Exhibit 10.1
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT ("Agreement") is made as of the 19th day of
May, 2003 by and among Onyx Software Corporation, a Washington corporation (the
"Company"), and the Investors identified on the signature pages affixed hereto
(each an "Investor" and collectively the "Investors").
RECITALS
A. The Company and the Investors are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the provisions of Regulation D ("Regulation D"), as promulgated by the U.S.
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended.
B. The Investors wish to purchase from the Company, and the Company
wishes to issue and sell to the Investors, upon the terms and conditions stated
in this Agreement, an aggregate of 4,153,900 shares (before giving effect to the
Reverse Split (as defined below)) of the Company's Common Stock, par value $0.01
per share (the "Common Stock").
C. The Company has agreed that, upon consummation of the purchase of
the Common Stock, the Company will issue to Special Situations Fund III, L.P.
("SSF") or its designee a warrant to purchase an aggregate of 25,000 shares of
Common Stock at an exercise price of $0.8125 (before giving effect to the
Reverse Split)(the "Warrants").
D. Contemporaneous with the sale of the Common Stock, the parties
hereto will execute and deliver a Registration Rights Agreement, in the form
attached hereto as Exhibit B (the "Registration Rights Agreement"), pursuant to
which the Company will agree to provide certain registration rights under the
Securities Act of 1933, as amended (the "1933 Act"), and the rules and
regulations promulgated thereunder, and applicable state securities laws.
In consideration of the mutual promises made herein and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Definitions. In addition to those terms defined above and elsewhere in
this Agreement, for the purposes of this Agreement, the following terms shall
have the meanings here set forth:
"Affiliate" means, with respect to any Person, any other Person
which directly or indirectly Controls, is controlled by, or is under common
control with, such Person.
"Antidilution Shares" means the shares of Common Stock issuable upon
the exercise of the Antidilution Warrants (as such term is defined in Section
7.6).
"Business Day" means a day, other than a Saturday or Sunday, on
which banks in New York City are open for the general transaction of business.
"Common Stock" means the common stock, par value $0.01 per share, of
the Company, and any securities into which the Common Stock may be reclassified.
"Company's Knowledge" means the actual knowledge of the officers of
the Company, after due inquiry.
"Confidential Information" means trade secrets, confidential
information and know-how (including but not limited to ideas, formulae,
compositions, processes, procedures and techniques, research and development
information, computer program code, performance specifications, support
documentation, drawings, specifications, designs, business and marketing plans,
and customer and supplier lists and related information).
"Control" means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
"Intellectual Property" means all of the following: (i) patents,
patent applications, patent disclosures and inventions (whether or not
patentable and whether or not reduced to practice); (ii) trademarks, service
marks, trade dress, trade names, corporate names, logos, slogans and Internet
domain names, together with all goodwill associated with each of the foregoing;
(iii) copyrights and copyrightable works; (iv) registrations, applications and
renewals for any of the foregoing; and (v) proprietary computer software
(including but not limited to data, data bases and documentation).
"Material Adverse Effect" means a material adverse effect on (i) the
assets, liabilities, results of operations, condition (financial or otherwise)
or business of the Company and its Subsidiaries taken as a whole, or (ii) the
ability of the Company to issue and sell the Securities as contemplated hereby
and to perform its obligations under the Transaction Documents.
"Nasdaq" means The Nasdaq Stock Market, Inc., its successors and
assigns.
"Nasdaq Shareholder Approval Rule" means Nasdaq Marketplace Rule
4350(i).
"Person" means an individual, corporation, partnership, limited
liability company, trust, business trust, association, joint stock company,
joint venture, sole proprietorship, unincorporated organization, governmental
authority or any other form of business entity.
"Purchase Price" has the meaning set forth in Section 3.
"Reverse Split" means an amendment and restatement of the Company's
Articles of Incorporation for the purpose of effecting a one-for-four reverse
split of the Common Stock
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and an increase in authorized capital to 80 million shares of Common Stock and
20 million shares of preferred stock (post-Reverse Split).
"SEC Filings" has the meaning set forth in Section 4.6.
"Securities" means the Shares, the Warrants, the Warrant Shares, the
Antidilution Warrants and the Antidilution Shares.
"Shares" means the shares of Common Stock being purchased by the
Investors hereunder. "Subsidiary" and "Subsidiaries" have the meanings set forth
in Section 4.1.
"Transaction Documents" means this Agreement, the Warrants and the
Registration Rights Agreement.
"Warrant Shares" means the shares of Common Stock issuable upon
exercise of the Warrants.
"1934 Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
2. Purchase and Sale of the Shares. Subject to the terms and conditions of
this Agreement, on the Closing Date, each of the Investors shall severally, and
not jointly, purchase, and the Company shall issue and sell to the Investors,
the Shares in the respective amounts set forth opposite the Investors' names on
the signature pages attached hereto at a purchase price of $0.65 per Share (the
"Purchase Price"). The total purchase price payable by each Investor for the
Shares that each Investor is hereby agreeing to purchase is set forth in such
Investor's signature block on the signature page hereto. The aggregate purchase
price payable by the Investors to the Company for all of the Shares purchased at
the Closing shall be $2,700,035. Also on the Closing Date, the Company shall
issue the Warrants to SSF or its designee, provided that such designee shall
have executed an investment representation letter in a form reasonably
acceptable to the Company.
3. Closing. Upon confirmation that the other conditions to closing
specified herein have been satisfied, the Company shall deliver to Xxxxxxxxxx
Xxxxxxx PC, in trust, a certificate or certificates, registered in such name or
names as the Investors may designate, representing the Shares, with instructions
that such certificates are to be held for release to the Investors only upon
payment of the Purchase Price to the Company. Upon receipt by Xxxxxxxxxx Xxxxxxx
PC of the certificates, each Investor shall promptly cause a wire transfer in
same day funds to be sent to the account of the Company as instructed in writing
by the Company, in an amount representing such Investor's pro rata portion of
the Purchase Price as set forth on the signature pages to this Agreement. On the
date (the "Closing Date") the Company receives such funds, the certificates
evidencing the Shares shall be released to the Investors and the Warrants shall
be issued to SSF or its designees, as provided in Section 2 (the "Closing"). The
purchase and sale of the Shares shall take place at the offices of Xxxxxxxxxx
Xxxxxxx PC, 1330 Avenue of the
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Americas, 21st Floor, New York, New York, or at such other location and on such
other date as the Company and the Investors shall mutually agree.
4. Representations and Warranties of the Company. Except as set forth the
Company Disclosure Letter delivered to the Investors herewith (which letter
shall indicate the particular section of this Agreement to which the disclosures
therein relate), the Company hereby represents and warrants to the Investors as
follows in this Article IV.
4.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized and validly existing under the laws of the state of
Washington, and has paid all excise taxes required by the Washington Department
of Revenue. Each of the Company's subsidiaries (each, a "Subsidiary," and,
collectively, the "Subsidiaries") is listed on Exhibit 21.1 to the Company's
annual report on Form 10-K for the year ended December 31, 2002 (the "2002
10-K"). Each Subsidiary is a corporation duly organized, validly existing and
(with respect to jurisdictions that recognize such concept) in good standing
under the laws of the jurisdiction of its incorporation. Each of the Company and
its Subsidiaries has all requisite corporate power and authority to carry on its
business as now conducted and to own its properties. Each of the Company and its
Subsidiaries is duly qualified to do business as a foreign corporation and (with
respect to jurisdictions that recognize such concept) is in good standing in
each jurisdiction in which the conduct of its business or its ownership or
leasing of property makes such qualification or leasing necessary, except where
the failure to so qualify has not had, and would not reasonably be expected to
have, a Material Adverse Effect.
4.2 Authorization. The Company has full power and authority and has
taken all requisite action on the part of the Company, its officers, directors
and shareholders necessary for (i) the authorization, execution and delivery of
the Transaction Documents, (ii) authorization of the performance of all
obligations of the Company hereunder or thereunder, and (iii) the authorization,
issuance (or reservation for issuance) and delivery of the Securities. This
Agreement constitutes, and the other Transaction Documents will, upon execution
and delivery by the Company at the Closing, constitute, the legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability,
relating to or affecting creditors' rights generally.
4.3 Capitalization. The Company has not issued any capital stock
since December 31, 2002. All of the issued and outstanding shares of the
Company's capital stock have been duly authorized and validly issued, are fully
paid and nonassessable and were issued in full compliance with applicable laws,
and were not issued in violation of any preemptive rights of third parties, or
similar rights to subscribe for or purchase securities. All of the issued and
outstanding shares of capital stock of each Subsidiary have been duly authorized
and validly issued, are fully paid and nonassessable, were issued in full
compliance with applicable law and any rights of third parties and are owned by
the Company, beneficially and of record, subject to no lien, encumbrance or
other adverse claim. No Person is entitled to preemptive rights (whether
statutory or contractual) with respect to the issuance of any securities by the
Company. There are no outstanding warrants, options, convertible securities or
other rights, agreements or arrangements of any character under which the
Company or any of its Subsidiaries is or may be
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obligated to issue any equity securities of any kind and, except as contemplated
by this Agreement, neither the Company nor any of its Subsidiaries is currently
in negotiations for the issuance of any equity securities of any kind. Except
for the Registration Rights Agreement, there are no voting agreements, buy-sell
agreements, option or right of first purchase agreements or other agreements of
any kind among the Company and any of the securityholders of the Company
relating to the securities of the Company held by them. The Company has not
granted any Person any outstanding right to require the Company to register any
securities of the Company under the 1933 Act, whether on a demand basis or in
connection with the registration of securities of the Company for its own
account or for the account of any other Person.
The Company Disclosure Schedule sets forth a true and complete table
setting forth the pro forma capitalization of the Company on a fully diluted
basis giving effect to (i) the issuance of the Shares and the Warrants, (ii) any
adjustments in other securities resulting from the issuance of the Shares or the
Warrants, (iii) the Reverse Split and (iv) the exercise or conversion of all
outstanding securities. The issuance and sale of the Securities hereunder will
not obligate the Company to issue shares of Common Stock or other securities to
any other Person (other than the Investors) and will not result in the
adjustment of the exercise, conversion, exchange or reset price of any
outstanding security.
The Company does not have outstanding shareholder purchase rights or
any similar arrangement in effect giving any Person the right to purchase any
equity interest in the Company upon the occurrence of certain events.
4.4 Valid Issuance. The Shares have been duly and validly authorized
and, upon issuance pursuant to the terms hereof, will be validly issued, fully
paid and nonassessable, and shall be free and clear of all encumbrances and
restrictions, except for restrictions on transfer set forth in the Transaction
Documents or imposed by applicable securities laws. The Warrants have been duly
and validly authorized. Upon the due exercise of the Warrants in accordance with
their terms, including payment of the exercise price therefor, the Warrant
Shares will be validly issued, fully paid and non-assessable free and clear of
all encumbrances and restrictions, except for restrictions on transfer set forth
in the Transaction Documents or imposed by applicable securities laws. The
Company has reserved a sufficient number of shares of Common Stock for issuance
upon the exercise of the Warrants.
