd Floor
Chicago, IL 60661
Attention: Roger E. Covey
Telecopier No.: (312) 474-7500
With a copy to:
Sachnoff & Weaver, Ltd.
30 South Wacker Drive
Chicago, IL 60606
Attention: William N. Weaver, Jr., Esq.
Telecopier No.: (312) 207-6400
If to the Purchaser:
Hambrecht & Quist, LLC
One Bush Street
San Francisco, CA 94104
Attn: Norman D. Colbert
With a copy to:
Gunderson Dettmer Stough
115 Constitution Drive
Menlo Park, CA 94025
Attn: Brooks Stough
or such other address or to the attention of such other Person as the recipient
party shall have specified by prior written notice to the sending party;
provided that the failure to deliver copies of notices as indicated above shall
not affect the validity of any notice. Any such communication shall be deemed to
have been received (i) when delivered, if personally delivered, or sent by
nationally recognized overnight courier or sent via facsimile or (ii) on the
third Business Day following the date on which the piece of mail containing such
communication is posted if sent by certified or registered mail.
12.6. Survival of Warranties and Certain Agreements.
12.6.1. All representations and warranties made herein shall survive
the execution and delivery of this Agreement, the sale and delivery of the
Purchaser Securities hereunder, including the execution and delivery of the
Preferred Stock, and shall continue (but, with respect to representations and
warranties, such representations and warranties are made only as of the Closing
Date) until thirty (30) days after the release of the Company's second set of
audited annual financial statements following the Closing Date.
55
<PAGE>
12.6.2. All covenants and agreements made herein shall survive the
execution and delivery of this Agreement, the sale and delivery of the Purchaser
Securities hereunder, including the execution and delivery of the Preferred
Stock, and shall continue until repayment of the Preferred Stock and the
Preferred Stock Obligations in full.
12.6.3. Notwithstanding anything in this Agreement or implied by law
to the contrary, the agreements of the Company set forth in Sections 12.1 and
12.2 shall survive, the redemption, cancellation or exchange of the Purchaser
Securities and the termination of this Agreement.
12.7. Failure or Indulgence Not Waiver Remedies Cumulative. No failure or
delay on the part of any Purchaser in the exercise of any power, right or
privilege hereunder or under any Purchaser Security shall impair such power,
right or privilege or be construed to be a waiver of any default or acquiescence
therein, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privilege. All rights and remedies existing under this Agreement or
the Purchaser Securities are cumulative to and not exclusive of, any rights or
remedies otherwise available.
12.8. Severability. In case any provision in this Agreement or the
Preferred Stock Documents shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
12.9. Headings. Article, section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.
12.10. Applicable Law. This agreement shall be governed by, and shall be
construed and enforced in accordance with, the laws of the State of Delaware
without regard to the principles of conflicts of laws.
12.11. Successors and Assigns; Subsequent Holders. This Agreement shall
be binding upon the parties hereto and their respective successors and permitted
assigns and shall inure to the benefit of the parties hereto and the successors
and assigns of the Purchaser. The terms and provisions of this Agreement and all
certificates delivered pursuant hereto shall inure to the benefit of any
assignee or transferee of the Purchaser Securities, to the extent the assignment
is permitted hereunder, and in the event of such transfer or assignment, the
rights and privileges herein conferred upon the Purchaser shall automatically
extend to and be vested in such transferee or assignee, all subject to the terms
and conditions hereof. Neither the shares of Series A Preferred Stock nor the
Warrants are transferable until September 1, 1998. The Purchaser's rights or any
interest therein or hereunder may not be assigned without the written consent of
the Required Preferred Holders.
12.12. Consent to Jurisdiction. Each of the parties agrees that all
actions, suits or proceedings arising out of or based upon this Agreement or the
subject matter hereof shall be brought and maintained exclusively in the federal
and state courts of the State of Delaware.
56
<PAGE>
Each of the parties hereto by execution hereof (i) hereby irrevocably submits to
the jurisdiction of the federal and state courts in the State of Delaware for
the purpose of any action, suit or proceeding arising out of or based upon this
Agreement or the subject matter hereof and (ii) hereby waives to the extent not
prohibited by applicable law, and agrees not to assert, by way of motion, as a
defense or otherwise, in any such action, suit or proceeding, any claim that he
or it is not subject personally to the jurisdiction of the above-named courts,
that he or it is immune from extraterritorial injunctive relief or other
injunctive relief, that his or its property is exempt or immune from attachment
or execution, that any such action, suit or proceeding may not be brought or
maintained in one of the above-named courts, that any such action, suit or
proceeding brought or maintained in one of the above-named courts should be
dismissed on grounds of forum non convenient, should be transferred to any court
other than one of the above-named courts, should be stayed by virtue of the
pendency of any other action, suit or proceeding in any court other than one of
the above-named courts, or that this Agreement or the subject matter hereof may
not be enforced in or by any of the above-named courts. Each of the parties
hereto hereby consents to service of process in any such suit, action or
proceeding in any manner permitted by the laws of the State of Delaware, agrees
that service of process by registered or certified mail, return receipt
requested, at the address specified in or pursuant to Section 12.5 is reasonably
calculated to give actual notice and waives and agrees not to assert by way of
motion, as a defense or otherwise, in any such action, suit or proceeding any
claim that service of process made in accordance with Section 12.5 does not
constitute good and sufficient service of process. The provisions of this
Section 12.12 shall not restrict the ability of any party to enforce in any
court any judgment obtained in a federal or state court of the State of
Delaware.
12.13. Waiver of Jury Trial. The Company hereby waives, to the full
extent permitted by applicable law, trial by jury in any litigation in any court
with respect to, in connection with, or arising out of this agreement or any
other document or the validity, protection, interpretation, collection or
enforcement thereof. Notwithstanding anything contained in this Agreement to the
contrary, no claim may be made by the Company against the Purchaser for any lost
profits or any special, indirect or consequential damages in respect of any
breach or wrongful conduct (other than willful misconduct constituting actual
fraud) in connection with, arising out of or in any way related to the
transactions contemplated hereunder or under the other Preferred Stock
Documents, or any act, omission or event occurring in connection therewith; the
Company hereby waives, releases and agrees not to sue upon any such claim for
any such damages. The Company agrees that this Section 12.13 is a specific and
material aspect of this Agreement and acknowledges that the Purchaser would not
extend to the Company any monies hereunder if this Section 12.13 were not part
of this Agreement.
12.14. Counterparts; Effectiveness. This Agreement and any amendments,
waivers, consents or supplements may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument. This Agreement shall
become effective upon the execution of a counterpart hereof by each of the
parties hereto, and written or telephonic notification of such execution and
authorization of delivery thereof has been received by the Company and the
Purchaser.
57
<PAGE>
12.15 Entirety. This Agreement and the other Preferred Stock Documents
embody the entire agreement among the parties and supersede all prior agreements
and understandings, if any, relating to the subject matter hereof and thereof.
* * * *
58
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by the respective duly authorized officers of the undersigned and by
the undersigned as of the date first written above.
SYSTEM SOFTWARE ASSOCIATES, INC.
By:_______________________________
Name:
Title:
H&Q SSA INVESTORS, L.P.
By:_______________________________
Name:
Title
<PAGE>
EXHIBIT 4.4
This Warrant and any shares acquired upon the exercise of this Warrant have
not been registered under the Securities Act of 1933, as amended ("Act")
and applicable state securities laws, and may not be transferred, sold or
otherwise disposed of except while such a registration is in effect or
pursuant to an exemption from registration under the Act and such state
securities laws.
This Warrant was originally issued pursuant to the Amended and Restated
Securities Purchase Agreement dated as of September __, 1997 between the
Company and the investors named therein, as in effect from time to time and
the transfer of this Warrant is subject to the restrictions set forth in
such Agreement.
The shares issuable upon exercise of this Warrant are subject to the
provisions of an Amended and Restated Registration Rights Agreement dated
as of September __, 1997 among the Company and the investors named therein,
as in effect from time to time, a copy of which is on file at the offices
of the Company.
SYSTEM SOFTWARE ASSOCIATES, INC.
Common Stock Purchase Warrant
Chicago, Illinois
No. 1. September __, 1997
System Software Associates, Inc., a Delaware corporation (the "Company"),
for value received, hereby certifies that H&Q SSA Investors, L.P., or registered
assigns, is entitled to purchase from the Company: Six hundred thousand
(600,000) duly authorized, validly issued, fully paid and nonassessable shares
of Common Stock, par value $0.0033 per share (the "Common Stock"), of the
Company at a purchase price per share equal to the Warrant Price (such number of
shares and Warrant Price as adjusted from time to time as provided herein)
exercisable at any time or from time to time prior to September __, 2007 (the
"Warrant Expiration Date"), all subject to the terms, conditions and adjustments
set forth below in this Warrant ("Warrant").
This Warrant is one of the Warrants (the "Warrants", such term to include
any such warrants issued in substitution therefor) originally issued in
connection with the execution and delivery of the Amended and Restated
Securities Purchase Agreement dated as of September __, 1997 (as in effect on
the date of this Warrant, the "Purchase Agreement") among the Company and the
investor named therein (the "Purchaser"). Certain capitalized terms used in
this Warrant are defined in Section 14 hereof.
<PAGE>
1. EXERCISE OR CASHLESS EXERCISE OF WARRANT.
1.1. Manner of Exercise or Cashless Exercise; Payment.
1.1.1 Exercise. This Warrant may be exercised by the holder hereof,
in whole or in part during normal business hours on any Business Day
on or prior to the Warrant Expiration Date, by surrender of this
Warrant to the Company at its office maintained pursuant to Section
13.2(a) hereof, accompanied by a subscription in substantially the
form attached to this Warrant as Exhibit A (or a reasonable facsimile
thereof) duly executed by such holder and accompanied by payment, (i)
in cash by wire transfer of immediately available funds or by
certified or official bank check payable to the order of the Company,
(ii) by cancellation of indebtedness owed to the holder hereof or
(iii) by any combination of such methods (provided that at least the
par value of the shares of Common Stock issuable upon exercise shall
have been paid in cash), in each case in the amount obtained by
multiplying (a) the number of shares of Common Stock (without giving
effect to any adjustment thereof) designated in such subscription by
(b) the Warrant Price, and such holder shall thereupon be entitled to
receive the number of duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock (or Other Securities) designated
in such subscription as provided in Sections 1 through 4 hereof.
1.1.2 Cashless Exercise. This Warrant may also be exercised by the
holder hereof, in whole or in part, to acquire shares of Common Stock,
during normal business hours on any Business Day on or prior to the
Warrant Expiration Date, by surrender of this Warrant to the Company
at its office maintained pursuant to Section 13.2(a) hereof,
accompanied by a cashless exercise notice in substantially the form
attached as Exhibit B to this Warrant (or a reasonable facsimile
thereof) duly executed by such holder, and such holder shall thereupon
be entitled to receive a number of duly authorized, validly issued,
fully paid and nonassessable shares of Common Stock (or Other
Securities) equal to:
(i) an amount equal to:
(a) an amount equal to (x) the number of shares of Common
Stock (or Other Securities) determined as provided in
Sections 1 through 4 hereof which such holder would be
entitled to receive upon exercise of this Warrant for the
number of shares of Common Stock designated in such cashless
exercise notice multiplied by (y) the Current Market Price
of each such share of Common Stock (or such Other
Securities) so receivable upon such exercise
2
<PAGE>
minus
(b) an amount equal to (x) the number of shares of Common
Stock (without giving effect to any adjustment thereof)
designated in such cashless exercise notice multiplied by
(y) the Warrant Price
divided by
(ii) such Current Market Price of each such share of Common
Stock (or Other Securities).
For all purposes of this Warrant (other than this Section 1.1), any
reference herein to the exercise of this Warrant shall be deemed to include
a reference to the cashless exercise of this Warrant into Common Stock (or
Other Securities) in accordance with the terms of this Section 1.1.2.
1.2. When Exercise Effective. Each exercise of this Warrant shall be
deemed to have been effected immediately prior to the close of business on
the Business Day on which this Warrant shall have been surrendered to the
Company as provided in Section 1.1 hereof (and in the case of exercise
pursuant to Section 1.1.1, provided that the holder has paid the
consideration required thereby), and at such time the Person or Persons in
whose name or names any certificate or certificates for shares of Common
Stock (or Other Securities) shall be issuable upon such exercise as
provided in Section 1.3 hereof shall be deemed to have become the holder or
holders of record thereof.
1.3. Delivery of Stock Certificates, etc. As soon as practicable after
each exercise of this Warrant, in whole or in part, and in any event within
five Business Days thereafter, the Company at its expense (including the
payment by it of any applicable issue taxes) will direct the Company's
transfer agent to issue and deliver in the name of the holder hereof or,
subject to Section 10 hereof, as such holder (upon payment by such holder
of any applicable transfer taxes) may direct:
(a) a certificate or certificates for the number of duly
authorized, validly issued, fully paid and nonassessable
shares of Common Stock (or Other Securities) to which such
holder shall be entitled upon such exercise plus, in lieu of
any fractional share to which such holder would otherwise be
entitled, cash in an amount equal to the same fraction of
the Market Price per share on the Business Day next
preceding the date of such exercise; and
(b) in case such exercise is in part only, a new Warrant or
Warrants of like tenor, dated the date hereof and calling in
the aggregate on the face or faces thereof for the number of
shares of Common Stock equal (without giving effect to any
adjustment thereof) to the number of such shares called for
on the face of this
3
<PAGE>
Warrant minus the number of such shares designated by the
holder upon such exercise as provided in Section 1.1 hereof.
2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES.
2.1. General; Number of Shares; Warrant Price. The number of and kind of
securities purchasable upon exercise of this Warrant and the Exercise Price
shall be subject to adjustment from time to time as provided in this
Section 2. The number of shares of Common Stock which the holder of this
Warrant shall be entitled to receive upon each exercise hereof shall be
determined by multiplying the number of shares of Common Stock which would
otherwise (but for the provisions of this Section 2) be issuable upon such
exercise, as designated by the holder hereof pursuant to Section 1.1
hereof, by the fraction of which (a) the numerator is the Initial Warrant
Price and (b) the denominator is the Warrant Price in effect on the date of
such exercise. The "Warrant Price" shall initially be the Initial Warrant
Price, shall be adjusted and readjusted from time to time as provided in
this Section 2 and, as so adjusted or readjusted, shall remain in effect
until a further adjustment or readjustment thereof is required by this
Section 2.
2.2. Adjustment of Warrant Price.
2.2.1 Issuance of Additional Shares of Common Stock. Subject to
Section 2.6, in case the Company at any time or from time to time
after the date hereof shall issue or sell Additional Shares of Common
Stock (including Additional Shares of Common Stock deemed to be issued
pursuant to Section 2.3 or 2.4 hereof) without consideration or for a
consideration per share less than the Warrant Price in effect
immediately prior to such issue or sale, then, and in each such case,
subject to Section 2.5 hereof, such Warrant Price shall be reduced,
concurrently with such issue or sale, to a price (calculated to the
nearest .001 of a cent) determined by multiplying such Warrant Price
by a fraction:
(a) the numerator of which shall be (i) the number of
shares of Common Stock outstanding immediately prior to such
issue or sale plus (ii) the Common Stock issuable upon
exercise of the Warrants plus (iii) the number of shares of
Common Stock which the aggregate consideration received by
the Company for the total number of such Additional Shares
of Common Stock so issued or sold would purchase at the
Warrant Price; and
(b) the denominator of which shall be the number of shares
of Common Stock outstanding immediately after such issue or
sale plus the Common Stock issuable upon exercise of the
Warrants.
No adjustment of the Warrant Price pursuant to this Section 2.2 shall
have the effect of increasing the Warrant Price above the Warrant Price in
effect immediately prior to such adjustment.
4
<PAGE>
2.2.2 Dividends and Distributions. In case the Company at any time
or from time to time after the date hereof shall declare, order, pay
or make a dividend or other distribution (including without limitation
any distribution of cash, other or additional stock or other
securities or property or Options, by way of dividend or spin-off,
reclassification, recapitalization or similar corporate rearrangement
or otherwise) on the Common Stock, other than a dividend payable in
Additional Shares of Common Stock, then, and in each such case,
subject to Section 2.6 hereof, the Warrant Price in effect immediately
prior to the close of business on the record date fixed for the
determination of holders of any class of securities entitled to
receive such dividend or distribution shall be reduced, effective as
of the close of business on such record date, to a price (calculated
to the nearest .001 of a cent) determined by multiplying such Warrant
Price by a fraction, the numerator of which shall be (x) the Current
Market Price in effect on such record date or, if the Common Stock
trades on an ex-dividend basis, on the date prior to the commencement
of ex-dividend trading, less the amount of such dividend or
distribution (as determined in good faith by the Board of Directors of
the Company) applicable to one share of Common Stock, and the
denominator of which shall be (y) such Current Market Price.
2.3. Treatment of Options and Convertible Securities. Subject to Section
2.6, in case the Company at any time or from time to time after the date
hereof shall issue, sell, grant or assume, or shall fix a record date for
the determination of holders of any class of securities entitled to
receive, any Options or Convertible Securities, then, and in each such
case, the maximum number of Additional Shares of Common Stock (as set forth
in the instrument relating thereto, without regard to any provisions
contained therein for a subsequent adjustment of such number the purpose of
which is to protect against dilution) at any time issuable upon the
exercise of such Options or, in the case of Convertible Securities and
Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued
as of the time of such issue, sale, grant or assumption or, in case such a
record date shall have been fixed, as of the close of business on such
record date (or, if the Common Stock trades on an ex-dividend basis, on the
date prior to the commencement of ex-dividend trading); provided, however,
that such Additional Shares of Common Stock shall not be deemed to have
been issued unless the consideration per share of such shares would be less
than the Warrant Price in effect on the date of and immediately prior to
such issue, sale, grant or assumption or immediately prior to the close of
business on such record date (or, if the Common Stock trades on an ex-
dividend basis, on the date prior to the commencement of ex-dividend
trading), as the case may be; and provided, further, that in any such case
in which Additional Shares of Common Stock are deemed to be issued:
(a) no further adjustment of the Warrant Price shall be
made upon the exercise of such Options or the conversion or
exchange of such Convertible Securities and the consequent
issue or sale of Convertible Securities or shares of Common
Stock;
5
<PAGE>
(b) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for
any increase in the consideration payable to the Company, or
decrease in the number of Additional Shares of Common Stock
issuable, upon the exercise, conversion or exchange thereof
(by change of rate or otherwise), the Warrant Price computed
upon the original issue, sale, grant or assumption thereof
(or upon the occurrence of the record date, or date prior to
the commencement of ex-dividend trading, as the case may be,
with respect thereto), and any subsequent adjustments based
thereon, shall, upon any such increase or decrease becoming
effective, be recomputed to reflect such increase or
decrease insofar as it affects such Options, or the rights
of conversion or exchange under such Convertible Securities,
which are outstanding at such time;
(c) upon the expiration (or purchase by the Company and
cancellation or retirement) of any such Options which shall
not have been exercised, or the expiration of any rights of
conversion or exchange under any such Convertible Securities
which (or purchase by the Company and cancellation or
retirement of any such Convertible Securities the rights of
conversion or exchange under which) shall not have been
exercised, the Warrant Price computed upon the original
issue, sale, grant or assumption thereof (or upon the
occurrence of the record date, or date prior to the
commencement of ex-dividend trading, as the case may be,
with respect thereto), and any subsequent adjustments based
thereon, shall, upon (and effective as of) such expiration
(or such cancellation or retirement, as the case may be), be
recomputed as if:
(i) in the case of Options or Convertible Securities,
the only Additional Shares of Common Stock issued or
sold were the Additional Shares of Common Stock, if
any, actually issued or sold upon the exercise of such
Options or the conversion or exchange of such
Convertible Securities and the consideration received
therefor was the consideration actually received by the
Company for the issue, sale, grant or assumption of all
such Options, whether or not exercised, plus the
consideration actually received by the Company upon
such exercise, or for the issue or sale of all such
Convertible Securities which were actually converted or
exchanged, plus the additional consideration, if any,
actually received by the Company upon such conversion
or exchange, and
6
<PAGE>
(ii) in the case of Options for Convertible
Securities, only the Convertible Securities, if any,
actually issued or sold upon the exercise of such
Options were issued at the time of the issue, sale,
grant or assumption of such Options, and the
consideration received by the Company for the
Additional Shares of Common Stock deemed to have then
been issued was the consideration actually received by
the Company for the issue, sale, grant or assumption of
all such Options, whether or not exercised, plus the
consideration deemed to have been received by the
Company upon the issue or sale of such Convertible
Securities with respect to which such Options were
actually exercised; and
(d) no readjustment pursuant to clause (b) or (c) above
(either individually or cumulatively together with all prior
readjustments as made in respect of such Options or
Convertible Securities) shall have the effect of increasing
the Warrant Price by a proportion (relative to the Warrant
Price in effect immediately prior to such readjustment) in
excess of the inverse of the aggregate proportional
adjustment thereof made in respect of the issue, sale, grant
or assumption of such Options or Convertible Securities.
