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REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CAYENNE SOFTWARE, INC.
(Exact Name of Registrant as Specified in Its Charter)
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MASSACHUSETTS 7399 04-2784044
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(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number) Identification Number)
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8 NEW ENGLAND EXECUTIVE PARK
BURLINGTON, MASSACHUSETTS
01803
(781) 273-9003
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
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PETER J. BONI
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CAYENNE SOFTWARE, INC.
8 NEW ENGLAND EXECUTIVE PARK
BURLINGTON, MASSACHUSETTS 01803
(781) 273-9003
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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COPIES TO:
JOHN D. PATTERSON, JR., ESQ.
FOLEY, HOAG & ELIOT LLP
ONE POST OFFICE SQUARE
BOSTON, MASSACHUSETTS 02109
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
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. [X]
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, 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
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: [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING REGISTRATION
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PRICE(1) FEE
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Common Stock, par value $0.01 5,295,972 $2.8125 $14,894,921 $4,513.61
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(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(c) under the Securities Act of 1933
based upon the average of the high and low prices of the Common Stock on
September 24, 1997, as reported by NASDAQ.
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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.
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CAYENNE SOFTWARE, INC.
FORM S-3
REGISTRATION STATEMENT
CROSS-REFERENCE SHEET
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Form S-3 Item Number and Caption Location in Prospectus
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1. Forepart of the Registration Statement
and Outside Front Cover Page of
Prospectus.......................................... Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back
Cover Pages of Prospectus........................... Available Information;
Information Incorporated by Reference; Outside
Back Cover Page of Prospectus
3. Summary Information, Risk Factors
and Ratio of Earnings to Fixed Charges.............. The Company; Risk Factors
4. Use of Proceeds..................................... Use of Proceeds
5. Determination of Offering Price..................... *
6. Dilution............................................ *
7. Selling Security-Holders............................ Selling Stockholders
8. Plan of Distribution................................ Plan of Distribution
9. Description of Securities to be Registered.......... *
10. Interests of Named Experts and Counsel.............. Experts; Legal Matters
11. Material Changes.................................... *
12. Incorporation of Certain Information by
Reference........................................... Information Incorporated by Reference
13. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities......................................... *
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* Omitted since the answer is negative or the item is inapplicable.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
CAYENNE SOFTWARE, INC.
5,295,972 SHARES OF COMMON STOCK
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The 5,295,972 shares (the "Shares") of common stock, par value $0.01 per share
(the "Common Stock"), of Cayenne Software, Inc. ("Cayenne" or the "Company")
covered by this Prospectus may be offered on a delayed or continuous basis by
certain stockholders of the Company or by pledgees, donees, transferees or other
successors in interest (the "Selling Stockholders") See "Selling Stockholders."
The Company will not receive any proceeds from the offering. The Company will
bear the costs relating to the registration of the Shares offered hereby (other
than selling commissions).
The Selling Stockholders may offer the Shares, from time to time during the
effectiveness of this registration, for sale through the NASDAQ Stock Market, in
the over-the-counter market, in one or more negotiated transactions, or through
a combination of methods of sale, at prices and on terms then prevailing or at
negotiated prices. Sales may be effected to or through broker-dealers, who may
receive compensation in the form of discounts, concessions or commissions in
connection therewith. See "Plan of Distribution."
The Common Stock is traded on the NASDAQ Stock Market under the symbol
"CAYN". On September 24, 1997, the closing price for the Common Stock, as
reported on the NASDAQ Stock Market, was $2.875 per share.
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THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS."
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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ALL SECURITIES TO BE REGISTERED HEREBY ARE TO BE OFFERED BY CERTAIN OF THE
COMPANY'S STOCKHOLDERS.
THE DATE OF THIS PROSPECTUS IS SEPTEMBER __, 1997.
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THE COMPANY
The Company was incorporated in Massachusetts in 1983 under the name
Bachman Information Systems, Inc. Its name was changed to Cayenne Software, Inc.
in July 1996. The Company supplies software analysis and design solutions for
commercial and technical applications and database development. The Company's
executive offices are located at 8 New England Executive Park, Burlington,
Massachusetts 01803. Its telephone number is (781) 273-9003.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed by the Company can be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington D.C. 20549; and at its regional
offices located at Citicorp Center, 500 W. Madison Street, Suite 1400, Chicago,
Illinois 60661-2511, and 7 World Trade Center, Suite 1300, New York, New York
10048. Copies of such material can be obtained from the public reference section
of the Commission at 450 Fifth Street, N.W., Washington D.C. 20549, at
prescribed rates. Electronic filings made by the Company through the
Commission's Electronic Data Gathering, Analysis and Retrieval System are
publicly available through the Commission's world wide web site
(http://www.sec.gov). The Company's Common Stock is traded on the NASDAQ Stock
Market under the symbol CAYN. Reports and other information concerning the
Company may be inspected at the National Association of Securities Dealers,
Inc., 1735 K Street, N.W., Washington, D.C. 20006.
This Prospectus constitutes a part of a Registration Statement on Form S-3
(the "Registration Statement") filed by the Company with the Commission under
the Securities Act of 1933, as amended (the "Securities Act"). This Prospectus
omits certain of the information contained in the Registration Statement and the
exhibits and schedules thereto, as certain items are omitted in accordance with
the rules and regulations of the Commission. For further information concerning
the Company and the Common Stock offered hereby, reference is hereby made to the
Registration Statement and the exhibits and schedules filed therewith, which may
be inspected without charge at the office of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549 and copies of which may be obtained from the
Commission at prescribed rates. Any statements contained herein concerning the
provisions of any document are not necessarily complete, and, in each instance,
reference is made to the copy of such documents filed as an exhibit to the
Registration Statement or otherwise filed with the Commission. Each such
statement is qualified in its entirety by such reference.
INFORMATION INCORPORATED BY REFERENCE
The following documents of the Company which have been filed with the
Commission are hereby incorporated by reference in this Prospectus.
(a) Annual Report on Form 10-K, as amended, for the transition period ended
December 31, 1996, Commission File No. 0-19682.
(b) Quarterly Report on Form 10-Q for the quarter ended March 31, 1997,
Commission File No. 0-19682.
(c) Quarterly Report on Form 10-Q for the quarter ended June 30, 1997,
Commission File No. 0-19682.
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(d) The description of the Company's Common Stock contained in the
Registration Statement on Form 8-A dated November 26, 1991, Commission File No.
0-19682.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Common Stock offered hereby shall be
deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the respective dates of filing such documents. Any statement or
information contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed modified or superseded for the purposes of this
Prospectus to the extent that a statement contained herein or in any
subsequently filed document which also is or is deemed to be incorporated by
reference modifies or supersedes such statement. Any such statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will provide without charge to any person to whom a Prospectus
is delivered, on written or oral request of such person, a copy of any or all of
the documents incorporated herein by reference (other than exhibits and
schedules to such documents). Requests should be directed to: Treasurer, Cayenne
Software, Inc., 8 New England Executive Park, Burlington, Massachusetts 01803,
(781) 273-9003.
FORWARD-LOOKING STATEMENTS
From time to time, information provided by the Company or statements made
by its employees may contain "forward-looking" information, as that term is
defined in the Private Securities Litigation Reform Act of 1995 (the "Act"). The
Company cautions investors that there can be no assurance that actual results or
business conditions will not differ materially from those projected or suggested
in such forward-looking statements as a result of various factors, including but
not limited to the matters discussed under "Risk Factors" below.
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RISK FACTORS
In addition to the other information in this Prospectus, the following should be
considered carefully in evaluating the Company and its business before
purchasing the Common Stock offered by this Prospectus.
FINANCIAL CONDITION OF THE COMPANY
On November 6, 1996, the Company amended and restated its revolving credit
agreement with a bank to borrow up to $5 million, to extend its term through
October 4, 1997 and to amend certain of the financial and operating covenants
and other provisions thereunder. In connection with the amendment, the Company
issued to the Bank a three-year warrant to purchase 25,000 shares of the
Company's Common Stock at an exercise price of $4.25 per share. The loan is
contingent upon meeting certain financial and operating covenants at the time of
any borrowing and over the life of the loan. The loan is secured by all of the
assets of the Company and any borrowing amounts are tied to a percentage of
qualified accounts receivable outstanding at the time of any borrowing. The
financial covenants, which were further amended in April 1997, include
attainment of specified levels of consolidated net income (loss) at the end of
each quarter, including net income of $250,000 for the quarter ended June 30,
1997 and each quarter thereafter, and specified levels of liquidity at the end
of each month. The Company was in compliance with all covenants as amended at
June 30, 1997 or has received a waiver from the bank as to any non-compliance.
At June 30, 1997, the borrowing base under the revolving credit agreement was
approximately $2.5 million and the Company had approximately $2.8 million
outstanding against the line of credit. In September 1997, the Company made a
payment of $0.3 million to bring the outstanding balance into line with the
available borrowing base. In July 1997, the Company raised $2 million in equity
capital through a private placement of Series C Convertible Preferred Stock and
Warrants to purchase Common Stock, and, in August 1997, the Company raised an
additional $5 million through a private placement of Series D Convertible
Preferred Stock and Warrants to the Selling Stockholders described in this
Prospectus. The Company expects to renew or renegotiate its revolving credit
agreement that expires on October 4, 1997. The Company expects that its existing
cash balances, funds generated through operations, and the additional equity
investment will provide sufficient cash resources to finance current operations
and projected capital requirements through the end of 1997. Thereafter, the
company's cash requirements will depend on the results of future operations,
which cannot be foreseen.
The Company has been required by The Nasdaq Stock Market, Inc. to maintain
a tangible net equity of at least $4.5 million in order to maintain its listing
on the Nasdaq National Market System. At August 31, 1997, the Company had met
the requirement as a result of equity investments in the company by private
investors aggregating $7,000,000 in July and August. Maintenance of the National
Market system listing hereafter will depend on the results of future operations,
which cannot be foreseen.
RESULTS OF RECENT OPERATIONS
The Company's operating results for the three years ended June 30, 1996, the
six-month transitional period ended December 31, 1996 and the six months ended
June 30, 1997 were significantly adversely affected by several factors. In July
1996, the Company completed its merger with Cadre Technologies, Inc., which
resulted in a $6.3 million charge to operations for the quarter ended September
30, 1996 to reflect costs associated with the combining of the two companies,
transaction fees, and other costs. In addition, the Company has continued to
invest heavily in its object-oriented and client/server-based products. The
Company's operating results continue to be affected by the market trends of the
Company's customers moving from mainframe development to client/server and
object-oriented solutions. The increased revenue growth of the Company's
client/server and object-oriented products has not been rapid enough to offset
the revenue decline of the Company's mainframe-based products.
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As the Company continues to make the transition from providing tools focused
solely on mainframe application development to supporting customers' needs for a
more open and flexible set of solutions aimed at the growing client/server
market, it faces many challenges. The Company plans to enhance its product
offerings through development efforts, strategic alliances and acquisitions to
improve its competitive position.
On July 18, 1996, the Company completed its acquisition of Cadre Technologies
Inc. ("Cadre") under an Agreement and Plan of Merger dated March 25, 1996, by
and among the Company, Cadre and B.C. Acquisition Corp., whereby the Company
agreed to acquire all of the outstanding capital stock of Cadre in exchange for
4,716,442 shares of Cayenne common stock (the "merger"). The merger was
accounted for as a pooling-of-interests during the transition period ended
December 31, 1996. Effective upon the merger, the Company changed its name to
Cayenne Software, Inc. The Company acquired Cadre to expand its product
offerings to include structured analysis and design and object-oriented
technology and to expand its customer base. During the transition period ended
December 31, 1996, the Company incurred a charge of $6.3 million in conjunction
with the merger and to reflect costs associated with combining the operations of
the two companies, transaction fees, and other costs. Included in the charge
were $1.6 million of employee-related termination expenses for approximately 45
employees; $1.3 million of legal, accounting, investment banking, and other
professional fees; $1.4 million of facilities closure and consolidation
expenses; and $2 million of other expenses associated with the consolidation of
the two companies and the name change.
SIGNIFICANT RECENT LOSSES; SHORT PRIOR HISTORY OF PROFITABILITY
Cayenne received its first venture financing in the third quarter of fiscal
1986, shipped its first software products in the fourth quarter of fiscal 1988,
and did not reach profitability until the first quarter of fiscal 1991. Cayenne
incurred net losses of $13.2 million, $24.9 million, and $11.3 million in Fiscal
1994, Fiscal 1995, and Fiscal 1996, respectively, and a net loss of $6.4 million
for the six months ended December 31, 1996, which included a $6.3 million charge
for restructuring and other costs in September 1996. For the six months ended
June 30, 1997 the Company recorded a net loss of $1.8 million. A reorganization
of the Company's sales force during June 1997 resulted in a longer sales cycle
for software licenses and adversely effected profitability. In September 1994,
the first quarter of fiscal 1995, the Company recorded a restructuring charge of
approximately $2 million resulting from reductions in staff and related
facilities expenses and the termination of certain contracts. During the quarter
ended June 30, 1995, the Company also incurred approximately $1.8 million in
restructuring costs, which included a $0.9 million write-off of redundant
capitalized software, $0.8 million of employee related costs, and $0.1 million
of other costs related to the restructuring. In the quarter ended December 31,
1995, the Company incurred an additional $1.7 million in restructuring charges.
Future operating results will depend on many factors, including demand for
Cayenne's products, Cayenne's ability to obtain major orders, the level of
competition, Cayenne's ability to develop and market new products, and the
ability of its officers and key employees to manage Cayenne's business and
control costs. There can be no assurance that revenue growth or profitable
operations on a quarterly or annual basis will be achieved during 1997 or in any
subsequent fiscal year.
CHANGING MARKETS
The Company develops software tools that help software developers create
applications and integrate diverse information sources for large and small
software development projects. The products include modeling, database design
and development tools for object-oriented, data-driven and structured
application development approaches for use by large corporations, independent
software vendors and technical organizations. The products are targeted to the
object and relational application development needs of software development
teams in a scalable, workgroup-to-enterprise environment. The Company's products
are used to create real-time and embedded applications, three-tier client/server
applications, data warehouses, and internet/intranet solutions
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on a wide range of platforms. The market in which Cayenne participates is
characterized by frequent and rapid changes in hardware and software technology
and in customer preferences; the Company has responded to these changes and will
continue to do so in the future. For information-intensive applications the
computing environment has migrated from centralized mainframe computers to
personal computer networks and related "client/server" technology, and it is now
incorporating internet/intranet environments. The Company has devoted much
effort to change its product mix in response to these market changes by: 1)
transitioning its mainframe products to a client/server environment, 2) leading
the software industry in the structured to object- oriented design methodologies
migration, 3) adding UML object modeling methodology to its OMT methodology, and
4)internet enabling the Company's products. Cayenne's future success will depend
on its ability to enhance its current products and to develop and introduce new
products that accommodate advances in software and hardware technology and
changing customer requirements.
In July 1996, the Company acquired Cadre Technologies, Inc. and entered into an
additional industry segment focused on the creation and maintenance of complex
software systems, the problem addressed by Computer Aided Software Engineering
("CASE") products. During the 1970s, a number of "structured" techniques and
methods were invented to replace earlier ad-hoc approaches to software
development. The analysis and design (as opposed to implementation) techniques
emphasize the building of abstract models to assist in the understanding,
planning, and implementation of a system. The rationale for modeling is the same
in software as it is in any engineering discipline; money and effort are saved
if problems are identified and dealt with early in the engineering process.
Structured analysis and structured design. In the early eighties, networks of
computer workstations made it feasible to partially automate the capture,
traversal, and analysis of engineering models by work groups. This technology
was rapidly adopted in the civil, mechanical, and electrical engineering
domains. The CASE market expanded quickly in the mid-to late-eighties, as did
the number of companies formed to service it. The high end of the market, with
its multi-user networked UNIX engineering workstation solution, found a home in
technically-oriented organizations, such as those in telecommunications,
aerospace and defense. The other end of the market focused on single-user,
personal computer ("PC") based products. These found early success in corporate
IS organizations, where PCs were widely used.
The IS CASE market declined in the early nineties for a number of reasons. While
the IS software development market is large, commitment to structured methods
(and the attendant engineering discipline) was weak. Some CASE companies made
claims which the products were unable to deliver and soured the market. Others
were slow to respond to technology changes such as the shift to client-server
application development and object orientation (discussed further below). The
decline resulted in a number of market leaders closing or being acquired. The
technical market, where Cadre derived the majority of its business, was affected
by the contraction and consolidation in the defense industry. Consequently,
Cadre diversified its product line into the software development process,
including debugging, measurement and verification tools.
Object oriented technology. In the meantime, the software development community
began to experiment with "object-oriented" technology, and in particular, OO
analysis, design and implementation techniques. The structured techniques
mentioned previously generally partition a system purely along functional lines,
i.e. in terms of what the system does. The OO approach partitions a system into
"objects", where each object encapsulates information and those functions that
operate on that information. The benefit of the OO approach is that systems
partitioned this way are more robust, more amenable to change, and the objects
are easier to reuse in other systems.
Cadre started selling its first OO analysis and design products (based on the
method of developing software created by Shlaer-Mellor) in 1989. When market
momentum began to build around a related method called the
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Object Modeling Technique ("OMT"), Cadre initially entered the market by
reselling an OMT product in 1993. This was replaced by the OMT tool developed by
Westmount Technology B.V., acquired by Cadre in 1995. In 1997, Cayenne
introduced an object oriented product line that uses the Unified Modeling
Language ("UML") methodology.
FLUCTUATIONS IN QUARTERLY PERFORMANCE
Throughout its history, Cayenne's revenue has varied from quarter to quarter,
with the largest portion of revenue recognized in the fourth quarter of each
fiscal year. In the normal course of events, Cayenne may realize lower revenue
in the first quarter than in the preceding fourth quarter and also may realize
lower revenue in the third quarter than in the preceding second quarter. Cayenne
has also frequently recognized more revenue in the last month of each quarter
than in either of the preceding two months. Cayenne believes that these
quarterly and monthly patterns are partly attributable to Cayenne's sales
commission policies, which compensate sales personnel for meeting or exceeding
quarterly quotas, and to the budgeting and purchasing cycles of customers. In
addition, Cayenne's revenue and earnings have fluctuated historically, and may
fluctuate in the future, due to the timing of large individual orders. There
were no large orders ($1,000,000 or more) during the six months ended June 30,
1997. Cayenne usually has no significant backlog, and substantially all of its
product revenue in any quarter results from sales made in that quarter. If sales
do not close in a quarter as expected, Cayenne's results of operations for that
quarter would be adversely affected. Net income may be disproportionately
affected by a reduction in revenues because only a small portion of Cayenne's
expenses vary with revenues.
HIGHLY COMPETITIVE INDUSTRY; INCREASING COMPETITION; DEPENDENCE ON KEY PERSONNEL
The market for Cayenne's software products is highly competitive, and Cayenne
expects competition to increase. Companies competing in related markets,
including hardware manufacturers, could seek to enter this market with software
products which offer functionality similar to that offered by Cayenne's
products. The computer aided software engineering ("CASE") market generally has
been adversely affected by competition from other programming support
environments. In addition, Cayenne expects to encounter additional competitors
as it expands its product line beyond the mainframe and structured analysis and
design markets into the client/server and object-oriented markets. Many of
Cayenne's existing and potential competitors have greater financial, technical
and other resources than Cayenne. In addition, mergers or other business
combinations among competitors could strengthen them and create larger companies
with broader product offerings, more extensive market influence and greater
resources. Maintaining and improving Cayenne's competitive position will require
continued investment by Cayenne in research and development, sales, and
marketing, particularly as Cayenne expands its product line beyond the mainframe
and structured analysis and design markets. There can be no assurance that
Cayenne will have sufficient resources to make that investment. Competitive
pressures could result in loss of market share, price reductions and increases
in expenses that could adversely affect Cayenne's business.
Cayenne has experienced turnover in its personnel in the past including certain
executives and key management, technical, and sales employees. Cayenne's future
success will depend in large part upon its ability to attract and retain skilled
executives and management and technical personnel. Competition for such
personnel in the software industry continues to be intense. There can be no
assurance that Cayenne will be successful in attracting and retaining the
personnel it requires for its operations.
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VOLATILITY OF SHARE PRICE
Since the completion of Cayenne's initial public offering in November 1991, the
closing price of Cayenne Common Stock, as reported by the Nasdaq Stock Market,
has ranged from $1 3/4 to $37 3/4. The highest closing price of the Common Stock
as reported on the NASDAQ Stock Market during the Company's last two completed
fiscal years was $11.875 per share. See "Price Range of Common Stock and
Dividends." Announcements of technological innovations or new products by
Cayenne or its competitors, quarterly variations in Cayenne's operating results,
general factors affecting the computer software industry, and other factors may
cause the market price of Cayenne Common Stock to fluctuate significantly in the
future. In addition, in recent years the stock market has experienced large
price and volume fluctuations, which often have been unrelated to the operating
performance of specific companies or market sectors.
RISKS OF INTERNATIONAL OPERATIONS; RELIANCE ON DISTRIBUTORS
Approximately 48%, 50%, 52%, 51% and 53% of Cayenne's revenues in fiscal 1994,
1995, and 1996, the six months ended December 31, 1996, and the six months ended
June 30, 1997, respectively, were attributable to international sales.
The future contribution of sales from Cayenne's international subsidiaries to
its results of operations depends on Cayenne's success in maintaining
cost-effective direct marketing operations through Cayenne's wholly owned
subsidiaries in Australia, Germany, Italy, the Netherlands, Singapore, Spain,
and the United Kingdom. Sales in countries in which Cayenne continues to use
independent distributors will remain subject to the distributors' financial
condition and success, which cannot be controlled by Cayenne. Other risks
inherent in Cayenne's international business generally include exposure to
currency fluctuations, longer payment cycles, greater difficulties in accounts
receivable collection and the requirement of complying with a wide variety of
foreign laws.
DEPENDENCE ON PROPRIETARY TECHNOLOGY
Cayenne's success is heavily dependent upon its proprietary software technology.
Cayenne relies principally on a combination of copyrights, trade secrets and
contractual rights to protect its proprietary technology. In addition, Cayenne
holds ten United States patents and currently has various patent applications
pending abroad. There can be no assurance that any patents will be issued in
respect of those applications, or that the steps taken by Cayenne to protect its
proprietary rights will be adequate to prevent misappropriation of its
technology or independent development by others of similar technology. Although
Cayenne believes that its products and technology do not infringe on any
existing proprietary rights of others, the use of patents to protect software
has increased, and there can be no assurance that third parties will not assert
infringement claims in the future. If any such claim were to be asserted, it
might involve costly and protracted litigation. No assurance can be given that
Cayenne would be successful in any such litigation or that, if it were not
successful, it would be able to license the disputed proprietary rights on
commercially reasonable terms.