4.5 Consents. The execution, delivery and performance by the Company
of the Transaction Documents and the offer, issuance and sale of the Securities
require no consent of, action by or in respect of, or filing with, any Person,
governmental body, agency, or official other than filings that have been made
pursuant to applicable state securities laws and post-sale filings pursuant to
applicable state and federal securities laws which the Company undertakes to
file within the applicable time periods. Assuming the truth and accuracy of the
Investors' representations and warranties hereunder, the Company has taken all
action necessary to exempt (i) the issuance and sale of the Shares and the
Warrants at Closing, (ii) the issuance of the Warrant Shares upon due exercise
of the Warrants, (iii) the issuance of the Antidilution Warrants, (iv) the
issuance of the Antidilution Shares upon due exercise of the Antidilution
Warrants and (v) the other transactions contemplated by the Transaction
Documents from the provisions of any anti-takeover, business combination or
control share law or statute binding on
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the Company or to which the Company or any of its assets and properties may be
subject or any similar antitakeover provision of the Company's Articles of
Incorporation, bylaws or any shareholder rights agreement that is or could
become applicable to the Investors solely as a result of the transactions
contemplated hereby, including without limitation, the issuance of the
Securities and the ownership, disposition or voting of the Securities by the
Investors or the exercise of any right granted to the Investors pursuant to this
Agreement or the other Transaction Documents.
4.6 Delivery of SEC Filings; Business. The Company has made
available to the Investors (including via XXXXX) copies of the 2002 10-K, and
all other reports filed by the Company pursuant to the 1934 Act since the filing
of the 2002 10-K and prior to the date hereof (collectively, the "SEC Filings").
The SEC Filings are the only filings required of the Company pursuant to the
1934 Act for such period. The Company and its Subsidiaries are engaged only in
the business described in the SEC Filings and the SEC Filings contain a complete
and accurate description in all material respects of the business of the Company
and its Subsidiaries, taken as a whole.
4.7 Use of Proceeds. The proceeds of the sale of the Shares
hereunder shall be used by the Company for working capital and general corporate
purposes.
4.8 No Material Adverse Change. Since December 31, 2002, except as
described in SEC Filings filed on or prior to the date hereof and except for the
Reverse Split and for the transactions contemplated by the Transaction
Documents, there has not been:
(i) any change in the consolidated assets, liabilities,
financial condition or operating results of the Company from that reflected in
the financial statements included in the 2002 10-K, except for changes in the
ordinary course of business which have not and would not reasonably be expected
to have a Material Adverse Effect, individually or in the aggregate;
(ii) any declaration or payment of any dividend, or any
authorization or payment of any distribution, on any of the capital stock of the
Company, or any redemption or repurchase of any securities of the Company;
(iii) any material damage, destruction or loss, whether or not
covered by insurance to any assets or properties of the Company or its
Subsidiaries;
(iv) any waiver, not in the ordinary course of business, by
the Company or any Subsidiary of a material right or of a material debt owed to
it;
(v) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company or a Subsidiary, except
in the ordinary course of business and which is not material to the assets,
properties, financial condition, operating results or business of the Company
and its Subsidiaries taken as a whole (as such business is presently conducted
and as it is proposed to be conducted);
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(vi) any change or amendment to the Company's Articles of
Incorporation or Bylaws, or material change to any material contract or
arrangement by which the Company or any Subsidiary is bound or to which any of
their respective assets or properties is subject;
(vii) any material labor difficulties or labor union
organizing activities with respect to employees of the Company or any
Subsidiary;
(viii) any material transaction entered into by the Company or
a Subsidiary other than in the ordinary course of business;
(ix) the loss of the services of any key employee, or material
change in the composition or duties of the senior management of the Company or
any Subsidiary;
(x) the loss or threatened loss of any customer which has had,
or would reasonably be expected to have a Material Adverse Effect; or
(xi) any other event or condition of any character that has
had, or would reasonably be expected to have, a Material Adverse Effect.
4.9 SEC Filings; S-3 Eligibility.
(a) At the time of filing thereof, each of the SEC Filings
complied as to form in all material respects with the requirements of the 1934
Act and did 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 the
light of the circumstances under which they were made, not misleading.
(b) The Company is eligible to use Form S-3 to register the
resale of the Registrable Securities (as such term is defined in the
Registration Rights Agreement) by the Investors as contemplated by the
Registration Rights Agreement.
4.10 No Conflict, Breach, Violation or Default. The execution,
delivery and performance of the Transaction Documents by the Company and the
issuance and sale of the Securities will not (i) conflict with or result in a
breach or violation of any of the terms and provisions of, or constitute a
default under the Company's Articles of Incorporation or the Company's Bylaws,
both as in effect on the date hereof (copies of which have been made available,
including via XXXXX, to the Investors before the date hereof), or (ii) conflict
with or result in a breach or violation of any of the terms and provisions of,
or constitute a default under (except for such breaches, violations, or defaults
that would not have a Material Adverse Effect) (a) any statute, rule, regulation
or order of any governmental agency or body or any court, domestic or foreign,
having jurisdiction over the Company, any Subsidiary or any of their respective
assets or properties, or (b) any agreement or instrument to which the Company or
any Subsidiary is a party or by which the Company or a Subsidiary is bound or to
which any of their respective assets or properties is subject.
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4.11 Tax Matters. The Company and each Subsidiary has timely
prepared and filed all material tax returns required to have been filed by the
Company or such Subsidiary with all appropriate governmental agencies and timely
paid all taxes shown thereon or otherwise owed by it. The charges, accruals and
reserves on the books of the Company in respect of taxes for all fiscal periods
are adequate in all material respects, and there are no material unpaid
assessments against the Company or any Subsidiary nor, to the Company's
Knowledge, any basis for the assessment of any additional taxes, penalties or
interest for any fiscal period or audits by any federal, state or local taxing
authority except for any assessment which would not have a Material Adverse
Effect. All taxes and other assessments and levies that the Company or any
Subsidiary is required to withhold or to collect for payment have been duly
withheld and collected and paid to the proper governmental entity or third party
when due, except as would not have a Material Adverse Effect. There are no tax
liens or claims pending or, to the Company's Knowledge, threatened against the
Company or any Subsidiary or any of their respective assets or property. There
are no outstanding tax sharing agreements or other such arrangements between the
Company and any Subsidiary or other corporation or entity.
4.12 Title to Properties. Except as set forth in SEC Filings filed
prior to the date hereof, the Company and each Subsidiary has good and
marketable title to all real properties and all other properties and assets
owned by it, in each case free from liens, encumbrances and defects that would
materially affect the value thereof or materially interfere with the use made or
currently planned to be made thereof by them; and the Company and each
Subsidiary holds any leased real or personal property under valid and
enforceable leases with no exceptions that would materially interfere with the
use made or currently planned to be made thereof by them.
4.13 Certificates, Authorities and Permits. The Company and each
Subsidiary possess adequate certificates, authorities or permits issued by
appropriate governmental agencies or bodies necessary to conduct the business
now operated by it, and neither the Company nor any Subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
certificate, authority or permit that, if determined adversely to the Company or
such Subsidiary, would reasonably be expected to have a Material Adverse Effect,
individually or in the aggregate.
4.14 No Labor Disputes. No material labor dispute with the employees
of the Company or any Subsidiary exists or, to the Company's Knowledge, is
imminent.
4.15 Intellectual Property.
(a) No Intellectual Property of the Company or its
Subsidiaries which is necessary for the conduct without Material Adverse Effect
of the Company's and each of its Subsidiaries' respective businesses as
currently conducted or as currently proposed to be conducted has been or is now
involved in any cancellation, dispute or litigation, and, to the Company's
Knowledge, no such action is threatened. Neither the Company nor any of its
Subsidiaries owns or has any interest in any U.S. or foreign patent or patent
application.
(b) All of the licenses and sublicenses and consent, royalty
or other agreements concerning Intellectual Property which are necessary for the
conduct without
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Material Adverse Effect of the Company's and each of its Subsidiaries'
respective businesses as currently conducted or as currently proposed to be
conducted to which the Company or any Subsidiary is a party or by which any of
their assets are bound (other than generally commercially available, non-custom,
off-the-shelf software application programs having a retail acquisition price of
less than $10,000 per license) (collectively, "License Agreements") are valid
and binding obligations of the Company or its Subsidiaries that are parties
thereto and, to the Company's Knowledge, the other parties thereto, enforceable
in accordance with their terms, except to the extent that enforcement thereof
may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws affecting the enforcement of creditors' rights
generally, and there exists no event or condition which will result in a
material violation or breach of or constitute (with or without due notice or
lapse of time or both) a default by the Company or any of its Subsidiaries under
any such License Agreement.
(c) The Company and its Subsidiaries own or, to the Company's
Knowledge, have the valid right to use all of the Intellectual Property that is
necessary for the conduct without Material Adverse Effect of the Company's and
each of its Subsidiaries' respective businesses as currently conducted or as
currently proposed to be conducted and for the ownership, maintenance and
operation of the Company's and its Subsidiaries' properties and assets, free and
clear of all liens, encumbrances, adverse claims or obligations to license all
such owned Intellectual Property and Confidential Information, other than
licenses entered into in the ordinary course of the Company's and its
Subsidiaries' businesses. To the Company's Knowledge, the Company and its
Subsidiaries have a valid and enforceable right to use all third party
Intellectual Property and Confidential Information used or held for use in the
respective businesses of the Company and its Subsidiaries, where the failure to
have such right would have a Material Adverse Effect.
(d) To the Company's Knowledge, the conduct of the Company's and its
Subsidiaries' businesses as currently conducted does not infringe or otherwise
impair or conflict with (collectively, "Infringe") any Intellectual Property
rights of any third party or any confidentiality obligation owed to a third
party, where such Infringement would have a Material Adverse Effect; and the
Intellectual Property and Confidential Information of the Company and its
Subsidiaries which are necessary for the conduct of Company's and each of its
Subsidiaries' respective businesses as currently conducted or as currently
proposed to be conducted are not being Infringed by any third party where such
Infringement, if permitted to continue, would, individually or in the aggregate
with all other Infringements, have or reasonably be expected to have a Material
Adverse Effect. There is no litigation or order pending or outstanding or, to
the Company's Knowledge, threatened or imminent, that seeks to limit or
challenge or that concerns the ownership, use, validity or enforceability of any
Intellectual Property or Confidential Information of the Company and its
Subsidiaries and the Company's and its Subsidiaries' use of any Intellectual
Property or Confidential Information owned by a third party, and, to the
Company's Knowledge, there is no valid basis for the same where such litigation
or order would have a Material Adverse Effect.
(e) The consummation of the transactions contemplated hereby will
not result in the alteration, loss, impairment of or restriction on the
Company's or any of its
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Subsidiaries' ownership or right to use any of the Intellectual Property or
Confidential Information which is necessary for the conduct of the Company's and
each of its Subsidiaries' respective businesses as currently conducted or as
currently proposed to be conducted.