If the consideration provided for in any Option or the additional
consideration, if any, payable upon the conversion or exchange of any
Convertible Security shall be reduced, or the rate at which any Option is
exercisable or any Convertible Security is convertible into or exchangeable
for shares of Common Stock shall be increased, at any time under or by
reason of provisions with respect thereto designed to protect against
dilution, then, effective concurrently with each such change, the Warrant
Price then in effect shall first be adjusted to eliminate the effects (if
any) of the issuance (or deemed issuance) of such Option or Convertible
Security on the Warrant Price and then readjusted as if such Option or
Convertible Security had been issued on the date of such change with the
terms in effect after such change, but only if as a result of such
adjustment the Warrant Price then in effect hereunder is thereby reduced.
2.4. Treatment of Stock Dividends, Stock Splits, etc. If the Company
shall at any time prior to the expiration of this Warrant subdivide its
Common Stock, by split-up or otherwise, or combine its Common Stock or
issue additional shares of its Common Stock as a dividend with respect to
any shares of its Common Stock, the number of shares of Common Stock
issuable on the exercise of this Warrant shall forthwith be proportionately
increased in the case of a subdivision or stock dividend as provided in
Section 2.1, or proportionately decreased in the case of a combination as
provided in Section 2.1. Appropriate adjustments shall also be made to the
purchase price payable per share as provided in Section 2.1, but the
aggregate purchase price payable for the total number of shares of Common
Stock purchasable under this Warrant (as adjusted) shall remain the same.
Any adjustment under this Section 2.4 shall become effective at the close
of
7
<PAGE>
business on the date the subdivision or combination becomes effective, or
as of the record date of such dividend, or in the event that no record date
is fixed, upon the making of such dividend.
In case of any reclassification, capital reorganization, or change in
the Common Stock of the Company (other than as a result of a subdivision,
combination, or stock dividend provided for in the foregoing paragraph),
then, as a condition of such reclassification, reorganization, or change,
lawful provision shall be made, and duly executed documents evidencing the
same from the Company or its successor shall be delivered to the holder of
this Warrant, so that the holder of this Warrant shall have the right at
any time prior to the expiration of this Warrant to purchase, at a total
price equal to that payable upon the exercise of this Warrant, the kind and
amount of shares of stock and other securities and property receivable in
connection with such reclassification, reorganization, or change by a
holder of the same number of shares of Common Stock as were purchasable by
the holder of this Warrant immediately prior to such reclassification,
reorganization, or change. In any such case appropriate provisions shall
be made with respect to the rights and interest of the holder of this
Warrant so that the provisions hereof shall thereafter be applicable with
respect to any shares of stock or other securities and property deliverable
upon exercise hereof, and appropriate adjustments shall be made to the
purchase price per share payable hereunder, provided the aggregate purchase
price shall remain the same.
2.5. Minimum Adjustment of Warrant Price. If the amount of any adjustment
of the Warrant Price required pursuant to this Section 2 would be less than
one-tenth (1/10) of one percent (1%) of the Warrant Price in effect at the
time such adjustment is otherwise so required to be made, such amount shall
be carried forward and adjustment with respect thereto made at the time of
and together with any subsequent adjustment which, together with such
amount and any other amount or amounts so carried forward, shall aggregate
at least one tenth (1/10) of one percent (1%) of such Warrant Price.
2.6. Shares Deemed Outstanding. For all purposes of the computations to be
made pursuant to this Section 2: (i) there shall be deemed to be
outstanding all shares of Common Stock issuable (A) pursuant to the
exercise of Options outstanding as of the date of this Warrant granted to
employees, directors, consultants and other persons under any Company stock
option, bonus or other incentive plan and any Options issued after the date
of this Warrant to any such persons under such plans provided that with
respect to Options issued after the date of this Warrant the exercise price
of such Options shall equal or exceed the Market Price of the Company's
Common Stock on the date of issuance; provided, that the aggregate number
of shares of Common Stock deemed outstanding pursuant to this clause (i)(A)
shall not exceed 6,000,000 shares and (B) pursuant to the exercise of any
other Options and conversion of Convertible Securities outstanding on the
date of this Warrant which have an exercise or conversion price equal to or
greater than the Initial Warrant Price, including without limitation the
Warrants, the Public Securities (as defined in the Purchase Agreement) and
(C) pursuant to the exercise of Warrants issued as of March 3, 1997 to
certain lenders for an aggregate of 775,000
8
<PAGE>
shares of Common Stock; (ii) immediately after any Additional Shares of
Common Stock are deemed to have been issued pursuant to Section 2.3 or 2.4
hereof, such Additional Shares shall be deemed to be outstanding; (iii)
treasury shares shall not be deemed to be outstanding; and (iv)
notwithstanding anything to the contrary contained in this Section 2, no
adjustment shall be made in the Warrant Price upon the issuance of shares
of Common Stock pursuant to Options and Convertible Securities deemed to be
outstanding pursuant to clause (i) hereof or upon the grant of any such
Options deemed to be outstanding pursuant to clause (i) hereof.
3. CONSOLIDATION, MERGER, ETC.
3.1. Adjustments for Consolidation, Merger, Sale of Assets, Reorganization,
etc. In case the Company after the date hereof (a) shall consolidate with
or merge into any other Person and shall not be the continuing or surviving
corporation of such consolidation or merger, or (b) shall permit any other
Person to consolidate with or merge into the Company and the Company shall
be the continuing or surviving Person but, in connection with such
consolidation or merger, the Common Stock or Other Securities shall be
changed into or exchanged for stock or other securities of any other Person
or cash or any other property, or (c) shall transfer all or substantially
all of its properties or assets to any other Person, or (d) shall effect a
capital reorganization or reclassification of the Common Stock or Other
Securities (other than a capital reorganization or reclassification to the
extent that such capital reorganization or reclassification results in the
issue of Additional Shares of Common Stock for which adjustment in the
Warrant Price is provided in Section 2.2.1 or 2.2.2 hereof), then, and in
the case of each such transaction, proper provision shall be made so that,
upon the basis and the terms and in the manner provided in this Warrant,
the holder of this Warrant, upon the exercise hereof at any time after the
consummation of such transaction, shall be entitled to receive (at the
aggregate Warrant Price in effect at the time of such consummation for all
Common Stock or Other Securities issuable upon such exercise immediately
prior to such consummation), in lieu of the Common Stock or Other
Securities issuable upon such exercise prior to such consummation, the
greatest amount of securities, cash or other property to which such holder
would actually have been entitled as a shareholder upon such consummation
if such holder had exercised the rights represented by this Warrant
immediately prior thereto, subject to adjustments (subsequent to such
consummation) as nearly equivalent as possible to the adjustments provided
for in Sections 2, 3 and 4 hereof; provided, however, that if a purchase,
tender or exchange offer shall have been made to and accepted by the
holders of more than 50% of the outstanding shares of Common Stock, and if
the holder of such Warrants so designates in a notice given to the Company
on or before the date immediately preceding the date of the consummation of
such transaction, the holder of such Warrants shall be entitled to receive
the greatest amount of securities, cash or other property to which such
holder would actually have been entitled as a shareholder if the holder of
such Warrants had exercised such Warrants prior to the expiration of such
purchase, tender or exchange offer and accepted such offer, subject to
adjustments (from and after the consummation of such purchase, tender or
exchange offer) as nearly equivalent as possible to the adjustments
provided for in
9
<PAGE>
Sections 2, 3 and 4 hereof.
3.2. Assumption of Obligations. Notwithstanding anything contained in the
Warrants or in the Purchase Agreement to the contrary, the Company will not
effect any of the transactions described in clauses (a) through (d) of
Section 3.1 hereof unless, prior to the consummation thereof, each person
(other than the Company) which may be required to deliver any stock,
securities, cash or property upon the exercise of this Warrant as provided
herein shall assume, by written instrument delivered to, and reasonably
satisfactory to, the holder of this Warrant, (a) the obligations of the
Company under this Warrant (and if the Company shall survive the
consummation of such transaction, such assumption shall be in addition to,
and shall not release the Company from, any continuing obligations of the
Company under this Warrant), (b) the obligations of the Company under the
Registration Rights Agreement and (c) the obligation to deliver to such
holder such shares of stock, securities, cash or property as, in accordance
with the foregoing provisions of this Section 3, such holder may be entitled
to receive, and such Person shall have similarly delivered to such holder an
opinion of counsel for such Person, which counsel shall be reasonably
satisfactory to such holder, stating that this Warrant shall thereafter
continue in full force and effect and the terms hereof (including without
limitation all of the provisions of this Section 3) shall be applicable to
the stock, securities, cash or property which such Person may be required to
deliver upon any exercise of this Warrant or the exercise of any rights
pursuant hereto. Nothing in this Section 3 shall be deemed to authorize the
Company to enter into any transaction not otherwise permitted by the
provisions hereof or by the terms of the Purchase Agreement.
4. OTHER DILUTIVE EVENTS. In case any event shall occur as to which the
provisions of Section 2 or 3 hereof are not strictly applicable but the failure
to make any adjustment would not, in the opinion of the holder of this Warrant,
fairly protect the purchase rights represented by this Warrant in accordance
with the essential intent and principles of such Sections, then, in each such
case, at the request of such holder, the Company shall (at the expense of such
holder) appoint a firm of independent investment bankers of recognized national
standing (which shall be completely independent of the Company and shall be
satisfactory to the holder of this Warrant), which shall give their opinion upon
the adjustment, if any, on a basis consistent with the essential intent and
principles established in Sections 2 and 3 hereof, necessary to preserve,
without dilution, the purchase rights represented by this Warrant. Upon receipt
of such opinion, the Company will promptly mail a copy thereof to the holder of
this Warrant and shall make the adjustments described therein.
5. NO DILUTION OR IMPAIRMENT. The Company will not, by amendment of its
certificate of incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the holder of
this Warrant against dilution or other impairment. Without limiting the
generality of the foregoing, the Company (a) will not permit the par value of
any shares of stock receivable upon the exercise of this
10
<PAGE>
Warrant to exceed the amount payable therefor upon such exercise, (b) will take
all such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of stock on the
exercise of the Warrants from time to time outstanding, and (c) will not take
any action which results in any adjustment of the Warrant Price if the total
number of shares of Common Stock (or Other Securities) issuable after the action
upon the exercise of all of the Warrants would exceed the total number of shares
of Common Stock (or Other Securities) then authorized by the Company's
certificate of incorporation and available for the purpose of issue upon such
exercise.
6. ACCOUNTANTS' REPORT AS TO ADJUSTMENTS. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable upon
the exercise of this Warrant, the Company at its expense will promptly compute
such adjustment or readjustment in accordance with the terms of this Warrant and
cause independent certified public accountants of recognized national standing
(which may be the regular auditors of the Company) selected by the Company to
verify such computation (other than any computation of the fair value of
property as determined in good faith by the Board of Directors of the Company)
and prepare a report setting forth such adjustment or readjustment and showing
in reasonable detail the method of calculation thereof and the facts upon which
such adjustment or readjustment is based, including a statement of (a) the
consideration received or to be received by the Company for any Additional
Shares of Common Stock issued or sold or deemed to have been issued, (b) the
number of shares of Common Stock outstanding or deemed to be outstanding, and
(c) the Warrant Price in effect immediately prior to such issue or sale and as
adjusted and readjusted (if required by Section 2 hereof) on account thereof.
The Company will forthwith mail a copy of each such report to each holder of a
Warrant and will, upon the written request at any time of any holder of a
Warrant, furnish to such holder a like report setting forth the Warrant Price at
the time in effect and showing in reasonable detail how it was calculated. The
Company will also keep copies of all such reports at its office maintained
pursuant to Section 13.2(a) hereof and will cause the same to be available for
inspection at such office during normal business hours by any holder of a
Warrant or any prospective purchaser of a Warrant designated by the holder
thereof.
7. AUTOMATIC EXERCISE. Notwithstanding any other provision of this Warrant,
this Warrant shall be automatically exercised immediately prior to the Warrant
Expiration Date without any further action on the part of the holder thereof in
the manner specified in Section 1.1.2.
8. NOTICES OF CORPORATE ACTION. In the event of:
(a) any taking by the Company of a record date of the holders of any
class of securities for the purpose of determining the holders thereof
who are entitled to receive any dividend or other distribution, or any
right to subscribe for, purchase or otherwise acquire any shares of
stock of any class or any other securities or property, or to receive
any other right, or
11
<PAGE>
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any
consolidation or merger involving the Company and any other Person or
any transfer of all or substantially all the assets of the Company to
any other Person, or
(c) any voluntary or involuntary dissolution, liquidation or winding-
up of the Company, or
(d) any issuance of any Common Stock, Convertible Security or Option
by the Company,
the Company will mail to each holder of a Warrant notice specifying (i) the date
or expected date on which any such record is to be taken for the purpose of such
dividend, distribution or right, and the amount and character of such dividend,
distribution or right, (ii) the date or expected date on which any such
reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up is to take place, the time, if
any such time is to be fixed, as of which the holders of record of Common Stock
(or Other Securities) shall be entitled to exchange their shares of Common Stock
(or Other Securities) for the securities or other property deliverable upon such
reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up and a description in reasonable
detail of the transaction and (iii) the date of such issuance, together with a
description of the security so issued and the consideration received by the
Company therefor. Such notice shall be mailed at least 30 days prior to the date
therein specified.
9. REGISTRATION OF COMMON STOCK. If this Warrant or any shares of Common Stock
required to be reserved for purposes of exercise of this Warrant require
registration with or approval of any governmental authority (including any self
regulatory body) under any federal or state law (other than the Securities Act)
before such shares may be issued upon exercise, the Company will, at its expense
and as expeditiously as possible prior to such issuance, use its best efforts to
cause such shares to be duly registered or approved, as the case may be, in
accordance with the terms of the Registration Rights Agreement. The shares of
Common Stock (and Other Securities) issuable upon exercise of this Warrant shall
constitute Registrable Securities (as such term is defined in the Registration
Rights Agreement). Each holder of this Warrant shall be entitled to all of the
benefits afforded to a holder of any such Registrable Securities under the
Registration Rights Agreement and such holder, by its acceptance of this
Warrant, agrees to be bound by and to comply with the terms and conditions of
the Registration Rights Agreement applicable to such holder as a holder of such
Registrable Securities.
10. RESTRICTIONS ON TRANSFER.
10.1. Restrictive Legends. Except as otherwise permitted by this Section
10, each certificate for Common Stock (or Other Securities) issued upon the
exercise of any Warrant, each certificate issued upon the direct or indirect
transfer of any such Common Stock (or Other Securities) all Warrants originally
issued pursuant to the Purchase Agreement and each Warrant issued upon direct or
indirect transfer or in substitution for
12
<PAGE>
any Warrant pursuant to Section 13 hereof shall be transferable only upon
satisfaction of the conditions specified in this Section 10 and shall be
stamped or otherwise imprinted with legends in substantially the form
required by the Registration Rights Agreement.
10.2. Notice of Proposed Transfer; Opinion of Counsel. Prior to any
transfer of any Restricted Securities which are not registered under an
effective registration statement under the Securities Act, the holder
thereof will give written notice to the Company of such holder's intention
to effect such transfer and to comply in all other respects with this
Section 10.2. Each such notice (a) shall describe the manner and
circumstances of the proposed transfer, and (b) shall designate counsel for
the holder giving such notice, which counsel shall be reasonably acceptable
to the Company. The holder giving such notice will submit a copy thereof to
the counsel designated in such notice. Subject to the foregoing, the
following provisions shall then apply:
(i) If in the opinion of such counsel (which opinion shall be
reasonably acceptable to the Company), the proposed transfer may be
effected without registration of such Restricted Securities under
the Securities Act, such holder shall thereupon be entitled to
transfer such Restricted Securities in accordance with the terms of
the notice delivered by such holder to the Company. Each
certificate representing such Restricted Securities issued upon or
in connection with such transfer shall bear the restrictive legends
required by Section 10.1 hereof, unless the related restrictions on
transfer provided for in the Registration Rights Agreement shall
have ceased and terminated as to such Restricted Securities
pursuant to Section 10.3 hereof.
(ii) If in the opinion of such counsel the proposed transfer may
not legally be effected without registration of such Restricted
Securities under the Securities Act (such opinion to state the
basis of the legal conclusions reached therein), thereafter such
holder shall not be entitled to transfer such Restricted Securities
until either (x) receipt by the Company of a further notice from
such holder pursuant to the foregoing provisions of this Section
10.2 and fulfillment of the provisions of clause (i) above or (y)
such Restricted Securities have been effectively registered under
the Securities Act.
Notwithstanding any other provision of this Section 10, no opinion of
counsel shall be necessary for a transfer of Restricted Securities by the holder
thereof to a subsidiary, shareholder, partner or other affiliate of such holder,
if the transferee agrees in writing to be subject to the terms hereof to the
same extent as if such transferee were the original Purchaser hereof.
10.3 Termination of Restrictions. The restrictions imposed by this Section
10 upon the transferability of Restricted Securities shall cease and
terminate as to any particular Restricted Securities (a) when such
Restricted Securities shall have been effectively registered under the
Securities Act, or (b) when, in the opinions of both counsel for the
13
<PAGE>
holder thereof and counsel for the Company, such restrictions are no longer
required in order to insure compliance with the Securities Act or the terms
of the Registration Rights Agreement. Whenever such restrictions shall
cease and terminate as to any Restricted Securities, the holder thereof
shall be entitled to receive from the Company, without expense (other than
applicable transfer taxes, if any), new securities of like tenor not
bearing the applicable legends required by Section 10.1 hereof.
11. AVAILABILITY OF INFORMATION. The Company will comply with the reporting
requirements of Sections 13 and 15(d) of the Exchange Act and will comply with
all other public information reporting requirements of the Commission (including
Rule 144 promulgated by the Commission under the Securities Act) from time to
time in effect and relating to the availability of an exemption from the
Securities Act for the sale of any Restricted Securities. The Company will also
cooperate with each holder of any Restricted Securities in supplying such
information as may be necessary for such holder to complete and file any
information reporting forms presently or hereafter required by the Commission as
a condition to the availability of an exemption from the Securities Act for the
sale of any Restricted Securities. The Company will furnish to each holder of
any Warrants, promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent or made available
generally by the Company to its stockholders, and copies of all regular and
periodic reports and all registration statements and prospectuses filed by the
Company with any securities exchange or with the Commission.
12. RESERVATION OF STOCK, ETC. The Company will at all times reserve and keep
available, solely for issuance and delivery upon exercise of the Warrants, the
number of shares of Common Stock of each class (or Other Securities) from time
to time issuable upon exercise of all Warrants at the time outstanding. All
shares of Common Stock (or Other Securities issuable upon exercise of any
Warrants shall be duly authorized and, when issued upon such exercise, shall be
validly issued and, in the case of shares, fully paid and nonassessable with no
liability on the part of the holders thereof.
13. OWNERSHIP, TRANSFER AND SUBSTITUTION OF WARRANTS.
13.1. Ownership of Warrants. The Company may treat the person in whose
name any Warrant is registered on the register kept at the office of the
Company maintained pursuant to Section 13.2(a) hereof as the owner and
holder thereof for all purposes, notwithstanding any notice to the
contrary, except that, if and when any Warrant is properly assigned in
blank, the Company may (but shall not be obligated to) treat the bearer
thereof as the owner of such Warrant for all purposes, notwithstanding any
notice to the contrary. Subject to Section 11 hereof, a Warrant, if
properly assigned, may be exercised by a new holder without a new Warrant
first having been issued. Effective upon the partial exercise of this
Warrant, the Company shall automatically issue to the holder thereof a new
Warrant of like tenor, dated this date of such exercise, with the aggregate
number of shares of Common Stock for which the new Warrant may be exercised
equal to the number of shares of Common Stock for which the existing
Warrant
14
<PAGE>
may be exercised immediately prior to such partial exercise, minus the number of
shares of Common Stock acquired upon such exercise.