ANTI-TAKEOVER EFFECT OF CERTAIN PROVISIONS OF CHARTER AND BY-LAWS, MASSACHUSETTS
LAW AND EMPLOYMENT AGREEMENTS
The Cayenne Board has the authority to issue up to 1,600,000 shares of preferred
stock (including the 100,000 shares of Series C Convertible Preferred Stock
issued in July 1997 and 250,000 shares of Series D Convertible Preferred Stock
issued in August 1997) and to determine the price, rights, preferences,
privileges and restrictions, including voting rights, of those shares without
any further vote or action by the stockholders. The rights of the holders of
Cayenne Common Stock will be subject to, and may be adversely affected by, the
rights of the holders of any Cayenne preferred stock that may be issued in the
-8-
<PAGE> 11
future. The issuance of Cayenne preferred stock, while providing desirable
flexibility in connection with possible acquisitions and other corporate
purposes, could have the effect of making it more difficult for a third party to
acquire a majority of the outstanding voting stock of Cayenne. In addition, the
classification of the Cayenne Board and certain other provisions of Cayenne's
Restated Articles of Organization (the "Cayenne Articles"), its Amended and
Restated By-Laws (the "Cayenne By-Laws") and Massachusetts law could delay or
frustrate the removal of incumbent directors and could make more difficult a
merger, tender offer or proxy contest involving Cayenne. Further, Cayenne and
certain of its current executive officers have entered into employment
agreements that become effective only upon the occurrence of certain "changes in
control." Other officers of the Company also have arrangements providing them
with severance payments and other benefits if their employment is terminated
without cause or, in some cases, in connection with a change in control of the
Company. While these agreements were intended by Cayenne to limit further
departures by executive officers, the agreements also could have the effect of
making a merger, tender offer or proxy contest more difficult.
SHARES OF COMMON STOCK ELIGIBLE FOR FUTURE SALE
Sales of a substantial number of shares of Cayenne Common Stock in the public
market could adversely affect the market price for the Cayenne Common Stock.
Sales of substantial amounts of Cayenne Common Stock by existing holders may
impair Cayenne's ability to raise capital in the future through the sale of
Cayenne Common Stock or other equity securities.
Cayenne has registered 11,799,945 shares of Cayenne Common Stock issuable under
its stock option and stock purchase plans, of which 3,788,701 shares were
subject to outstanding options at September 23, 1997. Shares issued upon the
exercise of options and shares issued under Cayenne's stock purchase plan
generally will be eligible for sale in the public market.
LITIGATION
Cayenne has received correspondence from Esprit Systems Consulting, Inc.
claiming that Cayenne's subsidiary, Cadre Technologies, Inc., is liable to
Esprit for approximately $1,650,000 under an extension to a contract for
services to be rendered to Cadre. Cayenne believes that the claim is without
merit, because, among other things, the contract in question terminated without
extension. The claim has not been asserted formally in arbitration or
litigation, and no assurance can be given as to its future course or likely
result.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Common Stock offered
hereby by the Selling Stockholders.
-9-
<PAGE> 12
BUSINESS
CAYENNE SOFTWARE, INC., organized as a Massachusetts corporation in 1983 under
the name BACHMAN Information Systems, Inc., develops, markets and supports a
comprehensive suite of software products and services. Fortune 1000 companies
and government agencies around the world use Cayenne products as they develop,
implement, and maintain enterprise-wide, business-critical information systems.
Cayenne's products are designed around an innovative open architecture that
enables organizations to create applications that integrate diverse information
sources into new high-performance computing environments, to modify applications
as business and technology change, and to run those applications on a variety of
platforms. Cayenne's approach to reusability and its open architecture directly
support mainframe and client/server initiatives and partnerships with other
leading software vendors.
Cayenne targets its products to Fortune 1000 companies, government agencies, and
organizations of similar size throughout the world that use personal computers,
workstations, mid-range and mainframe computers and relational database
management systems for data-intensive applications.
The Company develops software tools that help software developers create
applications and integrate diverse information sources for large and small
software development projects. The products include modeling, database design
and development tools for object-oriented, data-driven and structured
application development approaches for use by large corporations, independent
software vendors and technical organizations. The products are targeted to the
object and relational application development needs of software development
teams in a scaleable, workgroup-to-enterprise environment. The Company's
products are used to create real-time and embedded applications, three-tier
client/server applications, data warehouses, and Internet/intranet solutions on
a wide range of platforms. The market in which Cayenne participates is
characterized by frequent and rapid changes in hardware and software technology
and in customer preferences, and therefore, the Company has devoted much effort
to enhance its product offerings and to improve its competitive position
through: development efforts, strategic alliances and acquisitions. These
actions have had an adverse effect on the Company's operating results during
fiscal 1994, 1995 and 1996 the six-month transition period ended December 31,
1996 and the six months ended June 30, 1997.
Cayenne's executive offices, principal research and development facilities, and
principal marketing, customer service and support and production facilities are
located in approximately 62,000 square feet of space in an executive office park
in Burlington, Massachusetts. Cayenne occupies that space under a lease expiring
October 31, 1997. Cayenne is currently negotiating for renewal of its lease.
There is currently substantial demand for general office space in the Greater
Boston area; and Cayenne may experience an increase in rental expense for
periods after October 1997, as well as expenses for moving if Cayenne ultimately
arranges to lease other space. Cayenne maintains its primary sales and support
offices in nine locations in the United States, and its distribution
subsidiaries have offices in Toronto, Canada; Bracknell, England; Wiesbaden and
Munich, Germany; Singapore; Madrid, Spain; Delft, Netherlands; Canberra,
Australia; and Florence, Milan, Rome, and Turin, Italy.
SELLING STOCKHOLDERS
The following table sets forth the number of shares of Common Stock owned by
each of the Selling Stockholders as of September 12, 1997. Except as indicated,
none of the Selling Stockholders has had a material relationship with the
Company within the past three years other than as a result of the ownership of
the Shares or other securities of the Company. Because the Selling Stockholders
may offer all or some of the Shares which they hold pursuant to the offering
contemplated by this Prospectus, and because there are currently no agreements,
arrangements or understandings with respect to the sale of any of the Shares, no
-10-
<PAGE> 13
estimate can be given as to the amount of Shares that will be held by the
Selling Stockholders after completion of this offering. The Shares offered by
this Prospectus may be offered from time to time by the Selling Stockholders
named below:
<TABLE>
<CAPTION>
Shares
Beneficially Shares
Owned Before Registered for
the Offering(2) Sale Hereby(1)(3)
--------------- -----------------
<S> <C> <C>
Heracles Fund 288,218 529,597
Integral Capital Partners III, L.P. 940,167 1,727,547
Integral Capital Partners 212,705 390,843
International III, L.P.
Lewis A. Fraser 115,287 211,839
Quissett Partners, L.P.(4) 172,931 317,758
Quissett Investors (Bermuda) LP(4) 172,931 317,758
Themis Partners L.P. 172,931 317,758
Winston Partners, L..P 269,000 494,284
Winston II LLC 179,329 329,515
Winston II LDC 358,682 659,073
--------- ---------
Total 2,882,181 5,295,972
========= =========
</TABLE>
(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable in connection with the shares
registered for sale hereby by reason of any stock dividend, stock
split, recapitalization or other similar transaction effected without
the receipt of consideration which results in an increase in the
number of the Registrant's outstanding shares of Common Stock.
(2) Each Selling Stockholder holds shares of the company's Series D
Convertible Preferred Stock, which may be converted to shares of
Common Stock from time to time at a rate determined by the lower of
the average quoted market price of the Common Stock for either (i) the
ten trading days preceding the date of issuance or (ii) any five
trading days during the period of thirty trading days before the
conversion, subject to further adjustment if the Company issues Common
Stock or the equivalent at a lower price. The amount of Common Stock
shown in the table reflects the amount into which the shares of
Preferred Stock might have been converted on August 28, 1997 in
accordance with the market-price formula. Because the number of shares
of Common Stock that will be ultimately issued to each Selling
Stockholder upon conversion of the preferred stock is dependent upon
the conversion formula described above, that amount (and therefore the
amount of Common Stock offered hereby) cannot be determined at this
time. Each Selling Stockholder also holds warrants to purchase shares
of Common Stock. The amount of Common Stock shown in the table
reflects the amount that the respective Selling Stockholder would be
entitled to purchase upon exercise of the warrants in full.
(3) Under the provisions of the Registration Rights Agreement among the
Company and the several Selling Stockholders, the Company, in order to
allow for the variable conversion price of the Series D Convertible
Preferred Stock, is registering twice the amount of Common Stock that
would be issued on conversion of the Preferred Stock as of August 28,
1997 , [plus an amount estimated to cover dividends that may be paid
in Common Stock,] plus the amount of Common Stock that would be issued
upon exercise of the warrants.
(4) Wellington Management Company, LLP, investment adviser to Quissett
Partners, L.P. and Quissett Investors (Bermuda) LP, has filed a
statement on Schedule 13G dated June 10, 1997 reporting beneficial
ownership of 1,783,000 shares of the Company's Common Stock. Assuming
that the Quissett partnerships dispose of all the shares being
registered, then, after completion of the offering, Wellington
Management Company, LLP, will own beneficially approximately 9.32% of
the Company's outstanding Common Stock (assuming no conversion of
Preferred Stock or exercise of Warrants by any other Selling
Stockholder)
PLAN OF DISTRIBUTION
The Common Stock may be sold from time to time by the Selling Stockholders, or
by pledgees, donees, transferees or other successors in interest thereof. They
may sell from time to time on one or more exchanges, in the over-the-counter
market, or otherwise, at prices and at terms then prevailing or at prices
related to the
-11-
<PAGE> 14
then current market price or in negotiated transactions. The shares may be sold
by one or more of the following methods, without limitation: (a) a block trade
in which the broker or dealer so engaged will attempt to sell the shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction, (b) purchases by a broker or dealer as principal and
resale by such broker or dealer for its account pursuant to the Prospectus, as
supplemented, (c) an exchange distribution in accordance with the rules of such
exchange, (d) ordinary brokerage transactions and transactions in which the
broker solicits purchasers, (e) privately negotiated transactions; if short
sales; and (g) a combination of any such methods of sale. In addition, any
securities covered by the Prospectus which qualify for sale pursuant to Rule 144
may be sold under Rule 144 rather than pursuant to the Prospectus, as
supplemented. From time to time the Selling Stockholders may engage in short
sales, short sales against the box, puts and calls and other transactions in
securities of the Company or derivatives thereof, and may sell and deliver the
shares in connection therewith.
From time to time Selling Stockholders may pledge their shares pursuant to the
margin provisions of their respective customer agreements with their respective
brokers. Upon a default by a Selling Stockholder, the broker may offer and sell
the pledged shares of Common Stock from time to time.
To the extent required by applicable law, the specific Shares to be sold, the
names of the Selling Shareholders, the respective purchase prices and public
offering prices, the names of any such agent, broker-dealer or underwriter, and
any applicable commissions or discounts with respect to a particular offer will
be set forth in an accompanying Prospectus Supplement. Resales or reoffers of
the Shares by the Selling Shareholders must be accompanied by a copy of this
Prospectus.
The Selling Shareholders and any agents, broker-dealers or underwriters that
participate in the distribution of the Shares may be deemed to be underwriters,
and any profit on the sale of the Shares by them, and any discounts, commissions
or concessions received by them, may be deemed to be underwriting commissions or
discounts under the Securities Act.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Foley, Hoag & Eliot LLP, Boston, Massachusetts.
EXPERTS
The consolidated balance sheets as of December 31 and June 30, 1996 and 1995 and
the consolidated statements of operations, stockholders' equity (deficit), and
cash flows for the six month period ended December 31, 1996 and for each of the
three years in the period ended June 30, 1996 of the Company incorporated by
reference in this Registration Statement, have been incorporated by reference
herein in reliance on the report of Coopers & Lybrand L.L.P., independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
The consolidated financial statements of Cadre Technologies, Inc. and its
subsidiaries as of December 31, 1995 and for each of the two years in the period
then ended, incorporated in this prospectus by reference from the Cayenne
Software, Inc. Annual Report on Form 10-K for the year ended December 31, 1996
have been audited by Deloitte & Touche, LLP, independent auditors, as stated in
their report which is incorporated herein by reference (which report expresses
in unqualified opinion and includes an explanatory paragraph relating to
substantial doubt about Cadre Technologies, Inc.'s ability to continue as a
going concern), and have been so incorporated in reliance upon the report of
such firm given upon their authority as experts in accounting and auditing
-12-
<PAGE> 15
================================================================================
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and, if given or
made, such information or representations must not be relied upon as having been
authorized by the Company or any Selling Shareholder. This Prospectus does not
constitute an offer to sell or the solicitation of an offer to buy any
securities other than the securities to which it relates or an offer to sell or
the solicitation of an offer to buy such securities in any circumstances in
which such offer or solicitation is unlawful. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that there has been no change in the affairs of the Company
since the date hereof or the information contained herein is correct as of any
time subsequent to its date.
------------------------------------
5,295,972 Shares
CAYENNE SOFTWARE, INC.
Common Stock
(par value $.01 per share)
-----------------------
PROSPECTUS
-----------------------
September __, 1997
<PAGE> 16
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The Selling Stockholder(s) will bear all brokerage fees and commissions and
similar charges relating to their sales of any of the registered shares. The
following expenses of this registration (all estimated) will be borne by the
Registrant:
SEC registration fee..................... $ 4,513
Printing and EDGAR filing................ 5,000
Legal and accounting fees................ 7,500
-------
......................................... $17,013
=======
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Paragraph D of Article 6 of the Company's Articles provides that, to the
maximum extent permitted by Massachusetts law (as the same exists or is
subsequently amended), no director shall be personally liable to the Company or
any of its stockholders for monetary damages arising out of the director's
breach of fiduciary duty as a director of the Company. Section 13(b)(l 1/2) of
the Massachusetts BCL provides that a Massachusetts corporation's articles of
organization may state a provision eliminating or limiting the personal
liability of a director to a corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, provided that such provision
may not eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under specified sections of the Massachusetts
BCL establishing the liability of directors for certain unauthorized
distributions and loans to insiders or (iv) for any transaction from which the
director derived an improper personal benefit.
Section 6 of Article VII of the Company's By-Laws provides that the Company
shall, to the extent legally permissible, indemnify each of its directors and
officers (including persons who serve at its request as directors, officers or
trustees of any organization in which the Company has an interest as a
stockholder, creditor or otherwise), against all liabilities and expenses
reasonably incurred by such persons in connection with the defense or
disposition of any action, suit or proceeding in which they may be involved or
with which they may be threatened by reason of being or having been such a
director or officer, except with respect to any matter as to which they shall
have been adjudicated not to have acted in good faith in the reasonable belief
that their action was in the best interests of the Company. Section 67 of the
Massachusetts BCL authorizes a Massachusetts corporation to indemnify its
directors, officers, employees and other agents unless such person shall have
been adjudicated in any proceeding not to have acted in good faith in the
reasonable belief that such action was in the best interests of the corporation.
The effect of these provisions would be to permit indemnification by the
Company for, among other liabilities, (a) liabilities arising out of the
Securities Act in connection with this Registration Statement (see Item 9
below).
Section 67 of the Massachusetts BCL also affords a Massachusetts
corporation the power to obtain insurance on behalf of its directors, officers,
employees and agents against liabilities incurred by them in those capacities or
out of their status as such, whether or not the corporation would have the power
to indemnify them against those liabilities. The Company has procured a
directors' and officers' liability and company reimbursement liability insurance
policy that (a) insures directors and officers of the Company against losses (in
excess of a deductible amount) arising from certain claims made against them by
reason of certain acts done or attempted by such directors or officers and (b)
insures the Company against losses
II-1
<PAGE> 17
(in excess of a deductible amount) arising from any such claims, but only if the
Company is required or permitted to indemnify such directors or officers for
such losses under statutory or common law or under provisions of the Company's
articles of organization or by-laws.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a).............................Exhibits:
3.1 Statement of Rights and Preferences of Series D Convertible
Preferred Stock
4.1 Specimen Certificate representing Common Stock of the Company
(filed as Exhibit 4.1 to the Company's Registration Statement on
Form S-1, File No. 33-43401, and incorporated herein by
reference)
4.2 Convertible Preferred Stock Purchase Agreement dated as of August
28, 1997 between the Company and the Purchasers identified in
Schedule A thereto
4.3 Registration Rights Agreement dated as of August 28, 1997
4.4 Form of Warrant Agreement dated as of August 28, 1997
5.1 Opinion of Foley, Hoag & Eliot LLP
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Deloitte & Touche, LLP
23.3 Consent of Foley, Hoag & Eliot (included on Exhibit 5.1)
24.1 Power of Attorney (contained on the signature page)
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration
Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the
Registration Statement;
II-2
<PAGE> 18
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement;
provided, however, that paragraphs 2 (a)(1)(i) and 2 (a)(1)(ii) do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed
by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference
herein.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered herein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(c) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
3. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE> 19
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 Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Town of Burlington, Massachusetts, on September 25, 1997.
CAYENNE SOFTWARE, INC.
By: /s/ Frederick H. Phillips
------------------------------------------
Frederick H. Phillips
Vice President, Finance and Administration
KNOW ALL MEN BY THESE PRESENTS that each individual whose signature appears
below constitutes and appoints Peter J. Boni and Frederick H. Phillips, and each
of them, his true and lawful attorneys-in-fact and agents with full power of
substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto,
and all documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing he may
deem necessary or advisable to be done in connection with this Registration
Statement, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Peter J. Boni President and September 25, 1997
- ---------------------------------- Chief Executive Officer,
Peter J. Boni Director
/s/ Frederick H. Phillips Vice President, Finance and Administration, September 25, 1997
- ---------------------------------- Treasurer and Chief Financial Officer
Frederick H. Phillips (Principal Financial and Accounting Officer)
/s/ John J. Alexander Director September 25, 1997
- ----------------------------------
John J. Alexander
/s/ R. John Fletcher Director September 25, 1997
- ----------------------------------
R. John Fletcher
/s/ William H. D. Goddard Director September 25, 1997
- ----------------------------------
William H. D. Goddard
/s/ Roland Pampel Director September 25, 1997
- ----------------------------------
Roland Pampel
/s/ Allyn C. Woodward, Jr. Director September 25, 1997
- ----------------------------------
Allyn C. Woodward, Jr.
</TABLE>
<PAGE> 20
INDEX OF EXHIBITS
3.1 Statement of Rights and Preferences of Series D Convertible
Preferred Stock
4.1 Specimen Certificate representing Common Stock of the Company
(filed as Exhibit 4.1 to the Company=s Registration Statement on
Form S-1, File No. 33-43401, and incorporated herein by
reference)
4.2 Convertible Preferred Stock Purchase Agreement dated as of August
28, 1997 between the Company and the Purchasers identified in
Schedule A thereto
4.3 Registration Rights Agreement dated as of August 28, 1997
4.4 Form of Warrant Agreement dated as of August 28, 1997
5.1 Opinion of Foley, Hoag & Eliot LLP
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Deloitte & Touche, LLP
23.3 Consent of Foley, Hoag & Eliot (included on Exhibit 5.1)
24.1 Power of Attorney (contained on the signature page)
<PAGE> 1
EXHIBIT 3.1
STATEMENT OF THE RIGHTS AND PREFERENCES OF
SERIES D CONVERTIBLE PREFERRED STOCK OF
CAYENNE SOFTWARE, INC.
Section 1. DESIGNATION, AMOUNT AND PAR VALUE. The series of preferred
stock shall be designated as the Series D Convertible Preferred Stock (the
"Preferred Stock"), and the number of shares so designated shall be 300,000
(which shall not be subject to increase without the written consent of the
holders thereof). Each share of Preferred Stock shall have a par value of $1.00
per share and a stated value of $20.00 per share (the "Stated Value").
Section 2. DIVIDENDS.
A. Holders of Preferred Stock (the "Holders") shall be entitled to
receive, when and as declared by the Board of Directors of the Company (the
"Board of Directors") out of funds legally available therefor, and the Company
shall pay, cumulative dividends at the rate per share (as a percentage of the
Stated Value per share) equal to 5% per annum, payable, at the Company's option,
in cash or shares of Common Stock, in arrears at such time as the Company shall
determine, but in no event later than the Conversion Date (as hereinafter
defined). Dividends on the Preferred Stock shall accrue daily commencing the
Original Issue Date (as defined in Section 7), and shall be deemed to accrue on
such date whether or not earned or declared and whether or not there are
profits, surplus or other funds of the Company legally available for the payment
of dividends. The party that holds the Preferred Stock on an applicable record
date for any dividend payment will be entitled to receive such dividend payment
and any other accrued and unpaid dividends which accrued prior to such dividend
payment date, without regard to any sale or disposition of such Preferred Stock
subsequent to the applicable record date but prior to the applicable dividend
payment date. Except as otherwise provided herein, if at any time the Company
pays less than the total amount of dividends then accrued on account of the
Preferred Stock, such payment shall be distributed ratably among the holders of
the Preferred Stock based upon the number of shares held by each holder. Payment
of dividends on the Preferred Stock is further subject to the provisions of
Section 5(c)(iv).
B. Notwithstanding anything to the contrary contained herein, the
Company may not issue shares of Common Stock in payment of dividends on the
Preferred Stock if:
1. the number of shares of Common Stock at the time
authorized, unissued and unreserved for all purposes, or held as treasury stock,
is insufficient to issue such dividends in shares of Common Stock;
2. the shares of Common Stock to be issued in respect of such
dividends are not registered for resale pursuant to an effective registration
statement that names the recipient of such dividend as a selling stockholder
thereunder; or
<PAGE> 2
3. the shares of Common Stock to be issued in respect of such
dividends are not listed on the Nasdaq National Market, and any other exchange
on which the Common Stock is then listed for trading.
C. So long as any Preferred Stock shall remain outstanding, neither the
Company nor any subsidiary thereof shall without the prior written consent of
all the Holders redeem, purchase or otherwise acquire directly or indirectly any
Junior Securities (as defined in Section 7), nor shall the Company directly or
indirectly pay or declare any dividend or make any distribution (other than a
dividend or distribution described in Section 5) upon, nor shall any
distribution be made in respect of, any Junior Securities, nor shall any monies
be set aside for or applied to the purchase or redemption (through a sinking
fund or otherwise) of any Junior Securities unless all dividends on the
Preferred Stock for all past dividend periods shall have been paid.
Section 1. VOTING RIGHTS. Except as otherwise provided herein and as
otherwise required by law, each holder of Preferred Stock shall be entitled to
vote on all matters submitted to the shareholders of the Corporation for their
consideration and shall be entitled to cast that number of votes equal to the
largest number of whole shares of Common Stock into which such holder's shares
of Preferred Stock could be converted, pursuant to the provisions of Section 5
hereof, at the record date for the determination of shareholders entitled to
vote on such matter. Except as otherwise required by law or expressly provided
herein, the holders of shares of Preferred Stock, Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and Common Stock shall vote
together as a single class on all matters submitted to the shareholders of the
Corporation for their consideration. So long as any shares of Preferred Stock
are outstanding, the Company shall not, without the affirmative vote of the
holders of a majority of the shares of the Preferred Stock then outstanding,
alter or change adversely the powers, preferences or rights given to the
Preferred Stock or authorize or create any class of stock ranking as to
dividends or distribution of assets upon a Liquidation (as defined in Section 4)
senior to, prior to or pari passu with the Preferred Stock.
Section 2. LIQUIDATION. Upon any liquidation, dissolution or winding-up
of the Company, whether voluntary or involuntary (a "Liquidation"), the holders
of Preferred Stock shall be entitled to receive out of the assets of the
Company, whether such assets are capital or surplus, for each share of Preferred
Stock an amount equal to the Stated Value plus all accrued but unpaid dividends
per share, whether declared or not, before any distribution or payment shall be
made to the holders of any Junior Securities, and if the assets of the Company
shall be insufficient to pay in full such amounts, then the entire assets to be
distributed shall be distributed among the holders of Preferred Stock ratably in
accordance with the respective amounts that would be payable on such shares if
all amounts payable thereon were paid in full. A sale, conveyance or disposition
of all or substantially all of the assets of the Company or the effectuation by
the Company of a transaction or series of related transactions in which more
than 50% of the voting power of the Company is disposed of, or a consolidation
or merger of the Company with or into any other company or companies shall not
be treated as a Liquidation, but instead shall be subject to the provisions of
Section 5. The Company shall mail written notice of any such Liquidation, not
less than 45 days prior to the payment date stated therein, to each record
holder of Preferred Stock but after public disclosure of the event.