(f) The Company and its Subsidiaries have taken reasonable
steps to protect the Company's and its Subsidiaries' rights in their
Intellectual Property and Confidential Information where the failure to do so
would have a Material Adverse Effect. Each employee, consultant and contractor
(other than attorneys bound by ethical duties with respect to the protection of
client information) who has had access to Confidential Information which is
necessary for the conduct without Material Adverse Effect of the Company's and
each of its Subsidiaries' respective businesses as currently conducted or as
currently proposed to be conducted has executed an agreement to maintain the
confidentiality of such Confidential Information. Except under such
confidentiality obligations, there has been no disclosure of any of the
Company's or its Subsidiaries' Confidential Information to any third party,
except for such disclosures as have not had and would not reasonably be expected
to have a Material Adverse Effect, individually or in the aggregate, .
4.16 Environmental Matters. Neither the Company nor any Subsidiary
is in violation of any statute, rule, regulation, decision or order of any
governmental agency or body or any court, domestic or foreign, relating to the
use, disposal or release of hazardous or toxic substances or relating to the
protection or restoration of the environment or human exposure to hazardous or
toxic substances (collectively, "Environmental Laws"), owns or operates any real
property contaminated with any substance that is subject to any Environmental
Laws, is liable for any off-site disposal or contamination pursuant to any
Environmental Laws, and is subject to any claim relating to any Environmental
Laws, which violation, contamination, liability or claim has had or would
reasonably be expected to have a Material Adverse Effect, individually or in the
aggregate; and there is no pending or, to the Company's Knowledge, threatened
investigation that might lead to such a claim.
4.17 Litigation. There are no pending actions, suits or proceedings
against or affecting the Company, its Subsidiaries or any of its or their
properties; and to the Company's Knowledge, no such actions, suits or
proceedings are threatened or contemplated.
4.18 Financial Statements. The financial statements included in each
of the SEC Filings present fairly, in all material respects, the consolidated
financial position of the Company as of the dates shown and its consolidated
results of operations and cash flows for the periods shown, and such financial
statements have been prepared in conformity with United States generally
accepted accounting principles applied on a consistent basis (except as may be
disclosed therein or in the notes thereto, and, in the case of quarterly
financial statements, as permitted by Form 10-Q under the 1934 Act). Except as
set forth in the financial statements of the Company included in the SEC Filings
filed prior to the date hereof, neither the Company nor any of its Subsidiaries
has incurred any liabilities, contingent or otherwise, except those incurred in
the ordinary course of business, consistent (as to amount and nature) with past
practices since the date of such financial statements, none of which,
individually or in the aggregate, have had or would reasonably be expected to
have a Material Adverse Effect.
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4.19 Insurance Coverage. The Company and each Subsidiary maintains
in full force and effect insurance coverage that is customary for comparably
situated companies for the business being conducted and properties owned or
leased by the Company and each Subsidiary, and the Company reasonably believes
such insurance coverage to be adequate against all liabilities, claims and risks
against which it is customary for comparably situated companies to insure.
4.20 Compliance with Nasdaq Continued Listing Requirements. The
Company is in compliance with applicable Nasdaq continued listing requirements.
There are no proceedings pending or, to the Company's Knowledge, threatened
against the Company relating to the continued listing of the Company's Common
Stock on Nasdaq and the Company has not received any notice of, nor to the
Company's Knowledge is there any basis for, the delisting of the Common Stock
from Nasdaq.
4.21 Brokers and Finders. Except for the issuance of the Warrant as
provided herein, no Person will have, as a result of the transactions
contemplated by this Agreement, any valid right, interest or claim against or
upon the Company, any Subsidiary or an Investor for any commission, fee or other
compensation pursuant to any agreement, arrangement or understanding entered
into by or on behalf of the Company.
4.22 No Directed Selling Efforts or General Solicitation. Neither
the Company nor any Person acting on its behalf has conducted any general
solicitation or general advertising (as those terms are used in Regulation D) in
connection with the offer or sale of any of the Securities.
4.23 No Integrated Offering. Neither the Company nor any of its
Affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any Company security or solicited any
offers to buy any security, under circumstances that would adversely affect
reliance by the Company on Section 4(2) of the 1933 Act for the exemption from
registration for the transactions contemplated hereby or would require
registration of the offer and sale of the Securities to the Investors hereby
under the 1933 Act.
4.24 Private Placement. Assuming that the representations and
warranties of each Investor and of each other purchaser of the Company's Common
Stock on the Closing Date pursuant to that certain Purchase Agreement of even
date herewith, by and among the Company and certain other investors affiliated
with the Company (the "Purchase Agreement"), are true as of the date hereof and
as of the Closing Date, the offer and sale of the Securities to the Investors as
contemplated hereby is exempt from the registration requirements of the 1933
Act.
4.25 Questionable Payments. Neither the Company nor any of its
Subsidiaries nor, to the Company's Knowledge, any of their respective current or
former shareholders, directors, officers, employees, agents or other Persons
acting on behalf of the Company or any Subsidiary, has on behalf of the Company
or any Subsidiary or in connection with their respective businesses: (a) used
any corporate funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity; (b) made any direct or
indirect unlawful payments to any governmental officials or employees from
corporate funds; (c)
-11-
established or maintained any unlawful or unrecorded fund of corporate monies or
other assets; (d) made any false or fictitious entries on the books and records
of the Company or any Subsidiary; or (e) made any unlawful bribe, rebate,
payoff, influence payment, kickback or other unlawful payment of any nature.
4.26 Transactions with Affiliates. Except as set forth in SEC
Filings filed prior to the date hereof, and except for the transactions
contemplated by the Purchase Agreement, none of the officers or directors of the
Company and, to the Company's Knowledge, none of the employees of the Company is
presently a party to any transaction with the Company or a Subsidiary or to a
presently contemplated transaction (other than for services as employees,
officers and directors) that would be required to be disclosed pursuant to Item
404 of Regulation S-K promulgated under the 0000 Xxx.
4.27 Disclosures. Neither the Company nor any Person acting on its
behalf has provided the Investors or their agents or counsel with any
information that constitutes or might constitute material, non-public
information. The Transaction Documents (including the Company Disclosure Letter)
do not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements contained therein, in
light of the circumstances under which they were made, not misleading.
5. Representations and Warranties of the Investors. Each of the Investors
hereby severally, and not jointly, represents and warrants to the Company that:
5.1 Organization and Existence. The Investor is a validly existing
corporation, limited partnership or limited liability company and has all
requisite corporate, partnership or limited liability company power and
authority to fulfill its obligations under this Agreement and the other
Transaction Documents.
5.2 Authorization. The Investor has full power and authority and has
taken all requisite action on the part of the Investor, its officers, directors
and partners or members necessary for (i) the authorization, execution and
delivery of the Transaction Documents to which such Investor is a party and (ii)
authorization of the performance of all obligations of the Investor hereunder or
thereunder. This Agreement constitutes, and the other Transaction Documents to
which such Investor is a party will, upon execution and delivery, constitute the
valid and legally binding obligations of the Investor, enforceable against the
Investor in accordance with their respective terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability, relating to or affecting creditors' rights generally.
5.3 Purchase Entirely for Own Account. The Securities to be
purchased by the Investor hereunder will be acquired for the Investor's own
account, not as nominee or agent, and not with a view to the resale or
distribution of any part thereof in violation of the 1933 Act, and the Investor
has no present intention of selling, granting any participation in, or otherwise
distributing the same in violation of the 1933 Act. The Investor is not a
registered broker dealer or an entity engaged in the business of being a broker
dealer.
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5.4 Investment Experience. The Investor can bear the economic risk
and complete loss of its investment in the Securities and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment contemplated hereby.
5.5 Disclosure of Information. The Investor has had an opportunity
to receive all additional information related to the Company requested by it and
to ask questions of and receive answers from the Company regarding the Company,
its business and the terms and conditions of the offering of the Securities. The
Investor acknowledges that the SEC Filings have been made available to it.
Neither such inquiries nor any other due diligence investigation conducted by
the Investor shall modify, amend or affect the Investor's right to rely on the
Company's representations and warranties contained in this Agreement.
5.6 Restricted Securities. The Investor understands that the
Securities are characterized as "restricted securities" under the U.S. federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the 1933 Act only in certain limited circumstances.
5.7 Legends. It is understood that, except as provided below,
certificates evidencing such Securities may bear the following or any similar
legend:
(a) The securities evidenced by this certificate have not been
registered under the Securities Act of 1933, as amended (the "Act"), or
applicable state securities laws, and no interest may be sold, distributed,
assigned, offered, pledged or otherwise transferred unless (a) there is an
effective registration statement under the Act and applicable state securities
laws covering any such transaction involving said securities, (b) such
transaction complies with Rule 144, (c) this corporation receives an opinion of
legal counsel for the holder of these securities reasonably satisfactory to this
corporation stating that such transaction is exempt from registration, or (d)
this corporation otherwise satisfies itself that such transaction is exempt from
registration.
(b) If required by the authorities of any state in connection
with the issuance of sale of the Securities, the legend required by such state
authority.
Upon the earlier of (i) registration of the Shares, any Warrant
Shares and any Antidilution Shares (collectively, the "Underlying Shares") for
sale pursuant to the Registration Rights Agreement or (ii) Rule 144(k) becoming
available with respect to the Warrants, the Antidilution Warrants issued
pursuant to this Agreement or the Underlying Shares, as applicable, the Company
shall, upon an Investor's written request (which in the case of clause (i) shall
be accompanied by a written certification by the Investor that (A) the Investor
has a present intention to dispose of Underlying Shares covered by such
registration statement pursuant to the Plan of Distribution included in a
currently available final prospectus related thereto, and (B) the Investor will
comply with the prospectus delivery requirements applicable to such disposition,
and which, in the case of clause (ii), shall be accompanied by such reasonable
and appropriate customary representations as may be reasonably requested by the
Company), promptly cause
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certificates evidencing such Underlying Shares, Warrants and/or Antidilution
Warrants, as applicable, to be replaced with certificates which do not bear such
restrictive legends, and all Underlying Shares subsequently issued in respect of
such Warrants or Antidilution Warrants shall not bear such restrictive legends
provided the provisions of either clause (i) or clause (ii) above, as
applicable, are satisfied with respect to such Underlying Shares. When the
Company is required to cause unlegended certificates to replace previously
issued legended certificates, if unlegended certificates are not delivered to an
Investor within five (5) Business Days of submission by that Investor of
legended stock certificate(s) to the Company's transfer agent together with a
representation letter in customary form, the Company shall be liable to the
Investor for a penalty equal to 1% of the aggregate purchase price of the Shares
evidenced by such certificate(s) for each thirty (30) day period (or portion
thereof) beyond such five (5) Business Days that the unlegended certificates
have not been so delivered.
5.8 Accredited Investor. The Investor is an accredited investor as
defined in Rule 501(a) of Regulation D, as amended, under the 0000 Xxx.
5.9 No General Solicitation. The Investor did not learn of the
investment in the Securities as a result of any public advertising or general
solicitation.
5.10 Brokers and Finders. No Person will have, as a result of the
transactions contemplated by this Agreement, any valid right, interest or claim
against or upon the Company, any Subsidiary or an Investor for any commission,
fee or other compensation pursuant to any agreement, arrangement or
understanding entered into by or on behalf of the Investors.