13.2. Office; Transfer and Exchange of Warrants.
(a) The Company will maintain an office (which may be an agency
maintained at a bank) in Chicago, Illinois where notices,
presentations and demands in respect of this Warrant may be made upon
it. Such office shall be maintained at 500 W. Madison, Chicago,
Illinois 60661 until such time as the Company shall notify the holders
of the Warrants of any change of location of such office within
Chicago, Illinois.
(b) The Company shall cause to be kept at its office maintained
pursuant to Section 13.2(a) hereof a register for the registration and
transfer of the Warrants. The names and addresses of holders of
Warrants, the transfers thereof and the names and addresses of
transferees of Warrants shall be registered in such register. The
Person in whose name any Warrant shall be so registered shall be
deemed and treated as the owner and holder thereof for all purposes of
this Warrant, and the Company shall not be affected by any notice or
knowledge to the contrary.
(c) Upon the surrender of any Warrant, properly endorsed, for
registration of transfer or for exchange at the office of the Company
maintained pursuant to Section 13.2(a) hereof, the Company at its
expense will (subject to compliance with Section 10 hereof, if
applicable) execute and deliver to or upon the order of the holder
thereof a new Warrant or Warrants of like tenor, in the name of such
holder or as such holder (upon payment by such holder of any
applicable transfer taxes) may direct, calling in the aggregate on the
face or faces thereof for the number of shares of Common Stock called
for on the face or faces of the Warrant or Warrants so surrendered.
(d) Notwithstanding anything to the contrary herein no holder of any
Warrant shall transfer all or any portion of this Warrant without the
prior written consent of the Company (x) before September 1, 1998 and
(y) to any "competitor" of the Company as listed on Schedule 13.2
hereto prior to the registration under the Securities Act of 1933, as
amended (the "Act") of the transfer of Warrants pursuant to the
Registration Rights Agreement .
13.3. Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant
held by a Person other than a Purchaser
15
<PAGE>
or any institutional investor, upon delivery of indemnity reasonably
satisfactory to the Company in form and amount or, in the case of any such
mutilation, upon surrender of such Warrant for cancellation at the office of the
Company maintained pursuant to Section 13.2(a) hereof, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor
and dated the date hereof.
14. DEFINITIONS. As used herein, unless the context otherwise requires, the
following terms have the following respective meanings:
Additional Shares of Common Stock: All shares (including treasury shares)
of Common Stock issued or sold (or, pursuant to Section 2.3 or 2.4 hereof,
deemed to be issued) by the Company after the date hereof, whether or not
subsequently reacquired or retired by the Company, other than the shares of
Common Stock issued upon the exercise of Warrants.
Business Day: Any day other than a Saturday or a Sunday or a day on which
commercial banking institutions in Boston, Massachusetts, New York, New York or
Chicago, Illinois are authorized by law to be closed. Any reference to "days"
(unless Business Days are specified) shall mean calendar days.
Commission: The Securities and Exchange Commission or any other federal
agency at the time administering the Securities Act.
Common Stock: As defined in the introduction to this Warrant, such term to
include any stock into which such Common Stock shall have been changed or any
stock resulting from any reclassification of such Common Stock, and all other
stock of any class or classes (however designated) of the Company the holders of
which have the right, without limitation as to amount, either to all or to a
share of the balance of current dividends and liquidating dividends after the
payment of dividends and distributions on any shares entitled to preference.
Company: As defined in the introduction to this Warrant, such term to
include any corporation which shall succeed to or assume the obligations of the
Company hereunder in compliance with Section 3 hereof.
Convertible Securities: Any evidences of indebtedness, shares of stock
(other than Common Stock) or other securities directly or indirectly convertible
into or exchangeable for Additional Shares of Common Stock or other Convertible
Securities.
Current Market Price: On any date specified herein, the average daily
Market Price during the period of the most recent 20 days, ending on such date,
on which the national securities exchanges were open for trading, except that if
no class of the Common Stock is then listed or admitted to trading on any
national securities exchange or quoted in the over-the-counter market for any
portion of such 20-day period, the Current Market Price shall be the Market
Price on such date.
16
<PAGE>
Exchange Act: The Securities Exchange Act of 1934, or any similar federal
statute, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time.
Exercise Price: The Warrant Price.
Initial Warrant Price: An amount equal to $15.125 per share.
Market Price: On any date specified herein, the amount per share of Common
Stock equal to (a) the last sale price of Common Stock, regular way, on such
date or, if no such sale takes place on such date, the average of the closing
bid and asked prices thereof on such date, in each case as officially reported
on the principal national securities exchange on which Common Stock is then
listed or admitted to trading, or (b) if Common Stock is not then listed or
admitted to trading on any national securities exchange but is designated as a
national market system security by the NASD, the last trading price of Common
Stock on such date, or (c) if there shall have been no trading on such date or
if Common Stock is not so designated, the average of the closing bid and asked
prices of Common Stock on such date as shown by the NASD automated quotation
system, or (d) if Common Stock is not then listed or admitted to trading on any
national exchange or quoted in the over-the-counter market, the fair value
thereof determined in good faith by the Board of Directors of the Company as of
a date which is within 15 days of the date as of which the determination is to
be made.
NASD: The National Association of Securities Dealers, Inc.
Options: Rights, options or warrants to subscribe for, purchase or
otherwise acquire either Additional Shares of Common Stock or Convertible
Securities.
Other Securities: Any stock (other than Common Stock) and other securities
of the Company or any other Person which the holders of the Warrants at any time
shall be entitled to receive, or shall have received, upon the exercise of the
Warrants, in lieu of or in addition to Common Stock, or which at any time shall
be issuable or shall have been issued in exchange for or in replacement of
Common Stock or Other Securities pursuant to Section 3 hereof or otherwise.
Person: A corporation, an association, a partnership, an organization, a
business, an individual, a government or political subdivision thereof or a
governmental agency.
Purchase Agreement: As defined in the introduction to this Warrant.
Public Offering: As defined in the Purchase Agreement.
Purchaser: As defined in the introduction to this Warrant.
Registration Rights Agreement: The Registration Rights Agreement dated as
of September __, 1997, in the form of Exhibit B to the Purchase Agreement, as
from time to time in effect.
17
<PAGE>
Required Warrant Holders: Holders of a majority of the numbers of shares
of Common Stock issuable upon exercise of Warrant (giving effect to the
provisions of Sections 1 through 4 hereof).
Restricted Securities: All of the following: (a) any Warrants bearing the
applicable legend or legends referred to in Section 10.1 hereof, (b) any shares
of Common Stock (or Other Securities) which have been issued upon the exercise
of Warrants and which are evidenced by a certificate or certificates bearing the
applicable legend or legends referred to in such Section, (c) unless the context
otherwise requires, any shares of Common Stock (or Other Securities) which are
at the time issuable upon the exercise of Warrants and which, when so issued,
will be evidenced by a certificate or certificates bearing the applicable legend
or legends referred to in such Section.
Securities Act: The Securities Act of 1933, or any similar federal
statute, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time.
Warrant Price: As defined in Section 2.1 hereof.
Warrants: As defined in the introduction to this Warrant.
15. REMEDIES. The Company stipulates that the remedies at law of the holder
of this Warrant in the event of any default or threatened default by the Company
in the performance of or compliance with any of the terms of this Warrant are
not and will not be adequate and that, to the fullest extent permitted by law,
such terms may be specifically enforced by a decree for the specific performance
of any agreement contained herein or by an injunction against a violation of any
of the terms hereof or otherwise.
16. NO RIGHTS OR LIABILITIES AS STOCKHOLDER. Nothing contained in this Warrant
shall be construed as conferring upon the holder hereof any rights as a
stockholder of the Company or as imposing any obligation on such holder to
purchase any securities or as imposing any liabilities on such holder as a
stockholder of the Company, whether such obligation or liabilities are asserted
by the Company or by creditors of the Company.
17. NOTICES. Any notice or other communication in connection with this Warrant
shall be deemed to be delivered if in writing (or in the form of a telex or
telecopy) addressed as hereinafter provided and if either (x) actually delivered
at said address (evidenced in the case of a telex by receipt of the correct
answer back) or (y) in the case of a letter, three Business Days shall have
elapsed after the same shall have been deposited in the United States mails,
postage prepaid and registered or certified: (a) if to any holder of any
Warrant, at the registered address of such holder as set forth in the register
kept at the office of the Company maintained pursuant to Section 13.2(a) hereof;
or (b) if to the Company, to the attention of its President at its office
maintained pursuant to Section 13.2(a) hereof; provided, however, that the
exercise of any Warrant shall be effective in the manner provided in Section 1
hereof.
18
<PAGE>
19. MISCELLANEOUS. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the Company
and the holders of Warrants exercisable for two-thirds (66 2/3%) of the shares
of Common Stock for which the Warrants shall be exercisable at such time;
provided, however, that any such change, waiver, discharge or termination which
reduces the number of shares of Common Stock for which this Warrant is
exercisable or which affects the Initial Warrant Price, the Warrant Exercise
Date, the Warrant Expiration Date or the definition of "Required Warrant
Holders," or which amends this Section 20, shall not be effective unless and
until an instrument has been signed in writing by each holder of Warrants. This
Warrant shall be construed and enforced in accordance with and governed by the
laws of the State of Delaware. The Section headings in this Warrant are for
purposes of convenience only and shall not constitute a part hereof.
SYSTEM SOFTWARE ASSOCIATES, INC.
By:___________________________________
Title:
<PAGE>
Exhibit A
---------
FORM OF SUBSCRIPTION
[To be executed only upon exercise of Warrant]
To [ISSUER]
The undersigned registered holder of the within Warrant hereby irrevocably
exercises such Warrant for, and purchases thereunder, __________/1/ shares of
the Common Stock and herewith makes payment of $ therefor, and requests
that the certificates for such shares be issued in the name of, and delivered to
, whose address is .
Dated: ____________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
____________________________________
(Street Address)
____________________________________
(City) (State) (Zip Code)
- ---------------------
/1/ Insert here upon an exercise of Warrant, the number of shares called for on
the face of this Warrant (or, in the case of a partial exercise, the portion
thereof as to which this Warrant is being exercised), in either case without
making any adjustment for Additional Shares of Common Stock or any other
stock or other securities or property or cash which, pursuant to the
adjustment provisions of this Warrant, may be delivered upon exercise. In
the case of a partial exercise of Warrant, a new Warrant or Warrants will be
issued and delivered, representing the unexercised portion of Warrant, to
the holder surrendering the Warrant.
E-1
<PAGE>
Exhibit B
---------
FORM OF CASHLESS EXERCISE NOTICE
[To be executed only upon cashless exercise of Warrant]
To [ISSUER]
The undersigned registered holder of the within Warrant hereby irrevocably
exercises such Warrant with respect to __________/2/ shares of the Common Stock
which such holder would be entitled to receive upon the exercise hereof, and
requests that the certificates for such shares be issued in the name of, and
delivered to , whose address is .
Dated: ___________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
___________________________________
(Street Address)
___________________________________
(City) (State) (Zip Code)
- --------------------------
/2/ Insert here upon exercise of Warrant, the number of shares called for on the
face of this Warrant (or, in the case of a partial exercise, the portion
thereof as to which this Warrant is being exercised), in either case without
making any adjustment for Additional Shares of Common Stock or any other
stock or other securities or property or cash which, pursuant to the
adjustment provisions of this Warrant, may be delivered upon exercise. In
the case of a partial exercise of Warrant, a new Warrant or Warrants will be
issued and delivered, representing the unexercised portion of Warrant, to
the holder surrendering the Warrant.
E-2
<PAGE>
FORM OF ASSIGNMENT
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of the within Warrant
hereby sells, assigns and transfers unto ___________ the right represented by
such Warrant to purchase __________/3/ shares of Common Stock as provided
herein, of System Software Associates, Inc. to which such Warrant relates, and
appoints ____________ Attorney to make such transfer on the books of System
Software Associates, Inc. maintained for such purpose, with full power of
substitution in the premises.
Dated: ___________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
-----------------------------------
(Street Address)
-----------------------------------
(City) (State) (Zip Code)
Signed in the presence of:
________________________________
- ----------------------------
/3/ Insert here upon exercise of Warrant, the number of shares called for on the
face of this Warrant (or, in the case of a partial exercise, the portion
thereof as to which this Warrant is being exercised), in either case without
making any adjustment for Additional Shares of Common Stock or any other
stock or other securities or property or cash which, pursuant to the
adjustment provisions of this Warrant, may be delivered upon exercise. In
the case of a partial exercise of Warrant, a new Warrant or Warrants will be
issued and delivered, representing the unexercised portion of Warrant, to
the holder surrendering the Warrant.
E-3
<PAGE>
REGISTRATION RIGHTS AGREEMENT
September ___, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION> Page
----
<S> <C>
1. Registration Rights.........................................................1
1.1 Definitions.........................................................1
1.2 Shelf Registration..................................................3
1.3 Registration Procedures.............................................5
1.4 Holder's Obligations...............................................10
1.5 Expenses of Registration...........................................10
1.6 Delay of Registration..............................................11
1.7 Indemnification....................................................11
1.8 Assignment of Registration Rights..................................13
1.9 "Market Stand-Off" Agreement.......................................13
1.10 Termination of Registration Rights................................14
2. Miscellaneous..............................................................14
2.1 Successors and Assigns.............................................14
2.2 Governing Law......................................................14
2.3 Counterparts.......................................................14
2.4 Titles and Subtitles...............................................14
2.5 Notices............................................................14
2.6 Expenses...........................................................15
2.7 Entire Agreement: Amendments and Waivers...........................15
2.8 Severability.......................................................15
2.9 Aggregation of Stock...............................................15
</TABLE>
i
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made as of the _____ day of
September, 1997, by and between System Software Associates, Inc., a Delaware
corporation (the "Company") and H&Q SSA Investors, L.P., a Delaware limited
partnership (the "Purchaser").
RECITALS
--------
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the Company and the Purchaser are entering into the Amended and
Restated Securities Purchase Agreement dated as of September ___, 1997 (as
amended and in effect from time to time, the "Purchase Agreement") pursuant to
which the Company is issuing and selling to the Purchaser, and the Purchaser is
purchasing from the Company, warrants (the "Warrants") to purchase an aggregate
of 600,000 shares of the Company's common stock, par value $0.0033 per share
(the "Common Stock") and 10,000 shares of the Company's Series A Preferred
Stock, par value $0.01 per share (the "Preferred Stock"); and
WHEREAS, it is a condition to the issuance and sale by the Company,
and the purchase by the Purchaser, of such Warrants pursuant to the Purchase
Agreement that the Company and the Purchaser enter into this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties agree as follows:
1. Registration Rights. The Company covenants and agrees as
follows:
1.1 Definitions. For purposes of this Section 1:
(a) The term "Act" means the Securities Act of 1933, as
amended.
(b) The term "Business Day" means each Monday, Tuesday,
Wednesday, Thursday and Friday that is not a day on which banking institutions
in the City of New York are authorized or obligated by law or executive order to
close.
(c) The term "Convertible Subordinated Notes Offering" means
a firm commitment public offering of $100 million principal amount of
Convertible Notes of the Company due 2002.
(d) The term "Effectiveness Period" means the period
commencing with the date hereof and ending on the date that all Registrable
Securities have ceased to be Registrable Securities.
<PAGE>
(e) The term "Holder" means any person owning or having the
right to acquire Registrable Securities or any permitted assignee thereof in
accordance with Section 1.8 hereof.
(f) The term "Managing Underwriters" means the investment
banking firm or firms that shall manage or co-manage an Underwritten Offering.
(g) The term "1934 Act" means the Securities Exchange Act of
1934, as amended.
(h) The term "Prospectus" means the prospectus included in
any Registration Statement (including, without limitation, a prospectus that
discloses information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A promulgated under
the Securities Act), as amended or supplemented by any amendment or prospectus
supplement, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
(i) The terms "register," "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Act, and the declaration or
ordering of effectiveness of such registration statement or document.
(j) The term "Registrable Securities" means (i) the
Warrants, (ii) the Common Stock into which the Warrants are exercisable or
exercised, whether or not such Warrants have been exercised, (iii) the Common
Stock into which the Preferred Stock is convertible or converted, whether or not
such Preferred Stock has been converted and (iv) any shares of capital stock of
the Company issued as (or issuable upon the conversion or exercise of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of the shares
referenced in (ii) or (iii) above, excluding in all cases, however, any
Registrable Securities sold by a person in a transaction in which his rights
under this Section 1 are not assigned.
(k) The term "Registration Statement" means any registration
statement of the Company which covers any of the Registrable Securities pursuant
to the provisions of this Agreement, including the Prospectus, amendments and
supplements to such registration statement, including post-effective amendments,
all exhibits, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
(l) The term "Special Counsel" means Gunderson Dettmer
Stough Villeneuve Franklin & Hachigian, LLP, or such successor counsel as shall
be specified by the Holders of a majority of the Registrable Securities, the
fees and expenses of which will be paid by the Company pursuant to Section 1.5
hereof, such fees and expenses not to exceed $25,000.
2
<PAGE>
(m) The term "SEC" shall mean the Securities and Exchange
Commission.
(n) The terms "Underwritten Registration" or "Underwritten
Offering" refer to a registration in which securities of the Company are sold to
an underwriter for reoffering to the public.
1.2 Shelf Registration.
(a) The Company shall prepare and file with the SEC, not
later than September 1, 1998 (the "Filing Date"), a Registration Statement for
an offering to be made on a continuous basis pursuant to Rule 415 of the
Securities Act (a "Shelf Registration") registering the resale from time to time
by Holders thereof of all of the Registrable Securities (the "Initial Shelf
Registration"). The Initial Shelf Registration shall be on Form S-3 or another
appropriate form permitting registration of such Registrable Securities for
resale by the Holders in the manner or manners designated by them (including,
without limitation, one or more Underwritten Offerings). The Company shall use
its best efforts to cause the Initial Shelf Registration to be declared
effective under the Securities Act as soon as practicable and to keep the
Initial Shelf Registration continuously effective under the Securities Act until
the earlier of the expiration of the Effectiveness Period or the date a
Subsequent Shelf Registration, as defined below, covering all of the Registrable
Securities has been declared effective under the Securities Act.
(b) If the Initial Shelf Registration or any Subsequent
Shelf Registration, as defined below, ceases to be effective for any reason as a
result of the issuance of a stop order by the SEC at any time during the
Effectiveness Period, the Company shall use its best efforts to obtain the
prompt withdrawal of any order suspending the effectiveness thereof, and in any
event shall within thirty (30) days of such cessation of effectiveness amend the
Shelf Registration in a manner reasonably expected to obtain the withdrawal of
the order suspending the effectiveness thereof, or file an additional Shelf
Registration covering all of the Registrable Securities (a "Subsequent Shelf
Registration"). If a Subsequent Shelf Registration is filed, the Company shall
use its best efforts to cause the Subsequent Shelf Registration to be declared
effective as soon as practicable after such filing and to keep such Registration
Statement continuously effective until the end of the Effectiveness Period.
(c) The Company shall supplement and amend the Shelf
Registration if required by the rules, regulations or instructions applicable to
the registration form used by the Company for such Shelf Registration, if
required by the Securities Act, or if reasonably requested by the Purchaser or
by any Managing Underwriter of such Registrable Securities in the event of an
Underwritten Offering of the Registrable Securities.