<PAGE> 3
Section 3. CONVERSION.
D.(i) Each share of Preferred Stock shall be convertible into shares of
Common Stock (subject to reduction pursuant to Sections 5(a)(iii) and 5(a)(iv),
at the Conversion Ratio (as defined in Section 7) at the option of the holder in
whole or in part at any time after the Original Issue Date. The holder shall
effect conversions by giving the form of conversion notice attached hereto as
Exhibit A (the "Holder Conversion Notice"), with prompt delivery thereafter of
the certificate or certificates for the Preferred Stock being converted. Each
Holder Conversion Notice shall specify the number of shares of Preferred Stock
to be converted and the date on which such conversion is to be effected, which
date may not be prior to the date the holder delivers such Holder Conversion
Notice by facsimile (the "Holder Conversion Date"). If no Holder Conversion Date
is specified in a Holder Conversion Notice, the Holder Conversion Date shall be
the date that the Holder Conversion Notice is deemed delivered pursuant to
Section 5(h). Subject to Sections 5(b), 5(a)(iii) and 5(a)(iv), each Holder
Conversion Notice, once given, shall be irrevocable. If the holder is converting
less than all shares of Preferred Stock represented by the certificate or
certificates tendered by the holder with the Holder Conversion Notice, the
Company shall within three (3) business days deliver to such holder a
certificate for such number of shares of Preferred Stock as have not been
converted. A Holder Conversion Notice shall not be effective unless and until
the Holder has satisfied all pre-conditions to conversion applicable to that
Holder under the provisions of the Purchase Agreement relating to the original
issue of the shares to be converted.
(ii) Subject to the conditions set forth in this
Section 5(a)(ii), all outstanding and unconverted shares of Preferred Stock may
be converted, at the option of the Company, into shares of Common Stock (subject
to reduction pursuant to Sections 5(a)(iii) and 5(a)(iv)) at the Conversion
Ratio on or after the second anniversary of the date on which the Underlying
Securities Registration Statement (as defined in Section 7) has been declared
effective by the Securities and Exchange Commission (the "Commission"),
provided, that at all times from the date of the Company Conversion Notice (as
defined below) to the Company Conversion Date ( as defined below) such
Underlying Securities Registration Statement is effective and the Underlying
Shares (as defined in Section 7) are listed on the Nasdaq National Market or
Nasdaq SmallCap Market and each other securities exchange or market on which the
Common Stock is then listed. The conversion date for any conversion pursuant to
this Section 5(a)(ii) (the "Company Conversion Date") shall be not earlier than
20 days nor later than 5 days prior to the date on which the Company shall
deliver to the holders of such outstanding and unconverted shares of Preferred
Stock a notice of such conversion in the form attached hereto as Exhibit B (the
"Company Conversion Notice"). A Holder Conversion Date and a Company Conversion
Date are sometimes collectively referred to herein as the "Conversion Date" and
a Holder Conversion Notice and a Company Conversion Notice are sometimes
collectively referred to as a "Conversion Notice." Any conversion pursuant to
this Section 5(a)(ii) shall be subject to Section 5(b) with respect to
consequences of the Company's failure to deliver shares of Common Stock in
respect of a conversion under this Section and to Sections 5(a)(iii) and
5(a)(iv). Nothing in this paragraph shall be construed to alter or restrict the
right of any Holder to convert any share of Preferred Stock at any time.
<PAGE> 4
(iii) Certain Regulatory Approval. If on the Conversion Date
applicable to any conversion under this Section 5(a), (A) the Common Stock is
then listed for trading on the Nasdaq National Market or the American Stock
Exchange or if the rules of the Nasdaq Stock Market are hereafter amended to
extend Rule 4460(i) promulgated thereby (or any successor or replacement
provision thereof) to the Nasdaq SmallCap Market and the Common Stock is then
listed for trading on such market and (B) the Conversion Price then in effect is
such that the aggregate number of shares of Common Stock that would then be
issuable upon conversion of all shares of Preferred Stock submitted for
conversion on that Conversion Date, together with any shares of Common Stock
previously issued upon conversion of Preferred Stock and exercise of any warrant
issued in connection with issue of the Preferred Stock, would equal or exceed
20% of the number of shares of Common Stock outstanding on the Original Issue
Date (the "Issuable Maximum"), and the Company has not previously obtained
"Shareholder Approval" (as defined below), then the Company shall issue to the
converting Holder of the Preferred Stock an amount of shares of Common Stock
equal to the Issuable Maximum, such amount to be calculated based on each
Holder's percentage of total number of Preferred Shares outstanding on the
Original Issue Date, and, with respect to any shares of Common Stock that would
be issuable to such Holder in respect of the Conversion Notice at issue in
excess of the Issuable Maximum, the converting Holder shall have the option to
require the Company, either (1) as promptly as possible, but in no event later
than 60 days after such Conversion Date, to convene a meeting of the holders of
the Common Stock and obtain the Shareholder Approval or (2) to redeem, from
funds legally available therefor at the time of such redemption, the balance of
the Preferred Stock subject to such Conversion Notice at a price per share equal
to the product of (i) the average Per Share Market Value for the ten (10)
Trading Days immediately preceding (1) the Conversion Date or (2) the date of
payment in full by the Company of such redemption price, whichever is greater,
and (ii) the Conversion Ratio calculated on (1) the Conversion Date or (2)
calculated as if the Conversion Date (for purposes of determining the Conversion
Price) were the date of payment by the Company of such redemption price,
whichever date yields a lower Conversion Price denominator for the determination
of the Conversion Ratio; provided, however, that if the Holder shall elect to
require the Company to obtain Shareholder Approval under paragraph (1) above and
the Company fails for any reason to obtain such Shareholder Approval within the
time period set forth in (1) above, the Company shall be obligated to redeem the
Preferred Stock not converted as a result of the provisions of this Section in
accordance with the provisions of paragraph (2) above, and in such case the
interest contemplated by the immediately succeeding sentence shall be deemed to
accrue from the Conversion Date. If the Company fails for any reason to pay the
redemption price under (2) above within seven days after the Conversion Date,
the Company will pay interest on such redemption price at a rate of 0.2% per day
to the converting holder of Preferred Stock, accruing from the Conversion Date
until the redemption price plus any accrued interest thereon is paid in full.
The entire redemption price, including interest thereon, shall be paid in cash.
"Shareholder Approval" means the approval by a majority of the total votes cast
on the proposal, in person or by proxy, at a meeting of the shareholders of the
Company held in accordance with the Company's Articles of Organization and
by-laws, of the issuance by the Company of shares of Common Stock exceeding the
Issuable Maximum as a consequence of the conversion of Preferred Stock into
Common Stock or the exercise of Warrants to purchase Common Stock at a price
less than the greater of the book or market value on the Original Issue Date as
and to the extent required pursuant to Rule 4460(i) of the Nasdaq Stock Market
or Rule
<PAGE> 5
713 of the American Stock Exchange (or any successor or replacement provision
thereof), as applicable.
(iv) If on any Conversion Date, within one year after the
Original Issue Date, applicable to a conversion under Section 5(a), the average
Per Share Market Value for the ten Trading Days immediately preceding the date
of the applicable notice of conversion exceeds the Initial Conversion Price
(defined in Section 5(c)(i)) by more than 50%, the Conversion Price otherwise
applicable to such conversion or repayment shall be increased by an amount equal
to 50% of the difference between (A) the average Per Share Market Value for the
ten Trading Days immediately preceding such notice date, and (B) 150% of the
Initial Conversion Price. In the event that any increase may be required by this
paragraph, the Company will give the Holder notice by telephone, confirmed
promptly in writing, before effecting the Conversion.
E. Not later than three Trading Days after the Conversion Date, the
Company will deliver to the Holder (i) a certificate or certificates which shall
be free of restrictive legends and trading restrictions (other than those then
required by law and as set forth in the Purchase Agreement) representing the
number of shares of Common Stock being acquired upon the conversion of shares of
Preferred Stock (subject to reduction pursuant to Section 5(a)(iii)) and (ii)
one or more certificates representing the number of shares of Preferred Stock
not converted; provided, however, that the Company shall not be obligated to
issue certificates evidencing the shares of Common Stock issuable upon
conversion of any shares of Preferred Stock until certificates evidencing such
shares of Preferred Stock are either delivered for conversion to the Company or
any transfer agent for the Preferred Stock or Common Stock, or the holder of
such Preferred Stock notifies the Company that such certificates have been lost,
stolen or destroyed and provides a bond (or other adequate security reasonably
acceptable to the Company) reasonably satisfactory to the Company to indemnify
the Company from any loss incurred by it in connection therewith. The Company
shall, upon request of the holder of the Preferred Stock, use its best efforts
to deliver any certificate or certificates required to be delivered by the
Company under this Section. If such certificate or certificates are not
delivered by the date required under this Section 5(b), the holder shall be
entitled by written notice to the Company at any time on or before its receipt
of such certificate or certificates thereafter, to rescind such conversion, in
which event the Company shall immediately return the certificates representing
the shares of Preferred Stock tendered for conversion. If the Company fails to
deliver to the Holder such certificate or certificates pursuant to this Section,
including for purposes hereof, any shares of Common Stock to be issued on the
Conversion Date on account of accrued but unpaid dividends hereunder, by the
seventh Trading Day after the Conversion Date, the Company shall pay to such
holder, in cash, $1,500 for each such Subsequent Trading Day after the
Conversion Date until such certificates are delivered, which amount may be
applied as a reduction of any other amount then or thereafter owed by the
Company to the Holder as a result of its failure to deliver. If the Company
fails to deliver to the Holder such certificate or certificates pursuant to this
Section prior to the 30th day after the Conversion Date, the Company shall, at
the Holder's option (i) redeem, from funds legally available therefor at the
time of such redemption, such number of shares of Preferred Stock then held by
such Holder, as requested by such Holder, and (ii) pay all accrued but unpaid
dividends on account of the Preferred Stock for which the Company shall have
failed to issue Common Stock certificates hereunder, in cash. The redemption
price per share shall be equal to the product of
<PAGE> 6
(A) the average Per Share Market Value for the ten (10) Trading Days immediately
preceding (1) the Conversion Date or (2) the date of payment in full by the
Company of such redemption price, whichever is greater, and (ii) the Conversion
Ratio calculated on (1) the Conversion Date or (2) calculated as if the
Conversion Date (for purposes of determining the Conversion Price) were the date
of payment by the Company of such redemption price, whichever date yields a
lower Conversion Price denominator for the determination of the Conversion
Ratio. If the Holder has requested that the Company redeem shares of Preferred
Stock pursuant to this Section and the Company fails for any reason to pay the
redemption price under (2) above within seven days after such notice, the
Company will pay interest on the redemption price at a rate of 0.2% per day, in
cash to such Holder, accruing from such seventh day until the redemption price
and any accrued interest thereon is paid in full.
F.(i) The conversion price for each share of Preferred Stock (the
"Conversion Price") in effect on any Conversion Date shall be the lesser of (a)
the lower of (1) the average Per Share Market Value for the ten (10) Trading
Days immediately preceding the Original Issue Date and (2) the lower of (x) the
average Per Share Market Value for the ten (10) Trading Days immediately
preceding any issuance of Common Stock or Common Stock equivalent by the Company
within 90 days of the Original Issue Date and (y) the price at which the Common
Stock is so issued or may be issued on conversion or exercise of the Common
Stock equivalent (the "Initial Conversion Price"), and (b) the average of the
five lowest Per Share Market Values during the thirty (30) consecutive Trading
Days immediately preceding such Conversion Date.
(ii) If the Company, at any time while any shares of Preferred
Stock are outstanding, (a) shall pay a stock dividend or otherwise make a
distribution or distributions on shares of its Junior Securities payable in
shares of Common Stock, (b) subdivide outstanding shares of Common Stock into a
larger number of shares, (c) combine outstanding shares of Common Stock into a
smaller number of shares, or (d) issue by reclassification of shares of Common
Stock any shares of capital stock of the Company, the Initial Conversion Price
shall be multiplied by a fraction of which the numerator shall be the number of
shares of Common Stock (excluding treasury shares, if any) outstanding before
such event and of which the denominator shall be the number of shares of Common
Stock outstanding after such event. Any adjustment made pursuant to this Section
5(c)(ii) shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a
subdivision, combination or re-classification.
(iii) If the Company, at any time while any shares of Preferred
Stock are outstanding, shall issue rights or warrants to all holders of Common
Stock entitling them to subscribe for or purchase shares of Common Stock at a
price per share less than the Per Share Market Value of Common Stock at the
record date mentioned below, the Initial Conversion Price shall be multiplied by
a fraction, of which the denominator shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding on the date of issuance of
such rights or warrants plus the number of additional shares of Common Stock
offered for subscription or purchase, and of which the numerator shall be the
number of shares of Common Stock (excluding treasury shares, if any) outstanding
on the date of issuance of such rights or warrants
<PAGE> 7
plus the number of shares which the aggregate offering price of the total number
of shares so offered would purchase at such Per Share Market Value. Such
adjustment shall be made whenever such rights or warrants are issued, and shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such rights or warrants. However, upon the
expiration of any right or warrant to purchase Common Stock the issuance of
which resulted in an adjustment in the Initial Conversion Price pursuant to this
Section 5(c)(iii), if any such right or warrant shall expire and shall not have
been exercised, the Initial Conversion Price shall immediately upon such
expiration be recomputed and effective immediately upon such expiration be
increased to the price which it would have been (but reflecting any other
adjustments in the Initial Conversion Price made pursuant to the provisions of
this Section 5 after the issuance of such rights or warrants) had the adjustment
of the Initial Conversion Price made upon the issuance of such rights or
warrants been made on the basis of offering for subscription or purchase only
that number of shares of Common Stock actually purchased upon the exercise of
such rights or warrants actually exercised.
(iv) If the Company, at any time while shares of Preferred Stock
are outstanding, shall distribute to all holders of Common Stock (and not to
holders of Preferred Stock) evidences of its indebtedness or assets or rights or
warrants to subscribe for or purchase any security (excluding those referred to
in Sections 5(c)(ii) and (iii) above), then in each such case the Initial
Conversion Price at which each share of Preferred Stock shall thereafter be
convertible shall be determined by multiplying the Initial Conversion Price in
effect immediately prior to the record date fixed for determination of
stockholders entitled to receive such distribution by a fraction of which the
denominator shall be the Per Share Market Value of Common Stock determined as of
the record date mentioned above, and of which the numerator shall be such Per
Share Market Value of the Common Stock on such record date less the then fair
market value at such record date of the portion of such assets or evidence of
indebtedness so distributed applicable to one outstanding share of Common Stock
as determined by the Board of Directors in good faith; provided, however, that
in the event of a distribution exceeding ten percent (10%) of the net assets of
the Company, such fair market value shall be determined by a nationally
recognized or major regional investment banking firm or firm of independent
certified public accountants of recognized standing (which may be the firm that
regularly examines the financial statements of the Company) (an "Appraiser")
selected in good faith by the holders of a majority in interest of the shares of
Preferred Stock then outstanding; and provided, further, that the Company, after
receipt of the determination by such Appraiser shall have the right to select an
additional Appraiser, in good faith, in which case the fair market value shall
be equal to the average of the determinations by each such Appraiser. In either
case the adjustments shall be described in a statement provided to the holders
of Preferred Stock of the portion of assets or evidences of indebtedness so
distributed or such subscription rights applicable to one share of Common Stock.
Such adjustment shall be made whenever any such distribution is made and shall
become effective immediately after the record date mentioned above.
(v) All calculations under this Section 5 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be.
<PAGE> 8
(vi) Whenever the Initial Conversion Price is adjusted pursuant
to Section 5(c)(ii),(iii) or (iv), the Company shall promptly mail to each
holder of Preferred Stock, a notice setting forth the Initial Conversion Price
after such adjustment and setting forth a brief statement of the facts requiring
such adjustment.
(vii) In case of any reclassification of the Common Stock, any
consolidation or merger of the Company with or into another person pursuant to
which the Company will not be the surviving entity, the sale or transfer of all
or substantially all of the assets of the Company or any compulsory share
exchange pursuant to which the Common Stock is converted into other securities,
cash or property, the holders of the Preferred Stock then outstanding shall have
the right thereafter to, at their option, convert all or any part of such shares
only into the shares of stock and other securities, cash and property receivable
upon or deemed to be held by holders of Common Stock following such
reclassification, consolidation, merger, sale, transfer or share exchange, and
the holders of the Preferred Stock shall be entitled upon such event to receive
such amount of securities, cash or property as the shares of the Common Stock of
the Company into which such shares of Preferred Stock could have been converted
immediately prior to such reclassification, consolidation, merger, sale,
transfer or share exchange would have been entitled. The terms of any such
consolidation, merger, sale, transfer or share exchange shall include such terms
so as to continue to give to the holder of Preferred Stock the right to receive
the securities, cash or property set forth in this Section 5(c)(vii) upon any
conversion following such consolidation, merger, sale, transfer or share
exchange. This provision shall similarly apply to successive reclassifications,
consolidations, mergers, sales, transfers or share exchanges.
(viii) If:
A. the Company shall declare a dividend (or any
other distribution) on its Common Stock; or
B. the Company shall declare a special
nonrecurring cash dividend on or a
redemption of its Common Stock; or
C. the Company shall authorize the granting to
all holders of the Common Stock rights or
warrants to subscribe for or purchase any
shares of capital stock of any class or of
any rights; or
D. the approval of any stockholders of the
Company shall be required in connection with
any reclassification of the Common Stock of
the Company, any consolidation or merger to
which the Company is a party, any sale or
transfer of all or substantially all of the
assets of the Company, of any compulsory
share of exchange whereby the Common Stock
is converted into other securities, cash or
property; or
E. the Company shall authorize the voluntary or
involuntary dissolution, liquidation or
winding up of the affairs of the Company;
<PAGE> 9
then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of Preferred Stock, and shall cause to be mailed to
the holders of Preferred Stock at their last addresses as they shall appear upon
the stock books of the Company, at least 30 calendar days prior to the
applicable record or effective date hereinafter specified but in any event only
after public announcement of the event or circumstance giving rise to the
notice, a notice stating (x) the date on which a record is to be taken for the
purpose of such dividend, distribution, redemption, rights or warrants, or if a
record is not to be taken, the date as of which the holders of Common Stock of
record to be entitled to such dividend, distributions, redemption, rights or
warrants are to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected to become
effective or close, and the date as of which it is expected that holders of
Common Stock of record shall be entitled to exchange their shares of Common
Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share exchange.
Holders are entitled to convert shares of Preferred Stock during the 30-day
period commencing the date of such notice to the effective date of the event
triggering such notice.
G. The Company covenants that it will at all times reserve and keep
available out of its authorized and unissued Common Stock solely for the purpose
of issuance upon conversion of Preferred Stock and payment of dividends on
Preferred Stock, each as herein provided, free from preemptive rights or any
other actual contingent purchase rights of persons other than the holders of
Preferred Stock, such number of shares of Common Stock as shall be required to
be reserved in the aggregate under the provisions of any Purchase Agreement
executed by the Company in connection with the issue of Preferred Stock. The
Company covenants that all shares of Common Stock that shall be so issuable
shall, upon issue, be duly and validly authorized, issued and fully paid,
nonassessable and freely tradeable.
H. Upon a conversion hereunder the Company shall not be required to
issue stock certificates representing fractions of shares of Common Stock, but
may if otherwise permitted, make a cash payment in respect of any final fraction
of a share based on the Per Share Market Value at such time. If the Company
elects not, or is unable, to make such a cash payment, the holder of a share of
Preferred Stock shall be entitled to receive, in lieu of the final fraction of a
share, one whole share of Common Stock.
I. The issuance of certificates for shares of Common Stock on
conversion of Preferred Stock shall be made without charge to the holders
thereof for any documentary stamp or similar taxes that may be payable in
respect of the issue or delivery of such certificate, provided that the Company
shall not be required to pay any tax that may be payable in respect of any
transfer involved in the issuance and delivery of any such certificate upon
conversion in a name other than that of the holder of such shares of Preferred
Stock so converted and the Company shall not be required to issue or deliver
such certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
J. Shares of Preferred Stock converted into Common Stock shall be
canceled and shall have the status of authorized but unissued shares of
undesignated stock.
<PAGE> 10
K. Any and all notices or other communications or deliveries to be
provided by the holders of the Preferred Stock hereunder, including, without
limitation, any Conversion Notice, shall be in writing and delivered personally,
by facsimile, sent by a nationally recognized overnight courier service or sent
by certified or registered mail, postage prepaid, addressed to the attention of
the Chief Financial Officer of the Company at the facsimile telephone number or
address of the principal place of business of the Company as set forth in the
Purchase Agreement. Any and all notices or other communications or deliveries to
be provided by the Company hereunder shall be in writing and delivered
personally, by facsimile, sent by a nationally recognized overnight courier
service or sent by certified or registered mail, postage prepaid, addressed to
each holder of Preferred Stock at the facsimile telephone number or address of
such holder appearing on the books of the Company, or if no such facsimile
telephone number or address appears, at the principal place of business of the
holder. Any notice or other communication or deliveries hereunder shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 5:30 p.m. (Eastern Time),
(ii) the date after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section later than 5:30 p.m. (Eastern Time) on any date and earlier than 11:59
p.m. (Eastern Time) on such date, (iii) four days after deposit in the United
States mails, (iv) the Business Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (v) upon actual receipt by
the party to whom such notice is required to be given.
L. Any right or power of the Holders may be waived with respect to any
transaction by an instrument in writing signed by the Holders of not less than
two-thirds (2/3) of the then-outstanding shares of Preferred Stock (excluding
any shares then held by the Company or any subsidiary of the Company), provided
that such waiver applies equally to all Holders.
Section 1. REDEMPTIONS.
M. The Company shall have the right, exercisable at any time upon 30
Trading Days notice to the holders of the Preferred Stock given at any time on
or after the third anniversary after the Original Issue Date, to redeem, from
funds legally available therefor at the time of such redemption, all or any
portion of the shares of Preferred Stock which have not previously been
converted or redeemed, at a price per share equal to the product of (i) the
average Per Share Market Value for the ten (10) Trading Days immediately
preceding (1) the date of the redemption notice referenced above or (2) the date
of payment in full by the Company of the redemption price hereunder, whichever
is greater, and (ii) the Conversion Ratio calculated as if the Conversion Date
(for purposes of determining the Conversion Price) were (1) the date of such
redemption notice or (2) the date of payment by the Company of such redemption
price, whichever date yields a lower Conversion Price denominator for the
determination of the Conversion Ratio. The entire redemption price shall be paid
in cash. Holders of Preferred Stock may convert any shares of Preferred Stock,
including shares subject to a redemption notice given under this Section, during
the period from the date of such redemption notice through the 30th Trading Day
thereafter.
<PAGE> 11
N. The Company shall have the right, exercisable at any time upon 30
Trading Days notice to the Purchaser, given at any time after the Company has
announced publicly a merger or consolidation in which the Company will not be
the surviving entity, to redeem, from funds legally available therefor at the
time of such redemption, all (but not less than all) of the then outstanding and
unconverted shares of Preferred Stock. The redemption price for shares of
Preferred Stock to be redeemed pursuant to this Section will be determined in
accordance with Section 6(a) above and the payment of such redemption price
shall be subject to the provisions of Section 6(c) below. Holders of Preferred
Stock may convert any shares of Preferred Stock, including shares subject to a
redemption notice given under this Section, during the period from the date of
such redemption notice through the 30th Trading Day thereafter.