5.11 Previously-Acquired Shares of Common Stock. As of the date
hereof, the Investors, in the aggregate, beneficially own (within the meaning of
Rule 13d-3 of the General Rules and Regulations under the 0000 Xxx) 3,424,042
shares of the Common Stock of the Company.
5.12 Representation of Counsel. The Investor has had the opportunity
to seek the advice of independent legal counsel with respect to the negotiation,
preparation and execution of the Transaction Documents; further, the Investor
understands and acknowledges that Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP represents
the Company and does not represent the Investor in the transactions contemplated
by this Agreement and the other Transaction Documents.
6. Conditions to Closing.
6.1 Conditions to the Investors' Obligations. The obligation of the
Investors to purchase the Securities at the Closing is subject to the
fulfillment, on or prior to the Closing Date, of the following conditions, any
of which may be waived by the Investors agreeing hereunder to purchase a
majority of the Shares (the "Required Investors"):
(a) The representations and warranties made by the Company in
Section 4 hereof qualified as to materiality shall be true and correct at all
times prior to and on the Closing Date, except to the extent any such
representation or warranty expressly speaks as of
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an earlier date, in which case such representation or warranty shall be true and
correct as of such earlier date, and, the representations and warranties made by
the Company in Section 4 hereof not qualified as to materiality shall be true
and correct in all material respects at all times prior to and on the Closing
Date, except to the extent any such representation or warranty expressly speaks
as of an earlier date, in which case such representation or warranty shall be
true and correct in all material respects as of such earlier date. The Company
shall have performed in all material respects all obligations and conditions
herein required to be performed or observed by it on or prior to the Closing
Date.
(b) The Company shall have obtained any and all consents, permits,
approvals, registrations and waivers necessary or appropriate for consummation
of the purchase and sale of the Securities all of which shall be in full force
and effect.
(c) The Company shall have executed and delivered the Registration
Rights Agreement.
(d) The Company shall have taken all action necessary to cause the
Shares and the Warrant Shares to be approved for inclusion in The Nasdaq
National Market System upon official notice of issuance.
(e) The Company shall have received verbal advice from Nasdaq to the
effect that the issuance and sale of the Securities as contemplated hereby will
not require shareholder approval pursuant to the requirements of the Nasdaq
Shareholder Approval Rule.
(f) The Company shall have effected the private sale of shares of
Common Stock to certain investors, including certain of its directors and
executive officers, pursuant to the Purchase Agreement, on the same or better
(as to the Company) economic terms (including as to price) as contemplated
hereby for gross proceeds of at least Three Hundred Thousand Dollars ($300,000);
provided, however, that this condition will be deemed to be satisfied if the
transactions contemplated by the Purchase Agreement are consummated
simultaneously with the transactions contemplated hereby.
(g) No judgment, writ, order, injunction, award or decree of or by
any court, or judge, justice or magistrate, including any bankruptcy court or
judge, or any order of or by any governmental authority, shall have been issued,
and no action or proceeding shall have been instituted by any governmental
authority, enjoining or preventing the consummation of the transactions
contemplated hereby or in the other Transaction Documents.
(h) The Company shall have delivered a Certificate, executed on
behalf of the Company by its Chief Executive Officer or its Chief Financial
Officer, dated as of the Closing Date, certifying to the fulfillment of the
conditions specified in subsections (a), (b), (d), (e), (f) and (g) of this
Section 6.1.
(i) The Company shall have delivered a Certificate, executed on
behalf of the Company by its Secretary, dated as of the Closing Date, certifying
the resolutions adopted by the Board of Directors of the Company approving the
transactions contemplated by
-15-
this Agreement and the other Transaction Documents and the issuance of the
Securities, certifying the current versions of the Articles of Incorporation and
Bylaws of the Company and certifying as to the signatures and authority of
persons signing the Transaction Documents and related documents on behalf of the
Company.
(j) The Investors shall have received an opinion from Xxxxxx,
Xxxxxxxxxx & Xxxxxxxxx LLP, the Company's counsel, dated as of the Closing Date,
substantially in the form attached hereto as Exhibit C.
(k) No stop order or suspension of trading shall have been imposed
by Nasdaq, the SEC or any other governmental regulatory body with respect to
public trading in the Common Stock.
6.2 Conditions to Obligations of the Company. The Company's obligation to
sell and issue the Securities at the Closing is subject to the fulfillment to
the satisfaction of the Company on or prior to the Closing Date of the following
conditions, any of which may be waived by the Company:
(a) The representations and warranties made by the Investors in
Section 5 hereof, other than the representations and warranties contained in
Sections 5.3, 5.4, 5.5, 5.6, 5.7, 5.8 and 5.9 (the "Investment
Representations"), shall be true and correct in all material respects when made,
and shall be true and correct in all material respects on the Closing Date with
the same force and effect as if they had been made on and as of said date. The
Investment Representations shall be true and correct in all respects when made,
and shall be true and correct in all respects on the Closing Date with the same
force and effect as if they had been made on and as of said date. The Investors
shall have performed in all material respects all obligations and conditions
herein required to be performed or observed by them on or prior to the Closing
Date.
(b) The Registration Rights Agreement shall have been executed and
delivered by each Investor.
6.3 Termination of Obligations to Effect Closing; Effects.
(a) The obligations of the Company, on the one hand, and the
Investors, on the other hand, to effect the Closing shall terminate as follows:
(i) Upon the mutual written consent of the Company and the
Required Investors;
(ii) By the Company if any of the conditions set forth in
Section 6.2 shall have become incapable of fulfillment, and shall not have been
waived by the Company;
-16-
(iii) By the Required Investors if any of the conditions
set forth in Section 6.1 shall have become incapable of fulfillment, and shall
not have been waived by the Required Investors; or
(iv) By either the Company or the Required Investors if
the Closing has not occurred on or prior to August 31, 2003.
provided, however, that, except in the case of clause (i) above, the party
seeking to terminate its obligation to effect the Closing shall not then be in
breach of any of its representations, warranties, covenants or agreements
contained in this Agreement or the other Transaction Documents if such breach
has resulted in the circumstances giving rise to such party's seeking to
terminate its obligation to effect the Closing.
(b) In the event of termination by the Company or the Required
Investors of their obligations to effect the Closing pursuant to this Section
6.3, written notice thereof shall forthwith be given to the other parties hereto
and the obligation of all parties to effect the Closing shall be terminated,
without further action by any party. Nothing in this Section 6.3 shall be deemed
to release any party from any liability for any breach by such party of the
terms and provisions of this Agreement or the other Transaction Documents or to
impair the right of any party to compel specific performance by any other party
of its obligations under this Agreement or the other Transaction Documents.
7. Covenants and Agreements of the Company.
7.1 Reservation of Common Stock. The Company shall at all times that
the Warrants and Antidilution Warrants, if any, are outstanding, reserve and
keep available out of its authorized but unissued shares of Common Stock, solely
for the purpose of providing for the exercise of the Warrants and Antidilution
Warrants, if any, that number of shares of Common Stock equal to the number of
shares necessary to permit the exercise of the Warrants and Antidilution
Warrants, if any, issued pursuant to this Agreement in accordance with their
respective terms.
7.2 Amendment to Shareholder Rights Plan. In the event that the
issuance of Antidilution Warrants to the Investors as contemplated by Section
7.6 below would result in one or more of the Investors becoming an "Acquiring
Person" within the meaning of the Rights Agreement dated as of October 25, 1999,
as amended, by and among the Company and Mellon Investor Services, LLC, as
rights agent (the "Rights Agreement"), the Company shall, prior to such
issuance, take all necessary action to amend the Rights Agreement to make such
Investor(s) a "Grandfathered Shareholder" as defined therein, provided that such
Investor(s) shall have executed a customary standstill agreement in a form
reasonably acceptable to the Company.
7.3 [Intentionally Omitted.]
7.4 Listing of Underlying Shares and Related Matters. Promptly
following the date hereof, the Company shall take all necessary action to cause
the Shares and the Warrant Shares to be listed on the Nasdaq National Market
System no later than the Closing Date.
-17-
Further, if the Company applies to have its Common Stock or other securities
traded on any other principal stock exchange or market, it shall include in such
application the Shares and the Warrant Shares and will take such other action as
is necessary to cause such Common Stock to be so listed.
7.5 Proxy Statement; Shareholders Meeting. (a) As soon as
commercially reasonable following the Closing Date, the Company shall take all
action necessary to call a meeting of its shareholders (together with any
adjournments or postponements thereof, the "Shareholders Meeting"), with such
meeting to occur on or before July 31, 2003, for the purpose of seeking approval
of the Company's shareholders (the "Shareholder Approval") for the Reverse Split
(the "Reverse Split Proposal"). In connection therewith, the Company will
promptly prepare and file with the SEC proxy materials (including a proxy
statement and form of proxy) for use at the Shareholders Meeting and, after
receiving and promptly responding to any comments of the SEC thereon, shall
promptly mail such proxy materials to the shareholders of the Company. Each
Investor shall promptly furnish in writing to the Company such information
relating to such Investor and its investment in the Company as the Company may
reasonably request for inclusion in such proxy materials. The Company will
comply with Section 14(a) of the 1934 Act and the rules promulgated thereunder
in relation to any proxy statement (as amended or supplemented, the "Proxy
Statement") and any form of proxy to be sent to the shareholders of the Company
in connection with the Shareholders Meeting, and the Proxy Statement shall not,
on the date the Proxy Statement (or any amendment thereof or supplement thereto)
is first mailed to shareholders or at the time of the Shareholders Meeting,
contain any statement which, at the time and in the light of the circumstances
under which it is made, is false or misleading with respect to any material
fact, or which omits to state any material fact necessary in order to make the
statements therein not false or misleading or necessary to correct any statement
in any earlier communication with respect to the solicitation of a proxy for the
Shareholders Meeting or the subject matter thereof which has become false or
misleading.
(b) Subject to their fiduciary obligations under applicable law (as
determined in good faith by the Company's Board of Directors after consultation
with the Company's outside counsel), the Company's Board of Directors shall
recommend to the Company's shareholders (and not revoke or amend such
recommendation) that the shareholders vote in favor of the Reverse Split
Proposal and shall cause the Company to take all commercially reasonable action
(including, without limitation, the hiring of a proxy solicitation firm of
nationally recognized standing) to solicit the Shareholder Approval. Whether or
not the Company's Board of Directors determines at any time after the date
hereof that, due to its fiduciary duties, it must revoke or amend its
recommendation to the Company's shareholders, the Company is required to, and
will take, in accordance with applicable law and its Articles of Incorporation
and Bylaws, all action necessary to convene the Shareholders Meeting as provided
in subsection (a) above to consider and vote upon the approval of the Reverse
Split Proposal.