(d) Each Holder of Registrable Securities agrees that if
such Holder wishes to sell its Registrable Securities pursuant to a Shelf
Registration and related Prospectus, it will do so only in accordance with this
Section 1.2(d). Each Holder of Registrable Securities agrees to give written
notice to the Company at least three Business Days prior to any intended
distribution of Registrable Securities under the Shelf Registration, which
notice shall
3
<PAGE>
specify the date on which such Holder intends to begin such distribution and any
information with respect to such Holder and the intended distribution of
Registrable Securities by such Holder as may be required to amend the
Registration Statement or supplement the related Prospectus with respect to such
intended distribution of Registrable Securities by such Holder (the "Requisite
Information"). In the event the Holder fails to provide the Requisite
Information in its initial notice of its intention to distribute the Registrable
Securities pursuant to the Registration Statement, the Company will promptly
request such Holder to provide such Requisite Information. As soon as
practicable after the date the Requisite Information is provided, and in any
event within two Business Days after such date, the Company shall (i) if
necessary, prepare and file with the Commission a post-effective amendment to
the Shelf Registration or a supplement to the related Prospectus or a supplement
or amendment to any document incorporated therein by reference or file any other
required document so that such Registration Statement 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
so that, as thereafter delivered to purchasers of the Registrable Securities
being sold thereunder, such Prospectus 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, in light of the circumstances under
which they were made, not misleading; (ii) provide each Notice Holder (as
defined below) copies of any documents filed pursuant to Section 1.2(d)(i); and
(iii) inform each Notice Holder that the Company has complied with its
obligations in Section 1.2(d)(i) (or that, if the Company has filed a post-
effective amendment to the Shelf Registration which has not yet been declared
effective, the Company will notify the Notice Holder to that effect, will use
its best efforts to secure the effectiveness of such post-effective amendment
and will immediately notify the Notice Holder when the amendment has become
effective); each Holder who has given notice of intention to distribute such
Holder's Registrable Securities in accordance with this Section 1.2(d) hereof (a
"Notice Holder") will sell all or any of such Registrable Securities pursuant to
the Shelf Registration and related Prospectus only during the 30-day period
commencing with the date on which the Company gives notice, pursuant to Section
1.2(d)(iii), that the Registration Statement and Prospectus may be used for such
purpose (such 30-day period is referred to as a "Selling Period"). The Notice
Holders will not sell any Registrable Securities pursuant to such Registration
Statement or Prospectus after such Selling Period without giving a new notice of
intention to sell pursuant to Section 1.2(d) hereof and receiving a further
notice from the Company pursuant to Section 1.2(d)(iii) hereof.
(e) In the event (i) of the happening of any event of the
kind described in Section 1.3(c)(ii), 1.3(c)(iii), 1.3(c)(iv), 1.3(c)(v), or
1.3(c)(vi) hereof or (ii) that, in the judgment of the Company, it is advisable
to suspend use of the Prospectus for a discrete period of time due to pending
material corporate developments or similar material events that have not yet
been publicly disclosed and as to which the Company believes public disclosure
will be prejudicial to the Company, the Company shall deliver a certificate in
writing, signed by an authorized executive officer of the Company, to the Notice
Holders, the Special Counsel and the Managing Underwriters, if any, to the
effect of the foregoing and, upon receipt of such certificate, each such Notice
Holder's Selling Period will not commence until such Notice Holder's receipt of
copies of the supplemented or amended Prospectus provided for in Section
1.2(d)(i) hereof, or until it is advised in writing by the Company that the
Prospectus may
4
<PAGE>
be used and has received copies of any additional or supplemental filings that
are incorporated or deemed incorporated by reference in such Prospectus. The
Company will use its best efforts to ensure that the use of the Prospectus may
be resumed, and the Selling Period will commence, as soon as practicable and, in
the case of a pending development or event referred to in Section 1.2(e)(ii)
hereof, as soon as the earlier of (x) public disclosure of such pending material
corporate development or similar material event or (y) in the judgment of the
Company, public disclosure of such material corporate development or similar
material event would not be prejudicial to the Company. Notwithstanding any
other provision in this Agreement, the Company shall not under any circumstances
be entitled to exercise its right under this Section 1.2(e) to defer the
commencement of a Selling Period except as follows: the Company may defer the
commencement of a Selling Period in accordance with this Section 1.2(e) for a
period not to exceed 30 days in any three-month period, or not to exceed an
aggregate of 90 days in any 12-month period, and the period in which a Selling
Period is suspended shall not exceed fifteen (15) days unless the Company shall
deliver to such Notice Holders a second notice to the effect set forth above,
which shall have the effect of extending the period during which such Selling
Period is deferred by up to an additional fifteen (15) days, or such shorter
period of time as is specified in such second notice. In no event shall the
Company be permitted to extend the period during which such Selling Period is
deferred (a "Deferral Period") beyond such thirty (30) day period from and after
the date a Notice Holder provides notice to the Company in accordance with
Section 1.2(d) of its intention to distribute Registrable Securities.
1.3 Registration Procedures. In connection with the Company's
registration obligations under Section 1.2 hereof, the Company shall effect such
registrations to permit the sale of the Registrable Securities in accordance
with the intended method or methods of disposition thereof, and pursuant thereto
the Company shall:
(a) Prepare and file with the SEC a Registration Statement
or Registration Statements on any appropriate form under the Securities Act
available for the sale of the Registrable Securities by the Holders thereof in
accordance with the intended method or methods of distribution thereof, and use
its best efforts to cause each such Registration Statement to become effective
and remain effective as provided herein; provided, that before filing any such
Registration Statement or Prospectus or any amendments or supplements thereto
(other than documents that would be incorporated or deemed to be incorporated
therein by reference and that the Company is required by applicable securities
laws or stock exchange requirements to file) the Company shall furnish to the
Purchaser, the Special Counsel and the Managing Underwriters of such offering,
if any, copies of all such documents proposed to be filed, which documents will
be subject to the reasonable review of the Purchaser, the Special Counsel and
such Managing Underwriters, and the Company shall not file any such Registration
Statement or amendment thereto or any Prospectus or any supplement thereto
(other than such documents which, upon filing, would be incorporated or deemed
to be incorporated by reference therein and that the Company is required by
applicable securities laws or stock exchange requirements to file) to which the
Holders of a majority of the Registrable Securities covered by such Registration
Statement, the Purchaser or the Special Counsel shall reasonably object in
writing within two full Business Days.
5
<PAGE>
(b) Prepare and file with the SEC such amendments and post-
effective amendments to each Registration Statement as may be necessary to keep
such Registration Statement continuously effective for the applicable period
specified in Section 1.2; cause the related Prospectus to be supplemented by any
required Prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 (or any similar provisions then in force) under the Securities Act; and
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such Registration Statement and Prospectus during
the applicable period in accordance with the intended methods of disposition by
the sellers thereof set forth in such Registration Statement as so amended or
such Prospectus as so supplemented.
(c) Notify the Notice Holders, the Purchaser, the Special
Counsel and the Managing Underwriters, if any, promptly, and (if requested by
any such person) confirm such notice in writing, (i) when a Prospectus, any
Prospectus supplement, a Registration Statement or a post-effective amendment to
a Registration Statement has been filed with the SEC, and, with respect to a
Registration Statement or any post-effective amendment, when the same has become
effective, (ii) of any request by the SEC or any other federal or state
governmental authority for amendments or supplements to a Registration Statement
or related Prospectus or for additional information, (iii) of the issuance by
the SEC or any other federal or state governmental authority of any stop order
suspending the effectiveness of a Registration Statement or the initiation or
threatening of any proceedings for that purpose, (iv) of the receipt by the
Company of any notification with respect to the suspension of the qualification
or exemption from qualification of any of the Registrable Securities for sale in
any jurisdiction or the initiation or threatening of any proceeding for such
purpose, (v) of the existence of any fact or happening of any event which makes
any statement of a material fact in such Registration Statement or related
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue or which would require the making of any changes in the
Registration Statement or Prospectus in order that, in the case of the
Registration Statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and that in the case of
the Prospectus, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, and (vi) of the Company's determination that a post-
effective amendment to a Registration Statement would be appropriate.
(d) Use its best efforts to obtain the withdrawal of any
order suspending the effectiveness of a Registration Statement, or the lifting
of any suspension of the qualification (or exemption from qualification) of any
of the Registrable Securities for sale in any jurisdiction, at the earliest
possible moment.
(e) If reasonably requested by the Purchaser or the Managing
Underwriters, if any, or the Holders of a majority of the Registrable Securities
being sold, (i) promptly incorporate in a Prospectus supplement or post-
effective amendment to a Registration Statement such information as the
Purchaser, the Special Counsel, the Company, the Managing Underwriters, if any,
or such Holders, in connection with any offering of Registrable Securities,
agree should be included therein as required by applicable law, and (ii) make
all
6
<PAGE>
required filings of such Prospectus supplement or such post-effective amendment
as soon as reasonably practicable after the Company has received notification of
the matters to be incorporated in such Prospectus supplement or post-effective
amendment; provided, that the Company shall not be required to take any actions
under this Section 1.3(e) that are not, in the reasonable opinion of counsel for
the Company, in compliance with applicable law.
(f) Furnish to each selling Holder, the Special Counsel and
the Purchaser, and each Managing Underwriter, if any, without charge, at least
one conformed copy of the Registration Statement or Statements and any amendment
thereto, including financial statements but excluding schedules, all documents
incorporated or deemed to be incorporated therein by reference and all exhibits
(unless requested in writing by such selling Holder, counsel, the Purchaser or
underwriter).
(g) Deliver to each selling Holder, the Special Counsel and
the Purchaser and each Managing Underwriter, if any, in connection with any
offering of Registrable Securities, without charge, as many copies of the
Prospectus or Prospectuses relating to such Registrable Securities (including
each preliminary prospectus) and any amendment or supplement thereto as such
persons may reasonably request; and the Company hereby consents to the use of
such Prospectus or each amendment or supplement thereto by each of the selling
Holders of Registrable Securities and the underwriters, if any, in connection
with any offering and sale of the Registrable Securities covered by such
Prospectus or any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities,
use its best efforts to register or qualify or cooperate with the selling
Holders, the Managing Underwriters, if any, and the Special Counsel in
connection with the registration or qualification (or exemption from such
registration or qualification) of such Registrable Securities for offer and sale
under the securities or Blue Sky laws of such jurisdictions within the United
States as any selling Holder or Managing Underwriter reasonably requests in
writing; use its best efforts to keep each such registration or qualification
(or exemption therefrom) effective during the period such Registration Statement
is required to be kept effective and do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by the applicable Registration Statement;
provided, that the Company will not be required to (i) qualify generally to do
business in any jurisdiction where it is not then so qualified or (ii) take any
action that would subject it to general service of process in suits or to
taxation in any such jurisdiction where it is not then so subject.
(i) Use its best efforts to cause the Registrable Securities
covered by the applicable Registration Statement to be registered with or
approved by such other governmental agencies or authorities within the United
States, except as may be required solely as a consequence of the nature of such
selling Holder, in which case the Company will cooperate in all reasonable
respects with the filing of such Registration Statement and the granting of such
approvals, as may be necessary to enable the selling Holder or Holders thereof
or the Managing Underwriters, if any, to consummate the disposition of such
Registrable Securities.
7
<PAGE>
(j) During any Selling Period (other than during a Deferral
Period), immediately upon learning of the existence of any fact or the
occurrence of any event as a result of which a Registration Statement shall
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, or a Prospectus shall contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, promptly prepare and file (subject
to the proviso in Section 1.3(a)) a post-effective amendment to each
Registration Statement or a supplement to the related Prospectus or any document
incorporated therein by reference or file any other required document (such as a
Current Report on Form 8-K) that would be incorporated by reference into the
Registration Statement so that the Registration Statement shall not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading,
and so that the Prospectus will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, as thereafter delivered to the
purchasers of the Registrable Securities being sold thereunder, and, in the case
of a post-effective amendment to a Registration Statement, use its best efforts
to cause it to become effective as soon as practicable.
(k) Enter into such agreements (including, in the event of
an Underwritten Offering undertaken with the reasonable consent of the Company,
an underwriting agreement in form, scope and substance as is customary in
Underwritten Offerings) and take all such other actions in connection therewith
(including, in the event of an Underwritten Offering, those reasonably requested
by the Managing Underwriters, if any, or the Holders of a majority of the
Registrable Securities being sold) in order to expedite or facilitate the
disposition of such Registrable Securities and in such connection, whether or
not an underwriting agreement is entered into, and if the registration is an
underwritten registration, (i) make such representations and warranties, subject
to the Company's ability to do so, to the Holders of such Registrable Securities
and the underwriters with respect to the business of the Company and its
subsidiaries, the Registration Statement, Prospectus and documents incorporated
by reference or deemed incorporated by reference, if any, in each case, in form,
substance and scope as are customarily made by issuers to underwriters in
underwritten offerings (provided that the scope and substance shall not be
materially different than those contained in the Purchase Agreement) and confirm
the same if and when requested; (ii) use its best efforts to obtain opinions of
counsel to the Company and updates thereof (which counsel and opinions (in form,
scope and substance) shall be reasonably satisfactory to the Managing
Underwriters, if any, Special Counsel and the Holders of a majority of the
Registrable Securities being sold) addressed to each of the underwriters
covering the matters customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by such Special
Counsel and Managing Underwriters; (iii) use its best efforts to obtain "cold
comfort" letters and updates thereof from the independent certified public
accountants of the Company (and, if necessary, any other certified public
accountants of any business acquired or to be acquired by the Company for which
financial statements and financial data are, or are required to be, included in
the Registration Statement), addressed to each of the Managing Underwriters, if
any, such letters to
8
<PAGE>
be in customary form and covering matters of the type customarily covered in
"cold comfort" letters in connection with Underwritten Offerings; and (iv)
deliver such documents and certificates as may be reasonably requested by the
Holders of a majority of the Registrable Securities being sold, the Special
Counsel and the Managing Underwriters, if any, to evidence the continued
validity of the representations and warranties of the Company and its
subsidiaries made pursuant to clause (i) above and to evidence compliance with
any customary conditions contained in the underwriting agreement or other
agreement entered into by the Company. The above shall be done at each closing
under such underwriting or similar agreement as and to the extent required
thereunder.
(l) If requested in connection with a disposition of
Registrable Securities pursuant to a Registration Statement, make available for
reasonable inspection by a single representative of the Holders of Registrable
Securities being sold, any Managing Underwriter participating in any disposition
of Registrable Securities, if any, and a single attorney and a single accountant
retained by such selling Holders or underwriter, financial and other records,
pertinent corporate documents and properties of the Company and its
subsidiaries, and cause the executive officers, directors and employees of the
Company and its subsidiaries to supply all information reasonably requested by
any such representative, in a manner reasonably acceptable to the Company,
Managing Underwriter, attorney or accountant in connection with such
disposition; subject to reasonable assurances by each such person that such
information will only be used in connection with matters relating to such
Registration Statement; provided, however, that such persons shall first agree
in writing with the Company that any information that is reasonably and in good
faith designated by the Company in writing as confidential at the time of
delivery of such information shall be kept confidential by such persons and
shall be used solely for the purposes of exercising rights under this Agreement,
unless (i) disclosure of such information is required by court or administrative
order or is necessary to respond to inquiries of regulatory authorities, (ii)
disclosure of such information is required by law (including any disclosure
requirements pursuant to Federal securities laws in connection with the filing
of any Registration Statement or the use of any prospectus referred to in this
Agreement), (iii) such information becomes generally available to the public
other than as a result of a disclosure or failure to safeguard by any such
person or (iv) such information becomes available to any such person from a
source other than the Company and such source is not bound by a confidentiality
agreement.
(m) Comply with all applicable rules and regulations of the
SEC and make generally available to its securityholders earning statements
(which need not be audited) satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder (or any similar rule promulgated under
the Securities Act) no later than 45 days after the end of any 12-month period
(or 90 days after the end of any 12-month period if such period is a fiscal
year) (i) commencing at the end of any fiscal quarter in which Registrable
Securities are sold to underwriters in a firm commitment or best efforts
underwritten offering and (ii) if not sold to underwriters in such an offering,
commencing on the first day of the first fiscal quarter of the Company
commencing after the effective date of a Registration Statement, which
statements shall cover said 12-month periods.
9
<PAGE>
(n) Cooperate with the selling Holders of Registrable
Securities to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold and not bearing any restrictive
legends; and enable such Registrable Securities to be in such denominations and
registered in such names as such Holders may request.
(o) Cause the Common Stock and the Warrants covered by the
Registration Statement to be listed on the NASDAQ NNM (or such other national
trading market as is reasonably acceptable to both the Company and the Holders)
not later than September 1, 1998 and promptly use its best efforts to ensure
that such listing becomes effective, and in connection therewith, to the extent
applicable, to use its best efforts (i) to make such filings under the Exchange
Act (e.g., the filing of a Registration Statement on Form 8-A) and (ii) to have
such filings declared effective thereunder.
(p) Cooperate and assist in any filings required to be made
with the National Association of Securities Dealers, Inc.
1.4 Holder's Obligations. Each Holder agrees, by acquisition of
the Warrants and Registrable Securities, that no Holder of Registrable
Securities shall be entitled to sell any of such Registrable Securities pursuant
to a Registration Statement or to receive a Prospectus relating thereto, unless
such Holder has furnished the Company with the notice required pursuant to
Section 1.2(d) hereof and such other information regarding such Holder and the
distribution of such Registrable Securities as may be required to be included in
the Registration Statement or the Prospectus or as the Company may from time to
time reasonably request. The Company may exclude from such registration the
Registrable Securities of any Holder who does not furnish such information
provided above for so long as such information is not so furnished. Each Holder
of Registrable Securities as to which any Registration Statement is being
effected agrees promptly to furnish to the Company all information required to
be disclosed in order to make the information previously furnished to the
Company by such Holder not misleading. Any sale of any Registrable Securities by
any Holder shall constitute a representation and warranty by such Holder that
the information relating to such Holder and its plan of distribution is as set
forth in the Prospectus delivered by such Holder in connection with such
disposition, that such Prospectus does not as of the time of such sale contain
any untrue statement of a material fact relating to such Holder or its plan of
distribution and that such Prospectus does not as of the time of such sale omit
to state any material fact relating to such Holder or its plan of distribution
necessary to make the statements in such Prospectus, in light of the
circumstances under which they were made, not misleading.
1.5 Expenses of Registration. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 1.2 including
(without limitation) all registration, filing and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company and the
reasonable fees and disbursements of Special Counsel shall be borne by the
Company.
1.6 Delay of Registration. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any
10
<PAGE>
controversy that might arise with respect to the interpretation or
implementation of this Section 1.
1.7 Indemnification. In the event any Registrable Securities
are included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, the partners or officers, directors and
stockholders of each Holder, legal counsel and accountants for each Holder, any
underwriter (as defined in the Act) for such Holder and each person, if any, who
controls such Holder or underwriter within the meaning of the Act or the 1934
Act, against any losses, claims, damages, or liabilities (joint or several) to
which they may become subject under the Act, the 1934 Act or any state
securities laws, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"): (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, (ii) 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, or (iii) any
violation or alleged violation by the Company of the Act, the 1934 Act, any
state securities laws or any rule or regulation promulgated under the Act, the
1934 Act or any state securities laws; and the Company will reimburse each such
Holder, underwriter or controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this subsection l.7(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability, or action
if such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the Company be liable in any such
case for any such loss, claim, damage, liability, or action to the extent that
it arises out of or is based upon a Violation which occurs in reliance upon and
in conformity with written information furnished expressly for use in connection
with such registration by any such Holder, underwriter or controlling person;
provided further, however, that the foregoing indemnity agreement with respect
to any preliminary prospectus shall not inure to the benefit of any Holder or
underwriter, or any person controlling such Holder or underwriter, from whom the
person asserting any such losses, claims, damages or liabilities purchased
shares in the offering (the "Shares"), if a copy of the prospectus (as then
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto) was not sent or given by or on behalf of such Holder or
underwriter to such person, if required by law so to have been delivered, at or
prior to the written confirmation of the sale of the Shares to such person, and
if the prospectus (as so amended or supplemented) would have cured the defect
giving rise to such loss, claim, damage or liability.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, legal counsel and
accountants for the Company, any underwriter, any other Holder selling
securities in such registration statement and any controlling person of any such
11
<PAGE>
underwriter or other Holder, against any losses, claims, damages, or liabilities
(joint or several) to which any of the foregoing persons may become subject,
under the Act, the 1934 Act or any state securities laws, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereto) arise
out of or are based upon any Violation, in each case to the extent (and only to
the extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder expressly for use in connection
with such registration; and each such Holder will reimburse any person intended
to be indemnified pursuant to this subsection l.7(b), any legal or other
expenses reasonably incurred by in connection with investigating or defending
any such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this subsection l.7(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder (which consent
shall not be unreasonably withheld) provided, that, in no event shall any
indemnity under this subsection l.7(b) exceed the gross proceeds from the
offering received by such Holder.
(c) Promptly after receipt by an indemnified party under
this Section 1.7 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.7, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.7, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 1.7.
(d) If the indemnification provided for in this Section 1.7
is held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information
12
<PAGE>
supplied by the indemnifying party or by the indemnified party and the parties'
relative intent, knowledge, access to information, and opportunity to correct or
prevent such statement or
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and Holders under this
Section 1.7 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.8 Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of such securities, provided: (a) the Company is, within a reasonable
time after such transfer, furnished with written notice of the name and address
of such transferee or assignee and the securities with respect to which such
registration rights are being assigned; (b) such transferee or assignee agrees
in writing to be bound by and subject to the terms and conditions of this
Agreement, including without limitation the provisions of Section 1.9 below; and
(c) such assignment shall be effective only if immediately following such
transfer the further disposition of such securities by the transferee or
assignee is restricted under the Act.