O. If any portion of the redemption price under Section 6(a) or (b)
shall not be paid by the Company within seven calendar days after the date due
under such Sections, such redemption price shall be increased by 0.2% per day
until paid (which amount shall be paid as liquidated damages and not as a
penalty). In addition, if any portion of such redemption price remains unpaid
for more than seven calendar days after the date due, the holder of the
Preferred Stock subject to such redemption may elect, by written notice to the
Company given within 45 days after the date due, to either (i) demand conversion
in accordance with the formula and the time frame therefor set forth in Section
5 of all of the shares of Preferred Stock for which such redemption price, plus
accrued liquidated damages thereof, has not been paid in full (the "Unpaid
Redemption Shares"), in which event the Per Share Market Value for such shares
shall be the lower of the Per Share Market Value calculated on the date such
redemption price was originally due and the Per Share Market Value as of the
holder's written demand for conversion, or (ii) invalidate ab initio such
redemption, notwithstanding anything herein contained to the contrary. If the
holder elects option (i) above, the Company shall within five Trading Days of
its receipt of such election deliver to the holder the shares of Common Stock
issuable upon conversion of the Unpaid Redemption Shares subject to such holder
conversion demand and otherwise perform its obligations hereunder with respect
thereto; or, if the Holder elects option (ii) above, the Company shall promptly,
and in any event not later than five Trading Days from receipt of holder's
notice of such election, return to the holder all of the Unpaid Redemption
Shares. If, upon a holder election under option (i) above, the Company fails to
deliver the shares of Common Stock issuable upon conversion of the Unpaid
Redemption Shares within the time period set forth in this Section, the Company
shall pay to the Holder in cash, $1,500 per day until the Company delivers such
Common Stock to the holder, which amount may be applied as a reduction of any
other amount then or thereafter owed by the Company to the Holder as a result of
its failure to deliver.
P. No redemption notice by the Company shall be effective unless (i) at
the date of the notice, the Company has available funds sufficient to pay the
full redemption price determined as if the redemption were made on the date of
the notice, (ii) at all times from the date of the redemption notice to the
redemption date the Underlying Securities Registration Statement is effective
and the Underlying Shares are listed on the NASDAQ National Market or NASDAQ
SmallCap Market and each other securities exchange or market on which the Common
Stock is then listed, and (iii) the Company has not failed to issue Common Stock
pursuant to any valid Holder Conversion Notice . If a notice is given pursuant
to subsection (b) of this Section 6,
<PAGE> 12
available funds may include funds to be made available by an acquiring entity
pursuant to a binding agreement with the Company.
Q. Nothing in this Section 6 shall be construed to alter or restrict a
right of any Holder to convert any share of the Preferred Stock at any time.
Section 1. DEFINITIONS. For the purposes hereof, the following terms
shall have the following meanings:
"Business Day" means any day of the year on which commercial
banks are not required or authorized to be closed in New York, New York.
"Common Stock" means shares now or hereafter authorized of the
class of Common Stock, par value $0.01 per share, of the Company and stock of
any other class into which such shares may hereafter have been reclassified or
changed.
"Conversion Ratio" means, at any time, a fraction, of which the
numerator is Stated Value plus accrued but unpaid dividends (including any
accrued but unpaid interest thereon), and of which the denominator is the
Conversion Price at such time.
"Junior Securities" means the Common Stock and all other equity
securities of the Company, except the Series A Convertible Preferred Stock,
Series B Convertible Preferred Stock and Series C Convertible Preferred Stock.
"Original Issue Date" shall mean the date of the first issuance
of any shares of the Preferred Stock regardless of the number of transfers of
any particular shares of Preferred Stock and regardless of the number of
certificates which may be issued to evidence such Preferred Stock.
"Per Share Market Value" means on any particular date (a) the
closing bid price per share of the Common Stock on such date on the Nasdaq
National Market or other stock exchange on which the Common Stock has been
listed or if there is no such price on such date, then the closing bid price on
such exchange on the date nearest preceding such date, or (b) if the Common
Stock is not listed on the Nasdaq National Market or any stock exchange, the
closing bid price for a share of Common Stock in the over-the-counter market, as
reported by the Nasdaq Stock Market at the close of business on such date, or
(c) if the Common Stock is not quoted on the Nasdaq Stock Market, the closing
bid price for a share of Common Stock in the over-the-counter market as reported
by the National Quotation Bureau Incorporated (or similar organization or agency
succeeding to its functions of reporting prices), or (d) if the Common Stock is
not reported by the National Quotation Bureau Incorporated (or similar
organization or agency succeeding to its functions of reporting prices), then
the average of the "Pink Sheet" quotes for the relevant conversion period, as
determined in good faith by the holder, or (e) if the Common Stock is not
publicly traded the fair market value of a share of Common Stock as determined
by an Appraiser selected in good faith by the holders of a majority in interest
of the shares of the Preferred Stock; provided, however, that the Company, after
receipt of the
<PAGE> 13
determination by such Appraiser, shall have the right to select an additional
Appraiser, in which case, the fair market value shall be equal to the average of
the determinations by each such Appraiser.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
"Purchase Agreement" means the Convertible Preferred Stock
Purchase Agreement, dated as of the Original Issue Date, between the Company and
the original holder of the Preferred Stock.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated the Original Issue Date, by and between the Company and the
original holder of Preferred Stock.
"Trading Day" means (a) a day on which the Common Stock is traded
on the Nasdaq National Market or principal national securities exchange or
market on which the Common Stock has been listed, or (b) if the Common Stock is
not listed on the Nasdaq National Market or any stock exchange or market, a day
on which the Common Stock is traded in the over-the-counter market, as reported
by the OTC Bulletin Board, or (c) if the Common Stock is not quoted on the OTC
Bulletin Board, a day on which the Common Stock is quoted in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding its functions of
reporting prices).
"Underlying Shares" means the number of shares of Common Stock
into which the Shares are convertible in accordance with the terms hereof and
the Purchase Agreement.
"Underlying Securities Registration Statement" means the
registration statement filed by the Company, pursuant to the Registration Rights
Agreement, covering the Underlying Shares and the Warrant Shares.
"Warrant Shares" means the number of shares of Common Stock
issuable upon the exercise in full of the Warrants.
"Warrants" means the Common Stock purchase warrants issued by the
Company to and as directed by the original holder of the Preferred Stock
simultaneously with the closing of the purchase of Preferred Stock under the
Purchase Agreement, pursuant to which the holders of the Warrants shall,
collectively, have the right to acquire shares of Common Stock (subject to
adjustment as provided therein) at the exercise price per share set forth
therein.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 14
EXHIBIT A
NOTICE OF CONVERSION
AT THE ELECTION OF HOLDER
(To be Executed by the Registered Holder
in order to Convert shares of Preferred Stock)
The undersigned hereby irrevocably elects to convert the number of shares of
Series C Convertible Preferred Stock indicated below, into shares of Common
Stock, par value $.01 per share (the "Common Stock"), of Cayenne Software, Inc.
(the "Company") according to the conditions hereof, as of the date written
below. If shares are to be issued in the name of a person other than
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates and opinions as reasonably
requested by the Company in accordance therewith. No fee will be charged to the
holder for any conversion, except for such transfer taxes, if any.
Conversion calculations:
Date to Effect Conversion
Number of shares of Preferred Stock to be Converted
Number of shares of Common Stock to be Issued
Applicable Conversion Price
Signature
Name:
Address:
<PAGE> 15
EXHIBIT B
NOTICE OF CONVERSION AT
THE ELECTION OF THE COMPANY
The undersigned in the name and on behalf of Cayenne Software, Inc. (the
"Company") hereby notifies the addressee hereof that the Company hereby elects
to exercise its right to convert [ ] shares of its Series D Convertible
Preferred Stock (the "Preferred Stock") held by the Holder into shares of Common
Stock, par value $.01 per share (the "Common Stock") of the Company according to
the terms hereof, as of the date written below. No fee will be charged to the
Holder for any conversion hereunder, except for such transfer taxes, if any
which may be incurred by the Company if shares are to be issued in the name of a
person other than the person to whom this notice is addressed.
Conversion calculations:
Date to effect Conversion
Number of shares of Preferred Stock to be Converted
Number of shares of Common Stock to be Issued
Applicable Conversion Price
Name of Holder:
Address of Holder:
<PAGE> 1
EXHIBIT 4.2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
among
CAYENNE SOFTWARE, INC.
and
THE SEVERAL PURCHASERS IDENTIFIED
IN SCHEDULE A ATTACHED HERETO
------------------------------
August 28, 1997
------------------------------
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<PAGE> 2
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT, dated as of August 28,
1997 (this "Agreement"), by and among Cayenne Software, Inc., a Massachusetts
corporation (the "Company"), and the several Purchasers identified in Schedule A
attached hereto (the "Purchasers").
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchasers and the
Purchasers desire to acquire shares of the Company's Series D Convertible
Preferred Stock, par value $1.00 per share (the "Preferred Stock") and warrants
to purchase shares of the Company's Common Stock,
IN CONSIDERATION of the mutual covenants and agreements set forth
herein and for good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1. Certain Definitions. As used in this Agreement and
unless the context requires a different meaning, the following terms have the
meanings indicated:
"Affiliate" means, with respect to any Person, any Person that,
directly or indirectly, controls, is controlled by or is under common control
with such Person. For the purposes of this definition, "control" (including,
with correlative meanings, the terms "controlled by" and "under common control
with") shall mean the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such Person, whether
through the ownership of voting securities or by contract or otherwise.
"Business Day" means any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other government actions
to close.
"Closing Date" means the Series D closing date.
"Code" means the Internal Revenue Code of 1986, as amended, and
the rules and regulations thereunder as in effect on the date hereof.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's common stock, par value $0.01
per share.
"Disclosure Materials" means, collectively, the SEC Documents,
the disclosure package delivered to the Purchaser in connection with the
offering by the Company of the Shares and the Warrants and the Schedules to this
Agreement furnished by or on behalf of the Company pursuant to Section 3.1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Foley Hoag" shall mean Foley, Hoag & Eliot LLP, One Post Office
Square, Boston, MA 02109(a)
<PAGE> 3
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, encumbrance, right of first refusal, charge or security interest of any
kind in or on such asset or the revenues or income thereon or therefrom.
"Material Adverse Effect" shall have the meaning set forth in
Section 3.1(a).
"Original Issue Date" shall have the respective meanings (as
applicable) set forth in the Statements of Rights and Preferences.
"Person" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"Preferred Stock" shall have the meaning set forth in the
recitals hereto.
"Purchase Price" shall have the meaning set forth in Section 2.2.
"Purchaser" and "Purchasers" both mean all the Purchasers
collectively or one or more Purchasers severally, as may be appropriate in the
context.
"Registration Rights Agreement" means the registration rights
agreement, dated as of the date hereof, by and between the Company and the
Purchaser, in the form of Exhibit B, as the same may be amended, supplemented or
otherwise modified in accordance with its terms.
"Required Approvals" shall have the meaning set forth in Section
3.1(f).
"SEC Documents" shall have the meaning set forth in Section
3.1(l).
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means the shares of Preferred Stock purchased by the
Purchaser pursuant to this Agreement.
"Statement of Rights and Preferences" shall have the meaning set
forth in Section 2.1(b).
"Subsequent Sale" shall have the meaning set forth in Section
4.12(a).
"Subsequent Sale Notice" shall have the meaning set forth in
Section 4.12(a).
"Subsidiaries" shall have the meaning set forth in Section
3.1(a).
"Trading Day" shall have the meaning set forth in the Series D
Terms.
"Underlying Securities Registration Statement" shall have the
meaning set forth in Section 3.1(f).
"Underlying Shares" means the shares of Common Stock into which
the Shares are convertible in accordance with the terms hereof and the
Statements of Rights and Preferences.
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<PAGE> 4
"Warrants" shall have the meaning set forth in Section 4.20.
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<PAGE> 5
ARTICLE II
PURCHASE AND SALE OF SHARES
Section 2.1. Purchase and Sale of Shares.
(a) Subject to the terms and conditions set forth herein, at the
closing referred to below, the Company shall issue and sell to the Purchasers
and the Purchasers shall purchase shares of Preferred Stock in the respective
amounts set forth in Schedule A.
(b) The Preferred Stock shall have the respective rights,
preferences and privileges set forth in Exhibit A attached hereto (the "Series D
Terms"), which shall be incorporated into a Statement of Rights and Preferences
to be filed on or prior to the Closing Date (as defined below) by the Company
with the Commonwealth of Massachusetts (the "Series D Statement of Rights and
Preferences").
For purposes of this Agreement, "Conversion Price," "Original Issue
Date," "Conversion Date" "Trading Day" and "Per Share Market Value" shall have
the meanings set forth in the Series D Terms.
Section 2.2. Purchase Price.
The purchase price per Share shall be $20.00.
Section 2.3. The Closing.
(a) The Series D Closing. (i) (A) The closing (the "Series D
Closing") of the purchase and sale of shares of Preferred Stock (the "Series D
Shares") to be issued and sold thereat in accordance with the terms and
conditions set forth herein, shall take place at the offices of Foley Hoag on
the date hereof or as soon thereafter as practicable. ("Closing Date").
(b) At the Series D Closing, (1) the Company shall deliver to
each Purchaser one or more stock certificates representing the Series D Shares
and the Series D Warrants (as defined in Section 4.20), each registered in the
name of the Purchaser, the legal opinion of Foley, Hoag & Eliot LLP, counsel to
the Company, substantially in the form of Exhibit C, and all other documents,
instruments and writings required to have been delivered at or prior to the
Series D Closing by the Company pursuant to this Agreement, and (2) each
Purchaser shall deliver to the Company the purchase price for such Series D
Shares (calculated in accordance with Section 2.2) in United States dollars in
immediately available funds by wire transfer to an account designated in writing
by the Company for such purpose prior to the Closing Date, and all other
documents, instruments and writings required to have been delivered at or prior
to the Series D Closing by the Purchaser pursuant to this Agreement.
(c) In addition, at the Series D closing, the Company shall
deliver to the Purchasers:
(i) one or more executed counterparts of the
Registration Rights Agreement in the form attached hereto as Exhibit B;
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<PAGE> 6
(ii) an executed counterpart of the Transfer Agent
Instruction letter in the form attached hereto as Exhibit D;
(iii) a copy of the Certificate of Vote of Directors
Establishing a Series of a Class of Stock relating to the designation
of the Series D Preferred Stock, date-stamped by the office of the
Massachusetts State Secretary to acknowledge filing with that office;
(iv) a certificate of the Clerk or Assistant Clerk of
the Company certifying the Articles of Organization and By-Laws of the
Company as currently in effect and the adoption by the Company's Board
of Directors of resolutions authorizing the transactions contemplated
by this Agreement and the related documents referred to herein; and
(v) a letter from Foley Hoag addressed to the
Purchasers acknowledging that Foley Hoag is holding for the benefit of
the respective Purchasers original counterparts executed by the Company
of this Agreement and the related documents, including certificates for
Shares of Preferred Stock and original Warrants, to be executed by the
Company, pending confirmation of receipt by the Company of the purchase
price.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1. Representations and Warranties of the Company. The
Company hereby represents and warrants to the Purchaser as follows:
(a) Organization and Qualification. The Company is a
corporation, duly incorporated, validly existing and in good standing under the
laws of The Commonwealth of Massachusetts, with the requisite corporate power
and authority to own and use its properties and assets and to carry on its
business as currently conducted. The Company has no subsidiaries other than as
set forth in the SEC Documents or in Schedule 3.1(a) (collectively, the
"Subsidiaries"). Each of the Subsidiaries is a corporation, duly incorporated,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, with the full corporate power and authority to own and use its
properties and assets and to carry on its business as currently conducted. Each
of the Company and the Subsidiaries is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction in which the nature
of the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not, individually or in the aggregate, have a material
adverse effect on the results of operations, assets, prospects, or financial
condition of the Company and the Subsidiaries, taken as a whole (a "Material
Adverse Effect").
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated hereby, by the Warrants, by the Statements of Rights and
Preferences and by the Registration Rights Agreement, and otherwise to carry out
its obligations hereunder and thereunder. This Agreement, the Registration
Rights Agreement, the Statements of Rights and Preferences and the Warrants are
collectively referred to as the "Transaction Documents." The execution and
delivery of the Transaction Documents by the Company and the consummation by it
of the transactions contemplated thereby have been duly authorized by all
necessary action on the part of the Company. Each of the Transaction Documents
has been duly executed and delivered by the
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<PAGE> 7
Company and constitutes the legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application. Neither the Company nor any
Subsidiary is in violation of any of the provisions of its respective articles
of organization, bylaws or other charter documents.
(c) Capitalization. The authorized, issued and outstanding
capital stock of the Company and each of the Subsidiaries is set forth in
Schedule 3.1(c). No shares of Common Stock are entitled to preemptive or similar
rights. Except as specifically disclosed in Schedule 3.1(c), there are no
outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or, except as a result of
the purchase and sale of the Shares and Warrants hereunder, securities, rights
or obligations convertible into or exchangeable for, or giving any person any
right to subscribe for or acquire any shares of Common Stock, or contracts,
commitments, understandings, or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock.
(d) Issuance of Shares, Warrants, Warrant Shares and Underlying
Shares. The Shares and the Warrants are duly authorized and, when paid for in
accordance with the terms hereof, shall be validly issued, fully paid and
nonassessable, free and clear of any Liens. The Company, as at the Closing Date
will have and at all times while the Shares and any Warrants are outstanding
will maintain an adequate reserve of shares of Common Stock to enable it to
perform its conversion and other obligations under this Agreement, the Warrants
and the Statements of Rights and Preferences with respect to the number of
Shares and Warrants issued and outstanding at such Closing Date, which reserve
shall be no less than the sum of (i) the greater of (x) 125% of the number of
shares of Common Stock issuable upon conversion of all the Series D Preferred
Stock outstanding from time to time or (y) twice the number of shares of Common
Stock issuable hereunder and pursuant to the terms of the Statements of Rights
and Preferences, assuming a conversion in full of all of the Shares on the
Original Issue Date thereof and (ii) the number of shares of Common Stock
issuable upon the exercise in full of the Warrants (the "Warrant Shares") to be
issued at such Closing Date. When issued in accordance with the terms hereof and
the Statements of Rights and Preferences, and the Warrants, the Underlying
Shares and the Warrant Shares will be duly authorized, validly issued, fully
paid and nonassessable, free and clear of all Liens.
(e) No Conflicts. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of its articles of organization or bylaws (each as amended
through the date hereof) or (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company is
a party, or (iii) to the knowledge of the Company result in a violation of any
law, rule, regulation, order, judgment, injunction, decree or other restriction
of any court or governmental authority to which the Company is subject
(including Federal and State securities laws and regulations), or by which any
property or asset of the Company is bound or affected, except in the case of
each of clauses (ii) and (iii), such conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations as could not,
individually or in the aggregate, (x) adversely affect the legality, validity or
enforceability of the Transaction Documents, (y) have a Material Adverse Effect
or (z)
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<PAGE> 8
adversely impair the Company's ability to perform fully on a timely basis its
obligations under the Transaction Documents. The business of the Company is not
being conducted in violation of any law, ordinance or regulation of any
governmental authority, the violation of which would have a Material Adverse
Effect.
(f) Consents and Approvals. Except as specifically set forth in
Schedule 3.1(f), neither the Company nor any Subsidiary is required to obtain
any consent, waiver, authorization or order of, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, except for
(i) the filing of the Statements of Rights and Preferences with respect to the
Shares with the Secretary of State of The Commonwealth of Massachusetts, which
filing shall be effected prior to the applicable Closing Date, (ii) the filing
of the registration statements covering the Underlying Shares and the Warrant
Shares (the "Underlying Securities Registration Statement") with the Commission
and the making of the applicable blue-sky filings under state securities laws,
each as contemplated by the Registration Rights Agreement and (iii) other than,
in all other cases, where the failure to obtain such consent, waiver,
authorization or order, or to give or make such notice or filing, could not,
individually or in the aggregate, (x) adversely affect the legality, validity or
enforceability of the Transaction Documents, (y) have a Material Adverse Effect
or (z) adversely impair the Company's ability to perform fully on a timely basis
its obligations under the Transaction Documents (together with the consents,
waivers, authorizations, orders, notices and filings referred to in Schedule
3.1(f), the "Required Approvals"). The consents described in Exhibit 3.1(f) have
been received.
(g) Litigation; Proceedings. There is no action, suit, notice
of violation, proceeding or investigation pending or, to the best knowledge of
the Company, threatened against or affecting the Company or any of its
Subsidiaries or any of their respective properties before or by any court,
governmental or administrative agency or regulatory authority (Federal, state,
county, local or foreign) which (i) relates to or challenges the legality,
validity or enforceability of the Transaction Documents or the Shares (ii)
could, individually or in the aggregate, have a Material Adverse Effect or (iii)
could, individually or in the aggregate, adversely impair the ability of the
Company to perform fully on a timely basis its obligations under the Transaction
Documents.
(h) No Default or Violation. Neither the Company nor any
Subsidiary (i) is in default under or in violation of any indenture, loan or
credit agreement or any other agreement or instrument to which it is a party or
by which it or any of its properties is bound, except such conflicts or defaults
as do not have a Material Adverse Effect, (ii) is in violation of any order of
any court, arbitrator or governmental body, except for such violations as do not
have a Material Adverse Effect, or (iii) is in violation of any statute, rule or
regulation of any governmental authority which could (individually or in the
aggregate) (x) adversely affect the legality, validity or enforceability of the
Transaction Documents, (y) have a Material Adverse Effect or (z) adversely
impair the Company's ability or obligation to perform fully on a timely basis
its obligations under the Transaction Documents.
(i) Certain Fees. No fees or commission will be payable by the
Company to any broker, finder, investment banker or bank with respect to the
consummation of the transactions contemplated hereby. The Company has taken no
action that would require any Purchaser to pay any such fee or commission.
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<PAGE> 9
(j) Disclosure Materials. The Disclosure Materials do not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
(k) Private Offering. Neither the Company nor any Person acting
on its behalf has taken or will take any action (including, without limitation,
any offering of any securities of the Company under circumstances which would
require the integration of such offering with the offering of the Shares, the
Warrants the Underlying Shares or the Warrant Shares under the Securities Act)
which might subject the offering, issuance or sale of the Shares, the Warrants
the Underlying Shares or the Warrant Shares to the registration requirements of
Section 5 of the Securities Act.
(l) SEC Documents. The Company has filed all reports required
to be filed by it under the Exchange Act, including pursuant to Section 13(a) or
15(d) thereof, for the three years preceding the date hereof (the foregoing
materials being collectively referred to herein as the "SEC Documents") on a
timely basis, or has received a valid extension of such time of filing. As of
their respective dates, the SEC Documents complied in all material respects with
the requirements of the Securities Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, and none of the SEC
Documents, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the SEC Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
Commission with respect thereto. Such financial statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved, except as may be otherwise indicated in such
financial statements or the notes thereto, and fairly present in all material
respects the financial position of the Company and its consolidated subsidiaries
as of and for the dates thereof and the results of operations and cash flows for
the periods then ended, subject, in the case of unaudited statements, to normal
year-end audit adjustments. Since the date of the financial statements included
in the Company's last filed Quarterly Report on Form 10-Q, there has been no
event, occurrence or development that has had a Material Adverse Effect which is
not specifically disclosed in any of the Disclosure Materials.
(m) Seniority. No class of equity securities of the Company is
senior to the Shares in right of payment, whether upon liquidation, dissolution
or otherwise.
(n) Exclusivity. The Company shall not issue and sell the
Preferred Stock to any Person other than the Purchaser.
(o) Form S-3 Eligibility. The Company is eligible to register
securities for resale with the Commission under Form S-3 promulgated under the
Securities Act.