7.6 Antidilution Provisions.
(a) Subject to Section 7.6(e) and Section 7.8 below, if during the
period commencing on the Closing Date and ending on the six-month anniversary of
the Closing Date (the "Protection Period"), the Company issues or sells or is
deemed pursuant hereto to have
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issued or sold any shares of its Common Stock at an Issue Price (as defined
below) lower than $0.65 per share (prior to adjustment as a result of the
Reverse Split) (the "Benchmark Price") (a "Dilutive Issuance"), the Company
shall issue to the Investors, no later than five (5) Business Days after the
Dilutive Issuance, a warrant in the form attached hereto as Exhibit A (each, an
"Antidilution Warrant" and, collectively, the "Antidilution Warrants") to
purchase 100,000 shares (prior to adjustment as a result of the Reverse Split)
of Common Stock for every $0.01 (prior to adjustment as a result of the Reverse
Split) by which the Benchmark Price exceeds the Issue Price. The Antidilution
Warrants shall be allocated among the Investors on a pro rata basis in
accordance with the Shares purchased by the Investors hereunder. The
Antidilution Warrants will have the same terms as the Warrants, except that the
initial exercise price of each Antidilution Warrant shall equal 125% of the
Issue Price for the Dilutive Issuance giving rise to the issuance of such
Antidilution Warrant and the Call Price (as defined in the attached Form of
Antidilution Warrant) shall equal 150% of the Issue Price for the Dilutive
Issuance giving rise to the issuance of such Antidilution Warrant. The
provisions of this Section 7.6 shall apply to every Dilutive Issuance that
occurs or is deemed (pursuant to this Section 7.6) to occur during the
Protection Period.
(b) (i) For the purposes of this Section 7.6, the term "Issue Price"
shall include the amount actually paid by third parties for each share of Common
Stock without deduction of any expenses incurred or any underwriting commissions
or concessions paid or allowed by the Company in connection therewith. An
issuance and sale of shares of Common Stock shall be deemed to have occurred
upon the sale or issuance of rights, options, warrants or convertible securities
under which the Company is or may become obligated to issue shares of Common
Stock, and in such circumstances the Issue Price of the Common Stock covered
thereby shall also include the exercise or conversion price thereof (in addition
to the consideration received by the Company upon such sale or issuance). In
case of any such security issued within the Protection Period in a "Variable
Rate Transaction" or a "Protected Transaction" (each as defined below), the
Issue Price shall be deemed to be the lowest conversion or exercise price in
effect at any time during the Protection Period in the case of a Variable Rate
Transaction, or the lowest adjustment price in effect at any time during the
Protection Period in the case of a Protected Transaction (regardless of whether
shares of Common Stock are actually issued). If an adjustment is made in
accordance with the preceding sentence and the relevant conversion, exercise or
adjustment price is subsequently reduced at any time during the Protection
Period below the price in effect at the time such adjustment was made,
additional Antidilution Warrants shall be issued to reflect any such subsequent
reductions. If shares are issued for a consideration other than cash, the Issue
Price shall be the fair value of such consideration as determined in good faith
by independent certified public accountants mutually acceptable to the Company
and the Required Investors.
(ii) The term "Variable Rate Transaction" shall mean a transaction
in which the Company issues or sells any debt or equity securities that are
convertible into, exchangeable or exercisable for, or include the right to
receive additional shares of Common Stock either (x) at a conversion, exercise
or exchange rate or other price that is based upon and/or varies with the
trading prices of or quotations for the Common Stock at any time after the
initial issuance of such debt or equity securities, or (y) with a fixed
conversion, exercise or exchange price that is subject to being reset at some
future date after the initial issuance of such
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debt or equity security or upon the occurrence of specified or contingent events
directly or indirectly related to the business of the Company or the market for
the Common Stock (but excluding standard stock split anti-dilution provisions).
(iii) The term "Protected Transaction" shall mean a transaction in
which the Company issues or sells any securities in a transaction or series of
related transactions (the "New Issuance") which grants to the purchaser (the
"New Purchaser") the right to receive additional securities based upon future
issuances of Common Stock of the Company on terms more favorable than those
granted to the New Purchaser in the New Issuance.
(c) In the event the Company fails to deliver the Antidilution Warrants
within five (5) Business Days after the date on which the Dilutive Issuance
occurs or is deemed to occur (the "Delivery Date"), the Company shall be liable
to the Investors for a penalty equal to 2% of the aggregate exercise price of
the Antidilution Warrants to be issued in respect of such Dilutive Issuance (in
each instance to such Investor pro rata in accordance with its participation in
this offering) per 30-day period or pro rata for any portion thereof following
the Delivery Date until the Antidilution Warrants are issued and delivered to
the Investors.
(d) In case of any stock split or reverse stock split, stock dividend,
reclassification of the Common Stock, recapitalization, merger or consolidation,
or like capital adjustment affecting the Common Stock of the Company, including
the Reverse Split, the provisions of Section 7.6 shall be applied in a fair,
equitable and reasonable manner so as to give effect, as nearly as may be, to
the purposes hereof.
(e) Section 7.6(a) shall not apply to the issuance of (i) options or
Common Stock issued to directors, officers, employees or consultants of the
Company in connection with their service as directors of the Company, their
employment by the Company or their retention as consultants by the Company
pursuant to an equity compensation program approved by the Board of Directors of
the Company or the compensation committee of the Board of Directors of the
Company, (ii) shares of Common Stock issued upon the conversion or exercise of
outstanding options, warrants and rights issued prior to the date hereof, (iii)
securities issued by the Company in connection with a merger or other
acquisition of another Person, (iv) securities issued pursuant to the Rights
Agreement, dated October 25, 1999, by and between the Company and Mellon
Investor Services, as Rights Agent, as amended from time to time or (v)
securities issued pursuant to this Agreement.
7.7 Covenants and Agreements of the Company. Subject to Section 7.8 below,
for the period beginning on the Closing Date and ending on the earlier of (a)
the first anniversary of the Closing Date and (b) the date that the Investors
cease to beneficially own (within the meaning of Rule 13d-3 of the General Rules
and Regulations under the 1934 Act), in the aggregate, at least 25% of the
Shares purchased by them under this Agreement, the Investors shall have the
right to participate in any Dilutive Issuance (other than an Excluded Issuance)
(a "Covered Issuance") on the terms and conditions set forth in this Section
7.7. The Company shall give written notice to the Investors no later than two
Business Days after the consummation of any Covered Issuance, which notice shall
include a term sheet containing all material business terms of any proposed
transaction or execution copies of the investment agreements relating to
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any consummated transaction. Each Investor shall have the right to purchase the
securities which are being or have been issued in the Covered Issuance in an
amount equal to its Pro Rata Share (as defined below) for the same consideration
and on the same terms and conditions as the securities issued and sold or to be
issued and sold pursuant to the Covered Issuance. Each Investor's rights
hereunder must be exercised in writing by such Investor within five (5) Business
Days following receipt of the notice from the Company. If, subsequent to the
Company giving notice to an Investor hereunder but prior to the Investor
exercising its right to participate (or the expiration of the five-Business Day
period without response from the Investor), the terms and conditions of a
proposed Covered Issuance are changed in any material respect from that
disclosed in the related term sheet provided to such Investor, the Company shall
be required to provide a new notice to the Investors hereunder and the Investors
shall have the right, which must be exercised within five (5) Business Days of
such new notice, to exercise their rights to purchase the securities on such
changed terms and conditions as provided hereunder. In the event that any
Investor does not exercise its rights hereunder, or affirmatively declines to
exercise its rights hereunder, then such Investor's rights pursuant to this
Section 7.7 will terminate with respect to the Covered Issuance giving rise to
such rights (unless a material amendment thereto is made as provided above). An
Investor's "Pro Rata Share" for purposes of this Section 7.7 is the number of
shares determined by multiplying (a) the total number of shares issued by the
Company in the Covered Issuance, multiplied by (b) the ratio of (i) the number
of Shares purchased by such Investor hereunder, to (ii) a number of shares of
Common Stock equal to the sum of (x) the total number of shares of Common Stock
then outstanding plus (y) the total number of shares of Common Stock into which
all then outstanding shares of preferred stock and other convertible securities
of the Company are then convertible plus (z) the total number of shares of
Common Stock underlying all then outstanding and presently exercisable options,
warrants and other rights to purchase shares of Common Stock, in each case,
without giving effect to the Covered Issuance giving rise to such calculation.
7.8 Nasdaq Limitation. The Company shall not issue Antidilution Warrants
nor shall the Investors be entitled to exercise their rights pursuant to Section
7.7 if, after giving effect thereto, (i) the Investors would own or have the
right to acquire more than 19.9% of the Common Stock then outstanding after
giving effect to such issuance or exercise or (ii) the Company would be deemed
to have issued pursuant to this Agreement and the Purchase Agreement shares of
Common Stock or rights to acquire Common Stock which, in the aggregate,
represent more than 19.9% of the shares of Common Stock outstanding as of the
date hereof (without giving effect to the transactions contemplated hereby and
by the Purchase Agreement), unless and until the shareholders of the Company
shall have approved the issuance or the exercise in accordance with the
requirements of the Nasdaq Shareholder Approval Rule. If any such issuance or
exercise would require shareholder approval under the Nasdaq Shareholder
Approval Rule, the Company shall use its best efforts to obtain such shareholder
approval as promptly as practicable and, in connection therewith, shall promptly
call a special meeting of its shareholders for the purpose of obtaining such
approval. Upon receipt of the required shareholder approval, the limitations set
forth in this Section 7.8 shall no longer be applicable. The time periods during
which the Antidilution Warrants or the purchase rights specified in Section 7.7
are exercisable shall be tolled until the conclusion of the special meeting.
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8. Survival and Indemnification.
8.1 Survival. All representations, warranties, covenants and
agreements contained in this Agreement shall be deemed to be representations,
warranties, covenants and agreements as of the date hereof and shall survive the
execution and delivery of this Agreement for a period of three (3) years from
the date of this Agreement; provided, however, that the provisions contained in
Section 7 hereof shall survive in accordance therewith.
8.2 Indemnification. (a)The Company agrees to indemnify and hold
harmless, on an after-tax and after insurance recovery basis, each Investor and
its Affiliates and their respective directors, officers, employees and agents
from and against any and all losses, claims, damages, liabilities and expenses
(including without limitation reasonable attorney fees and disbursements and
other expenses incurred in connection with investigating, preparing or defending
any action, claim or proceeding, pending or threatened and the costs of
enforcement hereof) (collectively, "Losses") to which such Person may become
subject as a result of any breach of representation, warranty, covenant or
agreement made by or to be performed on the part of the Company under the
Transaction Documents, and will reimburse any such Person for all such amounts
as they are incurred by such Person.
(b) Each Investor agrees to indemnify and hold harmless, on an
after-tax and after insurance recovery basis, the Company and its Affiliates and
their respective directors, officers, employees and agents from and against any
and all Losses to which such Person may become subject as a result of any breach
of representation, warranty, covenant or agreement made by or to be performed on
the part of such Investor under the Transaction Documents, and will reimburse
any such Person for all such amounts as they are incurred by such Person.