1.9 "Market Stand-Off" Agreement. Each Holder hereby agrees
that it will not, without the prior written consent of the Managing Underwriter,
during the period commencing on the date of the final prospectus relating to an
Underwritten Offering and ending on the date specified by the Company and the
Managing Underwriter (such period not to exceed ninety (90) days) (i) lend,
offer, pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, or otherwise transfer or dispose of, directly or indirectly, any
Registrable Securities (whether such shares or any such securities are then
owned by the Holder or are thereafter acquired), or (ii) enter into any swap or
other arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of the Registrable Securities, whether any
such transaction described in clause (i) or (ii) above is to be settled by
delivery of Common Stock or such other securities, in cash or otherwise. The
foregoing provisions of this Section 1.9 shall not apply to the sale of any
shares to an underwriter pursuant to an underwriting agreement and shall only be
applicable to the Holders if all (i) officers and directors, (ii) greater than
ten percent (10%) stockholders of the Company, (iii) Management Investor (as
defined in the Purchase Agreement) and (iv) any transferee of the Management
Investor's who received a greater than ten percent (10%) position from the
Management Investor (for so long as such transferee continues to hold a greater
than ten percent (10%) position), enter into similar agreements. The
underwriters in connection with a public offering of the Company's securities
are intended third party beneficiaries of this Section 1.9 and shall have the
right, power and authority to enforce the provisions hereof as though they were
a party hereto.
13
<PAGE>
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
1.10 Termination of Registration Rights. No Holder shall be
entitled to exercise any right provided for in this Section 1 after three (3)
years from the date hereof; provided that, in the event any Holder is deemed to
be an affiliate of the Company ("Affiliate Holder") subsequent to such three (3)
year period, the Company shall file, within 30 days of notice from the Affiliate
Holder, a new Registration Statement for an offering to be made on a continuous
basis pursuant to Rule 415 of the Securities Act registering the resale from
time to time by the Affiliate Holders thereof of all the Registrable Securities.
Such new Registration Statement shall be governed by all of the applicable
provisions of this Section 1, as if such registration was a Shelf Registration,
and shall remain in effect for a period of two (2) years.
2. Miscellaneous.
2.1 Successors and Assigns. Except as otherwise provided
herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties
(including transferees of any shares of Registrable Securities). Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
2.2 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Delaware as applied to agreements among
Delaware residents entered into and to be performed entirely within Delaware.
2.3 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
2.4 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
2.5 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified, two days
after deposit with an overnight courier service or five days after deposit with
the United States Post Office, by first class mail, postage prepaid and
addressed to the party to be notified at the address indicated for such party on
the signature page hereof, or at such other address as such party may designate
by ten (10) days' advance written notice to the other parties.
14
<PAGE>
2.6 Expenses. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
2.7 Entire Agreement: Amendments and Waivers. This Agreement
(including the Exhibits hereto, if any) constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof. Any term of 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 with the written
consent of the Company and the holders of a majority of the Registrable
Securities. Any amendment or waiver effected in accordance with this paragraph
shall be binding upon each holder of any Registrable Securities each future
holder of all such Registrable Securities, and the Company.
2.8 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
2.9 Aggregation of Stock. All shares of Registrable Securities
held or acquired by affiliated entities or persons shall be aggregated together
for the purpose of determining the availability of any rights under this
Agreement.
15
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
SYSTEM SOFTWARE ASSOCIATES, INC.
By:_______________________________
Title:____________________________
H&Q SSA INVESTORS, L.P.
By:_______________________________
(Signature)
Title:____________________________
<PAGE>
EXHIBIT 4.6
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("ACT")
AND APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE TRANSFERRED, SOLD OR
OTHERWISE DISPOSED OF EXCEPT WHILE SUCH A REGISTRATION IS IN EFFECT OR
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUCH STATE
SECURITIES LAWS.
THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT ARE SUBJECT TO THE
PROVISIONS OF A REGISTRATION RIGHTS AGREEMENT DATED AS OF SEPTEMBER __,
1997 AMONG THE COMPANY AND THE INVESTORS NAMED THEREIN, AS IN EFFECT FROM
TIME TO TIME, A COPY OF WHICH IS ON FILE AT THE OFFICES OF THE COMPANY.
SYSTEM SOFTWARE ASSOCIATES, INC.
COMMON STOCK PURCHASE WARRANT
Chicago, Illinois
No. 1. September __, 1997
System Software Associates, Inc., a Delaware corporation (the "Company"),
for value received, hereby certifies that Hambrecht & Quist LLC or registered
assigns, is entitled to purchase from the Company: ___________________
(_______________) duly authorized, validly issued, fully paid and nonassessable
shares of Common Stock, par value $0.0033 per share (the "Common Stock"), of the
Company at a purchase price per share equal to the Warrant Price (such number of
shares and Warrant Price as adjusted from time to time as provided herein)
exercisable, in whole or in part, at any time and from time to time during the
period commencing on September __, 1998, and ending September __, 2002 (the
"Warrant Expiration Date"), all subject to the terms, conditions and adjustments
set forth below in this Warrant (the "Warrant," and together with each other
Warrant issued on the date hereof and each Warrant issued in replacement of, or
upon transfer or exchange of, any Warrant, the "Warrants").
1. EXERCISE OR CASHLESS EXERCISE OF WARRANT.
1.1 Manner of Exercise or Cashless Exercise; Payment.
------------------------------------------------
1.1.1 Exercise. This Warrant may be exercised by the holder hereof,
--------
in whole or in part during normal business hours on any Business Day
on or prior to the Warrant Expiration Date, by surrender of this
Warrant to the Company at its office maintained pursuant to Section
13.2(a) hereof, accompanied by a subscription in substantially the
form attached to this Warrant as Exhibit A (or a reasonable facsimile
---------
thereof) duly executed by such holder and accompanied by payment, (i)
in cash by wire transfer of immediately available funds or by
<PAGE>
certified or official bank check payable to the order of the Company,
(ii) by cancellation of indebtedness owed to the holder hereof or
(iii) by any combination of such methods (provided that at least the
par value of the shares of Common Stock issuable upon exercise shall
have been paid in cash), in each case in the amount obtained by
multiplying (a) the number of shares of Common Stock (without giving
effect to any adjustment thereof) designated in such subscription by
(b) the Warrant Price, and such holder shall thereupon be entitled to
receive the number of duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock (or Other Securities) designated
in such subscription, as adjusted pursuant to Sections 2 through 4
hereof.
1.1.2 Cashless Exercise. This Warrant may also be exercised by the
-----------------
holder hereof, in whole or in part, to acquire shares of Common Stock,
during normal business hours on any Business Day on or prior to the
Warrant Expiration Date, by surrender of this Warrant to the Company
at its office maintained pursuant to Section 13.2(a) hereof,
accompanied by a cashless exercise notice in substantially the form
attached as Exhibit B to this Warrant (or a reasonable facsimile
---------
thereof) duly executed by such holder, and such holder shall thereupon
be entitled to receive a number of duly authorized, validly issued,
fully paid and nonassessable shares of Common Stock (or Other
Securities) equal to:
(i) an amount equal to:
(a) an amount equal to (x) the number of shares of Common
Stock (or Other Securities) determined as provided in
Sections 1 through 4 hereof which such holder would be
entitled to receive upon exercise of this Warrant for the
number of shares of Common Stock designated in such cashless
exercise notice multiplied by (y) the Current Market Price
of each such share of Common Stock (or such Other
Securities) so receivable upon such exercise
minus
(b) an amount equal to (x) the number of shares of Common
Stock (without giving effect to any adjustment thereof)
designated in such cashless exercise notice multiplied by
(y) the Warrant Price
divided by
(ii) such Current Market Price of each such share of Common Stock
(or Other Securities).
For all purposes of this Warrant (other than this Section 1.1), any
reference herein to the exercise of this Warrant shall be deemed to include
a reference to the cashless exercise of this Warrant into Common Stock (or
Other Securities) in accordance with the terms of this Section 1.1.2.
2
<PAGE>
1.2. When Exercise Effective. Each exercise of this Warrant shall be deemed
-----------------------
to have been effected immediately prior to the close of business on the
Business Day on which this Warrant shall have been surrendered to the
Company as provided in Section 1.1 hereof (and in the case of exercise
pursuant to Section 1.1.1, provided that the holder has paid the
consideration required thereby), and at such time the Person or Persons in
whose name or names any certificate or certificates for shares of Common
Stock (or Other Securities) shall be issuable upon such exercise as
provided in Section 1.3 hereof shall be deemed to have become the holder or
holders of record thereof.
1.3. Delivery of Stock Certificates, etc. As soon as practicable after each
-----------------------------------
exercise of this Warrant, in whole or in part, and in any event within five
Business Days thereafter, the Company at its expense (including the payment
by it of any applicable issue taxes) will direct the Company's transfer
agent to issue and deliver in the name of the holder hereof or, subject to
Section 10 hereof, as such holder (upon payment by such holder of any
applicable transfer taxes) may direct:
(a) a certificate or certificates for the number of duly
authorized, validly issued, fully paid and nonassessable
shares of Common Stock (or Other Securities) to which such
holder shall be entitled upon such exercise plus, in lieu of
any fractional share to which such holder would otherwise be
entitled, cash in an amount equal to the same fraction of
the Market Price per share on the Business Day next
preceding the date of such exercise; and
(b) in case such exercise is in part only, a new Warrant or
Warrants of like tenor, dated the date hereof and calling in
the aggregate on the face or faces thereof for the number of
shares of Common Stock equal (without giving effect to any
adjustment thereof) to the number of such shares called for
on the face of this Warrant minus the number of such shares
designated by the holder upon such exercise as provided in
Section 1.1 hereof.
2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES.
2.1. General; Number of Shares; Warrant Price. The number of and kind of
----------------------------------------
securities purchasable upon exercise of this Warrant and the Exercise Price
shall be subject to adjustment from time to time as provided in this
Section 2. The number of shares of Common Stock which the holder of this
Warrant shall be entitled to receive upon each exercise hereof shall be
determined by multiplying the number of shares of Common Stock which would
otherwise (but for the provisions of this Section 2) be issuable upon such
exercise, as designated by the holder hereof pursuant to Section 1.1
hereof, by the fraction of which (a) the numerator is the Initial Warrant
Price and (b) the denominator is the Warrant Price in effect on the date of
such exercise. The "Warrant Price" shall initially be the Initial Warrant
Price, shall be adjusted and readjusted from time to time as
3
<PAGE>
provided in this Section 2 and, as so adjusted or readjusted, shall remain
in effect until a further adjustment or readjustment thereof is required by
this Section 2.
2.2. Adjustment of Warrant Price.
---------------------------
2.2.1 Issuance of Additional Shares of Common Stock. Subject to
---------------------------------------------
Section 2.6, in case the Company at any time or from time to time
after the date hereof shall issue or sell Additional Shares of Common
Stock (including Additional Shares of Common Stock deemed to be issued
pursuant to Section 2.3 or 2.4 hereof) without consideration or for a
consideration per share less than the Warrant Price in effect
immediately prior to such issue or sale, then, and in each such case,
subject to Section 2.5 hereof, such Warrant Price shall be reduced,
concurrently with such issue or sale, to a price (calculated to the
nearest .001 of a cent) determined by multiplying such Warrant Price
by a fraction:
(a) the numerator of which shall be (i) the number of
shares of Common Stock outstanding immediately prior to such
issue or sale plus (ii) the Common Stock issuable upon
exercise of the Warrants plus (iii) the number of shares of
Common Stock which the aggregate consideration received by
the Company for the total number of such Additional Shares
of Common Stock so issued or sold would purchase at the
Warrant Price; and
(b) the denominator of which shall be the number of shares
of Common Stock (including the Additional Shares of Common
Stock) outstanding (or deemed outstanding) immediately after
such issue or sale plus the Common Stock issuable upon
exercise of the Warrants.
No adjustment of the Warrant Price pursuant to this Section 2.2 shall
have the effect of increasing the Warrant Price above the Warrant Price in
effect immediately prior to such adjustment.
2.2.2 Dividends and Distributions. In case the Company at any time or
---------------------------
from time to time after the date hereof shall declare, order, pay or
make a dividend or other distribution (including without limitation
any distribution of cash, other or additional stock or other
securities or property or Options, by way of dividend or spin-off,
reclassification, recapitalization or similar corporate rearrangement
or otherwise) on the Common Stock, other than a dividend payable in
Additional Shares of Common Stock, then, and in each such case,
subject to Section 2.6 hereof, the Warrant Price in effect immediately
prior to the close of business on the record date fixed for the
determination of holders of any class of securities entitled to
receive such dividend or distribution shall be reduced, effective as
of the close of business on such record date, to a price (calculated
to the nearest .001 of a cent) determined by multiplying such Warrant
Price by a fraction, the numerator of which shall be (x) the Current
Market Price in effect on such record
4
<PAGE>
date or, if the Common Stock trades on an ex-dividend basis, on the
date prior to the commencement of ex-dividend trading, less the amount
of such dividend or distribution (as determined in good faith by the
Board of Directors of the Company) applicable to one share of Common
Stock, and the denominator of which shall be (y) such Current Market
Price.
2.3. Treatment of Options and Convertible Securities. Subject to Section
-----------------------------------------------
2.6, in case the Company at any time or from time to time after the date
hereof shall issue, sell, grant or assume, or shall fix a record date for
the determination of holders of any class of securities entitled to
receive, any Options or Convertible Securities, then, and in each such
case, the maximum number of Additional Shares of Common Stock (as set forth
in the instrument relating thereto, without regard to any provisions
contained therein for a subsequent adjustment of such number the purpose of
which is to protect against dilution) at any time issuable upon the
exercise of such Options or, in the case of Convertible Securities and
Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued
as of the time of such issue, sale, grant or assumption or, in case such a
record date shall have been fixed, as of the close of business on such
record date (or, if the Common Stock trades on an ex-dividend basis, on the
date prior to the commencement of ex-dividend trading); provided, however,
that such Additional Shares of Common Stock shall not be deemed to have
been issued unless the consideration per share of such shares would be less
than the Warrant Price in effect on the date of and immediately prior to
such issue, sale, grant or assumption or immediately prior to the close of
business on such record date (or, if the Common Stock trades on an ex-
dividend basis, on the date prior to the commencement of ex-dividend
trading), as the case may be; and provided, further, that in any such case
in which Additional Shares of Common Stock are deemed to be issued:
(a) no further adjustment of the Warrant Price shall be
made upon the exercise of such Options or the conversion or
exchange of such Convertible Securities and the consequent
issue or sale of Convertible Securities or shares of Common
Stock;
(b) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for
any increase in the consideration payable to the Company, or
decrease in the number of Additional Shares of Common Stock
issuable, upon the exercise, conversion or exchange thereof
(by change of rate or otherwise), the Warrant Price computed
upon the original issue, sale, grant or assumption thereof
(or upon the occurrence of the record date, or date prior to
the commencement of ex-dividend trading, as the case may be,
with respect thereto), and any subsequent adjustments based
thereon, shall, upon any such increase or decrease becoming
effective, be recomputed to reflect such increase or
decrease insofar as it affects such Options, or the
5
<PAGE>
rights of conversion or exchange under such Convertible
Securities, which are outstanding at such time;
(c) upon the expiration (or purchase by the Company and
cancellation or retirement) of any such Options which shall
not have been exercised, or the expiration of any rights of
conversion or exchange under any such Convertible Securities
which (or purchase by the Company and cancellation or
retirement of any such Convertible Securities the rights of
conversion or exchange under which) shall not have been
exercised, the Warrant Price computed upon the original
issue, sale, grant or assumption thereof (or upon the
occurrence of the record date, or date prior to the
commencement of ex-dividend trading, as the case may be,
with respect thereto), and any subsequent adjustments based
thereon, shall, upon (and effective as of) such expiration
(or such cancellation or retirement, as the case may be), be
recomputed as if:
(i) in the case of Options or Convertible Securities,
the only Additional Shares of Common Stock issued or
sold were the Additional Shares of Common Stock, if
any, actually issued or sold upon the exercise of such
Options or the conversion or exchange of such
Convertible Securities and the consideration received
therefor was the consideration actually received by the
Company for the issue, sale, grant or assumption of all
such Options, whether or not exercised, plus the
consideration actually received by the Company upon
such exercise, or for the issue or sale of all such
Convertible Securities which were actually converted or
exchanged, plus the additional consideration, if any,
actually received by the Company upon such conversion
or exchange, and
(ii) in the case of Options for Convertible Securities,
only the Convertible Securities, if any, actually
issued or sold upon the exercise of such Options were
issued at the time of the issue, sale, grant or
assumption of such Options, and the consideration
received by the Company for the Additional Shares of
Common Stock deemed to have then been issued was the
consideration actually received by the Company for the
issue, sale, grant or assumption of all such Options,
whether or not exercised, plus the consideration deemed
to have been received by the Company upon the issue or
sale of such Convertible Securities with respect to
which such Options were actually exercised; and
6
<PAGE>
(d) no readjustment pursuant to clause (b) or (c) above
(either individually or cumulatively together with all prior
readjustments as made in respect of such Options or
Convertible Securities) shall have the effect of increasing
the Warrant Price by a proportion (relative to the Warrant
Price in effect immediately prior to such readjustment) in
excess of the inverse of the aggregate proportional
adjustment thereof made in respect of the issue, sale, grant
or assumption of such Options or Convertible Securities.
If the consideration provided for in any Option or the additional
consideration, if any, payable upon the conversion or exchange of any
Convertible Security shall be reduced, or the rate at which any Option is
exercisable or any Convertible Security is convertible into or exchangeable
for shares of Common Stock shall be increased, at any time under or by
reason of provisions with respect thereto designed to protect against
dilution, then, effective concurrently with each such change, the Warrant
Price then in effect shall first be adjusted to eliminate the effects (if
any) of the issuance (or deemed issuance) of such Option or Convertible
Security on the Warrant Price and then readjusted as if such Option or
Convertible Security had been issued on the date of such change with the
terms in effect after such change, but only if as a result of such
adjustment the Warrant Price then in effect hereunder is thereby reduced.
2.4. Treatment of Stock Dividends, Stock Splits, etc. If the Company shall
-----------------------------------------------
at any time prior to the expiration of this Warrant subdivide its Common
Stock, by split-up or otherwise, or combine its Common Stock or issue
additional shares of its Common Stock as a dividend with respect to any
shares of its Common Stock, the number of shares of Common Stock issuable
on the exercise of this Warrant shall forthwith be proportionately
increased in the case of a subdivision or stock dividend as provided in
Section 2.1, or proportionately decreased in the case of a combination as
provided in Section 2.1. Appropriate adjustments shall also be made to the
purchase price payable per share as provided in Section 2.1, but the
aggregate purchase price payable for the total number of shares of Common
Stock purchasable under this Warrant (as adjusted) shall remain the same.
Any adjustment under this Section 2.4 shall become effective at the close
of business on the date the subdivision or combination becomes effective,
or as of the record date of such dividend, or in the event that no record
date is fixed, upon the making of such dividend.
In case of any reclassification, capital reorganization, or change in
the Common Stock of the Company (other than as a result of a subdivision,
combination, or stock dividend provided for in the foregoing paragraph),
then, as a condition of such reclassification, reorganization, or change,
lawful provision shall be made, and duly executed documents evidencing the
same from the Company or its successor shall be delivered to the holder of
this Warrant, so that the holder of this Warrant shall have the right at
any time prior to the expiration of this Warrant to purchase, at a total
price equal to that payable upon the exercise of this Warrant, the kind and
amount of shares of stock and other securities and property receivable in
connection with such reclassification,
7
<PAGE>
reorganization, or change by a holder of the same number of shares of
Common Stock as were purchasable by the holder of this Warrant immediately
prior to such reclassification, reorganization, or change. In any such case
appropriate provisions shall be made with respect to the rights and
interest of the holder of this Warrant so that the provisions hereof shall
thereafter be applicable with respect to any shares of stock or other
securities and property deliverable upon exercise hereof, and appropriate
adjustments shall be made to the purchase price per share payable
hereunder, provided the aggregate purchase price shall remain the same.
2.5. Minimum Adjustment of Warrant Price. If the amount of any adjustment
-----------------------------------
of the Warrant Price required pursuant to this Section 2 would be less than
one-tenth (1/10) of one percent (1%) of the Warrant Price in effect at the
time such adjustment is otherwise so required to be made, such amount shall
be carried forward and adjustment with respect thereto made at the time of
and together with any subsequent adjustment which, together with such
amount and any other amount or amounts so carried forward, shall aggregate
at least one tenth (1/10) of one percent (1%) of such Warrant Price.