(p) Investment Company. The Company is not and is not an
Affiliate of an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
(q) Real Property Holding Company. The company is not a real
property holding company within the meaning of Section 897 of the Internal
Revenue Code of 1986, as amended.
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<PAGE> 10
(r) Intellectual Property Rights. The Company and its
subsidiaries own or possess adequate rights or licenses to use all trademarks,
trade names, service marks, service approvals, governmental authorizations,
trade secrets and rights necessary to conduct their respective business as now
conducted. None of the Company's trademarks, trade names, service marks, service
mark registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, government authorizations, trade secrets or
other intellectual property rights have expired or terminated, or are expected
to expire or terminate within two years from the date of this Agreement. The
Company and its subsidiaries do not have any knowledge of any infringement by
the Company or its subsidiaries of trademark, trade name rights, patents, patent
rights, copyrights, inventions, licenses, service names, service marks, service
mark registrations, trade secret or other similar rights of others, or of any
such development of similar or identical trade secrets or technical information
by others and there is no claim, action or proceeding being made or brought
against, or to the Company's knowledge, being threatened against, the Company or
its subsidiaries regarding trademark, trade name, patents, patent rights,
invention, copyright, license, service names, service marks, service mark
registrations, trade secret or other infringement; and the Company and its
subsidiaries are unaware of any facts or circumstances which might give rise to
any of the foregoing. The Company and its subsidiaries have taken reasonable
security measures to protect the secrecy, confidentiality and value of all of
their intellectual properties.
(s) Title. The Company and its Subsidiaries have good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as do not materially affect the value of
such property and do not interfere with the use made and proposed to be made of
such property by the Company or any of its Subsidiaries. Any real property and
facilities held under lease by the Company or any of its Subsidiaries are held
by them under valid, subsisting and enforceable leases with such exceptions as
are not material and do not interfere with the use made and proposed to be made
of such property and buildings by the Company and its Subsidiaries.
(t) Dilutive Effect. The Company understands and acknowledges
that the number of Conversion Shares issuable upon conversion of the Preferred
Shares and the Warrant Shares issuable upon exercise of the Warrants will
increase in certain circumstances. The Company further acknowledges that its
obligation to issue Conversion Shares upon conversions of the Preferred Shares
in accordance with this Agreement and the Statement of Rights and Preferences
and its obligation to issue the Warrant Shares upon exercise of the Warrants in
accordance with this Agreement and the Warrants, is, in each case, absolute and
unconditional regardless of the dilutive effect that such issuance may have on
the ownership interests of other stockholders of the Company.
Section 3.2. Representations and Warranties of the Purchasers.
Each Purchaser hereby severally represents and warrants to the Company as
follows:
(a) Organization; Authority. The Purchaser is a corporation,
partnership, limited liability company, or other entity duly and validly
existing and in good standing under the laws of the jurisdiction of its
organization. The Purchaser has the requisite power and authority to enter into
and to consummate the transactions contemplated hereby and by the other
Transaction Documents and otherwise to carry out its obligations hereunder and
thereunder. The purchase of the Shares and the Warrants by the Purchaser
hereunder has been duly authorized by all necessary action on the part of the
Purchaser. Each of the Transaction Documents has been
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<PAGE> 11
duly executed and delivered by the Purchaser or on its behalf and constitutes
the valid and legally binding obligation of the Purchaser, enforceable against
the Purchaser in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights generally and to
general principles of equity.
(b) Investment Intent. The Purchaser is acquiring the Shares,
the Warrants, the Warrant Shares and the Underlying Shares for its own account
for investment purposes only and not with a view to or for distributing or
reselling such Shares, Warrants, Warrant Shares or Underlying Shares or any part
thereof or interest therein, without prejudice, however, to the Purchaser's
right, subject to the provisions of the Transaction Documents, at all times to
sell or otherwise dispose of all or any part of such Shares, Warrants, Warrant
Shares or Underlying Shares under an effective registration statement under the
Securities Act and in compliance with applicable state securities laws or under
an exemption from such registration.
(c) Purchaser Status. The Purchaser was not formed for the
purpose of acquiring the Shares and the Warrants. At the time the Purchaser was
offered the Shares and the Warrants, it was and at the date hereof it is an
"accredited investor" as defined in Rule 501(a) under the Securities Act.
(d) Experience of Purchaser. The Purchaser has such knowledge,
sophistication and experience in business and financial matters so as to be
capable of evaluating the merits and risks of the prospective investment in the
Shares, the Warrants, the Underlying Shares and the Warrant Shares, and has so
evaluated the merits and risks of such investment.
(e) Ability of Purchaser to Bear Risk of Investment. The
Purchaser is able to bear the economic risk of an investment in the Shares, the
Warrants, the Underlying Shares and the Warrant Shares and is able to afford a
complete loss of such investment.
(f) Prohibited Transactions. The Shares and the Warrants are
not being acquired, directly or indirectly, with the assets of any "employee
benefit plan", within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended.
(g) Access to Information. The Purchaser acknowledges receipt
of the Disclosure Materials and further acknowledges that it has been afforded
(i) the opportunity to ask such questions as it has deemed necessary of, and to
receive answers from, representatives of the Company concerning the terms and
conditions of the offering of the Shares and the Warrants and the merits and
risks of investing in the Shares and the Warrants; (ii) access to information
about the Company and the Company's financial condition, results of operations,
business, properties, management and prospects sufficient to enable it to
evaluate its investment in the Company; and (iii) the opportunity to obtain such
additional information that the Company possesses or can acquire without
unreasonable effort or expense and that is necessary to make an informed
investment decision with respect to the Shares and the Warrants and to verify
the accuracy and completeness of the information contained in the Disclosure
Materials.
(h) Reliance. The Purchaser understands and acknowledges that
(i) the Shares and the Warrants are being offered and sold, and the Underlying
Shares and the Warrant Shares are being offered, to it without registration
under the Securities Act in a private placement that is exempt from the
registration provisions of the Securities Act and (ii) the availability of such
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exemption depends in part on, and that the Company will rely upon the accuracy
and truthfulness of, the foregoing representations and the Purchaser hereby
consents to such reliance.
The Company acknowledges and agrees that the Purchaser makes no
representation or warranty with respect to the transactions contemplated hereby
other than those specifically set forth in this Section 3.2.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
Section 4.1. Transfer Restrictions. If the Purchaser should
decide to dispose of any of the Shares or any portion of the Warrants (and upon
conversion or exercise thereof, any Underlying Shares or Warrant Shares), the
Purchaser understands and agrees that it may do so only (i) pursuant to an
effective the registration statement under the Securities Act, (ii) pursuant to
an available exemption from the registration requirements of the Securities Act
or (iii) to the Company. In connection with any transfer of any Shares,
Warrants, Underlying Shares or Warrant Shares other than pursuant to an
effective registration statement or to the Company, the Company may require that
the transferor provide to the Company an opinion of counsel experienced in the
area of United States securities laws selected by the transferor, the form and
substance of which opinion shall be reasonably satisfactory to the Company, to
the effect that such transfer does not require registration of such Shares,
Warrants, Underlying Shares or Warrant Shares under the Securities Act or any
state securities laws.
The Purchaser agrees to the imprinting, so long as is required by
this Section, of the following legend on certificates representing the Shares,
Warrants, Underlying Shares or Warrant Shares:
NEITHER THESE SECURITIES NOR ANY SECURITIES INTO WHICH THESE
SECURITIES MAY BE [CONVERTIBLE] [EXERCISABLE] HAVE BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION PROMULGATED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAW.
The legend set forth above shall be removed upon the conversion
of Shares or exercise of Warrants represented by such certificates at any time
while an Underlying Securities Registration Statement is effective under the
Securities Act or sooner if, in the opinion of counsel to the Company
experienced in the area of United States securities laws such legend is no
longer required under applicable requirements of the Securities Act (including
judicial interpretations and pronouncements issued by the staff of the
Commission). The Company agrees that it will provide the Purchaser, upon
request, with a substitute stock certificate or certificates or warrant
certificates, free from such legend at such time as such legend is no longer
applicable.
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Section 4.2. Stop Transfer Instruction. The Company may not make
any notation on its records or give instructions to any transfer agent of the
Company which enlarge the restrictions on transfer set forth in Section 4.1
above, or which are inconsistent with the instructions stated in Exhibit D.
Section 4.3. Furnishing of Information. For so long as the
Purchaser owns Shares, Warrants, Underlying Shares or Warrant Shares, the
Company covenants to timely file (or obtain valid extensions in respect thereof)
all reports required to be filed by the Company after the date hereof pursuant
to Section 13(a) or 15(d) of the Exchange Act and to promptly furnish the
Purchaser with true and complete copies of all such filings. If the Company is
not at the time required to file reports pursuant to such sections, it will
prepare and furnish to the Purchaser annual and quarterly financial statements,
together with a discussion and analysis of such financial statements in form and
substance substantially similar to those that would otherwise be required to be
included in reports required by Section 13(a) or 15(d) of the Exchange Act in
the time period that such filings would have been required to have been made
under the Exchange Act.
Section 4.4. Notice of Certain Events. The Company shall (i)
advise the Purchaser promptly after obtaining knowledge thereof, and, if
requested by the Purchaser, confirm such advice in writing, of (A) the issuance
by any state securities commission of any stop order suspending the
qualification or exemption from qualification of the Shares, Warrant Shares or
Underlying Shares or the Common Stock for offering or sale in any jurisdiction,
or the initiation of any proceeding for such purpose by any state securities
commission or other regulatory authority, or (B) any event that makes any
statement of a material fact made in the Disclosure Materials untrue or that
requires the making of any additions to or changes in the Disclosure Materials
in order to make the statements therein, in the light of the circumstances under
which they are made, not misleading, provided, however, that the Company shall
not give any notice before the facts disclosed in the notice have been publicly
disclosed, (ii) use its best efforts to prevent the issuance of any stop order
or order suspending the qualification or exemption from qualification of the
Shares, Warrant Shares or Underlying Shares or the Common Stock under any state
securities or Blue Sky laws, and (iii) if at any time any state securities
commission or other regulatory authority shall issue an order suspending the
qualification or exemption from qualification of the Shares, Warrant Shares or
Underlying Shares or the Common Stock under any such laws, use its best efforts
to obtain the withdrawal or lifting of such order at the earliest possible time.
Section 4.5. Copies and Use of Disclosure Materials. The Company
shall furnish the Purchaser, without charge, as many copies of the Disclosure
Materials, and any amendments or supplements thereto, as the Purchaser may
reasonably request. The Company consents to the use of the Disclosure Materials,
and any amendments and supplements thereto, by the Purchaser in connection with
resales of the Shares, the Warrant Shares or the Underlying Shares other than
pursuant to an effective registration statement.
Section 4.6. Modification to Disclosure Materials. If any event
shall occur as a result of which, in the reasonable judgment of the Company, it
becomes necessary or advisable to amend or supplement the Disclosure Materials
in order to make the statements therein, in the light of the circumstances at
the time the Disclosure Materials were delivered to the Purchaser, not
misleading, or if it is necessary to amend or supplement the Disclosure
Materials to comply with applicable law, the Company shall promptly prepare an
appropriate amendment or supplement to the Disclosure Materials so that (i) as
so amended or supplemented the Disclosure Materials will not include an untrue
statement of material fact or omit to state a material fact necessary in order
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<PAGE> 14
to make the statements therein, in the light of the circumstances existing at
the time it is delivered to Purchaser, not misleading and (ii) the Disclosure
Materials will comply in all material respects with applicable law.
Section 4.7. Blue Sky Laws. In accordance with the Registration
Rights Agreement, the Company shall qualify the Shares, the Warrants, the
Warrant Shares and the Underlying Shares under the securities or Blue Sky laws
of such jurisdictions as the Purchaser may reasonably request and to continue
such qualification at all times through the third anniversary of the Closing
Date; provided, however, that neither the Company nor its Subsidiaries shall be
required in connection therewith to qualify as a foreign corporation where they
are not now so qualified.
Section 4.8. Integration. The Company shall not and shall use its
best efforts to ensure that no Affiliate shall sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Shares, the Warrant Shares or the Underlying Shares in a manner that
would require the registration under the Securities Act of the sale of the
Shares, the Warrant Shares or Underlying Shares to the Purchaser.
Section 4.9. Furnishing of Rule 144A Materials. The Company
shall, for so long as any of the Shares, Warrants, Warrant Shares or Underlying
Shares remain outstanding and during any period in which it is not subject to
Section 13 or 15(d) of the Exchange Act, make available to any registered holder
of Shares or Underlying Shares in connection with any sale thereof and any
prospective purchaser of such Shares, Warrants, Warrant Shares or Underlying
Shares from such Person, the following information in accordance with Rule
144A(d)(4) under the Securities Act: a brief statement of the nature of the
business of the Company and the products and services it offers and the
Company's most recent audited balance sheet and profit and loss and retained
earnings statements, and similar audited financial statements for such part of
the two preceding fiscal years as the Company has been in operation.
Section 4.10. Solicitation Materials. The Company shall not (i)
distribute any offering materials in connection with the offering and sale of
the Shares, Warrants, Warrant Shares or Underlying Shares other than the
Disclosure Materials and any amendments and supplements thereto prepared in
compliance herewith or (ii) solicit any offer to buy or sell the Shares,
Warrants, Warrant Shares or Underlying Shares by means of any form of general
solicitation or advertising.
Section 4.11. Subsequent Financial Statements. The Company shall
furnish to the Purchaser, promptly after they are filed with the Commission, a
copy of all financial statements for any period subsequent to the period covered
by the financial statements included in the Disclosure Materials.
Section 4.12. Right of First Refusal; Certain Corporate Actions.
(a) The Company shall not, directly or indirectly, without the prior written
consent of the Purchaser, offer, sell, grant any option to purchase or otherwise
dispose (or announce any offer, sale, grant or any option to purchase or other
disposition) of any of its or its Affiliates equity or equity equivalent
securities (a "Subsequent Sale") for a period of 180 days after the Closing
Date, except (i) upon conversion of any of the Preferred Stock or the Series C
Preferred Stock or exercise of any of the Warrants or warrants heretofore issued
in connection with the Series C Preferred Stock, (ii) as a stock dividend or
upon any subdivision of shares of Common Stock, provided that the securities
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<PAGE> 15
issued pursuant to such stock dividend or subdivision are limited to additional
shares of Common Stock, (iii) pursuant to subscriptions, warrants, options,
convertible securities or other rights which are outstanding on the Closing
Date, (iv) solely in consideration for the acquisition (whether by merger or
otherwise) by the Company or any of its Subsidiaries of all or substantially all
of the stock or assets of any other entity, (v) pursuant to a primary registered
public offering under the Securities Act, other than an offering subject to Rule
415 under the Securities Act, (vi) pursuant to the exercise of options or
purchase rights to purchase Common Stock granted to employees, consultants and
directors of the Company pursuant to any stock purchase, stock option or
employee stock bonus plan approved by the Board of Directors, (vii) securities
issued to equipment lessors in connection with lease of corporate equipment by
the Company as approved by the Company's Board of Directors, (viii) upon the
exercise of any right other than a right to purchase securities which was not
itself in violation of the terms of this paragraph, and (ix) securities issued
in connection with refinancing the Company's existing bank debt, not more than
200,000 shares in any calendar year unless (A) the Company delivers to the
Purchaser a written notice (the "Subsequent Sale Notice") of its intention to
effect such Subsequent Sale, which Subsequent Sale Notice shall describe in
reasonable detail the proposed terms of such Subsequent Sale, the identity of
the Persons who proposes to provide such Subsequent Sale and the amount of
proceeds intended to be raised thereunder and (B) the Purchaser shall not have
notified the Company by 5:00 p.m. (Eastern Time) on the tenth Business Day after
its receipt of the Subsequent Sale Notice of its willingness to enter into good
faith negotiations to provide (or to cause its sole designee to provide)
financing to the Company on substantially the terms set forth in the Subsequent
Sale Notice. If the Purchaser shall fail to notify the Company of its intention
to enter into such negotiations within such time period, the Company may effect
the Subsequent Sale substantially upon the terms and to the Persons (or
Affiliates of such Persons) set forth in the Subsequent Sale Notice; provided,
that the Company shall provide the Purchaser with a second Subsequent Sale
Notice, and the Purchaser shall again have the right of first refusal set forth
above in this paragraph (a), subject to the exceptions set forth above in this
paragraph (a), if the Subsequent Sale subject to the initial Subsequent Sale
Notice shall not have been consummated for any reason on the terms set forth in
such Subsequent Sale Notice within 90 days after the date of the initial
Subsequent Sale Notice with the Person (or an Affiliate of such Person)
identified in the Subsequent Sale Notice.
(b) For as long as Preferred Stock or Warrants outstanding, the
Company shall not and shall cause the Subsidiaries not to, without the consent
of the Purchaser, (i) amend its Restated Articles of Organization, bylaws or
other charter documents so as to adversely affect any rights provided in the
Transaction Documents to the Preferred Stock and the Warrants; (ii) split,
combine or reclassify its outstanding capital stock; (iii) redeem, repurchase or
offer to repurchase or otherwise acquire shares of its Junior Securities (as
defined in the Statements of Rights and Preferences); or (iv) enter into any
agreement with respect to any of the foregoing.
Section 4.13. Notwithstanding anything to the contrary contained
herein, each Conversion Notice shall contain a representation that, after giving
effect to the shares of the Company's Common Stock to be issued pursuant to such
Conversion Notice, the total number of shares of the Company's Common Stock
deemed beneficially owned by the holder thereof, together with all shares of the
Company's Common Stock deemed beneficially owned by such holder's "affiliates"
as defined in Rule 144 promulgated under the Securities Act of 1933, as amended,
(exclusive of shares issuable upon conversion of the unconverted portion of the
Shares of Series D Preferred Stock or the unexercised or unconverted portion of
any other securities of the Company subject to a limitation on conversion or
exercise analogous to the limitations contained herein) will not result in
beneficial ownership by the holder and its affiliates of more
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than 4.9% of the outstanding shares of Common Stock. For purposes of this
subparagraph, beneficial ownership shall be determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation
13 D-G thereunder, except as other provided above. Any Conversion Notice which
does not contain such representation shall be ineffective provided, however,
that the requirement of this paragraph shall not apply to any Purchaser marked
as "excluded from Section 4.13" on Schedule A.
Section 4.14. Availability of Common Stock. The Company has duly
reserved a sum of 5,200,000 shares of authorized and unissued Common Stock for
issuance upon the conversion of Series D Shares and the exercise all of the
Series D Warrants. If at any time the Company does not have reserved sufficient
shares of Common Stock to enable it to perform its conversion and exercise
obligations hereunder with respect to all shares of Preferred Stock and all
Warrants then outstanding it shall, at the option of the holders of Preferred
Stock, redeem all Shares and Underlying Shares then held by such holders,
pursuant to Section 4.16 hereto.
Section 4.15. Listing of Underlying Shares and Warrant Shares.
Prior to the Closing, the Company shall have filed an additional listing
application with the Nasdaq National Market or SmallCap Market, as the case may
be (and each other national securities exchange on which the Common Stock is
then listed) for the listing of the Underlying Shares and the Warrant Shares.
The Company shall, as promptly as possible, take all steps necessary to cause
the Underlying Shares and Warrant Shares to be approved for listing in the
Nasdaq National Market or SmallCap Market (and each other national securities
exchange or market on which the Common Stock is then listed), and shall provide
to the Purchaser evidence of such listing when approved and shall maintain the
listing of its Common Stock on such exchange.
Section 4.16. Purchaser's Rights if Trading in Common Stock is
Suspended or Delisted. In the event that at any time within the three-year
period after the Closing Date trading in the shares of the Common Stock is
suspended, or if the Common Stock shall not listed for trading, on the Nasdaq
National Market (other than as a result of the suspension of trading in
securities on such market or exchange generally or temporary suspensions pending
the release of material information and other than a suspension of trading on
the Nasdaq National Market if the Common Stock is listed for trading, and not
suspended, on the Nasdaq SmallCap Market within one Business Day after such
suspension) for more than ten days, at the Purchaser's option exercisable by
written notice to the Company, the Company shall redeem for cash all Shares and
all Underlying Shares then held by such Purchaser, at an aggregate purchase
price equal to (A) the product of the average Per Share Market Value for the
five Trading Days immediately preceding the day of such notice multiplied by the
number of shares of Common Stock into which the Shares to be purchased are then
convertible and exercisable (or in the case of Underlying Shares, the number of
Underlying Shares to be purchased), plus (B) interest on such amount accruing
from the 7th day after such notice at the rate of 15% per annum.
Section 4.17. No Violation of Applicable Law. Notwithstanding any
provision of this Agreement to the contrary, if any redemption of Shares or
Underlying Shares otherwise required under the Transaction Documents or the
Statements of Rights and Preferences would be prohibited by the relevant
provisions of the Massachusetts Business Corporation Law, such redemption shall
be effected as soon as it is permitted under such law; provided, however, that,
interest payable by the Company with respect to any such redemption shall
continue to accrue in accordance with Section 4.16 during any such period.
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Section 4.18. Redemption Restrictions. Notwithstanding any
provision of this Agreement to the contrary, if any redemption of Shares or
Underlying Shares otherwise required under this Agreement would be prohibited in
the absence of consent from any lender of the Company or of any Subsidiary, or
by the holders of any class of securities of the Company, the Company shall use
its best efforts to obtain such consent as promptly as practicable after the
redemption is required but in no event later than 30 days after the redemption
is required. Interest payable by the Company with respect to any such redemption
shall continue to accrue in accordance with Section 4.16 until such consent is
obtained. Nothing contained in this Section shall be construed as a waiver by
the Purchaser of any rights it may have by virtue of any breach of any
representation or warranty of the Company herein as to the absence of any
requirement to obtain any such consent.
Section 4.19. Notice of Breaches. Each of the Company and the
Purchaser shall give prompt written notice to the other of any breach of any
representation, warranty or other agreement contained in the Transaction
Documents, as well as any events or occurrences arising after the date hereof
and prior to the Closing Date, which could reasonably be likely to cause any
representation or warranty or other agreement of such party, as the case may be,
contained herein or therein to be incorrect or breached as of such Closing Date.
However, no disclosure by either party pursuant to this Section shall be deemed
to cure any breach of any representation, warranty or other agreement contained
herein or in the other Transaction Documents. Neither the Company, any
Subsidiary nor the Purchaser will take, or agree to commit to take, any action
that is intended to make any representation or warranty of the Company or the
Purchaser, as the case may be, contained herein or in the other Transaction
Documents or in the Statements of Rights and Preferences inaccurate in any
respect at such Closing Date.
Notwithstanding the generality of the foregoing, the Company shall
promptly notify the Purchaser of any notice or claim (written or oral) that it
receives from any lender of the Company to the effect that the consummation of
the transactions contemplated by the Transaction Documents violates or would
violate any written agreement or understanding between such lender and the
Company, and the Company shall promptly furnish by facsimile to the holders of
the Shares and Warrants a copy of any written statement in support of or
relating to such claim or notice.
Section 4.20. The Warrants.
(a) The Series D Warrants. At the Series D Closing, the Company
shall issue to each Purchaser three Common Stock purchase warrants (the "Series
D Warrants"), in accordance with the following terms: (i) one Series D Warrant
shall entitle the Purchaser to acquire 0.66666 shares of Common Stock for each
share of Preferred Stock being purchased by that Purchaser at a price per share
equal to 125% of the average Per Share Market Value for the ten trading days
immediately preceding the Closing Date (the "Average Price") in accordance with
the terms thereof and shall be exercisable through the date that is three years
after the Closing Date, (ii) one Series D Warrant shall entitle the Purchaser to
acquire 0.66666 shares of Common Stock for each share of Preferred Stock being
purchased by that Purchaser at a price per share equal to 135% of the Average
Price in accordance with the terms thereof and shall be exercisable through the
date that is four years after the Closing Date, and (iii) one Series D Warrant
shall entitle the Purchaser to acquire 1.0 share of Common Stock for each share
of Preferred Stock being purchased by that Purchaser at a price per share equal
to 150% of the Average Price in accordance with the terms thereof and shall be
exercisable through the date that is five years after the Closing Date.