8.3 Conduct of Indemnification Proceedings. Promptly after receipt
by any Person (the "Indemnified Person") of notice of any demand, claim or
circumstances which would or might give rise to a claim or the commencement of
any action, proceeding or investigation in respect of which indemnity may be
sought pursuant to Section 8.2, such Indemnified Person shall promptly notify
the indemnifying party in writing and the indemnifying party shall assume the
defense thereof, including the employment of counsel reasonably satisfactory to
such Indemnified Person, and shall assume the payment of all fees and expenses;
provided, however, that the failure of any Indemnified Person so to notify the
indemnifying party shall not relieve the indemnifying party of its obligations
hereunder except to the extent that the indemnifying party is materially
prejudiced by such failure to notify. In any such proceeding, any Indemnified
Person shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Person unless: (i)
the indemnifying party and the Indemnified Person shall have mutually agreed to
the retention of such counsel; or (ii) in the reasonable judgment of counsel to
such Indemnified Person representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them.
The indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent, which consent shall not be unreasonably
withheld, but if settled with such consent, or if there be a final judgment for
the plaintiff, the indemnifying party shall indemnify and hold harmless such
Indemnified Person from and against any loss or liability (to the extent stated
above) by reason of such settlement or judgment. Without the prior written
-22-
consent of the Indemnified Person, which consent shall not be unreasonably
withheld, the indemnifying party shall not effect any settlement of any pending
or threatened proceeding in respect of which any Indemnified Person is or could
have been a party and indemnity could have been sought hereunder by such
Indemnified Party, unless such settlement includes an unconditional release of
such Indemnified Person from all liability arising out of such proceeding.
9. Miscellaneous.
9.1 Successors and Assigns. This Agreement may not be assigned by a
party hereto without the prior written consent of the Company or the Required
Investors, as applicable, provided, however, that an Investor may assign its
rights and delegate its duties hereunder in whole or in part in a private
transaction without the prior written consent of the Company or the other
Investors to (x) an Affiliate or (y) a third party acquiring beneficial
ownership (within the meaning of Rule 13d-3 of the General Rules and Regulations
under the 0000 Xxx) of not less than (i) 100,000 shares of Common Stock or (ii)
all of the shares of Common Stock then beneficially owned by such Investor,
provided that (A) notice of such transfer is duly given by such Investor to the
Company and the other Investors and (B) the transferee agrees in writing to be
bound by the terms of this Agreement (any transferee meeting these requirements
is referred to herein as a "Permitted Transferee") provided, that no such
assignment or obligation shall affect the obligations of such Investor
hereunder. The provisions of this Agreement shall inure to the benefit of and be
binding upon the respective permitted successors and assigns of the parties.
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
9.2 Counterparts; Faxes. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement may also
be executed via facsimile, which shall be deemed an original.
9.3 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
9.4 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given as hereinafter described (i) if given by personal delivery,
then such notice shall be deemed given upon such delivery, (ii) if given by
telex or telecopier, then such notice shall be deemed given upon receipt of
confirmation of complete transmittal, (iii) if given by mail, then such notice
shall be deemed given upon the earlier of (A) receipt of such notice by the
recipient or (B) three days after such notice is deposited in first class mail,
postage prepaid, and (iv) if given by an internationally recognized overnight
air courier, then such notice shall be deemed given one day after delivery to
such carrier. All notices shall be addressed to the party to be notified at the
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address as follows, or at such other address as such party may designate by ten
days' advance written notice to the other party:
If to the Company:
Onyx Software Corporation
0000 000xx Xxxxxx XX
Xxxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Chief Legal Officer
Fax: (000) 000-0000
With a copy to:
Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP
000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxxx
Fax: (000) 000-0000
If to the Investors:
to the addresses set forth on the signature pages hereto.
9.5 Expenses. The parties hereto shall pay their own costs and
expenses in connection herewith, except that the Company shall reimburse the
Investors for their reasonable fees and reasonable expenses incurred in
connection herewith (including, but not limited to, reasonable legal fees and
expenses of a single counsel and due diligence travel expenses), in an amount
not to exceed $30,000. Such expenses shall be paid not later than the Closing.
The Company shall reimburse the Investors upon demand for all reasonable
out-of-pocket expenses incurred by the Investors, including without limitation
reimbursement of attorneys' fees and disbursements not to exceed $5,000, in
connection with any amendment, modification or waiver of this Agreement or the
other Transaction Documents. In the event that legal proceedings are commenced
by any party to this Agreement against another party to this Agreement in
connection with this Agreement or the other Transaction Documents, the party or
parties which do not prevail in such proceedings shall severally, but not
jointly, pay their pro rata share of the reasonable attorneys' fees and other
reasonable out-of-pocket costs and expenses incurred by the prevailing party in
such proceedings.
9.6 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Required
Investors. Any amendment or waiver effected in accordance with this paragraph
shall be binding upon each holder of Securities purchased under this Agreement
at the time outstanding, each future holder of all such Securities and the
Company.
-24-
9.7 Publicity. No public release or announcement concerning the
transactions contemplated hereby shall be issued by the Company or the Investors
without the prior consent of the Company (in the case of a release or
announcement by the Investors) or SSF (in the case of a release or announcement
by the Company), which consents shall not be unreasonably withheld, except as
such release or announcement may be required by law or the applicable rules or
regulations of any securities exchange or securities market, in which case the
Company or the Investors, as the case may be, shall allow SSF or the Company, as
applicable, to the extent reasonably practicable in the circumstances,
reasonable time to comment on such release or announcement in advance of such
issuance.
9.8 Severability. Any provision of this Agreement that is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof but shall be interpreted as if it
were written so as to be enforceable to the maximum extent permitted by
applicable law, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by applicable law, the parties hereby
waive any provision of law which renders any provision hereof prohibited or
unenforceable in any respect.
9.9 Entire Agreement. This Agreement, including the Exhibits and the
Disclosure Schedules, and the other Transaction Documents constitute the entire
agreement among the parties hereof with respect to the subject matter hereof and
thereof and supersede all prior agreements and understandings, both oral and
written, between the parties with respect to the subject matter hereof and
thereof.
9.10 Further Assurances. The parties shall execute and deliver all
such further instruments and documents and take all such other actions as may
reasonably be required to carry out the transactions contemplated hereby and to
evidence the fulfillment of the agreements herein contained.
9.11 Governing Law; Consent to Jurisdiction. This Agreement shall be
governed by, and construed in accordance with, the internal laws of the State of
New York without regard to the choice of law principles thereof. Each of the
parties hereto irrevocably submits to the exclusive jurisdiction of the courts
of the State of New York located in New York County and the United States
District Court for the Southern District of New York for the purpose of any
suit, action, proceeding or judgment relating to or arising out of this
Agreement and the transactions contemplated hereby. Service of process in
connection with any such suit, action or proceeding may be served on each party
hereto anywhere in the world by the same methods as are specified for the giving
of notices under this Agreement. Each of the parties hereto irrevocably consents
to the jurisdiction of any such court in any such suit, action or proceeding and
to the laying of venue in such court. Each party hereto irrevocably waives any
objection to the laying of venue of any such suit, action or proceeding brought
in such courts and irrevocably waives any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum.
[signature page follows]
-25-
IN WITNESS WHEREOF, the parties have executed this Agreement or caused
their duly authorized officers to execute this Agreement as of the date first
above written.
The Company: ONYX SOFTWARE CORPORATION
By: /s/ XXXXX X. XXXXX
------------------------------
Name: Xxxxx X. Xxxxx
Title: Executive Vice President and
Chief Financial Officer
-26-
The Investors: SPECIAL SITUATIONS FUND III, L.P.
By: /s/ XXXXX X. GREENHOUSE
--------------------------------
Name: Xxxxx X. Greenhouse
Title: General Partner
Aggregate Purchase Price: $1,430,975
Number of Shares: 2,201,500
Address for Notice:
000 X. 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
with a copy to:
Xxxxxxxxxx Xxxxxxx PC
00 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attn: Xxxx X. Xxxxxxxx, Esq.
Telephone: 000.000.0000
Facsimile: 973.597.2400
SPECIAL SITUATIONS CAYMAN FUND, L.P.
By:: /s/ XXXXX X. GREENHOUSE
-------------------------------
Name: Xxxxx X. Greenhouse
Title: General Partner
Aggregate Purchase Price: $351,000
Number of Shares: 540,000
Address for Notice:
000 X. 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
-27-
with a copy to:
Xxxxxxxxxx Xxxxxxx PC
00 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attn: Xxxx X. Xxxxxxxx, Esq.
Telephone: 000.000.0000
Facsimile: 973.597.2400
SPECIAL SITUATIONS PRIVATE EQUITY
FUND, L.P.
By::_/s/ XXXXX X. GREENHOUSE_______
Name: Xxxxx X. Greenhouse
Title: General Partner
Aggregate Purchase Price: $702,000
Number of Shares: 1,080,000
000 X. 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
with a copy to:
Xxxxxxxxxx Xxxxxxx PC
00 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attn: Xxxx X. Xxxxxxxx, Esq.
Telephone: 000.000.0000
Facsimile: 973.597.2400
SPECIAL SITUATIONS TECHNOLOGY
FUND, L.P.
By::_/s/ XXXXX X. GREENHOUSE_______
Name: Xxxxx X. Greenhouse
Title: General Partner
Aggregate Purchase Price: $216,060
Number of Shares: 332,400
-28-
Address for Notice:
000 X. 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
with a copy to:
Xxxxxxxxxx Xxxxxxx PC
00 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attn: Xxxx X. Xxxxxxxx, Esq.
Telephone: 000.000.0000
Facsimile: 973.597.2400
-29-
EXHIBIT A
FORM OF ANTIDILUTION WARRANT
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS, AND NO INTEREST MAY BE
SOLD, DISTRIBUTED, ASSIGNED, OFFERED PLEDGED OR OTHERWISE TRANSFERRED EXCEPT TO
A PERMITTED TRANSFEREE (AS DEFINED HEREIN) AND UNLESS (A) THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS
COVERING ANY SUCH TRANSACTION INVOLVING SAID SECURITIES, (B) SUCH TRANSACTION
COMPLIES WITH RULE 144, (C) THIS CORPORATION RECEIVES AN OPINION OF LEGAL
COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THIS
CORPORATION STATING THAT SUCH TRANSACTION IS EXEMPT FROM REGISTRATION, OR (D)
THIS CORPORATION OTHERWISE SATISFIES ITSELF THAT SUCH TRANSACTION IS EXEMPT FROM
REGISTRATION.
SUBJECT TO THE PROVISIONS OF SECTION 10 HEREOF, THIS WARRANT SHALL BE VOID
AFTER 5:00 P.M. EASTERN TIME ON [FIFTH ANNIVERSARY OF THE DATE OF ISSUANCE] (the
"EXPIRATION DATE").
Warrant No. __________ Number of Shares: ______________
Date of Issuance: ______________
ONYX SOFTWARE CORPORATION
WARRANT TO PURCHASE ___________ SHARES OF
COMMON STOCK, PAR VALUE $0.01 PER SHARE
For VALUE RECEIVED, ____________________ ("Warrantholder"), is entitled to
purchase, subject to the provisions of this Warrant, from Onyx Software
Corporation, a Washington corporation ("Company"), at any time not later than
5:00 P.M., Eastern time, on the Expiration Date (as defined above), at an
exercise price per share equal to $____ (the exercise price in effect being
herein called the "Warrant Price"), ______ shares ("Warrant Shares") of the
Company's Common Stock, par value $0.01 per share ("Common Stock"). The number
of Warrant Shares purchasable upon exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time as described herein.