2.6. Shares Deemed Outstanding. For all purposes of the computations to be
-------------------------
made pursuant to this Section 2: (i) there shall be deemed to be
outstanding all shares of Common Stock issuable (A) pursuant to the
exercise of Options outstanding as of the date of this Warrant granted to
employees, directors, consultants and other persons under any Company stock
option, bonus or other incentive plan and any Options issued after the date
of this Warrant to any such persons under such plans provided that with
respect to Options issued after the date of this Warrant the exercise price
of such Options shall equal or exceed the Market Price of the Company's
Common Stock on the date of issuance; provided, that the aggregate number
-------- ----
of shares of Common Stock deemed outstanding pursuant to this clause (i)(A)
shall not exceed 6,000,000 shares and (B) pursuant to the exercise of any
other Options and conversion of Convertible Securities outstanding on the
date of this Warrant which have an exercise or conversion price equal to or
greater than the Initial Warrant Price, including without limitation the
Warrants, the Public Securities (as defined in the Purchase Agreement) and
(C) pursuant to the exercise of Warrants issued as of March 3, 1997 to
certain lenders for an aggregate of 775,000 shares of Common Stock; (ii)
immediately after any Additional Shares of Common Stock are deemed to have
been issued pursuant to Section 2.3 or 2.4 hereof, such Additional Shares
shall be deemed to be outstanding; (iii) treasury shares shall not be
deemed to be outstanding; and (iv) notwithstanding anything to the contrary
contained in this Section 2, no adjustment shall be made in the Warrant
Price upon the issuance of shares of Common Stock pursuant to Options and
Convertible Securities deemed to be outstanding pursuant to clause (i)
hereof or upon the grant of any such Options deemed to be outstanding
pursuant to clause (i) hereof.
3. CONSOLIDATION, MERGER, ETC.
3.1. Adjustments for Consolidation, Merger, Sale of Assets, Reorganization,
----------------------------------------------------------------------
etc. In case the Company after the date hereof (a) shall consolidate with
---
or merge into any other
8
<PAGE>
Person and shall not be the continuing or surviving corporation of such
consolidation or merger, or (b) shall permit any other Person to
consolidate with or merge into the Company and the Company shall be the
continuing or surviving Person but, in connection with such consolidation
or merger, the Common Stock or Other Securities shall be changed into or
exchanged for stock or other securities of any other Person or cash or any
other property, or (c) shall transfer all or substantially all of its
properties or assets to any other Person, or (d) shall effect a capital
reorganization or reclassification of the Common Stock or Other Securities
(other than a capital reorganization or reclassification to the extent that
such capital reorganization or reclassification results in the issue of
Additional Shares of Common Stock for which adjustment in the Warrant Price
is provided in Section 2.2.1 or 2.2.2 hereof), then, and in the case of
each such transaction, proper provision shall be made so that, upon the
basis and the terms and in the manner provided in this Warrant, the holder
of this Warrant, upon the exercise hereof at any time after the
consummation of such transaction, shall be entitled to receive (at the
aggregate Warrant Price in effect at the time of such consummation for all
Common Stock or Other Securities issuable upon such exercise immediately
prior to such consummation), in lieu of the Common Stock or Other
Securities issuable upon such exercise prior to such consummation, the
greatest amount of securities, cash or other property to which such holder
would actually have been entitled as a shareholder upon such consummation
if such holder had exercised the rights represented by this Warrant
immediately prior thereto, subject to adjustments (subsequent to such
consummation) as nearly equivalent as possible to the adjustments provided
for in Sections 2, 3 and 4 hereof; provided, however, that if a purchase,
tender or exchange offer shall have been made to and accepted by the
holders of more than 50% of the outstanding shares of Common Stock, and if
the holder of such Warrants so designates in a notice given to the Company
on or before the date immediately preceding the date of the consummation of
such transaction, the holder of such Warrants shall be entitled to receive
the greatest amount of securities, cash or other property to which such
holder would actually have been entitled as a shareholder if the holder of
such Warrants had exercised such Warrants prior to the expiration of such
purchase, tender or exchange offer and accepted such offer, subject to
adjustments (from and after the consummation of such purchase, tender or
exchange offer) as nearly equivalent as possible to the adjustments
provided for in Sections 2, 3 and 4 hereof.
3.2. Assumption of Obligations. Notwithstanding anything contained in the
-------------------------
Warrants or in the Purchase Agreement to the contrary, the Company will not
effect any of the transactions described in clauses (a) through (d) of
Section 3.1 hereof unless, prior to the consummation thereof, each person
(other than the Company) which may be required to deliver any stock,
securities, cash or property upon the exercise of this Warrant as provided
herein shall assume, by written instrument delivered to, and reasonably
satisfactory to, the holder of this Warrant, (a) the obligations of the
Company under this Warrant (and if the Company shall survive the
consummation of such transaction, such assumption shall be in addition to,
and shall not release the Company from, any continuing obligations of the
Company under this Warrant), (b) the obligations of the Company under the
Registration Rights Agreement and (c) the obligation to deliver to
9
<PAGE>
such holder such shares of stock, securities, cash or property as, in
accordance with the foregoing provisions of this Section 3, such holder may
be entitled to receive, and such Person shall have similarly delivered to
such holder an opinion of counsel for such Person, which counsel shall be
reasonably satisfactory to such holder, stating that this Warrant shall
thereafter continue in full force and effect and the terms hereof
(including without limitation all of the provisions of this Section 3)
shall be applicable to the stock, securities, cash or property which such
Person may be required to deliver upon any exercise of this Warrant or the
exercise of any rights pursuant hereto. Nothing in this Section 3 shall be
deemed to authorize the Company to enter into any transaction not otherwise
permitted by the provisions hereof or by the terms of the Purchase
Agreement.
4. OTHER DILUTIVE EVENTS. In case any event shall occur as to which the
provisions of Section 2 or 3 hereof are not strictly applicable but the failure
to make any adjustment would not, in the opinion of the holder of this Warrant,
fairly protect the purchase rights represented by this Warrant in accordance
with the essential intent and principles of such Sections, then, in each such
case, at the request of such holder, the Company shall (at the expense of such
holder) appoint a firm of independent investment bankers of recognized national
standing (which shall be completely independent of the Company and shall be
satisfactory to the holder of this Warrant), which shall give their opinion upon
the adjustment, if any, on a basis consistent with the essential intent and
principles established in Sections 2 and 3 hereof, necessary to preserve,
without dilution, the purchase rights represented by this Warrant. Upon receipt
of such opinion, the Company will promptly mail a copy thereof to the holder of
this Warrant and shall make the adjustments described therein.
5. NO DILUTION OR IMPAIRMENT. The Company will not, by amendment of its
certificate of incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the holder of
this Warrant against dilution or other impairment. Without limiting the
generality of the foregoing, the Company (a) will not permit the par value of
any shares of stock receivable upon the exercise of this Warrant to exceed the
amount payable therefor upon such exercise, (b) will take all such action as may
be necessary or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable shares of stock on the exercise of the
Warrants from time to time outstanding, and (c) will not take any action which
results in any adjustment of the Warrant Price if the total number of shares of
Common Stock (or Other Securities) issuable after the action upon the exercise
of all of the Warrants would exceed the total number of shares of Common Stock
(or Other Securities) then authorized by the Company's certificate of
incorporation and available for the purpose of issue upon such exercise.
6. ACCOUNTANTS' REPORT AS TO ADJUSTMENTS. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable upon
the exercise of this Warrant, the Company at its expense will promptly compute
such adjustment or readjustment in accordance with the terms of this Warrant and
cause independent certified public
10
<PAGE>
accountants of recognized national standing (which may be the regular auditors
of the Company) selected by the Company to verify such computation (other than
any computation of the fair value of property as determined in good faith by the
Board of Directors of the Company) and prepare a report setting forth such
adjustment or readjustment and showing in reasonable detail the method of
calculation thereof and the facts upon which such adjustment or readjustment is
based, including a statement of (a) the consideration received or to be received
by the Company for any Additional Shares of Common Stock issued or sold or
deemed to have been issued, (b) the number of shares of Common Stock outstanding
or deemed to be outstanding, and (c) the Warrant Price in effect immediately
prior to such issue or sale and as adjusted and readjusted (if required by
Section 2 hereof) on account thereof. The Company will forthwith mail a copy of
each such report to each holder of a Warrant and will, upon the written request
at any time of any holder of a Warrant, furnish to such holder a like report
setting forth the Warrant Price at the time in effect and showing in reasonable
detail how it was calculated. The Company will also keep copies of all such
reports at its office maintained pursuant to Section 13.2(a) hereof and will
cause the same to be available for inspection at such office during normal
business hours by any holder of a Warrant or any prospective purchaser of a
Warrant designated by the holder thereof.
7. AUTOMATIC EXERCISE. Notwithstanding any other provision of this Warrant,
this Warrant shall be automatically exercised immediately prior to the Warrant
Expiration Date without any further action on the part of the holder thereof in
the manner specified in Section 1.1.2.
8. NOTICES OF CORPORATE ACTION. In the event of:
(a) any taking by the Company of a record date of the
holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive
any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of
stock of any class or any other securities or property, or
to receive any other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of
the Company or any consolidation or merger involving the
Company and any other Person or any transfer of all or
substantially all the assets of the Company to any other
Person, or
(c) any voluntary or involuntary dissolution, liquidation
or winding-up of the Company, or
(d) any issuance of any Common Stock, Convertible Security
or Option by the Company,
the Company will mail to each holder of a Warrant notice specifying (i) the date
or expected date on which any such record is to be taken for the purpose of such
dividend, distribution or right, and the amount and character of such dividend,
distribution or right, (ii) the date or expected date
11
<PAGE>
on which any such reorganization, reclassification, recapitalization,
consolidation, merger, transfer, dissolution, liquidation or winding-up is to
take place, the time, if any such time is to be fixed, as of which the holders
of record of Common Stock (or Other Securities) shall be entitled to exchange
their shares of Common Stock (or Other Securities) for the securities or other
property deliverable upon such reorganization, reclassification,
recapitalization, consolidation, merger, transfer, dissolution, liquidation or
winding-up and a description in reasonable detail of the transaction and (iii)
the date of such issuance, together with a description of the security so issued
and the consideration received by the Company therefor. Such notice shall be
mailed at least 30 days prior to the date therein specified.
9. REGISTRATION OF COMMON STOCK. If this Warrant or any shares of Common Stock
required to be reserved for purposes of exercise of this Warrant require
registration with or approval of any governmental authority (including any self
regulatory body) under any federal or state law (other than the Securities Act)
before such shares may be issued upon exercise, the Company will, at its expense
and as expeditiously as possible prior to such issuance, use its best efforts to
cause such shares to be duly registered or approved, as the case may be, in
accordance with the terms of the Registration Rights Agreement. The shares of
Common Stock (and Other Securities) issuable upon exercise of this Warrant shall
constitute Registrable Securities (as such term is defined in the Registration
Rights Agreement). Each holder of this Warrant shall be entitled to all of the
benefits afforded to a holder of any such Registrable Securities under the
Registration Rights Agreement and such holder, by its acceptance of this
Warrant, agrees to be bound by and to comply with the terms and conditions of
the Registration Rights Agreement applicable to such holder as a holder of such
Registrable Securities.
10. RESTRICTIONS ON TRANSFER.
10.1. Restrictive Legends. Except as otherwise permitted by this Section
-------------------
10, each certificate for Common Stock (or Other Securities) issued upon the
exercise of any Warrant, each certificate issued upon the direct or
indirect transfer of any such Common Stock (or Other Securities) all
Warrants originally issued pursuant to the Purchase Agreement and each
Warrant issued upon direct or indirect transfer or in substitution for any
Warrant pursuant to Section 13 hereof shall be transferable only upon
satisfaction of the conditions specified in this Section 10 and shall be
stamped or otherwise imprinted with legends in substantially the form
required by the Registration Rights Agreement.
10.2 Notice of Proposed Transfer; Opinion of Counsel. Prior to any
-----------------------------------------------
transfer of any Restricted Securities which are not registered under an
effective registration statement under the Securities Act, the holder
thereof will give written notice to the Company of such holder's intention
to effect such transfer and to comply in all other respects with this
Section 10.2. Each such notice (a) shall describe the manner and
circumstances of the proposed transfer, and (b) shall designate counsel for
the holder giving such notice, which counsel shall be reasonably acceptable
to the Company. The holder giving such notice will submit a copy thereof to
the counsel designated in such notice. Subject to the foregoing, the
following provisions shall then apply:
12
<PAGE>
(i) If in the opinion of such counsel (which opinion shall
be reasonably acceptable to the Company), the proposed transfer
may be effected without registration of such Restricted
Securities under the Securities Act, such holder shall thereupon
be entitled to transfer such Restricted Securities in accordance
with the terms of the notice delivered by such holder to the
Company. Each certificate representing such Restricted Securities
issued upon or in connection with such transfer shall bear the
restrictive legends required by Section 10.1 hereof, unless the
related restrictions on transfer provided for in the Registration
Rights Agreement shall have ceased and terminated as to such
Restricted Securities pursuant to Section 10.3 hereof.
(ii) If in the opinion of such counsel the proposed transfer
may not legally be effected without registration of such
Restricted Securities under the Securities Act (such opinion to
state the basis of the legal conclusions reached therein),
thereafter such holder shall not be entitled to transfer such
Restricted Securities until either (x) receipt by the Company of
a further notice from such holder pursuant to the foregoing
provisions of this Section 10.2 and fulfillment of the provisions
of clause (i) above or (y) such Restricted Securities have been
effectively registered under the Securities Act.
Notwithstanding any other provision of this Section 10, no opinion of
counsel shall be necessary for a transfer of Restricted Securities by the holder
thereof to a subsidiary, shareholder, partner or other affiliate of such holder,
if the transferee agrees in writing to be subject to the terms hereof to the
same extent as if such transferee were the original purchaser hereof.
10.3 Termination of Restrictions. The restrictions imposed by this
---------------------------
Section 10 upon the transferability of Restricted Securities shall cease
and terminate as to any particular Restricted Securities (a) when such
Restricted Securities shall have been effectively registered under the
Securities Act, or (b) when, in the opinions of both counsel for the holder
thereof and counsel for the Company, such restrictions are no longer
required in order to insure compliance with the Securities Act or the terms
of the Registration Rights Agreement. Whenever such restrictions shall
cease and terminate as to any Restricted Securities, the holder thereof
shall be entitled to receive from the Company, without expense (other than
applicable transfer taxes, if any), new securities of like tenor not
bearing the applicable legends required by Section 10.1 hereof.
11. AVAILABILITY OF INFORMATION. The Company will comply with the reporting
requirements of Sections 13 and 15(d) of the Exchange Act and will comply with
all other public information reporting requirements of the Commission (including
Rule 144 promulgated by the Commission under the Securities Act) from time to
time in effect and relating to the availability of an exemption from the
Securities Act for the sale of any Restricted Securities. The Company will also
cooperate with each holder of any Restricted Securities in supplying such
information as may be necessary for such holder to complete and file any
information reporting forms
13
<PAGE>
presently or hereafter required by the Commission as a condition to the
availability of an exemption from the Securities Act for the sale of any
Restricted Securities. The Company will furnish to each holder of any Warrants,
promptly upon their becoming available, copies of all financial statements,
reports, notices and proxy statements sent or made available generally by the
Company to its stockholders, and copies of all regular and periodic reports and
all registration statements and prospectuses filed by the Company with any
securities exchange or with the Commission.
12. RESERVATION OF STOCK, ETC. The Company will at all times reserve and keep
available, solely for issuance and delivery upon exercise of the Warrants, the
number of shares of Common Stock of each class (or Other Securities) from time
to time issuable upon exercise of all Warrants at the time outstanding. All
shares of Common Stock (or Other Securities issuable upon exercise of any
Warrants shall be duly authorized and, when issued upon such exercise, shall be
validly issued and, in the case of shares, fully paid and nonassessable with no
liability on the part of the holders thereof.
13. OWNERSHIP, TRANSFER AND SUBSTITUTION OF WARRANTS.
13.1. Ownership of Warrants. The Company may treat the person in whose
---------------------
name any Warrant is registered on the register kept at the office of the
Company maintained pursuant to Section 13.2(a) hereof as the owner and
holder thereof for all purposes, notwithstanding any notice to the
contrary, except that, if and when any Warrant is properly assigned in
blank, the Company may (but shall not be obligated to) treat the bearer
thereof as the owner of such Warrant for all purposes, notwithstanding any
notice to the contrary. Subject to Section 11 hereof, a Warrant, if
properly assigned, may be exercised by a new holder without a new Warrant
first having been issued. Effective upon the partial exercise of this
Warrant, the Company shall automatically issue to the holder thereof a new
Warrant of like tenor, dated this date of such exercise, with the aggregate
number of shares of Common Stock for which the new Warrant may be exercised
equal to the number of shares of Common Stock for which the existing
Warrant may be exercised immediately prior to such partial exercise, minus
the number of shares of Common Stock acquired upon such exercise.
13.2. Office; Transfer and Exchange of Warrants.
-----------------------------------------
(a) The Company will maintain an office (which may be an
agency maintained at a bank) in Chicago, Illinois where
notices, presentations and demands in respect of this
Warrant may be made upon it. Such office shall be maintained
at 500 W. Madison, Chicago, Illinois 60661 until such time
as the Company shall notify the holders of the Warrants of
any change of location of such office within Chicago,
Illinois.
(b) The Company shall cause to be kept at its office
maintained pursuant to Section 13.2(a) hereof a register for
the registration and transfer of the Warrants. The names and
addresses of holders of
14
<PAGE>
Warrants, the transfers thereof and the names and addresses
of transferees of Warrants shall be registered in such
register. The Person in whose name any Warrant shall be so
registered shall be deemed and treated as the owner and
holder thereof for all purposes of this Warrant, and the
Company shall not be affected by any notice or knowledge to
the contrary.
(c) Upon the surrender of any Warrant, properly endorsed,
for registration of transfer or for exchange at the office
of the Company maintained pursuant to Section 13.2(a)
hereof, the Company at its expense will (subject to
compliance with Section 10 hereof, if applicable) execute
and deliver to or upon the order of the holder thereof a new
Warrant or Warrants of like tenor, in the name of such
holder or as such holder (upon payment by such holder of any
applicable transfer taxes) may direct, calling in the
aggregate on the face or faces thereof for the number of
shares of Common Stock called for on the face or faces of
the Warrant or Warrants so surrendered.
(d) Notwithstanding anything to the contrary herein, no
holder of any Warrant shall transfer all or any portion of
this Warrant without the prior written consent of the
Company (x) before September 1, 1998 and (y) to any
"competitor" of the Company as listed on Schedule 13.2
hereto prior to the registration under the Securities Act of
1933, as amended (the "Act") of the transfer of Warrants
pursuant to the Registration Rights Agreement.
13.3. Replacement of Warrants. Upon receipt of evidence reasonably
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation
of any Warrant and, in the case of any such loss, theft or destruction of
any Warrant held by a Person, upon delivery of indemnity reasonably
satisfactory to the Company in form and amount or, in the case of any such
mutilation, upon surrender of such Warrant for cancellation at the office
of the Company maintained pursuant to Section 13.2(a) hereof, the Company
at its expense will execute and deliver, in lieu thereof, a new Warrant of
like tenor and dated the date hereof.
14. DEFINITIONS. As used herein, unless the context otherwise requires, the
following terms have the following respective meanings:
Additional Shares of Common Stock: All shares (including treasury shares)
---------------------------------
of Common Stock issued or sold (or, pursuant to Section 2.3 or 2.4 hereof,
deemed to be issued) by the Company after the date hereof, whether or not
subsequently reacquired or retired by the Company, other than the shares of
Common Stock issued upon the exercise of Warrants.
Business Day: Any day other than a Saturday or a Sunday or a day on which
------------
commercial banking institutions in Boston, Massachusetts, New York, New York or
Chicago, Illinois are
15
<PAGE>
authorized by law to be closed. Any reference to "days" (unless Business Days
are specified) shall mean calendar days.
Commission: The Securities and Exchange Commission or any other federal
----------
agency at the time administering the Securities Act.