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(b) The Warrants shall be substantially in the form of
Exhibit E.
ARTICLE V
MISCELLANEOUS
Section 5.1. Fees and Expenses. Each party shall pay the fees
and expenses of its advisers, counsel, accountants and other experts, if any,
and all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement, except as
provided in the Registration Rights Agreement. The Company shall pay all stamp
and other taxes and duties levied in connection with the issuance of the Shares
(and upon conversion thereof, the Underlying Shares) and the Warrants (and upon
exercise thereof, the Warrant Shares) pursuant hereto. The Purchaser shall be
responsible for its own tax liability that may arise as a result of the
investment hereunder or the transactions contemplated by this Agreement. Whether
or not the transactions contemplated by this Agreement are consummated or this
Agreement is terminated, the Company shall pay (i) all costs, expenses, fees and
all taxes incident to and in connection with: (A) the preparation, printing and
distribution of the Disclosure Materials and all amendments and supplements
thereto (including, without limitation, financial statements and exhibits), and
all preliminary and final Blue Sky memoranda and all other agreements,
memoranda, correspondence and other documents prepared and delivered in
connection herewith (B) the issuance and delivery of the Shares and the Warrants
and, upon conversion of the Shares, the Underlying Shares and upon exercise of
the Warrants, the Warrant Shares, (C) the qualification of the Shares and the
Warrants and, upon conversion of the Shares, the Underlying Shares and upon
exercise of the Warrants, the Warrant Shares for offer and sale under the
securities or Blue Sky laws of the several states (including, without
limitation, the fees and disbursements of the Purchasers' counsel relating to
such registration or qualification), (D) furnishing such copies of the
Disclosure Materials and all amendments and supplements thereto, as may
reasonably be requested for use in connection with resales of the Shares and the
Warrants and, upon conversion of the Shares, the Underlying Shares and upon
exercise of the Warrants, the Warrant Shares, and (E) the preparation of
certificates for the Shares and the Warrants and, upon conversion of the Shares,
the Underlying Shares and upon exercise of the Warrants, the Warrant Shares
(including, without limitation, printing and engraving thereof), (ii) all fees
and expenses of the counsel and accountants of the Company and (iii) all
expenses and listing fees in connection with the application for quotation of
the Underlying Shares and the Warrant Shares in the Nasdaq National Market.
Section 5.2. Entire Agreement; Amendments. This Agreement,
together with the Exhibits, and Schedules hereto, and the Registration Rights
Agreement, the Statement of Rights and Preferences and the Warrants contain the
entire understanding of the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings, oral or written, with
respect to such matters.
Section 5.3. Notices. Any notice or other communication required
or permitted to be given hereunder shall be in writing and shall be deemed to
have been received (a) upon hand delivery (receipt acknowledged) or delivery by
telex (with correct answer back received), telecopy or facsimile (with
transmission confirmation report) at the address or number designated below (if
delivered on a Business Day during normal business hours where such notice is to
be received), or the first Business Day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second Business Day following the date of mailing
by express courier service, fully prepaid, addressed to
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such address, or upon actual receipt of such mailing, whichever shall first
occur. The addresses for such communications shall be:
If to the Company: Cayenne Software, Inc.
8 New England Executive Park
Burlington, MA 01803
Facsimile No.:
Attention: Frederick H. Phillips
With copies to: Foley, Hoag & Eliot
One Post Office Square
Boston, MA 02109
Facsimile No.: (617) 832-7000
Attention: David W. Walker
If to a Purchaser: to that Purchaser's address set forth in
Schedule A, with a copy to the
corresponding person and address
designated in that schedule
or such other address as may be designated in writing hereafter, in the same
manner, by such person.
Section 5.4. Amendments; Waivers. No provision of this Agreement
may be waived or amended except in a written instrument signed, in the case of
an amendment, by both the Company and the Purchaser, or, in the case of a
waiver, by the party against whom enforce ment of any such waiver is sought. No
waiver of any default with respect to any provision, condition or requirement of
this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right accruing to it thereafter.
Section 5.5. Headings. The headings herein are for convenience
only, do not constitute a part of this Agreement and shall not be deemed to
limit or affect any of the provisions hereof.
Section 5.6. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties and their successors and
permitted assigns. The Company may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Purchaser. The
Purchaser may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Company, except that the Purchaser may
assign its rights hereunder and under the Transaction Documents without the
consent of the Company as long as the assignee demonstrates to the reasonable
satisfaction of the Company its satisfaction of the representations and
warranties set forth in Section 3.2. This provision shall not limit the
Purchaser's right to transfer securities or transfer or assign rights hereunder
or under the Registration Rights Agreement.
Section 5.7. No Third Party Beneficiaries. This Agreement is
intended for the benefit of the parties hereto and their respective permitted
successors and assigns and, other than
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with respect to permitted assignees under Section 5.6, is not for the benefit
of, nor may any provision hereof be enforced by, any other Person.
Section 5.8. Governing Law; Arbitration. (a) This Agreement
shall be governed by and construed and enforced in accordance with the internal
laws of New York without regard to the principles of conflicts of law thereof.
(b) All disputes between the parties hereto arising under
the terms of this Agreement and the other Transaction Documents shall be
arbitrated in New York City under the rules of the American Arbitration
Association then in effect in that city. Judgment on any award made by the
arbitrators hereunder may be rendered in any court having jurisdiction. The
parties consent to the nonexclusive jurisdiction of the United States District
Court sitting in the city where the arbitration was held, in connection with the
enforcement of such award. The parties agree to keep confidential any materials,
documents and other information that is disclosed in connection with any
arbitration proceeding.
Section 5.9. Survival. The representations and warranties of the
Company and the Purchaser contained in Article III and the agreements and
covenants of the parties contained in Article IV and this Article V shall
survive the Closing (or any earlier termination of this Agreement) and any
conversion of Shares and exercise of Warrants hereunder.
Section 5.10. Counterpart Signatures. This Agreement may be
executed in two or more counterparts, all of which when taken together shall be
considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party, it
being understood that both parties need not sign the same counterpart. In the
event that any signature is delivered by facsimile transmission, such signature
shall create a valid and binding obligation of the party executing (or on whose
behalf such signature is executed) the same with the same force and effect as if
such facsimile signature page were an original thereof.
Section 5.11. Publicity. The Company and the Purchaser shall
consult with each other in issuing any press releases or otherwise making public
statements with respect to the transactions contemplated hereby and neither
party shall issue any such press release or otherwise make any such public
statement without the prior written consent of the other, which consent shall
not be unreasonably withheld or delayed, except that no prior consent shall be
required if such disclosure is required by law, in which such case the
disclosing party shall provide the other party with prior notice of such public
statement.
Section 5.12. Severability. In case any one or more of the
provisions of this Agreement shall be invalid or unenforceable in any respect,
the validity and enforceability of the remaining terms and provisions of this
Agreement shall not in any way be affected or impaired thereby and the parties
will attempt to agree upon a valid and enforceable provision which shall be a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.
Section 5.13. Remedies. In addition to being entitled to exercise
all rights provided herein or granted by law, including recovery of damages, the
Purchaser will be entitled to specific performance of the obligations of the
Company under this Agreement and the other Transaction Documents and the Company
will be entitled to specific performance of the obligations of the Purchaser
hereunder with respect to the subsequent transfer of Shares,
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Warrants, Warrant Shares and Underlying Shares. Each of the Company and the
Purchaser agrees that monetary damages would not be adequate compensation for
any loss incurred by reason of any breach of its obligations described in the
foregoing sentence and hereby agrees to waive in any action for specific
performance of any such obligation the defense that a remedy at law would be
adequate.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the date first indicated above.
Company:
CAYENNE SOFTWARE, INC.
By:______________________________________________
Name: Frederick H. Phillips
Title: Vice President and Treasurer
Purchasers:
INTEGRAL CAPITAL PARTNERS III, L.P.
By:______________________________________________
Name:
Title:
INTEGRAL CAPITAL PARTNERS
INTERNATIONAL III, L.P.
By:______________________________________________
Name:
Title:
THEMIS PARTNERS, L.P.
By: Promethean Investment Group, L.L.C.
Its: General Partner
By:______________________________________________
Name: Brian S. Yeh
Its: Authorized Representative
HERACLES FUND
By: Promethean Investment Group, L.L.C.
Its: Investment Advisor
By:______________________________________________
Name: Brian S. Yeh
Its: Authorized Representative
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LEWIS A. FRASER
By: Promethean Investment Group, L.L.C.
Its: Investment Advisor
By:______________________________________________
Name: Brian S. Yeh
Its: Authorized Representative
QUISSETT PARTNERS, L.P.
By: Wellington Management Company LLP
By:______________________________________________
Name:
Title:
QUISSETT INVESTORS (BERMUDA) LP
By: Wellington Management Company LLP
By:______________________________________________
Name:
Title:
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WINSTON I
By:______________________________________________
Name:
Title:
WINSTON II LLC
By: Chatterjee Advisors LLC
Its: Manager
By:______________________________________________
Name:
Title:
WINSTON II LDC
By:______________________________________________
Name:
Title:
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SCHEDULE A
List of Purchasers
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EXHIBIT 4.3
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and
entered into as of August 28, 1997, by and among Cayenne Software, Inc., a
Massachusetts corporation (the "Company"), and the several purchasers identified
in Schedule A attached hereto (the "Purchasers").
This Agreement is made pursuant to the Convertible Preferred
Stock Purchase Agreement, dated as of the date hereof, by and among the Company
and the Purchasers (the "Purchase Agreement"). The execution of this Agreement
is a condition to the closing of the transactions contemplated by the Purchase
Agreement.
The Company and the Purchaser hereby agree as follows:
6. Definitions
Capitalized terms used and not otherwise defined herein shall
have the meanings given such terms in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
"Advice" shall have meaning set forth in Section 3(o).
"Affiliate" means, with respect to any Person, any other Person
that directly or indirectly controls or is controlled by or under common control
with such Person. For the purposes of this definition, "control," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms of "affiliated," "controlling" and "controlled" have meanings
correlative to the foregoing.
"Business Day" means any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
state of New York generally are authorized or required by law or other
government actions to close.
"Certificate of Vote" shall have the meaning set forth in
Section 4.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's Common Stock, par value $0.01
per share.
"Effectiveness Date" means with respect to the Registration
Statement to be filed with respect to the Series D Shares, the 120th day
following the Series D Closing Date.
"Effectiveness Period" shall have the meaning set forth in
Section 2(a).
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"Event" shall have the meaning set forth in Section 4.
"Event Date" shall have the meaning set forth in Section 4.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Filing Date" means with respect to the shares of Common Stock
issuable upon conversion of the Series D Shares and the Series D Warrants, the
30th day following the Series D Closing Date.
"Holder" or "Holders" means the holder or holders, as the case
may be, from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section
6(c).
"Indemnifying Party" shall have the meaning set forth in Section
6(c).
"Losses" shall have the meaning set forth in Section 6(a).
"Managing Underwriter" means any managing underwriter retained by
a Holder in connection with the offer and sale of Registrable Securities.
"Person" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"Preferred Stock" means the shares of Series D Convertible
Preferred Stock, par value $1.00 per share, of the Company issued to the
Purchaser pursuant to the Purchase Agreement.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
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 prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
"Registrable Securities" means with respect to the Registration
Statement to be filed after the Series D Closing, the shares of Common Stock
issuable upon conversion of the Series D Shares, shares of Common Stock issuable
upon exercise of the Series D Warrants, and shares of Common Stock issuable as
payment of dividends on the Series D Shares; provided, however that in order to
account for the fact that the number of shares of Common Stock that are issuable
upon conversion of shares of Preferred Stock is determined in part upon the
market price of the Common Stock at the time of conversion, Registrable
Securities shall
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include a number of shares of Common Stock equal to no less than the sum of (1)
the greater of (x) 125% of the number of shares issuable upon conversion of all
the Series D Shares outstanding from time to time and (y) two times the number
of shares of Common Stock issuable upon conversion in full of the Series D
Share, assuming such conversion occurred on the particular Closing Date for such
shares of Preferred Stock, (2) the number of shares of Common Stock issuable
upon exercise in full of the Series D Warrants, assuming such exercise occurred
on the particular issuance date for such Warrants, and (3) the number of Shares
of Common Stock issuable on payment of dividends on the Series D Shares for the
one year period after the applicable Closing Date, or such other number of
shares of Common Stock as agreed to by the parties to the Purchase Agreement.
Notwithstanding anything herein contained to the contrary, if the actual number
of shares of Common Stock into which the Preferred Stock is convertible exceeds
twice the number of shares of Common Stock into which particular shares of
Preferred Stock are convertible based upon a computation as at a particular
Closing Date, the term "Registrable Securities" shall be deemed to include such
additional shares of Common Stock. If an additional Registration Statement is
required to be filed because the actual number of shares of Common Stock into
which the Preferred Stock are convertible, plus shares issuable upon payment of
dividends as described above and shares issuable upon exercise of the Warrants
exceeds the number of shares of Common Stock initially registered in respect of
any particular series of Preferred Stock based upon the computation on a
particular Closing Date, the Company shall have 10 Business Days after it makes
such a determination or receives notice from the Holders of Registrable
Securities as to such a determination to file such additional Registration
Statement in accordance with the terms hereof.
"Registration Statement" means the registration statement,
contemplated by Section 2(a) (and any additional Registration Statements
contemplated in the definition of Registrable Securities), including (in each
case) the Prospectus, amendments and supplements to such registration statement
or Prospectus, including pre- and post-effective amendments, all exhibits
thereto, and all material incorporated by reference or deemed to be incorporated
by reference in such registration statement.
"Rule 144" means Rule 144 promulgated by the Commission pursuant
to the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 158" means Rule 158 promulgated by the Commission pursuant
to the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission pursuant
to the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
"Series D Closing Date" means the date of the issuance and sale
of the Series D Shares pursuant to the Purchase Agreement.
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"Series D Shares" means the shares of Preferred Stock issued and
sold on the Series D Closing Date pursuant to the Purchase Agreement.
"Special Counsel" means any special counsel to the Holders, for
which the Holders will be reimbursed by the Company pursuant to Section 4.
"Underwriter" means any underwriter retained by a Holder in
connection with the offer and sale of Registrable Securities.
"Underwritten Registration or Underwritten Offering" means a
registration in connection with which securities of the Company are sold to an
underwriter for reoffering to the public pursuant to an effective registration
statement.
"Warrants" means the Common Stock purchase warrants issued to or
as directed by the Purchaser on each Closing Date.
7. Shelf Registration
(a) On or prior to each applicable Filing Date the Company
shall prepare and file with the Commission a "Shelf" Registration Statement
covering all Registrable Securi ties for an offering to be made on a continuous
basis pursuant to Rule 415. The Registration Statement shall be on Form S-3 (or
another appropriate form approved by the Holders of a majority of the
Registrable Securities that permit registration of Registrable Securities for
resale by the Holders in the manner or manners designated by them (including,
without limitation, public or private sales and one or more Underwritten
Offerings)). The Company shall (i) not without the consent of the Holders
participating as selling stockholders in the registration, which consent will
not be withheld unreasonably, permit any securities other than the Registrable
Securities and those securities specifically listed on Schedule 8 attached
hereto, to be included in the Registration Statement and (ii) use its best
efforts to cause the Registration Statement to be declared effective under the
Securities Act as promptly as possible after the filing thereof, but in any
event prior to the Effectiveness Date, and to keep such Registration Statement
continuously effective under the Securities Act until the date which is two
years after the date that such Registration Statement is declared effective by
the Commission or such earlier date when all Registrable Securities covered by
such Registration Statement have been sold or may be sold pursuant to Rule 144
without volume restrictions as determined by the counsel to the Company pursuant
to a written opinion letter, addressed to the Holders, to such effect (the
"Effectiveness Period"); provided, however, that the Company shall not be deemed
to have used its best efforts to keep the Registration Statement effective
during the Effectiveness Period if it voluntarily takes any action that would
result in the Holders not being able to sell the Registrable Securities covered
by such Registration Statement during the Effectiveness Period, unless such
action is required under applicable law or the Company has filed a
post-effective amendment to the Registration Statement and the Commission has
not declared it effective.
(b) If the Holders of a majority of the Registrable Securities
so elect, an offering of Registrable Securities pursuant to the Registration
Statement may be effected in the form of an Underwritten Offering. In such
event, and if the Managing Underwriters advise the Company and such Holders in
writing that in their opinion the amount of Registrable Securities proposed to
be sold in such Underwritten Offering exceeds the amount of
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Registrable Securities which can be sold in such Underwritten Offering, there
shall be included in such Underwritten Offering the amount of such Registrable
Securities which in the opinion of such Managing Underwriters can be sold, and
such amount shall be allocated pro rata among the Holders proposing to sell
Registrable Securities in such Underwritten Offering.
(c) If any of the Registrable Securities are to be sold in an
Underwritten Offering, the investment banker or investment bankers and manager
or managers that will administer the offering will be selected by the Holders of
a majority of the Registrable Securities included in such offering. No Holder
may participate in any Underwritten Offering hereunder unless such Person (i)
agrees to sell its Registrable Securities on the basis provided in any
underwriting agreements approved by the Persons entitled hereunder to approve
such arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such arrangements.
8. Registration Procedures
In connection with the Company's registration obligations
hereunder, the Company shall:
(a) Prepare and file with the Commission on or prior to the
Filing Date a Registration Statement on Form S-3 in accordance with the method
or methods of distribution thereof as specified by the Holders, and cause the
Registration Statement to become effective and remain effective as provided
herein; provided, however, that not less than five (5) Business Days prior to
the filing of the Registration Statement or any related Prospectus or any
amendment or supplement thereto (including any document that would be
incorporated or deemed to be incorporated therein by reference), the Company
shall (i) furnish to the Holders, their Special Counsel and any Managing
Underwriters, copies of all such documents proposed to be filed, which documents
(other than those incorporated or deemed to be incorporated by reference) will
be subject to the review of such Holders, their Special Counsel and such
Managing Underwriters, and (ii) cause its officers and directors, counsel and
independent certified public accountants to respond to such inquiries as shall
be necessary, in the reasonable opinion of respective counsel to such Holders
and such Underwriters, to conduct a reasonable investigation within the meaning
of the Securities Act. The Company shall not file the Registration Statement or
any such Prospectus or any amendments or supplements thereto to which the
Holders of a majority of the Registrable Securities, their Special Counsel, or
any Managing Underwriters, shall object.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective for the
Effectiveness Period and prepare and file with the Commission such additional
Registration Statements in order to register for resale under the Securities Act
all of the Registrable Securities; (ii) cause the related Prospectus to be
amended or supplemented by any required Prospectus supplement, and as so
supplemented or amended to be filed pursuant to Rule 424 (or any similar
provisions then in force) promulgated under the Securities Act; (iii) respond as
promptly as practicable to any comments received from the Commission with
respect to the Registration Statement or any amendment thereto and promptly
provide the Holders true and complete copies of all correspondence from and to
the Commission relating to the Registration Statement; and (iv) comply with the
provisions of the Securities Act and the Exchange Act with respect to the
disposition of all Registrable Securities
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covered by the Registration Statement during the applicable period in accordance
with the intended methods of disposition by the Holders thereof set forth in the
Registration Statement as so amended or in such Prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities to be sold,
their Special Counsel and any Managing Underwriters immediately (and, in the
case of (i)(A) below, not less than five (5) days prior to such filing) and (if
requested by any such Person) confirm such notice in writing no later than 3
Business Days following the day (i)(A) when a Prospectus or any Prospectus
supplement or post-effective amendment to the Registration Statement is proposed
to be filed; (B) when the Commission notifies the Company whether there will be
a "review" of such Registration Statement and whenever the Commission comments
on such Registration Statement; and (C) with respect to the Registration
Statement or any post-effective amendment, when the same has become effective;
(ii) of any request by the Commission or any other Federal or state governmental
authority for amendments or supplements to the Registration Statement or
Prospectus or for additional information; (iii) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement covering any or all of the Registrable Securities or the initiation of
any Proceedings for that purpose; (iv) if at any time any of the representations
and warranties of the Company contained in any agreement (including any
underwriting agreement) contemplated hereby ceases to be true and correct in all
material respects; (v) 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; and (vi) of the
occurrence of any event that makes any statement made in the Registration
Statement or Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, 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 light of the circumstances under which they were
made, not misleading.
(d) Use its best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of (i) any order suspending the effectiveness of
the Registration Statement or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.
(e) If requested by any Managing Underwriter or the Holders of
a majority of the Registrable Securities to be sold in connection with an
Underwritten Offering, (i) promptly incorporate in a Prospectus supplement or
post-effective amendment to the Registration Statement such information as such
Managing Underwriters and such Holders reasonably agree should be included
therein and (ii) make all required filings of such Prospectus supplement or such
post-effective amendment as soon as practicable after the Company has received
notification of the matters to be incorporated in such Prospectus supplement or
post-effective amendment; provided, however, that the Company shall not be
required to take any action pursuant to this Section 3(e) that would, in the
opinion of counsel for the Company, violate applicable law.
(f) Furnish to each Holder, their Special Counsel and any
Managing Underwriters, without charge, at least one conformed copy of each
Registration Statement and each amendment thereto, including financial
statements and schedules, all documents
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incorporated or deemed to be incorporated therein by reference, and all exhibits
to the extent requested by such Person (including those previously furnished or
incorporated by reference) promptly after the filing of such documents with the
Commission.
(g) Promptly deliver to each Holder, their Special Counsel, and
any Underwriters, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request; and the Company
hereby consents to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders and any Underwriters in con nection with
the offering and sale of the Registrable Securities covered by such Prospectus
and 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,
any Underwriters and their respective 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 Holder or Underwriter requests in writing, to keep each such registration or
qualification (or exemption therefrom) effective during the Effectiveness Period
and to do any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Registrable Securities covered by a
Registration Statement; provided, however, that the Company shall not be
required to qualify to do business or to file a general consent to service of
process in any jurisdiction.
(i) Cooperate with the Holders and any Managing Underwriters to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold, which certificates shall be free of all
restrictive legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any such Managing Underwriters or
Holders may request at least two Business Days prior to any sale of Registrable
Securities.
(j) Upon the occurrence of any event contemplated by Section
3(c)(vi), as promptly as practicable, prepare a supplement or amendment,
including a post-effective amendment, to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed to
be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, neither the Registration Statement nor such
Prospectus will 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.
(k) Use its best efforts to cause all Registrable Securities
relating to such Registration Statement to be listed on the Nasdaq National
Market and any other securities exchange, market or over-the-counter bulletin
board, if any, on which similar securities issued by the Company are then
listed.