Section 1. Registration. The Company shall maintain books for the transfer
and registration of the Warrant. Upon the initial issuance of this Warrant, the
Company shall issue and register the Warrant in the name of the Warrantholder.
Section 2. Transfers. This Warrant may not be transferred to any person or
entity unless such person is a Permitted Transferee (as defined below) and one
of the following is true: (A) there is an effective registration statement under
the Securities Act of 1933, as amended (the "Securities Act") and applicable
state securities laws covering any such transaction involving this Warrant, (B)
such transaction complies with Rule 144, (C) the Company receives an opinion
of legal counsel for the holder of this Warrant reasonably satisfactory to the
Company stating that such transaction is exempt from registration, or (D) the
Company otherwise satisfies itself that such transaction is exempt from
registration. For purposes of this Section 2, the term "Permitted Transferee"
shall mean, with respect to the Warrantholder, (i) an Affiliate of such
Warrantholder or (y) a transferee of Warrants to purchase not less than (i)
50,000 shares of Common Stock (subject to adjustment as provided in Section 8
hereof, including pursuant to the Reverse Split as such term is defined in the
Purchase Agreement referred to below) or (ii) all of the shares of Common Stock
then held by such Warrantholder, provided that (A) notice of such transfer is
duly given by such Warrantholder to the Company and (B) the transferee agrees in
writing to be bound by the terms of this Warrant. Subject to such restrictions,
the Company shall transfer this Warrant from time to time upon the books to be
maintained by the Company for that purpose, upon surrender thereof for transfer
properly endorsed or accompanied by appropriate instructions for transfer and
such other documents as may be reasonably required by the Company, including, if
required by the Company, an opinion of its counsel to the effect that such
transfer is exempt from the registration requirements of the Securities Act, to
establish that such transfer is being made in accordance with the terms hereof,
and a new Warrant shall be issued to the transferee and the surrendered Warrant
shall be canceled by the Company.
Section 3. Exercise of Warrant. Subject to the provisions hereof, the
Warrantholder may exercise this Warrant in whole or in part at any time prior to
its expiration upon surrender of the Warrant, together with delivery of the duly
executed Warrant exercise notice attached hereto as Appendix A (the "Exercise
Notice") and payment by cash, certified check or wire transfer of funds for the
aggregate Warrant Price for that number of Warrant Shares then being purchased,
to the Company during normal business hours on any business day at the Company's
principal executive offices (or such other office or agency of the Company as it
may designate by notice to the holder hereof). The Warrant Shares so purchased
shall be deemed to be issued to the holder hereof or such holder's designee, as
the record owner of such shares, as of the close of business on the date on
which this Warrant shall have been surrendered (or evidence of loss, theft or
destruction thereof and security or indemnity satisfactory to the Company), the
Warrant Price shall have been paid and the completed Exercise Notice shall have
been delivered. Certificates for the Warrant Shares so purchased, representing
the aggregate number of shares specified in the Exercise Notice, shall be
delivered to the holder hereof within a reasonable time, not exceeding three (3)
business days, after this Warrant shall have been so exercised. The certificates
so delivered shall be in such denominations as may be requested by the holder
hereof and shall be registered in the name of such holder or such other name as
shall be designated by such holder. If this Warrant shall have been exercised
only in part, then, unless this Warrant has expired, the Company shall, at its
expense, at the time of delivery of such certificates, deliver to the holder a
new Warrant representing the number of shares with respect to which this Warrant
shall not then have been exercised. As used herein, "business day" means a day,
other than a Saturday or Sunday, on which banks in New York City are open for
the general transaction of business. Each exercise hereof shall constitute the
re-affirmation by the Warrantholder that the Warrantholder's representations and
warranties contained in Section 5 of the Purchase Agreement, dated as of May __,
2003, by and among the Company and the Investors named
-32-
therein (including the Warrantholder)(the "Purchase Agreement") are true and
correct in all material respects with respect to the Warrantholder as of the
time of such exercise.
Section 3. Compliance with the Securities Act of 1933. The Company may
cause the legend set forth on the first page of this Warrant to be set forth on
each Warrant or similar legend on any security issued or issuable upon exercise
of this Warrant, unless counsel for the Company is of the opinion as to any such
security that such legend is unnecessary.
Section 4. Payment of Taxes. The Company will pay any documentary stamp
taxes attributable to the initial issuance of Warrant Shares issuable upon the
exercise of the Warrant; provided, however, that the Company shall not be
required to pay any tax or taxes which may be payable in respect of any transfer
involved in the issuance or delivery of any certificates for Warrant Shares in a
name other than that of the registered holder of this Warrant in respect of
which such shares are issued, and in such case, the Company shall not be
required to issue or deliver any certificate for Warrant Shares or any Warrant
until the person requesting the same has paid to the Company the amount of such
tax or has established to the Company's reasonable satisfaction that such tax
has been paid. The holder shall be responsible for income taxes due under
federal, state or other law, if any such tax is due.
Section 5. Mutilated or Missing Warrants. In case this Warrant shall be
mutilated, lost, stolen, or destroyed, the Company shall issue in exchange and
substitution of and upon cancellation of the mutilated Warrant, or in lieu of
and substitution for the Warrant lost, stolen or destroyed, a new Warrant of
like tenor and for the purchase of a like number of Warrant Shares, but only
upon receipt of evidence reasonably satisfactory to the Company of such loss,
theft or destruction of the Warrant, and with respect to a lost, stolen or
destroyed Warrant, reasonable indemnity or bond with respect thereto, if
requested by the Company.
Section 7. Reservation of Common Stock. The Company hereby represents and
warrants that there have been reserved, and the Company shall at all applicable
times keep reserved until issued (if necessary) as contemplated by this Section
7, out of the authorized and unissued shares of Common Stock, sufficient shares
to provide for the exercise of the rights of purchase represented by this
Warrant. The Company agrees that all Warrant Shares issued upon due exercise of
the Warrant shall be, at the time of delivery of the certificates for such
Warrant Shares, duly authorized, validly issued, fully paid and non-assessable
shares of Common Stock of the Company.
Section 8. Adjustments. Subject and pursuant to the provisions of this
Section 8, the Warrant Price and number of Warrant Shares subject to this
Warrant shall be subject to adjustment from time to time as set forth
hereinafter.
(a) If the Company shall, at any time or from time to time while
this Warrant is outstanding, pay a dividend or make a distribution on its Common
Stock in shares of Common Stock, subdivide its outstanding shares of Common
Stock into a greater number of shares or combine its outstanding shares of
Common Stock into a smaller number of shares (including
-33-
pursuant to the Reverse Split contemplated by the Purchase Agreement) or issue
by reclassification of its outstanding shares of Common Stock any shares of its
capital stock (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing corporation),
then the number of Warrant Shares purchasable upon exercise of the Warrant and
the Warrant Price in effect immediately prior to the date upon which such change
shall become effective, shall be adjusted by the Company so that the
Warrantholder thereafter exercising the Warrant shall be entitled to receive the
number of shares of Common Stock or other capital stock which the Warrantholder
would have received if the Warrant had been exercised immediately prior to such
event upon payment of a Warrant Price that has been adjusted to reflect a fair
allocation of the economics of such event to the Warrantholder. Such adjustments
shall be made successively whenever any event listed above shall occur.
(b) If at any time after the date hereof there shall be any capital
reorganization or reclassification of the capital stock of the Company (a
"Reorganization"), consolidation or merger of the Company with another
corporation in which the Company is not the survivor, or sale, transfer or other
disposition of all or substantially all of the Company's assets to another
corporation (a "Merger"), then, as a condition of such Reorganization or Merger,
lawful and adequate provision shall be made whereby each Warrantholder shall
thereafter have the right to purchase and receive upon the basis and upon the
terms and conditions herein specified and in lieu of the Warrant Shares
immediately theretofore issuable upon exercise of the Warrant, such shares of
stock, securities, cash or assets as would have been issuable or payable with
respect to or in exchange for a number of Warrant Shares equal to the number of
Warrant Shares immediately theretofore issuable upon exercise of the Warrant,
had such Reorganization or Merger not taken place, and in any such case
appropriate provision shall be made with respect to the rights and interests of
each Warrantholder to the end that the provisions hereof (including, without
limitation, provision for adjustment of the Warrant Price) shall thereafter be
applicable, as nearly equivalent as may be practicable in relation to any shares
of stock, securities, cash or assets thereafter deliverable upon the exercise
thereof. The Company shall not effect any such Reorganization or Merger unless
prior to or simultaneously with the consummation thereof the successor
corporation (if other than the Company) resulting from such Reorganization or
Merger, or the corporation purchasing or otherwise acquiring such assets or
other appropriate corporation or entity shall assume the obligation to deliver
to the holder of the Warrant, at the last address of such holder appearing on
the books of the Company, such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holder may be entitled to
purchase, and the other obligations under this Warrant. The provisions of this
paragraph (b) shall similarly apply to successive Reorganizations and Mergers.
(c) In case the Company shall fix a payment date for the making of a
distribution to all holders of Common Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of indebtedness or assets (other than cash
dividends or cash distributions payable out of consolidated earnings or earned
surplus or dividends or distributions referred to in Section 8(a)), or
subscription rights or warrants, the Warrant Price to be in effect after such
payment date shall be determined by multiplying the Warrant Price in effect
immediately prior to such payment date
-34-
by a fraction, the numerator of which shall be the total number of shares of
Common Stock outstanding multiplied by the Market Price (as defined below) per
share of Common Stock immediately prior to such payment date, less the fair
market value (as determined by the Company's Board of Directors in good faith)
of said assets or evidences of indebtedness so distributed, or of such
subscription rights or warrants, and the denominator of which shall be the total
number of shares of Common Stock outstanding multiplied by such Market Price per
share of Common Stock immediately prior to such payment date. "Market Price" as
of a particular date (the "Valuation Date") shall mean the following: (a) if the
Common Stock is then listed on a national stock exchange, the closing sale price
of one share of Common Stock on such exchange on the last trading day prior to
the Valuation Date; (b) if the Common Stock is then quoted on The Nasdaq Stock
Market, Inc. ("Nasdaq"), the closing sale price of one share of Common Stock on
Nasdaq on the last trading day prior to the Valuation Date or, if no such
closing sale price is available, the average of the high bid and the low asked
price quoted on Nasdaq on the last trading day prior to the Valuation Date; or
(c) if the Common Stock is not then listed on a national stock exchange or
quoted on Nasdaq, the fair market value of one share of Common Stock as of the
Valuation Date, shall be determined in good faith by the Board of Directors of
the Company and the Warrantholder. The Board of Directors of the Company shall
respond promptly, in writing, to an inquiry by the Warrantholder prior to the
exercise hereunder as to the Market Value of a share of Common Stock as
determined by the Board of Directors of the Company. In the event that the Board
of Directors of the Company and the Warrantholder are unable to agree upon the
Market Value in respect of subpart (c) hereof, the Company and the Warrantholder
shall jointly select an appraiser, who is experienced in such matters. The
decision of such appraiser shall be final and conclusive, and the cost of such
appraiser shall be borne evenly by the Company and the Warrantholder. Such
adjustment shall be made successively whenever such a payment date is fixed.