Common Stock: As defined in the introduction to this Warrant, such term to
------------
include any stock into which such Common Stock shall have been changed or any
stock resulting from any reclassification of such Common Stock, and all other
stock of any class or classes (however designated) of the Company the holders of
which have the right, without limitation as to amount, either to all or to a
share of the balance of current dividends and liquidating dividends after the
payment of dividends and distributions on any shares entitled to preference.
Company: As defined in the introduction to this Warrant, such term to
-------
include any corporation which shall succeed to or assume the obligations of the
Company hereunder in compliance with Section 3 hereof.
Convertible Securities: Any evidences of indebtedness, shares of stock
----------------------
(other than Common Stock) or other securities directly or indirectly convertible
into or exchangeable for Additional Shares of Common Stock or other Convertible
Securities.
Current Market Price: On any date specified herein, the average daily
--------------------
Market Price during the period of the most recent 20 days, ending on such date,
on which the national securities exchanges were open for trading, except that if
no class of the Common Stock is then listed or admitted to trading on any
national securities exchange or quoted in the over-the-counter market for any
portion of such 20-day period, the Current Market Price shall be the Market
Price on such date.
Exchange Act: The Securities Exchange Act of 1934, or any similar federal
------------
statute, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time.
Exercise Price: The Warrant Price.
--------------
Initial Warrant Price: An amount equal to $___________ per share.
---------------------
Market Price: On any date specified herein, the amount per share of Common
------------
Stock equal to (a) the last sale price of Common Stock, regular way, on such
date or, if no such sale takes place on such date, the average of the closing
bid and asked prices thereof on such date, in each case as officially reported
on the principal national securities exchange on which Common Stock is then
listed or admitted to trading, or (b) if Common Stock is not then listed or
admitted to trading on any national securities exchange but is designated as a
national market system security by the NASD, the last trading price of Common
Stock on such date, or (c) if there shall have been no trading on such date or
if Common Stock is not so designated, the average of the closing bid and asked
prices of Common Stock on such date as shown by the NASD automated quotation
system, or (d) if Common Stock is not then listed or admitted to trading on any
16
<PAGE>
national exchange or quoted in the over-the-counter market, the fair value
thereof determined in good faith by the Board of Directors of the Company as of
a date which is within 15 days of the date as of which the determination is to
be made.
NASD: The National Association of Securities Dealers, Inc.
----
Options: Rights, options or warrants to subscribe for, purchase or
-------
otherwise acquire either Additional Shares of Common Stock or Convertible
Securities.
Other Securities: Any stock (other than Common Stock) and other securities
----------------
of the Company or any other Person which the holders of the Warrants at any time
shall be entitled to receive, or shall have received, upon the exercise of the
Warrants, in lieu of or in addition to Common Stock, or which at any time shall
be issuable or shall have been issued in exchange for or in replacement of
Common Stock or Other Securities pursuant to Section 3 hereof or otherwise.
Person: A corporation, an association, a partnership, an organization, a
------
business, an individual, a government or political subdivision thereof or a
governmental agency.
Registration Rights Agreement: The Registration Rights Agreement with
-----------------------------
respect to the Warrants and dated as of September __, 1997.
Required Warrant Holders: Holders of a majority of the numbers of shares
------------------------
of Common Stock issuable upon exercise of Warrant (giving effect to the
provisions of Sections 1 through 4 hereof).
Restricted Securities: All of the following: (a) any Warrants bearing the
---------------------
applicable legend or legends referred to in Section 10.1 hereof, (b) any shares
of Common Stock (or Other Securities) which have been issued upon the exercise
of Warrants and which are evidenced by a certificate or certificates bearing the
applicable legend or legends referred to in such Section, (c) unless the context
otherwise requires, any shares of Common Stock (or Other Securities) which are
at the time issuable upon the exercise of Warrants and which, when so issued,
will be evidenced by a certificate or certificates bearing the applicable legend
or legends referred to in such Section.
Securities Act: The Securities Act of 1933, or any similar federal
--------------
statute, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time.
Warrant Price: As defined in Section 2.1 hereof.
-------------
Warrants: As defined in the introduction to this Warrant.
--------
15. REMEDIES. The Company stipulates that the remedies at law of the holder of
this Warrant in the event of any default or threatened default by the Company in
the performance of or compliance with any of the terms of this Warrant are not
and will not be adequate and that, to the fullest extent permitted by law, such
terms may be specifically enforced by a decree for the
17
<PAGE>
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.
16. NO RIGHTS OR LIABILITIES AS STOCKHOLDER. Nothing contained in this Warrant
shall be construed as conferring upon the holder hereof any rights as a
stockholder of the Company or as imposing any obligation on such holder to
purchase any securities or as imposing any liabilities on such holder as a
stockholder of the Company, whether such obligation or liabilities are asserted
by the Company or by creditors of the Company.
17. NOTICES. Any notice or other communication in connection with this Warrant
shall be deemed to be delivered if in writing (or in the form of a telex or
telecopy) addressed as hereinafter provided and if either (x) actually delivered
at said address (evidenced in the case of a telex by receipt of the correct
answer back) or (y) in the case of a letter, three Business Days shall have
elapsed after the same shall have been deposited in the United States mails,
postage prepaid and registered or certified: (a) if to any holder of any
Warrant, at the registered address of such holder as set forth in the register
kept at the office of the Company maintained pursuant to Section 13.2(a) hereof;
or (b) if to the Company, to the attention of its President at its office
maintained pursuant to Section 13.2(a) hereof; provided, however, that the
exercise of any Warrant shall be effective in the manner provided in Section 1
hereof.
18
<PAGE>
19. MISCELLANEOUS. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the Company
and the holders of Warrants exercisable for two-thirds (66 2/3%) of the shares
of Common Stock for which the Warrants shall be exercisable at such time;
provided, however, that any such change, waiver, discharge or termination which
- -------- -------
reduces the number of shares of Common Stock for which this Warrant is
exercisable or which affects the Initial Warrant Price, the Warrant Exercise
Date, the Warrant Expiration Date or the definition of "Required Warrant
Holders," or which amends this Section 19, shall not be effective unless and
until an instrument has been signed in writing by each holder of Warrants. This
Warrant shall be construed and enforced in accordance with and governed by the
laws of the State of Delaware. The Section headings in this Warrant are for
purposes of convenience only and shall not constitute a part hereof.
SYSTEM SOFTWARE ASSOCIATES, INC.
By:______________________________
Title:
<PAGE>
Exhibit A
---------
FORM OF SUBSCRIPTION
[To be executed only upon exercise of Warrant]
To [ISSUER]
The undersigned registered holder of the within Warrant hereby irrevocably
exercises such Warrant for, and purchases thereunder, __________/1/ shares of
the Common Stock and herewith makes payment of $ therefor, and requests
that the certificates for such shares be issued in the name of, and delivered to
, whose address is .
Dated: ___________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
___________________________________
(Street Address)
___________________________________
(City) (State) (Zip Code)
____________________
/1/ Insert here upon an exercise of Warrant, the number of shares called for
on the face of this Warrant (or, in the case of a partial exercise, the portion
thereof as to which this Warrant is being exercised), in either case without
making any adjustment for Additional Shares of Common Stock or any other stock
or other securities or property or cash which, pursuant to the adjustment
provisions of this Warrant, may be delivered upon exercise. In the case of a
partial exercise of Warrant, a new Warrant or Warrants will be issued and
delivered, representing the unexercised portion of Warrant, to the holder
surrendering the Warrant.
E-1
<PAGE>
Exhibit B
---------
FORM OF CASHLESS EXERCISE NOTICE
[To be executed only upon cashless exercise of Warrant]
To [ISSUER]
The undersigned registered holder of the within Warrant hereby irrevocably
exercises such Warrant with respect to __________/2/ shares of the Common Stock
which such holder would be entitled to receive upon the exercise hereof, and
requests that the certificates for such shares be issued in the name of, and
delivered to , whose address is .
Dated: ___________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
___________________________________
(Street Address)
___________________________________
(City) (State) (Zip Code)
____________________
/2/ Insert here upon exercise of Warrant, the number of shares called for on
the face of this Warrant (or, in the case of a partial exercise, the portion
thereof as to which this Warrant is being exercised), in either case without
making any adjustment for Additional Shares of Common Stock or any other stock
or other securities or property or cash which, pursuant to the adjustment
provisions of this Warrant, may be delivered upon exercise. In the case of a
partial exercise of Warrant, a new Warrant or Warrants will be issued and
delivered, representing the unexercised portion of Warrant, to the holder
surrendering the Warrant.
E-2
<PAGE>
FORM OF ASSIGNMENT
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of the within Warrant
hereby sells, assigns and transfers unto ___________ the right represented by
such Warrant to purchase __________/3/ shares of Common Stock as provided
herein, of System Software Associates, Inc. to which such Warrant relates, and
appoints ____________ Attorney to make such transfer on the books of System
Software Associates, Inc. maintained for such purpose, with full power of
substitution in the premises.
Dated: __________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
__________________________________
(Street Address)
__________________________________
(City) (State) (Zip Code)
Signed in the presence of:
_________________________
/3/ Insert here upon exercise of Warrant, the number of shares called for on
the face of this Warrant (or, in the case of a partial exercise, the portion
thereof as to which this Warrant is being exercised), in either case without
making any adjustment for Additional Shares of Common Stock or any other stock
or other securities or property or cash which, pursuant to the adjustment
provisions of this Warrant, may be delivered upon exercise. In the case of a
partial exercise of Warrant, a new Warrant or Warrants will be issued and
delivered, representing the unexercised portion of Warrant, to the holder
surrendering the Warrant.
E-3
<PAGE>
EXHIBIT 4.7
REGISTRATION RIGHTS AGREEMENT
SEPTEMBER ___, 1997
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
1. REGISTRATION RIGHTS...................................................... 1
1.1 Definitions....................................................... 1
1.2 Shelf Registration................................................ 2
1.3 Registration Procedures........................................... 5
1.4 Holder's Obligations..............................................10
1.5 Expenses of Registration..........................................10
1.6 Delay of Registration.............................................10
1.7 Indemnification...................................................10
1.8 Assignment of Registration Rights.................................13
1.9 "Market Stand-Off" Agreement......................................13
1.10 Termination of Registration Rights................................13
2. MISCELLANEOUS............................................................14
2.1 Successors and Assigns............................................14
2.2 Governing Law.....................................................14
2.3 Counterparts......................................................14
2.4 Titles and Subtitles..............................................14
2.5 Notices...........................................................14
2.6 Expenses..........................................................14
2.7 Entire Agreement: Amendments and Waivers..........................14
2.8 Severability......................................................15
2.9 Aggregation of Stock..............................................15
</TABLE>
i
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made as of the _____ day of
September, 1997, by and between System Software Associates, Inc., a Delaware
corporation (the "Company") and Hambrecht & Quist LLC, a Delaware limited
liability company (the "Purchaser").
RECITALS
--------
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the Company is issuing to the Purchaser in consideration of
underwriting services warrants (the "Warrants") to purchase an aggregate of
________________ shares of the Company's common stock, par value $0.0033 per
share (the "Common Stock").
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties agree as follows:
1. Registration Rights. The Company covenants and agrees as follows:
-------------------
1.1 Definitions. For purposes of this Section 1:
-----------
(a) The term "Act" means the Securities Act of 1933, as
amended.
(b) The term "Business Day" means each Monday, Tuesday,
Wednesday, Thursday and Friday that is not a day on which banking institutions
in the City of New York are authorized or obligated by law or executive order to
close.
(c) The term "Effectiveness Period" means the period
commencing with the date hereof and ending on the date that all Registrable
Securities have ceased to be Registrable Securities.
(d) The term "Holder" means any person owning or having the
right to acquire Registrable Securities or any permitted assignee thereof in
accordance with Section 1.8 hereof.
(e) The term "Managing Underwriters" means the investment
banking firm or firms that shall manage or co-manage an Underwritten Offering.
(f) The term "1934 Act" means the Securities Exchange Act
of 1934, as amended.
(g) The term "Prospectus" means the prospectus included in
any Registration Statement (including, without limitation, a prospectus that
discloses information
<PAGE>
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any amendment or prospectus supplement, including
post-effective amendments, and all material incorporated by reference or deemed
to be incorporated by reference in such Prospectus.
(h) The terms "register," "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Act, and the declaration or
ordering of effectiveness of such registration statement or document.
(i) The term "Registrable Securities" means (i) the
Warrants and (ii) the Common Stock into which the Warrants are exercisable or
exercised, whether or not such Warrants have been exercised and (iii) any shares
of capital stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of
the shares referenced in (i) or (ii) above, excluding in all cases, however, any
Registrable Securities sold by a person in a transaction in which his rights
under this Section 1 are not assigned.
(j) The term "Registration Statement" means any
registration statement of the Company which covers any of the Registrable
Securities pursuant to the provisions of this Agreement, including the
Prospectus, amendments and supplements to such registration statement, including
post-effective amendments, all exhibits, and all material incorporated by
reference or deemed to be incorporated by reference in such registration
statement.
(k) The term "Special Counsel" means Gunderson Dettmer
Stough Villeneuve Franklin & Hachigian, LLP, or such successor counsel as shall
be specified by the Holders of a majority of the Registrable Securities, the
fees and expenses of which will be paid by the Company pursuant to Section 1.5
hereof, such fees and expenses not to exceed $25,000.
(l) The term "SEC" shall mean the Securities and Exchange
Commission.
(m) The terms "Underwritten Registration" or "Underwritten
Offering" refer to a registration in which securities of the Company are sold to
an underwriter for reoffering to the public.
1.2 Shelf Registration.
------------------
(a) The Company shall prepare and file with the SEC, not
later than September 1, 1998 (the "Filing Date"), a Registration Statement for
an offering to be made on a continuous basis pursuant to Rule 415 of the
Securities Act (a "Shelf Registration") registering the resale from time to time
by Holders thereof of all of the Registrable Securities (the "Initial Shelf
Registration"). The Initial Shelf Registration shall be on Form S-3 or another
2
<PAGE>
appropriate form permitting registration of such Registrable Securities for
resale by the Holders in the manner or manners designated by them (including,
without limitation, one or more Underwritten Offerings). The Company shall use
its best efforts to cause the Initial Shelf Registration to be declared
effective under the Securities Act as soon as practicable and to keep the
Initial Shelf Registration continuously effective under the Securities Act until
the earlier of the expiration of the Effectiveness Period or the date a
Subsequent Shelf Registration, as defined below, covering all of the Registrable
Securities has been declared effective under the Securities Act. At the
Company's election, the "Initial Shelf Registration" may be effected on the
registration statement filed pursuant to the Registration Rights Agreement dated
September __, 1997, by and between the Company and H&Q SSA Investors, L.P.;
provided that such registration is otherwise effected in accordance with all of
- -------------
the terms and conditions herein and therein.
(b) If the Initial Shelf Registration or any Subsequent
Shelf Registration, as defined below, ceases to be effective for any reason as a
result of the issuance of a stop order by the SEC at any time during the
Effectiveness Period, the Company shall use its best efforts to obtain the
prompt withdrawal of any order suspending the effectiveness thereof, and in any
event shall within thirty (30) days of such cessation of effectiveness amend the
Shelf Registration in a manner reasonably expected to obtain the withdrawal of
the order suspending the effectiveness thereof, or file an additional Shelf
Registration covering all of the Registrable Securities (a "Subsequent Shelf
Registration"). If a Subsequent Shelf Registration is filed, the Company shall
use its best efforts to cause the Subsequent Shelf Registration to be declared
effective as soon as practicable after such filing and to keep such Registration
Statement continuously effective until the end of the Effectiveness Period.
(c) The Company shall supplement and amend the Shelf
Registration if required by the rules, regulations or instructions applicable to
the registration form used by the Company for such Shelf Registration, if
required by the Securities Act, or if reasonably requested by the Purchaser or
by any Managing Underwriter of such Registrable Securities in the event of an
Underwritten Offering of the Registrable Securities.
(d) Each Holder of Registrable Securities agrees that if
such Holder wishes to sell its Registrable Securities pursuant to a Shelf
Registration and related Prospectus, it will do so only in accordance with this
Section 1.2(d). Each Holder of Registrable Securities agrees to give written
notice to the Company at least three Business Days prior to any intended
distribution of Registrable Securities under the Shelf Registration, which
notice shall specify the date on which such Holder intends to begin such
distribution and any information with respect to such Holder and the intended
distribution of Registrable Securities by such Holder as may be required to
amend the Registration Statement or supplement the related Prospectus with
respect to such intended distribution of Registrable Securities by such Holder
(the "Requisite Information"). In the event the Holder fails to provide the
Requisite Information in its initial notice of its intention to distribute the
Registrable Securities pursuant to the Registration Statement, the Company will
promptly request such Holder to provide such Requisite Information. As soon as
practicable after the date the Requisite Information is provided, and in any
event within two Business Days after such date, the Company shall (i) if
3
<PAGE>
necessary, prepare and file with the Commission a post-effective amendment to
the Shelf Registration or a supplement to the related Prospectus or a supplement
or amendment to any document incorporated therein by reference or file any other
required document so that such Registration Statement 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
so that, as thereafter delivered to purchasers of the Registrable Securities
being sold thereunder, such Prospectus 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, in light of the circumstances under
which they were made, not misleading; (ii) provide each Notice Holder (as
defined below) copies of any documents filed pursuant to Section 1.2(d)(i); and
(iii) inform each Notice Holder that the Company has complied with its
obligations in Section 1.2(d)(i) (or that, if the Company has filed a post-
effective amendment to the Shelf Registration which has not yet been declared
effective, the Company will notify the Notice Holder to that effect, will use
its best efforts to secure the effectiveness of such post-effective amendment
and will immediately notify the Notice Holder when the amendment has become
effective); each Holder who has given notice of intention to distribute such
Holder's Registrable Securities in accordance with this Section 1.2(d) hereof (a
"Notice Holder") will sell all or any of such Registrable Securities pursuant to
the Shelf Registration and related Prospectus only during the 30-day period
commencing with the date on which the Company gives notice, pursuant to Section
1.2(d)(iii), that the Registration Statement and Prospectus may be used for such
purpose (such 30-day period is referred to as a "Selling Period"). The Notice
Holders will not sell any Registrable Securities pursuant to such Registration
Statement or Prospectus after such Selling Period without giving a new notice of
intention to sell pursuant to Section 1.2(d) hereof and receiving a further
notice from the Company pursuant to Section 1.2(d)(iii) hereof.
(e) In the event (i) of the happening of any event of the
kind described in Section 1.3(c)(ii), 1.3(c)(iii), 1.3(c)(iv), 1.3(c)(v), or
1.3(c)(vi) hereof or (ii) that, in the judgment of the Company, it is advisable
to suspend use of the Prospectus for a discrete period of time due to pending
material corporate developments or similar material events that have not yet
been publicly disclosed and as to which the Company believes public disclosure
will be prejudicial to the Company, the Company shall deliver a certificate in
writing, signed by an authorized executive officer of the Company, to the Notice
Holders, the Special Counsel and the Managing Underwriters, if any, to the
effect of the foregoing and, upon receipt of such certificate, each such Notice
Holder's Selling Period will not commence until such Notice Holder's receipt of
copies of the supplemented or amended Prospectus provided for in Section
1.2(d)(i) hereof, or until it is advised in writing by the Company that the
Prospectus may be used and has received copies of any additional or supplemental
filings that are incorporated or deemed incorporated by reference in such
Prospectus. The Company will use its best efforts to ensure that the use of the
Prospectus may be resumed, and the Selling Period will commence, as soon as
practicable and, in the case of a pending development or event referred to in
Section 1.2(e)(ii) hereof, as soon as the earlier of (x) public disclosure of
such pending material corporate development or similar material event or (y) in
the judgment of the Company, public disclosure of such material corporate
development or similar material event would not be prejudicial to the Company.
Notwithstanding any other provision in this Agreement, the Company shall not
under any circumstances be entitled to exercise its right under this Section
1.2(e) to defer the
4
<PAGE>
commencement of a Selling Period except as follows: the Company may defer the
commencement of a Selling Period in accordance with this Section 1.2(e) for a
period not to exceed 30 days in any three-month period, or not to exceed an
aggregate of 90 days in any 12-month period, and the period in which a Selling
Period is suspended shall not exceed fifteen (15) days unless the Company shall
deliver to such Notice Holders a second notice to the effect set forth above,
which shall have the effect of extending the period during which such Selling
Period is deferred by up to an additional fifteen (15) days, or such shorter
period of time as is specified in such second notice. In no event shall the
Company be permitted to extend the period during which such Selling Period is
deferred (a "Deferral Period") beyond such thirty (30) day period from and after
the date a Notice Holder provides notice to the Company in accordance with
Section 1.2(d) of its intention to distribute Registrable Securities.