(l) Enter into such agreements (including an underwriting
agreement in form, scope and substance as is customary in Underwritten
Offerings) and take all such other actions in connection therewith (including
those reasonably requested by any Managing Underwriters and the Holders of a
majority of the Registrable Securities being sold) in order to expedite or
facilitate the disposition of such Registrable Securities, and whether or not an
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underwriting agreement is entered into, (i) make such representations and
warranties to such Holders and such Underwriters as are customarily made by
issuers to underwriters in underwritten public offerings, and confirm the same
if and when requested; (ii) obtain and deliver copies thereof to each Holder and
the Managing Underwriters, if any, of opinions of counsel to the Company and
updates thereof addressed to each selling Holder and each such Underwriter, in
form, scope and substance reasonably satisfactory to any such Managing
Underwriters and Special Counsel to the selling Holders 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
Underwriters; (iii) immediately prior to the effectiveness of the Registration
Statement, and, in the case of an Underwritten Offering, at the time of delivery
of any Registrable Securities sold pursuant thereto, obtain and deliver copies
to the Holders and the Managing Underwriters, if any, of "cold comfort" letters
and updates thereof from the independent certified public accountants of the
Company (and, if necessary, any other independent certified public accountants
of any subsidiary of the Company or of any business acquired by the Company for
which financial statements and financial data is, or is required to be, included
in the Registration Statement), addressed to each selling Holder and each of the
Underwriters, if any, in form and substance as are custom ary in connection with
Underwritten Offerings; (iv) if an underwriting agreement is entered into, the
same shall contain indemnification provisions and procedures no less favorable
to the selling Holders and the Underwriters, if any, than those set forth in
Section 7 (or such other provisions and procedures acceptable to the Managing
Underwriters, if any, and holders of a majority of Registrable Securities
participating in such Underwritten Offering); and (v) deliver such documents and
certificates as may be reasonably requested by the Holders of a majority of the
Registrable Securities being sold, their Special Counsel and any Managing
Underwriters to evidence the continued validity of the representations and
warranties made pursuant to clause 3(l)(i) above and to evidence compliance with
any customary conditions contained in the underwriting agreement or other
agreement entered into by the Company.
(m) Make available for inspection by the selling Holders, any
representative of such Holders, any Underwriter participating in any disposition
of Registrable Securities, and any attorney or accountant retained by such
selling Holders or Underwriters, at the offices where normally kept, during
reasonable business hours, all financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries, and cause the
officers, directors, agents and employees of the Company and its subsidiaries to
supply all information in each case requested by any such Holder,
representative, Underwriter, attorney or accountant in connection with the
Registration Statement; provided, however, that any information that is
determined in good faith by the Company in writing to be of a confidential
nature at the time of delivery of such information shall be kept confidential by
such Persons, 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, in the opinion of counsel to
such Person, is required by law; (iii) such information becomes generally
available to the public other than as a result of a disclosure or failure to
safeguard by such Person; or (iv) such information becomes available to such
Person from a source other than the Company and such source is not known by such
Person to be bound by a confidentiality agreement with the Company.
(n) Comply with all applicable rules and regulations of the
Commission and make generally available to its security holders earning
statements satisfying the provisions of Section 11(a) of the Securities Act and
Rule 158 not 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
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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 after the
effective date of the Registration Statement, which statement shall cover said
12-month period, or end shorter periods as is consistent with the requirements
of Rule 158.
(o) Provide a CUSIP number for all Registrable Securities, not
later than the effective date of the Registration Statement.
The Company may require each selling Holder to furnish to the
Company such information regarding the distribution of such Registrable
Securities as is required by law to be disclosed in the Registration Statement
and the Company may exclude from such registration the Registrable Securities of
any such Holder who unreasonably fails to furnish such information within a
reasonable time after receiving such request.
If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder shall
have the right to require (i) the inclusion therein of language, in form and
substance reasonably satisfactory to such Holder, to the effect that the
ownership by such Holder of such securities is not to be construed as a
recommendation by such Holder of the investment quality of the Company's
securities covered thereby and that such ownership does not imply that such
Holder will assist in meeting any future financial requirements of the Company,
or (ii) if such reference to such Holder by name or otherwise is not required by
the Securities Act or any similar Federal statute then in force, the deletion of
the reference to such Holder in any amendment or supplement to the Registration
Statement filed or prepared subsequent to the time that such reference ceases to
be required.
The Purchaser covenants and agrees that (i) it will not offer or
sell any Registrable Securities under the Registration Statement until it has
received copies of the Prospectus as then amended or supplemented as
contemplated in Section 3(g) and notice from the Company that such Registration
Statement and any post-effective amendments thereto have become effective as
contemplated by Section 3(c) and (ii) the Purchaser and its officers, directors
or Affiliates, if any, will comply with the prospectus delivery requirements of
the Securities Act as applicable to them in connection with sales of Registrable
Securities pursuant to the Registration Statement.
Each Holder agrees by its acquisition of such Registrable
Securities that, upon receipt of a notice from the Company of the occurrence of
any event of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv),
3(c)(v) or 3(c)(vi), such Holder will forthwith discontinue disposition of such
Registrable Securities until such Holder's receipt of the copies of the
supplemented Prospectus and/or amended Registration Statement contemplated by
Section 3(j), or until it is advised in writing (the "Advice") by the Company
that the use of the applicable Prospectus may be resumed, and, in either case,
has received copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement.
9. Liquidated Damages. The Company acknowledges and agrees that
the Holders will suffer damages, and that it would not be feasible to ascertain
the extent of such damages with precision, if (a) a Registration Statement shall
not have been filed with the
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Commission on or prior to the applicable Filing Date, or (b) the Company fails
to file with the Commission a request for acceleration in accordance with Rule
12d1-2 promulgated under the Securities Exchange Act of 1934, as amended, within
five (5) days of the date that the Company is notified (orally or in writing,
whichever is earlier) by the Commission that an Underlying Securities
Registration Statement will not be "reviewed" or is not subject to further
review or comment, or (c) a Registration Statement is not declared effective by
the Commission on or prior to the applicable Effectiveness Date, or (d) a
Registration Statement is filed with and declared effective by the Commission
but thereafter ceases to be effective at any time prior to the expiration of the
Effectiveness Period without being succeeded within 10 Business Days by a
subsequent Registration Statement filed with and declared effective by the
Commission, or (e) trading in the Common Stock shall be suspended for any reason
for more than three Trading Days (as such term is defined under the Certificate
of Vote of Directors Establishing A Series Of A Class Of Stock filed with the
State of Massachusetts in respect of the Preferred Stock (the "Certificate of
Vote")) or (f) if the conversion rights of the holders of the Preferred Stock as
set forth in the Certificate of Vote are suspended for any reason (any such
failure being referred to as an "Event," and for purposes of clauses (a), (c)
and (f) the date on which such Event occurs, or, for purposes of clause (b) the
date on which such five (5) day period is exceeded, or for purposes of clause
(d) the date which such 10 Business Day- period is exceeded, or for purposes of
clause (e) the date on which such three Trading Day period is exceeded, being
referred to as "Event Date"), then the Company shall pay the Purchaser in cash
an amount equal to 0.2% of the Purchase Price per day, payment thereof due on
the day after such Event Date and thereafter on each monthly anniversary date of
such Event Date, until such time as a subsequent Registration Statement is
declared effective by the Commission, or until any Event contemplated by clause
(e) or (f), as the case may be, is cured. If the Company fails to make any
payment required by this paragraph when due, each holder shall have the option,
exercisable by giving written notice to the Company at any time after a default
in payment and before all such defaults are cured, to require the Company to
redeem for cash all or any part of the Preferred Stock then held by that Holder
at a redemption price equal to 120% of the Purchase Price of the shares so
redeemed, provided, however that the option to require redemption shall not be
effective if the Company has been advised in writing by The Nasdaq Stock Market,
Inc. that the availability or the exercise of that option would require the
Preferred Stock to be excluded from equity of the Company for purposes of
applicable listing maintenance requirements for the Nasdaq national market
system.
The Company shall notify each Holder within five days of each
Event and Event Date. The Company shall pay the liquidated damages due with
respect to the Registrable Securities to each Holder of record as at the Event
Date on a monthly basis, beginning with the date upon which such liquidated
damages first accrue.
10. Registration Expenses
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company
whether or not the Registration Statement is filed or becomes effective and
whether or not any Registrable Securities are sold pursuant to the Registration
Statement. The fees and expenses referred to in the foregoing sentence shall
include, without limitation, (i) all registration and filing fees (including,
without limitation, fees and expenses (A) with respect to filings required to be
made with the National Association of Securities Dealers, Inc. and (B) in
compliance with state securities or Blue Sky laws (including, without
limitation, fees and disbursements of counsel for the Underwriters or Holders in
connection with Blue Sky qualifications of the
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<PAGE> 11
Registrable Securities and determination of the eligibility of the Registrable
Securities for investment under the laws of such jurisdictions as the Managing
Underwriters, if any, or Holders of a majority of Registrable Securities may
designate)), (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities and of printing prospectuses if
the printing of prospectuses is requested by the Managing Underwriters, if any,
or by the holders of a majority of the Registrable Securities included in the
Registration Statement), (iii) messenger, telephone and delivery expenses, (iv)
reasonable fees and disbursements of counsel for the Company and Special Counsel
for the Holders, (v) fees and disbursements of all independent certified public
accountants referred to in Section 3(l)(iii) (including, without limitation, the
expenses of any special audit and "cold comfort" letters required by or incident
to such performance), (vi) Securities Act liability insurance, if the Company so
desires such insurance, and (vii) fees and expenses of all other Persons
retained by the Company in connection with the consummation of the transactions
contemplated by this Agreement. In addition, the Company shall be responsible
for all of its internal expenses incurred in connection with the consummation of
the transactions contemplated by this Agreement (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit, the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange on which similar securities issued by the Company are then
listed.
(b) In connection with the Registration Statement, the Company
shall reimburse the Holders for the fees and disbursements of one firm of
attorneys chosen by the Holders of a majority of the Registrable Securities.
11. Indemnification. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:
(a) To the fullest extent permitted by law, the Company will,
and hereby does, indemnify, hold harmless and defend each Holder who holds such
Registrable Securities, the directors, officers, partners, employees, agents of,
and each person, if any, who controls, any Holder within the meaning of the 1933
Act or the Securities Exchange Act of 1934, as amended (the "1934 Act"), and any
underwriter (as defined in the 1933 act) for the Holders, and the Directors and
officers of, and each Person, if any, who controls, any such underwriter within
the meaning of the 1933 Act or the 1934 Act (each, and "Indemnified Person"),
against any losses, claims, damages, liabilities, judgments, fines, penalties,
charges, costs, attorneys' fees, amounts paid in settlement or expenses, joint
or several, (collectively, "Claims") incurred in investigating, preparing or
defending any action, claim, suit, inquiry, proceeding, investigation or appeal
taken from the foregoing by or before any court or governmental, administrative
or other regulatory agency, body or the SEC, whether pending or threatened,
whether or not an indemnified party is or may be a party thereto ("Indemnified
Damages"), to which any of them may become subject insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon: (i) any untrue statement or alleged untrue
statement of a material fact in a Registration Statement or any post-effective
amendment thereto or in any filing made in connection with the qualification of
the offering under the securities or other "blue sky" laws of any jurisdiction
in which Registrable Securities are offered ("Blue Sky Filing"), or the omission
or alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which the statements therein were made, not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files
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<PAGE> 12
any amendment thereof or supplement thereto with the SEC) or the omission or
alleged omission to state therein any material fact necessary to make the
statements made therein, in light of the circumstances under which the
statements therein were made, not misleading, or (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement (the matters in the foregoing
clauses (i) through (iii) being, collectively, "Violations"). Subject to the
restrictions set forth in Section 6(d) with respect to the number of legal
counsel, the Company shall reimburse the Holders and each such underwriter or
controlling person, promptly as such expenses are incurred and are due and
payable, for any legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(a): (i) shall not apply to a Claim arising out of or
based upon a Violation which occurs in reliance upon and in conformity with
information furnished in writing to the Company by any Indemnified Person or
underwriter for such Indemnified Person expressly for use in connection with the
preparation of the Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(g); (ii) with respect to any preliminary prospectus, shall
not inure to the benefit of any such person from whom the person asserting any
such Claim purchased the Registrable Securities that are the subject thereof (or
to the benefit of any person controlling such person) if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
in the prospectus, as then amended or supplemented, if such prospectus was
timely made available by the Company pursuant to Section 3(g), and the
Indemnified Person was promptly advised in writing not to use the incorrect
prospectus prior to the use giving rise to a violation and such Indemnified
Person, notwithstanding such advice, used it; (iii) shall not be available to
the extent such Claim is based on a failure of the Holder to deliver or to cause
to be delivered the prospectus made available by the Company; and (iv) shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not be
unreasonably withheld. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Indemnified Person
and shall survive the transfer of the Registrable Securities by the Holders
pursuant to Section 8.
(b) In connection with any Registration Statement in which a
Holder is participating, each such Holder agrees severally and not jointly to
indemnify, hold harmless and defend, to the same extent and in the same manner
as is set forth in Section 6(a), the Company, each of its directors, each of its
officers who signs the Registration Statement, each Person, if any, who controls
the Company within the meaning of the 1933 Act or the 1934 Act (collectively and
together with an Indemnified Person, an "Indemnified Party"), against any Claim
or Indemnified Damages to which any of them may become subject, under the 1933
Act, the 1934 Act or otherwise, insofar as such Claim or Indemnified Damages
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 to the Company by such Holder
expressly for use in connection with such Registration Statement; and, subject
to Section 6(d), such Holder will reimburse any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such Claim; provided, however, that the indemnity agreement contained in this
Section 6(b) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of such Holder, which
consent shall not be unreasonably withheld; provided, further, however, that the
Holder shall be liable under this Section 6(b) for only that amount of a Claim
or Indemnified Damages as does not exceed the net proceeds to such Holder as a
result of the sale of Registrable Securities pursuant to such
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<PAGE> 13
Registration Statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the transfer of the Registrable Securities by the Holders
pursuant to Section 8. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(b) with
respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus was corrected on a timely basis in the prospectus,
as then amended or supplemented.
(c) The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution, to the same extent as provided
above, with respect to information such persons so furnished in writing
expressly for inclusion in the Registration Statement.
(d) Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action or proceeding (including any governmental action or proceeding) involving
a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in
respect thereof is to be made against any indemnifying party under this Section
6, 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 control of the defense thereof
with counsel mutually satisfactory to the indemnifying party and the Indemnified
Person or the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or the Indemnified Party shall have the right to retain its
own counsel with the fees and expenses to be paid by the indemnifying party, if,
in the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such proceeding. The Company shall pay reasonable
fees for only one separate legal counsel for the Holders, and such legal counsel
shall be selected by the Holders holding a majority in interest of the
Registrable Securities included in the Registration Statement to which the Claim
relates. The Indemnified Party or Indemnified Person shall cooperate fully with
the indemnifying party in connection with any negotiation or defense of any such
action or claim by the indemnifying party all information reasonably available
to the Indemnified Party or Indemnified Person which relates to such action or
claim. The indemnifying party shall keep the Indemnified Party or Indemnified
Person fully apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto. No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its written consent, provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the consent of the Indemnified Party or Indemnified Person,
consent to entry of any judgment or enter into any settlement or other
compromise which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified party or Indemnified Person of a
release from all liability in respect to such claim or litigation. Following
indemnification as provided for hereunder, the indemnifying party shall be
subrogated to all rights of the Indemnified Party or Indemnified Person with
respect to all third parties, firms or corporations relating to the matter for
which indemnification has been made. The failure to deliver written notice to
the indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action.
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<PAGE> 14
(e) The indemnification required by this Section 6 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as when bills are received or Indemnified Damages are
incurred.
(f) The indemnity agreements contained herein shall be in
addition to (i) any cause of action or similar right of the Indemnified party or
Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.
(g) Contribution. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 6 to the fullest extent permitted by
law; provided, however, that: (i) no contribution shall be made under
circumstances where the maker would not have been liable for indemnification
under the fault standards set forth in Section 6; (ii) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any seller of
Registrable Securities who was not guilty of fraudulent misrepresentation; and
(iii) contribution by any seller of Registrable Securities shall be limited in
amount to the net amount of proceeds received by such seller from the sale of
such Registrable Securities.
12. Rule 144
The Company shall file the reports required to be filed by it
under the Securities Act and the Exchange Act in a timely manner and, if at any
time the Company is not required to file such reports, they will, upon the
request of any Holder, make publicly available other information so long as
necessary to permit sales of its securities pursuant to Rule 144. The Company
further covenants that it will take such further action as any Holder may
reasonably request, all to the extent required from time to time to enable such
Holder to sell Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by Rule 144. Upon the
request of any Holder, the Company shall deliver to such Holder a written
certification of a duly authorized officer as to whether it has complied with
such requirements.
13. Miscellaneous
(a) Remedies. In the event of a breach by the Company or by a
Holder, of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Except as set forth in
Schedule 8 hereto, neither the Company nor any of its subsidiaries has, as of
the date hereof, nor shall the Company or any of its subsidiaries, on or after
the date of this Agreement, enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the
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<PAGE> 15
Holders in this Agreement or otherwise conflicts with the provisions hereof.
Neither the Company nor any of its subsidiaries has previously entered into any
agreement granting any registration rights with respect to any of its securities
to any Person. Without limiting the generality of the foregoing, without the
written consent of the Holders of a majority of the then outstanding Registrable
Securities, the Company shall not grant to any Person the right to request the
Company to register any securities of the Company under the Securities Act
unless the rights so granted are subject in all respects to the prior rights in
full of the Holders set forth herein, and are not otherwise in conflict or
inconsistent with the provisions of this Agreement.
(c) No Piggyback on Registrations. Except as set forth in
Schedule 8 hereto, neither of the Company nor any of its security holders (other
than the Holders in such capacity pursuant hereto) may include securities of the
Company in the Registration Statement other than the Common Stock to be issued
under the Purchase Agreement, and the Company shall not enter into any agreement
providing any such right to any of its securityholders.
(d) Piggy-Back Registrations. If at any time the Company shall
determine to prepare and file with the Commission a registration statement
relating to an offering for its own account or the account of others under the
Securities Act of any of its equity securities, other than on Form S-4 or Form
S-8 (each as promulgated under the Securities Act) or their then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, the Company shall
send to each holder of Registrable Securities written notice of such
determination and, if within twenty (20) days after receipt of such notice, any
such holder shall so request in writing, the Company shall include in such
registration statement all or any part of the Registrable Securities such holder
requests to be registered, except that if, in connection with any Underwritten
Offering for the account of the Company the managing underwriter(s) thereof
shall impose a limitation on the number of shares of Common Stock which may be
included in the registration statement because, in such underwriter(s)'
judgment, such limitation is necessary to effect an orderly public distribution
of securities covered thereby, then the Company shall be obligated to include in
such registration statement only such limited portion of the Registrable
Securities for to which such holder has requested inclusion hereunder. Any
exclusion of Registrable Securities shall be made pro rata among the holders
seeking to include Registrable Securities, in proportion to the number of
Registrable Securities sought to be included by such holders; provided, however,
that the Company shall not exclude any Registrable Securities unless the Company
has first excluded all outstanding securities the holders of which are not
entitled by right to inclusion of securities in such registration statement; and
provided, further, however, that, after giving effect to the immediately
preceding proviso, any exclusion of Registrable Securities shall be made pro
rata with holders of other securities having the right to include such
securities in such registration statement. No right to registration of
Registrable Securities under this Section shall be construed to limit any
registration otherwise required hereunder. This Section 8(d) shall apply only at
such times when all of the Registrable Securities issued and outstanding cannot
be sold pursuant to an effective Registration Statement on Form S-3 and for a
period not to exceed two years after the date of this Agreement.
(e) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and the Holders of at least a majority of the then outstanding Registrable
Securities; provided, however, that, for the purposes of this sentence,
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Registrable Securities that are owned, directly or indirectly, by the Company,
or an Affiliate of the Company are not deemed outstanding. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with respect
to a matter that relates exclusively to the rights of Holders and that does not
directly or indirectly affect the rights of other Holders may be given by
Holders of at least a majority of the Registrable Securities to which such
waiver or consent relates; provided, however, that the provisions of this
sentence may not be amended, modified, or supplemented except in accordance with
the provisions of the immediately preceding sentence.
(f) Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section prior to 4:30 p.m. (Eastern
Time) on a Business Day, (ii) the Business Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
telephone number specified in the Purchase Agreement later than 4:30 p.m.
(Eastern Time) on any date and earlier than 11:59 p.m. (Eastern Time) on such
date, (iii) the Business Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such notice is required to be given. The address for such
communications shall be:
If to the Company: Cayenne Software, Inc.
8 New England Executive Park
Burlington, MA 01803
Facsimile No.: (617) 229-8124
Attention: Frederick H. Phillips
With copies to: Foley, Hoag & Eliot LLP
One Post Office Square
Boston, MA 02109
Facsimile No.: (617) 832-7000
Attention: David W. Walker
If to any Purchaser: to the address stated for that Purchaser in
Schedule A, with a copy to the respective
person so specified in that Schedule,
If to any other Person who is then the registered Holder:
To the address of such Holder as it appears
in the stock transfer books of the Company
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
(g) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each Holder. The Company may not
assign its rights or obligations hereunder
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<PAGE> 17
without the prior written consent of each Holder. A Holder may assign its rights
hereunder in the manner and to the Persons as permitted under the Purchase
Agreement.
(h) Assignment of Registration Rights. The rights of the
Purchaser hereunder, including the right to have the Company register for resale
Registrable Securities in accordance with the terms of this Agreement, shall be
automatically assignable by the Purchaser to any assignee or transferee of all
or a portion of the shares of Preferred Stock, the Warrants or the Registrable
Securities if: (i) the Purchaser agrees in writing with the transferee or
assignee to assign such rights, and a copy of such agreement is furnished to the
Company within a reasonable time after such assignment, (ii) the Company is,
within a reasonable time after such transfer or assignment, furnished with
written notice of (a) the name and address of such transferee or assignee, and
(b) the securities with respect to such registration rights are being
transferred or assigned, (iii) following such transfer or assignment the further
disposition of such securities by the transferee or assignees restricted under
the Securities Act and applicable state securities laws, (iv) at or before the
time the Company receives the written notice contemplated by clause (ii) of this
Section, the transferee or assignee agrees in writing with the Company to be
bound by all of the provisions of this Agreement, and (v) such transfer shall
have been made in accordance with the applicable requirements of the Purchase
Agreement. The rights to assignment shall apply to the Purchaser's (and to
subsequent) successors and assigns.
(i) Counterparts. This Agreement may be executed in any number
of counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.
(j) Governing Law; Arbitration;. (A) This Agreement shall be
governed by and construed and enforced in accordance with the internal laws of
NewYork, without regard to principles of conflicts of law thereof.
(B) All disputes between the parties hereto arising under
the terms of this Agreement shall be arbitrated in New York City under the rules
of the American Arbitration Association then in effect in that city. Judgment on
any award made by the arbitrators hereunder may be rendered in any court having
jurisdiction. The parties consent to the nonexclusive jurisdiction of the United
States District Court sitting in the city where the arbitration was conducted,
in connection with the enforcement of such award. The parties agree to keep
confidential any materials, documents or other information that is disclosed in
connection with any arbitration proceeding.
(k) Cumulative Remedies. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(l) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by
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<PAGE> 18
such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, cove nants and restrictions without including any
of such that may be hereafter declared invalid, illegal, void or unenforceable.
(m) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(n) Shares Held by The Company and its Affiliates. Whenever the
consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its Affiliates (other than the Purchaser or transferees or successors or assigns
thereof if such Persons are deemed to be Affiliates solely by reason of their
holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
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[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first written above.
CAYENNE SOFTWARE, INC.
By:______________________________________________
Name: Frederick H. Phillips
Title: Vice President and Treasurer
INTEGRAL CAPITAL
PARTNERS III, L.P.
By:______________________________________________
Name:
Title:
INTEGRAL CAPITAL PARTNERS
INTERNATIONAL III, L.P.
By:______________________________________________
Name:
Title:
THEMIS PARTNERS, L.P.
By: Promethean Investment Group,
L.L.C.
Its: General Partner
By:______________________________________________
Name: Brian S. Yeh
Its: Authorized Representative
HERACLES FUND
By: Promethean Investment Group,
L.L.C.
Its: Investment Advisor
-48-
<PAGE> 20
By:______________________________________________
Name: Brian S. Yeh
Its: Authorized Representative
LEWIS A. FRASER
By: Promethean Investment Group,
L.L.C.
Its: Investment Advisor
By:______________________________________________
Name: Brian S. Yeh
Its: Authorized Representative
QUISSETT PARTNERS, L.P.
By: Wellington Management Company,
LP
Its: Investment Adviser
By:______________________________________________
Name:
Title:
QUISSETT INVESTORS (BERMUDA)
LP
By: Wellington Management Company,
LP
Its: Investment Adviser
By:______________________________________________
Name:
Title:
WINSTON I
By:______________________________________________
Name:
Title:
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<PAGE> 21
WINSTON II LLC
By: Chatterjee Advisors LLC
Its: Manager
By:______________________________________________
Name:
Title:
WINSTON II LDC
By:______________________________________________
Name:
Title:
-50-
<PAGE> 1
EXHIBIT 4.4
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
CAYENNE SOFTWARE, INC.
WARRANT
August 28, 1997
Cayenne Software, Inc., a Massachusetts corporation (the "Company"),
hereby certifies that, for value received, [ ], or its
registered assigns ("Holder"), is entitled, subject to the terms set forth
below, to purchase from the Company up to a total of [ ] shares of
Common Stock, $.01 par value per share (the "Common Stock"), of the Company
(each such share, a "Warrant Share" and all such shares, the "Warrant Shares")
at an exercise price equal to [ ] per share (as adjusted from time to time as
provided in Section 8, the "Exercise Price"), at any time and from time to time
from the date hereof through and including August 28, 200[ ] (the "Expiration
Date"), and subject to the following terms and conditions:
i. REGISTRATION OF WARRANT. The Company shall register this Warrant,
upon records to be maintained by the Company for that purpose (the "Warrant
Register"), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, and the Company shall not be affected by
notice to the contrary.
ii. REGISTRATION OF TRANSFERS AND EXCHANGES.
(a) The Company shall register the transfer of any portion of
this Warrant in the Warrant Register, upon surrender of this Warrant, with the
Form of Assignment attached hereto duly completed and signed, to the Company at
the office specified in or pursuant to Section 3(b). Upon any such registration
or transfer, a new warrant to purchase Common Stock, in substantially the form
of this Warrant (any such new warrant, a "New Warrant"), evidencing the portion
of this Warrant so transferred shall be issued to the transferee and a New
Warrant evidencing the remaining portion of this Warrant not so transferred, if
any, shall be issued to the transferring Holder. The acceptance of the New
Warrant by the transferee thereof shall be deemed the acceptance by such
transferee of all of the rights and obligations of a holder of a Warrant.
<PAGE> 2
(b) This Warrant is exchangeable, upon the surrender hereof by
the Holder to the office of the Company specified in or pursuant to Section 3(b)
for one or more New Warrants, evidencing in the aggregate the right to purchase
the number of Warrant Shares which may then be purchased hereunder. Any such New
Warrant will be dated the date of such exchange.
iii. DURATION AND EXERCISE OF WARRANTS.
(a) This Warrant shall be exercisable by the registered Holder
on any business day before 5:30 P.M., New York time, at any time and from time
to time on or after the date hereof to and including the Expiration Date. At
5:30 P.M., New York time on the Expiration Date, the portion of this Warrant not
exercised prior thereto shall be and become void and of no value. Prior to the
Expiration Date, the Company may not call or otherwise redeem this Warrant
without the prior written consent of the Holder.
(b) Subject to Sections 2(b), 6 and 10, upon surrender of this
Warrant, with the Form of Election to Purchase attached hereto duly completed
and signed, to the Company at its office at 8 New England Executive Park,
Burlington, MA 01803, Attention: Chief Financial Officer, or at such other
address as the Company may specify in writing to the then registered Holder, and
upon payment of the Exercise Price multiplied by the number of Warrant Shares
that the Holder intends to purchase hereunder, in lawful money of the United
States of America, in cash or by certified or official bank check or checks, all
as specified by the Holder in the Form of Election to Purchase, the Company
shall promptly (but in no event later than 3 business days after the Date of
Exercise) issue or cause to be issued and cause to be delivered to or upon the
written order of the Holder and in such name or names as the Holder may
designate, a certificate for the Warrant Shares issuable upon such exercise,
free of restrictive legends other than as required by applicable law. Any person
so designated by the Holder to receive Warrant Shares shall be deemed to have
become holder of record of such Warrant Shares as of the Date of Exercise of
this Warrant.
A "Date of Exercise" means the date on which the Company shall have
received (i) this Warrant (or any New Warrant, as applicable), with the Form of
Election to Purchase attached hereto (or attached to such New Warrant)
appropriately completed and duly signed, and (ii) payment of the Exercise Price
for the number of Warrant Shares so indicated by the holder hereof to be
purchased.
(c) This Warrant shall be exercisable, either in its entirety
or, from time to time, for a portion of the number of Warrant Shares. If less
than all of the Warrant Shares which may be purchased under this Warrant are
exercised at any time, the Company shall issue or cause to be issued, at its
expense, a New Warrant evidencing the right to purchase the remaining number of
Warrant Shares for which no exercise has been evidenced by this Warrant.
iv. PIGGYBACK REGISTRATION RIGHTS. During the term of this Warrant
the Company may not file any registration statement with the Securities and
Exchange Commission (other than registration statements of the Company filed on
Form S-8 or Form S-4 including supplements thereto, but not additionally filed
registration statements in respect of such securities, each as promulgated under
the Securities Act of 1933, as amended, pursuant to which the Company is
registering securities pursuant to a Company employee benefit plan or pursuant
to a merger, acquisition or similar transaction) unless the Company provides the
Holder with not less than five business days notice of its intention to file
such registration statement and provides the Purchaser
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<PAGE> 3
the option to include any or all of the applicable Warrant Shares therein. The
piggyback registration rights granted to the Holder pursuant to this Section
shall continue until all of the Holder's Warrant Shares have been sold in
accordance with an effective registration statement or upon the expiration of
this Warrant. The Company will pay all registration expenses in connection
therewith.
v. DEMAND REGISTRATION RIGHTS. At any time during the term of this
Warrant when the Warrant Shares are not registered pursuant to an effective
registration statement, the Holder may make a written request for the
registration under the Securities Act of 1933, as amended (a "Demand
Registration"), of all or any portion of the Warrant Shares (the "Registrable
Securities"), and the Company shall use its best efforts to effect such Demand
Registration as promptly as possible, but in any case within 90 days thereafter.
Any request for a Demand Registration shall specify the aggregate number of
Registrable Securities proposed to be sold and shall also specify the intended
method of disposition thereof. The right to cause a registration of the
Registrable Securities under this Section 5 shall be limited to two such
registrations. In any registration initiated as a Demand Registration, the
Company will pay all registration expenses in connection therewith. A Demand
Registration shall not be counted as a Demand Registration hereunder until such
Demand Registration has been declared effective by the Securities and Exchange
Commission and maintained continuously effective for a period of at least 360
days or such shorter period when all Registrable Securities included therein
have been sold in accordance with such Demand Registration, provided, however
that any days on which such registration statement is not effective or on which
the Holder is not permitted by the Company or any governmental authority to sell
Warrant Shares under such registration statement shall not count towards such
360 day period.
vi. PAYMENT OF TAXES. The Company will pay all documentary stamp
taxes attributable to the issuance of Warrant Shares upon the exercise of this
Warrant; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the registration
of any certificates for Warrant Shares or Warrants in a name other than that of
the Holder, and the Company shall not be required to issue or cause to be issued
or deliver or cause to be delivered the certificates for Warrant Shares unless
or until the person or persons requesting the issuance thereof shall have paid
to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid. The Holder shall be
responsible for all other tax liability that may arise as a result of holding or
transferring this Warrant or receiving Warrant Shares upon exercise hereof.
vii. REPLACEMENT OF WARRANT. If this Warrant is mutilated, lost,
stolen or destroyed, the Company may in its discretion issue or cause to be
issued in exchange and substitution for and upon cancellation hereof, or in lieu
of and substitution for this Warrant, a New Warrant, but only upon receipt of
evidence reasonably satisfactory to the Company of such loss, theft or
destruction and indemnity, if requested, satisfactory to it. Applicants for a
New Warrant under such circumstances shall also comply with such other
reasonable regulations and procedures and pay such other reasonable charges as
the Company may prescribe.
viii. RESERVATION OF WARRANT SHARES. The Company covenants that it will
at all times reserve and keep available out of the aggregate of its authorized
but unissued Common Stock, solely for the purpose of enabling it to issue
Warrant Shares upon exercise of this Warrant as herein provided, the number of
Warrant Shares which are then issuable and deliverable upon the exercise of this
entire Warrant, free from preemptive rights or any other actual contingent
-53-
<PAGE> 4
purchase rights of persons other than the Holders (taking into account the
adjustments and restrictions of Section 9). The Company covenants that all
Warrant Shares that shall be so issuable and deliverable shall, upon issuance
and the payment of the applicable Exercise Price in accordance with the terms
hereof, be duly and validly authorized, issued and fully paid and nonassessable.
ix. CERTAIN ADJUSTMENTS. The Exercise Price and number of Warrant
Shares issuable upon exercise of this Warrant are subject to adjustment from
time to time as set forth in this Section 9. Upon each such adjustment of the
Exercise Price pursuant to this Section 9, the Holder shall thereafter prior to
the Expiration Date be entitled to purchase, at the Exercise Price resulting
from such adjustment, the number of Warrant Shares obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
Warrant Shares issuable upon exercise of this Warrant immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(a) If the Company, at any time while this Warrant is
outstanding, (i) shall pay a stock dividend (except scheduled dividends paid on
outstanding preferred stock as of the date hereof which contain a stated divided
rate) or otherwise make a distribution or distributions on shares of its Common
Stock (as defined below) or on any other class of capital stock and not the
Common Stock) payable in shares of Common Stock, (ii) subdivide outstanding
shares of Common Stock into a larger number of shares, or (iii) combine
outstanding shares of Common Stock into a smaller number of shares, the Exercise
Price shall be multiplied by a fraction of which the numerator shall be the
number of shares of Common Stock (excluding treasury shares, if any) outstanding
before such event and of which the denominator shall be the number of shares of
Common Stock (excluding treasury shares, if any) outstanding after such event.
Any adjustment made pursuant to this Section shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision or combination, and shall apply to
successive subdivisions and combinations.
(b) In case of any reclassification of the Common Stock, any
consolidation or merger of the Company with or into another person, the sale or
transfer of all or substantially all of the assets of the Company or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or property, then the Holder shall have the right
thereafter to exercise this Warrant only into the shares of stock and other
securities and property receivable upon or deemed to be held by holders of
Common Stock following such reclassification, consolidation, merger, sale,
transfer or share exchange, and the Holder shall be entitled upon such event to
receive such amount of securities or property equal to the amount of Warrant
Shares such Holder would have been entitled to had such Holder exercised this
Warrant immediately prior to such reclassification, consolidation, merger, sale,
transfer or share exchange. The terms of any such consolidation, merger, sale,
transfer or share exchange shall include such terms so as to continue to give to
the Holder the right to receive the securities or property set forth in this
Section 9(b) upon any exercise following any such reclassification,
consolidation, merger, sale, transfer or share exchange.
(c) If the Company, at any time while this Warrant is
outstanding, shall distribute to all holders of Common Stock (and not to holders
of this Warrant) evidences of its indebtedness or assets or rights or warrants
to subscribe for or purchase any security (excluding those referred to in
Sections 9(a), (b) and (d)), then in each such case the Exercise Price shall be
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<PAGE> 5
determined by multiplying the Exercise Price in effect immediately prior to the
record date fixed for determination of stockholders entitled to receive such
distribution by a fraction of which the denominator shall be the Exercise Price
determined as of the record date mentioned above, and of which the numerator
shall be such Exercise Price on such record date less the then fair market value
at such record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of Common Stock as determined by
the Company's independent certified public accountants that regularly examines
the financial statements of the Company (an "Appraiser").
(d) If, at any time while this Warrant is outstanding, the
Company shall issue or cause to be issued rights or warrants to acquire or
otherwise sell or distribute shares of Common Stock to all holders of Common
Stock for a consideration per share less than the Exercise Price then in effect,
then, forthwith upon such issue or sale, the Exercise Price shall be reduced to
the price (calculated to the nearest cent) determined by dividing (i) an amount
equal to the sum of (A) the number of shares of Common Stock outstanding
immediately prior to such issue or sale multiplied by the Exercise Price, and
(B) the consideration, if any, received or receivable by the Company upon such
issue or sale by (ii) the total number of shares of Common Stock that would be
outstanding immediately after such issue or sale if all the rights or warrants
so issued were exercised in full.
(e) For the purposes of this Section 9, the following clauses
shall also be applicable:
(i) RECORD DATE. In case the Company shall take a record
of the holders of its Common Stock for the purpose of entitling them (A) to
receive a dividend or other distribution payable in Common Stock or in
Convertible Securities, or (B) to subscribe for or purchase Common Stock or
Convertible Securities, then such record date shall be deemed to be the date of
the issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
(ii) TREASURY SHARES. The number of shares of Common
Stock outstanding at any given time shall not include shares owned or held by or
for the account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock.
(f) All calculations under this Section 8 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be.
(g) Whenever the Exercise Price is adjusted pursuant to Section
9(c) above, the Holder, after receipt of the determination by the Appraiser,
shall have the right to select an additional appraiser (which shall be a
nationally recognized accounting firm), in which case the adjustment shall be
equal to the average of the adjustments recommended by each of the Appraiser and
such appraiser. The Holder shall promptly mail or cause to be mailed to the
Company, a notice setting forth the Exercise Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment. Such
adjustment shall become effective immediately after the record date mentioned
above.
(h) If:
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<PAGE> 6
(i) the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
(ii) the Company shall declare a special nonrecurring
cash dividend on or a redemption of its Common
Stock; or
(iii) the Company shall authorize the granting to all
holders of the Common Stock rights or warrants to
subscribe for or purchase any shares of capital
stock of any class or of any rights; or
(iv) the approval of any stockholders of the Company
shall be required in connection with any
reclassification of the Common Stock of the
Company, any consolidation or merger to which the
Company is a party, any sale or transfer of all or
substantially all of the assets of the Company, or
any compulsory share exchange whereby the Common
Stock is converted into other securities, cash or
property; or
(v) the Company shall authorize the voluntary
dissolution, liquidation or winding up of the
affairs of the Company,
then the Company shall cause to be mailed to each Holder at their last addresses
as they shall appear upon the Warrant Register, at least 30 calendar days prior
to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up; PROVIDED, HOWEVER, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice.
x. CASHLESS EXERCISE. At any time when there is not an effective
Registration Statement under the Securities Act of 1993 pursuant to which the
Holder may sell shares of Common Stock acquired upon exercise of this Warrant,
or when there is in effect a stop order or other prohibition on sale of Common
Stock thereunder, the Holder hereof may exercise its right to purchase some or
all of the shares of Common Stock pursuant to this Warrant, on a net basis, such
that, without the exchange of any funds, the Holder hereof receives that number
of shares of Common Stock subscribed to pursuant to this Warrant less that
number of shares of Common Stock having an aggregate Per Share Market Value at
the time of exercise equal to the aggregate Exercise Price that would otherwise
have been paid by the holder for the number of shares of Common Stock subscribed
to under this Warrant.
xi. FRACTIONAL SHARES. The Company shall not be required to issue or
cause to be issued fractional Warrant Shares on the exercise of this Warrant.
The number of full Warrant
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<PAGE> 7
Shares which shall be issuable upon the exercise of this Warrant shall be
computed on the basis of the aggregate number of Warrant Shares purchasable on
exercise of this Warrant so presented. If any fraction of a Warrant Share would,
except for the provisions of this Section 9, be issuable on the exercise of this
Warrant, the Company shall pay an amount in cash equal to the Exercise Price
multiplied by such fraction.
xii. NOTICES. Any and all notices or other communications or
deliveries hereunder shall be in writing and shall be deemed given and effective
on the earliest of (i) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile telephone number specified in this
Section prior to 4:30 p.m. (New York time) on a business day, (ii) the business
day after the date of transmission, if such notice or communication is delivered
via facsimile at the facsimile telephone number specified in this Section later
than 4:30 p.m. (New York time) on any date and earlier than 11:59 p.m. (New York
time) on such date, (iii) the business day following the date of mailing, if
sent by nationally recognized overnight courier service, or (iv) upon actual
receipt by the party to whom such notice is required to be given. The addresses
for such communications shall be: (i) if to the Company, to CAYENNE SOFTWARE,
INC., 8 New England Executive Park, Burlington, MA 01803, Attention: Chief
Financial Officer, or to facsimile no. (617) 229-8124, or (ii) if to the Holder,
to the Holder at the address or facsimile number appearing on the Warrant
Register or such other address or facsimile number as the Holder may provide to
the Company in accordance with this Section 11.
xiii. WARRANT AGENT.
(a) The Company shall serve as warrant agent under this
Warrant. Upon thirty (30) days' notice to the Holder, the Company may appoint a
new warrant agent.
(b) Any corporation into which the Company or any new warrant
agent may be merged or any corporation resulting from any consolidation to which
the Company or any new warrant agent shall be a party or any corporation to
which the Company or any new warrant agent transfers substantially all of its
corporate trust or shareholders services business shall be a successor warrant
agent under this Warrant without any further act. Any such successor warrant
agent shall promptly cause notice of its succession as warrant agent to be
mailed (by first class mail, postage prepaid) to the Holder at the Holder's last
address as shown on the Warrant Register.
xiv. MISCELLANEOUS.
(a) This Warrant shall be binding on and inure to the benefit
of the parties hereto and their respective successors and permitted assigns.
This Warrant may be amended only in writing signed by the Company and the
Holder.
(b) Subject to Section 13(a), above, nothing in this Warrant
shall be construed to give to any person or corporation other than the Company
and the Holder any legal or equitable right, remedy or cause under this Warrant;
this Warrant shall be for the sole and exclusive benefit of the Company and the
Holder.
(c) This Warrant shall be governed by and construed and
enforced in accordance with the internal laws of New York without regard to the
principles of conflicts of law thereof.
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<PAGE> 8
(d) The headings herein are for convenience only, do not
constitute a part of this Warrant and shall not be deemed to limit or affect any
of the provisions hereof.
(e) In case any one or more of the provisions of this Warrant
shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant shall not
in any way be affected or impaired thereby and the parties will attempt in good
faith to agree upon a valid and enforceable provision which shall be a
commercially reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Warrant.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed by its authorized officer as of the date first indicated above.
CAYENNE SOFTWARE, INC.
By:
-------------------------------------
Name: Frederick H. Phillips
-----------------------------------
Title: Vice President and Treasurer
----------------------------------
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<PAGE> 9
FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)
To Cayenne Software, Inc.:
In accordance with the Warrant enclosed with this Form of Election to Purchase,
the undersigned hereby irrevocably elects to purchase _____________ shares of
Common Stock ("Common Stock"), $.01 par value per share, of Cayenne Software,
Inc. and encloses herewith $________ in cash, certified or official bank check
or checks, which sum represents the aggregate Exercise Price (as defined in the
Warrant) for the number of shares of Common Stock to which this Form of Election
to Purchase relates, together with any applicable taxes payable by the
undersigned pursuant to the Warrant.
The undersigned requests that certificates for the shares of Common Stock
issuable upon this exercise be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
______________________________________
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
________________________________________________________________________________
If the number of shares of Common Stock issuable upon this exercise shall not be
all of the shares of Common Stock which the undersigned is entitled to purchase
in accordance with the enclosed Warrant, the undersigned requests that a New
Warrant (as defined in the Warrant) evidencing the right to purchase the shares
of Common Stock not issuable pursuant to the exercise evidenced hereby be issued
in the name of and delivered to:
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
________________________________________________________________________________
Dated:_____________,___ Name of Holder:
(Print)_______________________________
(By:)_________________________________
(Name:)
(Title:)
(Signature must conform in all
respects to name of holder as
specified on the face of the Warrant)
<PAGE> 10
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Warrant to purchase ____________ shares of Common Stock of Cayenne Software,
Inc. which the within Warrant relates and appoints ________________ attorney to
transfer said right on the books of Cayenne Software, Inc. 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 the Warrant)
__________________________________________________
Address of Transferee
__________________________________________________
__________________________________________________
In the presence of:
__________________________
<PAGE> 1
EXHIBIT 5.1
FOLEY, HOAG & ELIOT LLP
One Post Office Square
Boston, Massachusetts 02109
September 26, 1997
Cayenne Software, Inc.
8 New England Executive Park
Burlington, MA 01803
Ladies and Gentlemen:
We are familiar with the Registration Statement on Form S-3 transmitted
for filing by the Company today (the "S-3 Registration Statement") relating to
5,295,972 shares (the "Shares") of the Company's Common Stock to be offered and
sold by certain holders of Series D Convertible Preferred Stock (the "Preferred
Stock") and Warrants of the Company (the "Selling Stockholders").
We are familiar with the Company's Articles of Organization and all amendments
thereto, its By-Laws and all amendments thereto, the records of all meetings and
consents of its Board of Directors and of its stockholders, and its stock
records. We have examined such other records and documents as we deemed
necessary or appropriate for purposes of rendering this opinion.
Based upon the foregoing, we are of the opinion that (a) the Company
has corporate power adequate for the issuance of the Shares in the manner set
forth in the S-3 Registration Statement; (b) the Company has taken all necessary
corporate action required to authorize the issuance and sale of the Shares to
the Selling Stockholders upon conversion of Preferred Stock or exercise of
Warrants; and (c) upon issuance in accordance with the applicable provisions of
the Preferred Stock or the Warrants, the Shares will be legally issued, fully
paid and non-assessable.
We consent to the filing of this opinion as an exhibit to the S-3
Registration Statement.
Very truly yours,
FOLEY, HOAG & ELIOT LLP
By: /s/ David W. Walker
-------------------
a Partner
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Stockholders
of Cayenne Software, Inc.
We consent to the incorporation by reference in this Registration
Statement of Cayenne Software, Inc. (formerly Bachman Information Systems, Inc.)
on Form S-3 of our report, which included an explanatory paragraph about the
merger of Cayenne Software, Inc. and Cadre Technologies Inc. which has been
accounted for as a pooling of interests, dated February 25, 1997, on our audits
of the consolidated financial statements of Cayenne Software, Inc. as of
December 31, 1996 and June 30, 1996, and for the six month period ended December
31, 1996 and the year ended June 30, 1996, which report is included in the
Annual Report on Form 10-K of Cayenne Software, Inc. for the transition period
ended December 31, 1996. We also consent to the reference to our firm under the
caption "Experts".
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
September 26, 1997
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Cayenne Software, Inc. on Form S-3 of our report dated February 2, 1996
(relating to the consolidated financial statements of Cadre Technologies Inc.
and its subsidiaries, which expresses an unqualified opinion and includes an
explanatory paragraph relating to substantial doubt about Cadre Technologies
Inc.'s ability to continue as a going concern) appearing in the Annual Report on
Form 10-K of Cayenne Software, Inc. for the transition period ended December 31,
1996 and to the reference to us under the heading "Experts" in the Prospectus,
which is part of this Registration Statement.
Deloitte & Touche LLP
Boston, MA
September 26, 1997