1.3 Registration Procedures. In connection with the Company's
-----------------------
registration obligations under Section 1.2 hereof, the Company shall effect such
registrations to permit the sale of the Registrable Securities in accordance
with the intended method or methods of disposition thereof, and pursuant thereto
the Company shall:
(a) Prepare and file with the SEC a Registration Statement or
Registration Statements on any appropriate form under the Securities Act
available for the sale of the Registrable Securities by the Holders thereof in
accordance with the intended method or methods of distribution thereof, and use
its best efforts to cause each such Registration Statement to become effective
and remain effective as provided herein; provided, that before filing any such
Registration Statement or Prospectus or any amendments or supplements thereto
(other than documents that would be incorporated or deemed to be incorporated
therein by reference and that the Company is required by applicable securities
laws or stock exchange requirements to file) the Company shall furnish to the
Purchaser, the Special Counsel and the Managing Underwriters of such offering,
if any, copies of all such documents proposed to be filed, which documents will
be subject to the reasonable review of the Purchaser, the Special Counsel and
such Managing Underwriters, and the Company shall not file any such Registration
Statement or amendment thereto or any Prospectus or any supplement thereto
(other than such documents which, upon filing, would be incorporated or deemed
to be incorporated by reference therein and that the Company is required by
applicable securities laws or stock exchange requirements to file) to which the
Holders of a majority of the Registrable Securities covered by such Registration
Statement, the Purchaser or the Special Counsel shall reasonably object in
writing within two full Business Days.
(b) Prepare and file with the SEC such amendments and post-
effective amendments to each Registration Statement as may be necessary to keep
such Registration Statement continuously effective for the applicable period
specified in Section 1.2; cause the related Prospectus to be supplemented by any
required Prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 (or any similar provisions then in force) under the Securities Act; and
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such Registration Statement and Prospectus during
the applicable period in accordance with the intended methods of disposition by
the sellers thereof set forth in such Registration Statement as so amended or
such Prospectus as so supplemented.
5
<PAGE>
(c) Notify the Notice Holders, the Purchaser, the Special
Counsel and the Managing Underwriters, if any, promptly, and (if requested by
any such person) confirm such notice in writing, (i) when a Prospectus, any
Prospectus supplement, a Registration Statement or a post-effective amendment to
a Registration Statement has been filed with the SEC, and, with respect to a
Registration Statement or any post-effective amendment, when the same has become
effective, (ii) of any request by the SEC or any other federal or state
governmental authority for amendments or supplements to a Registration Statement
or related Prospectus or for additional information, (iii) of the issuance by
the SEC or any other federal or state governmental authority of any stop order
suspending the effectiveness of a Registration Statement or the initiation or
threatening of any proceedings for that purpose, (iv) of the receipt by the
Company of any notification with respect to the suspension of the qualification
or exemption from qualification of any of the Registrable Securities for sale in
any jurisdiction or the initiation or threatening of any proceeding for such
purpose, (v) of the existence of any fact or happening of any event which makes
any statement of a material fact in such Registration Statement or related
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue or which would require the making of any changes in the
Registration Statement or Prospectus in order that, in the case of the
Registration Statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and that in the case of
the Prospectus, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, and (vi) of the Company's determination that a post-
effective amendment to a Registration Statement would be appropriate.
(d) Use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement, or the lifting of any
suspension of the qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction, at the earliest possible
moment.
(e) If reasonably requested by the Purchaser or the Managing
Underwriters, if any, or the Holders of a majority of the Registrable Securities
being sold, (i) promptly incorporate in a Prospectus supplement or post-
effective amendment to a Registration Statement such information as the
Purchaser, the Special Counsel, the Company, the Managing Underwriters, if any,
or such Holders, in connection with any offering of Registrable Securities,
agree should be included therein as required by applicable law, and (ii) make
all required filings of such Prospectus supplement or such post-effective
amendment as soon as reasonably practicable after the Company has received
notification of the matters to be incorporated in such Prospectus supplement or
post-effective amendment; provided, that the Company shall not be required to
take any actions under this Section 1.3(e) that are not, in the reasonable
opinion of counsel for the Company, in compliance with applicable law.
(f) Furnish to each selling Holder, the Special Counsel and the
Purchaser, and each Managing Underwriter, if any, without charge, at least one
conformed copy of the Registration Statement or Statements and any amendment
thereto, including financial statements but excluding schedules, all documents
incorporated or deemed to be incorporated
6
<PAGE>
therein by reference and all exhibits (unless requested in writing by such
selling Holder, counsel, the Purchaser or underwriter).
(g) Deliver to each selling Holder, the Special Counsel and the
Purchaser and each Managing Underwriter, if any, in connection with any offering
of Registrable Securities, without charge, as many copies of the Prospectus or
Prospectuses relating to such Registrable Securities (including each preliminary
prospectus) and any amendment or supplement thereto as such persons may
reasonably request; and the Company hereby consents to the use of such
Prospectus or each amendment or supplement thereto by each of the selling
Holders of Registrable Securities and the underwriters, if any, in connection
with any offering and sale of the Registrable Securities covered by such
Prospectus or any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities, use
its best efforts to register or qualify or cooperate with the selling Holders,
the Managing Underwriters, if any, and the Special Counsel in connection with
the registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States as
any selling Holder or Managing Underwriter reasonably requests in writing; use
its best efforts to keep each such registration or qualification (or exemption
therefrom) effective during the period such Registration Statement is required
to be kept effective and do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the Registrable
Securities covered by the applicable Registration Statement; provided, that the
Company will not be required to (i) qualify generally to do business in any
jurisdiction where it is not then so qualified or (ii) take any action that
would subject it to general service of process in suits or to taxation in any
such jurisdiction where it is not then so subject.
(i) Use its best efforts to cause the Registrable Securities
covered by the applicable Registration Statement to be registered with or
approved by such other governmental agencies or authorities within the United
States, except as may be required solely as a consequence of the nature of such
selling Holder, in which case the Company will cooperate in all reasonable
respects with the filing of such Registration Statement and the granting of such
approvals, as may be necessary to enable the selling Holder or Holders thereof
or the Managing Underwriters, if any, to consummate the disposition of such
Registrable Securities.
(j) During any Selling Period (other than during a Deferral
Period), immediately upon learning of the existence of any fact or the
occurrence of any event as a result of which a Registration Statement shall
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, or a Prospectus shall contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, promptly prepare and file (subject
to the proviso in Section 1.3(a)) a post-effective amendment to each
Registration Statement or a supplement to the related Prospectus or any document
incorporated therein by reference or file any other required document (such as a
Current Report on Form 8-K)
7
<PAGE>
that would be incorporated by reference into the Registration Statement so that
the Registration Statement shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and so that the
Prospectus will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, as thereafter delivered to the purchasers of the
Registrable Securities being sold thereunder, and, in the case of a post-
effective amendment to a Registration Statement, use its best efforts to cause
it to become effective as soon as practicable.
(k) Enter into such agreements (including, in the event of an
Underwritten Offering undertaken with the reasonable consent of the Company, an
underwriting agreement in form, scope and substance as is customary in
Underwritten Offerings) and take all such other actions in connection therewith
(including, in the event of an Underwritten Offering, those reasonably requested
by the Managing Underwriters, if any, or the Holders of a majority of the
Registrable Securities being sold) in order to expedite or facilitate the
disposition of such Registrable Securities and in such connection, whether or
not an underwriting agreement is entered into, and if the registration is an
underwritten registration, (i) make such representations and warranties, subject
to the Company's ability to do so, to the Holders of such Registrable Securities
and the underwriters with respect to the business of the Company and its
subsidiaries, the Registration Statement, Prospectus and documents incorporated
by reference or deemed incorporated by reference, if any, in each case, in form,
substance and scope as are customarily made by issuers to underwriters in
underwritten offerings (provided that the scope and substance shall not be
materially different than those contained in that certain Amended and Restated
Purchase Agreement dated as of September __, 1997, by and between the Company
and H&Q SSA Investors, LLC (the "Purchase Agreement")) and confirm the same if
and when requested; (ii) use its best efforts to obtain opinions of counsel to
the Company and updates thereof (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the Managing Underwriters, if
any, Special Counsel and the Holders of a majority of the Registrable Securities
being sold) addressed to each of the underwriters covering the matters
customarily covered in opinions requested in underwritten offerings and such
other matters as may be reasonably requested by such Special Counsel and
Managing Underwriters; (iii) use its best efforts to obtain "cold comfort"
letters and updates thereof from the independent certified public accountants of
the Company (and, if necessary, any other certified public accountants of any
business acquired or to be acquired by the Company for which financial
statements and financial data are, or are required to be, included in the
Registration Statement), addressed to each of the Managing Underwriters, if any,
such letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with Underwritten
Offerings; and (iv) deliver such documents and certificates as may be reasonably
requested by the Holders of a majority of the Registrable Securities being sold,
the Special Counsel and the Managing Underwriters, if any, to evidence the
continued validity of the representations and warranties of the Company and its
subsidiaries made pursuant to clause (i) above and to evidence compliance with
any customary conditions contained in the underwriting agreement or other
agreement entered into by the Company. The above shall be done at each closing
under such underwriting or similar agreement as and to the extent required
thereunder.
8
<PAGE>
(l) If requested in connection with a disposition of Registrable
Securities pursuant to a Registration Statement, make available for reasonable
inspection by a single representative of the Holders of Registrable Securities
being sold, any Managing Underwriter participating in any disposition of
Registrable Securities, if any, and a single attorney and a single accountant
retained by such selling Holders or underwriter, financial and other records,
pertinent corporate documents and properties of the Company and its
subsidiaries, and cause the executive officers, directors and employees of the
Company and its subsidiaries to supply all information reasonably requested by
any such representative, in a manner reasonably acceptable to the Company,
Managing Underwriter, attorney or accountant in connection with such
disposition; subject to reasonable assurances by each such person that such
information will only be used in connection with matters relating to such
Registration Statement; provided, however, that such persons shall first agree
in writing with the Company that any information that is reasonably and in good
faith designated by the Company in writing as confidential at the time of
delivery of such information shall be kept confidential by such persons and
shall be used solely for the purposes of exercising rights under this Agreement,
unless (i) disclosure of such information is required by court or administrative
order or is necessary to respond to inquiries of regulatory authorities, (ii)
disclosure of such information is required by law (including any disclosure
requirements pursuant to Federal securities laws in connection with the filing
of any Registration Statement or the use of any prospectus referred to in this
Agreement), (iii) such information becomes generally available to the public
other than as a result of a disclosure or failure to safeguard by any such
person or (iv) such information becomes available to any such person from a
source other than the Company and such source is not bound by a confidentiality
agreement.
(m) Comply with all applicable rules and regulations of the SEC
and make generally available to its securityholders earning statements (which
need not be audited) satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder (or any similar rule promulgated under
the Securities Act) no later than 45 days after the end of any 12-month period
(or 90 days after the end of any 12-month period if such period is a fiscal
year) (i) commencing at the end of any fiscal quarter in which Registrable
Securities are sold to underwriters in a firm commitment or best efforts
underwritten offering and (ii) if not sold to underwriters in such an offering,
commencing on the first day of the first fiscal quarter of the Company
commencing after the effective date of a Registration Statement, which
statements shall cover said 12-month periods.
(n) Cooperate with the selling Holders of Registrable Securities
to facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any restrictive legends; and
enable such Registrable Securities to be in such denominations and registered in
such names as such Holders may request.
(o) Cause the Common Stock and the Warrants covered by the
Registration Statement to be listed on the NASDAQ NNM (or such other national
trading market as is reasonably acceptable to both the Company and the Holders)
not later than September 1, 1998 and promptly use its best efforts to ensure
that such listing becomes effective, and in connection therewith, to the extent
applicable, to use its best efforts (i) to make such filings under
9
<PAGE>
the Exchange Act (e.g., the filing of a Registration Statement on Form 8-A) and
(ii) to have such filings declared effective thereunder.
(p) Cooperate and assist in any filings required to be made with
the National Association of Securities Dealers, Inc.
1.4 Holder's Obligations. Each Holder agrees, by acquisition of the
--------------------
Warrants and Registrable Securities, that no Holder of Registrable Securities
shall be entitled to sell any of such Registrable Securities pursuant to a
Registration Statement or to receive a Prospectus relating thereto, unless such
Holder has furnished the Company with the notice required pursuant to Section
1.2(d) hereof and such other information regarding such Holder and the
distribution of such Registrable Securities as may be required to be included in
the Registration Statement or the Prospectus or as the Company may from time to
time reasonably request. The Company may exclude from such registration the
Registrable Securities of any Holder who does not furnish such information
provided above for so long as such information is not so furnished. Each Holder
of Registrable Securities as to which any Registration Statement is being
effected agrees promptly to furnish to the Company all information required to
be disclosed in order to make the information previously furnished to the
Company by such Holder not misleading. Any sale of any Registrable Securities by
any Holder shall constitute a representation and warranty by such Holder that
the information relating to such Holder and its plan of distribution is as set
forth in the Prospectus delivered by such Holder in connection with such
disposition, that such Prospectus does not as of the time of such sale contain
any untrue statement of a material fact relating to such Holder or its plan of
distribution and that such Prospectus does not as of the time of such sale omit
to state any material fact relating to such Holder or its plan of distribution
necessary to make the statements in such Prospectus, in light of the
circumstances under which they were made, not misleading.
1.5 Expenses of Registration. All expenses other than underwriting
------------------------
discounts and commissions incurred in connection with registrations, filings or
qualifications pursuant to Section 1.2 including (without limitation) all
registration, filing and qualification fees, printers' and accounting fees, fees
and disbursements of counsel for the Company and the reasonable fees and
disbursements of Special Counsel shall be borne by the Company.
1.6 Delay of Registration. No Holder shall have any right to obtain
---------------------
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 1.
1.7 Indemnification. In the event any Registrable Securities are
---------------
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, the partners or officers, directors and
stockholders of each Holder, legal counsel and accountants for each Holder, any
underwriter (as defined in the Act) for such Holder and each person, if any, who
controls such Holder or underwriter within the meaning of the Act or the 1934
Act, against any losses, claims, damages, or liabilities (joint or
10
<PAGE>
several) to which they may become subject under the Act, the 1934 Act or any
state securities laws, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations (collectively a "Violation"): (i)
any untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii) 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, or
(iii) any violation or alleged violation by the Company of the Act, the 1934
Act, any state securities laws or any rule or regulation promulgated under the
Act, the 1934 Act or any state securities laws; and the Company will reimburse
each such Holder, underwriter or controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this subsection l.7(a) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability, or
action if such settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld), nor shall the Company be liable in
any such case for any such loss, claim, damage, liability, or action to the
extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by any such Holder, underwriter or
controlling person; provided further, however, that the foregoing indemnity
agreement with respect to any preliminary prospectus shall not inure to the
benefit of any Holder or underwriter, or any person controlling such Holder or
underwriter, from whom the person asserting any such losses, claims, damages or
liabilities purchased shares in the offering (the "Shares"), if a copy of the
prospectus (as then amended or supplemented if the Company shall have furnished
any amendments or supplements thereto) was not sent or given by or on behalf of
such Holder or underwriter to such person, if required by law so to have been
delivered, at or prior to the written confirmation of the sale of the Shares to
such person, and if the prospectus (as so amended or supplemented) would have
cured the defect giving rise to such loss, claim, damage or liability.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, legal counsel and
accountants for the Company, any underwriter, any other Holder selling
securities in such registration statement and any controlling person of any such
underwriter or other Holder, against any losses, claims, damages, or liabilities
(joint or several) to which any of the foregoing persons may become subject,
under the Act, the 1934 Act or any state securities laws, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereto) arise
out of or are based upon any Violation, in each case to the extent (and only to
the extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder expressly for use in connection
with such registration; and each such Holder will reimburse any person intended
to be indemnified pursuant to this subsection l.7(b), any legal or other
expenses reasonably incurred by in connection with investigating or defending
any such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this subsection l.7(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of
11
<PAGE>
the Holder (which consent shall not be unreasonably withheld) provided, that, in
no event shall any indemnity under this subsection l.7(b) exceed the gross
proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 1.7 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.7, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.7, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 1.7.
(d) If the indemnification provided for in this Section 1.7 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and Holders under this
Section 1.7 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
12
<PAGE>
1.8 Assignment of Registration Rights. The rights to cause the
---------------------------------
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of such securities, provided: (a) the Company is, within a reasonable
time after such transfer, furnished with written notice of the name and address
of such transferee or assignee and the securities with respect to which such
registration rights are being assigned; (b) such transferee or assignee agrees
in writing to be bound by and subject to the terms and conditions of this
Agreement, including without limitation the provisions of Section 1.9 below; and
(c) such assignment shall be effective only if immediately following such
transfer the further disposition of such securities by the transferee or
assignee is restricted under the Act.
1.9 "Market Stand-Off" Agreement. Each Holder hereby agrees that it
---------------------------
will not, without the prior written consent of the Managing Underwriter, during
the period commencing on the date of the final prospectus relating to an
Underwritten Offering and ending on the date specified by the Company and the
Managing Underwriter (such period not to exceed ninety (90) days) (i) lend,
offer, pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, or otherwise transfer or dispose of, directly or indirectly, any
Registrable Securities (whether such shares or any such securities are then
owned by the Holder or are thereafter acquired), or (ii) enter into any swap or
other arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of the Registrable Securities, whether any
such transaction described in clause (i) or (ii) above is to be settled by
delivery of Common Stock or such other securities, in cash or otherwise. The
foregoing provisions of this Section 1.9 shall not apply to the sale of any
shares to an underwriter pursuant to an underwriting agreement and shall only be
applicable to the Holders if all (i) officers and directors, (ii) greater than
ten percent (10%) stockholders of the Company, (iii) Management Investor (as
defined in the Purchase Agreement) and (iv) any transferee of the Management
Investor's who received a greater than ten percent (10%) position from the
Management Investor (for so long as such transferee continues to hold a greater
than ten percent (10%) position), enter into similar agreements. The
underwriters in connection with a public offering of the Company's securities
are intended third party beneficiaries of this Section 1.9 and shall have the
right, power and authority to enforce the provisions hereof as though they were
a party hereto.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
1.10 Termination of Registration Rights. No Holder shall be entitled
----------------------------------
to exercise any right provided for in this Section 1 after three (3) years from
the date hereof; provided that, in the event any Holder is deemed to be an
affiliate of the Company ("Affiliate Holder") subsequent to such three (3) year
period, the Company shall file, within 30 days of notice from the Affiliate
Holder, a new Registration Statement for an offering to be made on a continuous
basis pursuant to Rule 415 of the Securities Act registering the resale from
time to time by the Affiliate Holders thereof of all the Registrable Securities.
Such new Registration
13
<PAGE>
Statement shall be governed by all of the applicable provisions of this Section
1, as if such registration was a Shelf Registration, and shall remain in effect
for a period of two (2) years.
2. Miscellaneous.
-------------
2.1 Successors and Assigns. Except as otherwise provided herein, the
----------------------
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any shares of Registrable Securities). Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
2.2 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of Delaware as applied to agreements among Delaware
residents entered into and to be performed entirely within Delaware.
2.3 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
2.4 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
2.5 Notices. Unless otherwise provided, any notice required or
-------
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified, two days
after deposit with an overnight courier service or five days after deposit with
the United States Post Office, by first class mail, postage prepaid and
addressed to the party to be notified at the address indicated for such party on
the signature page hereof, or at such other address as such party may designate
by ten (10) days' advance written notice to the other parties.
2.6 Expenses. If any action at law or in equity is necessary to
--------
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
2.7 Entire Agreement: Amendments and Waivers. This Agreement
----------------------------------------
(including the Exhibits hereto, if any) constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof. Any term of 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 with the written
consent of the Company and the holders of a majority of the Registrable
Securities. Any amendment or waiver effected in accordance with this paragraph
shall be binding upon each
14
<PAGE>
holder of any Registrable Securities each future holder of all such Registrable
Securities, and the Company.
2.8 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
2.9 Aggregation of Stock. All shares of Registrable Securities held
--------------------
or acquired by affiliated entities or persons shall be aggregated together for
the purpose of determining the availability of any rights under this Agreement.
15
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
SYSTEM SOFTWARE ASSOCIATES, INC.
By:_____________________________
Title:__________________________
HAMBRECHT & QUIST, LLC
By:_____________________________
(Signature)
Title:__________________________
16