(d) An adjustment to the Warrant Price shall become effective
immediately after the payment date in the case of each dividend or distribution
and immediately after the effective date of each other event which requires an
adjustment.
(e) In the event that, as a result of an adjustment made pursuant to
this Section 8, the holder of this Warrant shall become entitled to receive any
shares of capital stock of the Company other than shares of Common Stock, the
number of such other shares so receivable upon exercise of this Warrant shall be
subject thereafter to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the Warrant
Shares contained in this Warrant.
Section 9. Fractional Interest. The Company shall not be required to issue
fractions of Warrant Shares upon the exercise of this Warrant. If any fractional
share of Common Stock would, except for the provisions of the first sentence of
this Section 9, be deliverable upon such exercise, the Company, in lieu of
delivering such fractional share, shall pay to the exercising holder of this
Warrant an amount in cash equal to the Market Price of such fractional share of
Common Stock on the date of exercise.
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Section 10. Extension of Expiration Date. If the Company fails to cause
any Registration Statement covering Registrable Securities (unless otherwise
defined herein, capitalized terms are as defined in the Registration Rights
Agreement dated as of May 19, 2003 by and among the Company and the Investors
named therein, including the Warrantholder (the "Registration Rights
Agreement")) to be declared effective prior to the applicable dates set forth
therein, or if any of the events specified in Section 2(c)(ii) of the
Registration Rights Agreement occurs, and the Blackout Period (whether alone, or
in combination with any other Blackout Period) continues for more than 60 days
in any 12 month period, or for more than a total of 90 days, then the Expiration
Date of this Warrant shall be extended one day for each day beyond the 60-day or
90-day limits, as the case may be, that the Blackout Period continues.
Section 11. Benefits. Nothing in this Warrant shall be construed to give
any person, firm or corporation (other than the Company and the Warrantholder)
any legal or equitable right, remedy or claim, it being agreed that this Warrant
shall be for the sole and exclusive benefit of the Company and the
Warrantholder.
Section 12. Notices to Warrantholder. Upon the happening of any event
requiring an adjustment of the Warrant Price, the Company shall promptly give
written notice thereof to the Warrantholder at the address appearing in the
records of the Company, stating the adjusted Warrant Price and the adjusted
number of Warrant Shares resulting from such event and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based. Failure to give such notice to the Warrantholder or any
defect therein shall not affect the legality or validity of the subject
adjustment.
Section 13. Identity of Transfer Agent. The Transfer Agent for the Common
Stock is Mellon Investor Services, Seattle, Washington. Upon the appointment of
any subsequent transfer agent for the Common Stock or other shares of the
Company's capital stock issuable upon the exercise of the rights of purchase
represented by the Warrant, the Company will mail to the Warrantholder a
statement setting forth the name and address of such transfer agent.
Section 14. Notices. Unless otherwise provided, any notice required or
permitted under this Warrant shall be given in writing and shall be deemed
effectively given as hereinafter described (i) if given by personal delivery,
then such notice shall be deemed given upon such delivery, (ii) if given by
telex or facsimile, then such notice shall be deemed given upon receipt of
confirmation of complete transmittal, (iii) if given by mail, then such notice
shall be deemed given upon the earlier of (A) receipt of such notice by the
recipient or (B) three days after such notice is deposited in first class mail,
postage prepaid, and (iv) if given by an internationally recognized overnight
air courier, then such notice shall be deemed given one day after delivery to
such carrier. All notices shall be addressed as follows: if to the
Warrantholder, at its address as set forth in the Company's books and records
and, if to the Company, at the address as follows, or at such other address as
the Warrantholder or the Company may designate by ten days' advance written
notice to the other:
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If to the Company:
Onyx Software Corporation
0000 000xx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxx X. Xxxxxx
Fax: (000) 000-0000
With a copy to:
Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP
000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxxx
Fax: (000) 000-0000
Section 15. Registration Rights. The initial holder of this Warrant is
entitled to the benefit of certain registration rights with respect to the
shares of Common Stock issuable upon the exercise of this Warrant as provided in
the Registration Rights Agreement, and any subsequent holder hereof may be
entitled to such rights.
Section 16. Successors. All the covenants and provisions hereof by or for
the benefit of the Warrantholder shall bind and inure to the benefit of its
respective successors and assigns hereunder.
Section 17. Governing Law. This Warrant shall be governed by, and
construed in accordance with, the internal laws of the State of New York,
without reference to the choice of law provisions thereof. The Company and, by
accepting this Warrant, the Warrantholder, each irrevocably submits to the
exclusive jurisdiction of the courts of the State of New York located in New
York County and the United States District Court for the Southern District of
New York for the purpose of any suit, action, proceeding or judgment relating to
or arising out of this Warrant and the transactions contemplated hereby. Service
of process in connection with any such suit, action or proceeding may be served
on each party hereto anywhere in the world by the same methods as are specified
for the giving of notices under this Warrant. The Company and, by accepting this
Warrant, the Warrantholder, each irrevocably consents to the jurisdiction of any
such court in any such suit, action or proceeding and to the laying of venue in
such court. The Company and, by accepting this Warrant, the Warrantholder, each
irrevocably waives any objection to the laying of venue of any such suit, action
or proceeding brought in such courts and irrevocably waives any claim that any
such suit, action or proceeding brought in any such court has been brought in an
inconvenient forum.
Section 18. Cashless Exercise.
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Net Issue Election. With and only with the consent of the Company in
its sole discretion, the Warrantholder may elect to receive, without the payment
by the Warrantholder of the aggregate Warrant Price in respect of the shares of
Common Stock to be acquired, shares of Common Stock equal to the value of this
Warrant or any portion hereof by the surrender of this Warrant (or such portion
of this Warrant being so exercised) together with the Net Issue Election Notice
annexed hereto as Appendix B duly executed, at the office of the Company.
Thereupon, the Company shall issue to the Warrantholder such number of fully
paid, validly issued and nonassessable shares of Common Stock as is computed
using the following formula:
X = Y (A - B)
---------
A
where
X = the number of shares of Common Stock which the Warrantholder has
then requested be issued to the Warrantholder;
Y = the total number of shares of Common Stock covered by this
Warrant which the Warrantholder has surrendered at such time for cashless
exercise (including both shares to be issued to the Warrantholder and shares to
be canceled as payment therefor);
A = the "Fair Market Value" of one share of Common Stock as at the
time the net issue election is made; and
B = the Warrant Price in effect under this Warrant at the time the
net issue election is made.
Section 19. Call Provision. Notwithstanding any other provision contained
herein to the contrary, in the event that the closing bid price of a share of
Common Stock as traded on the Nasdaq (or such other exchange or stock market on
which the Common Stock may then be listed or quoted) equals or exceeds $____
(appropriately adjusted for any stock split, reverse stock split, stock dividend
or other reclassification or combination of the Common Stock occurring after the
date hereof)(the "Call Price") for ten (10) consecutive trading days and all of
the shares of Common Stock issuable hereunder either (i) are registered pursuant
to an effective Registration Statement (as defined in the Registration Rights
Agreement) which is available for sales of such shares of Common Stock during
the Notice Period (as defined below) or (ii) no longer constitute Registrable
Securities (as defined in the Registration Rights Agreement), the Company, upon
ten (10) days prior written notice (the "Notice Period") given to the
Warrantholder immediately following such ten (10) trading day period, may demand
that the Warrantholder exercise its rights hereunder, and the Warrantholder must
exercise its rights prior to the expiration of the Notice Period or if such
exercise is not made or if only a partial exercise is made, any and all rights
to further exercise rights hereunder shall cease upon the expiration of the
Notice Period.
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Section 20. No Rights as Shareholder. Prior to the exercise of this
Warrant, the Warrantholder shall not have or exercise any rights as a
shareholder of the Company by virtue of its ownership of this Warrant.
Section 21. Amendment; Waiver. This Warrant is one of a series of Warrants
of like tenor issued by the Company pursuant to the Purchase Agreement,
including a warrant to purchase an aggregate of 25,000 shares of Common Stock
issued at Closing (as defined in the Purchase Agreement) and any warrants issued
as Antidilution Warrants (as defined in the Purchase Agreement) (all such
warrants, collectively, the "Company Warrants"). Any term of this Warrant may be
amended or waived (including the adjustment provisions included in Section 8 of
this Warrant) upon the written consent of the Company and the holders of Company
Warrants representing at least 50% of the number of shares of Common Stock then
subject to all outstanding Company Warrants (the "Majority Holders"); provided,
that (x) any such amendment or waiver must apply to all Company Warrants; and
(y) the number of Warrant Shares subject to this Warrant, the Warrant Price and
the Expiration Date may not be amended, and the right to exercise this Warrant
may not be altered or waived, without the written consent of the Warrantholder.
Section 22. Section Headings. The section headings in this Warrant are for
the convenience of the Company and the Warrantholder and in no way alter,
modify, amend, limit or restrict the provisions hereof.
-39-
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed, as of the ______ day of ___________, 200_.
ONYX SOFTWARE CORPORATION
By:___________________________
Name:
Title:
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APPENDIX A
ONYX SOFTWARE CORPORATION
WARRANT EXERCISE NOTICE
To: Onyx Software Corporation:
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant ("Warrant") for, and to purchase
thereunder by the payment of the Warrant Price and surrender of the Warrant,
_______________ shares of Common Stock ("Warrant Shares") provided for therein,
and requests that certificates for the Warrant Shares be issued as follows:
-------------------------------
Name
--------------------------------
Address
--------------------------------
--------------------------------
Federal Tax ID or Social Security No.
and delivered by (certified mail to the above address, or
(electronically (provide DWAC Instructions:___________________), or
(other (specify): __________________________________________).
and, if the number of Warrant Shares shall not be all the Warrant Shares
purchasable upon exercise of the Warrant, that a new Warrant for the balance of
the Warrant Shares purchasable upon exercise of this Warrant be registered in
the name of the undersigned Warrantholder or the undersigned's Assignee as below
indicated and delivered to the address stated below.
Dated: ___________________, ____
Note: The signature must correspond with
Signature:______________________________
the name of the registered holder as written
on the first page of the Warrant in every ______________________________
particular, without alteration or enlargement Name (please print)
or any change whatever, unless the Warrant
has been assigned. ______________________________
______________________________
Address
______________________________
Federal Identification or
Social Security No.
Assignee:
______________________________
______________________________
42
APPENDIX B
Net Issue Election Notice
To: Onyx Software Corporation
Date:_________________________
The undersigned hereby elects under Section 18 of this Warrant to
surrender the right to purchase ____________ shares of Common Stock pursuant to
this Warrant and hereby requests the issuance of _____________ shares of Common
Stock. The certificate(s) for the shares issuable upon such net issue election
shall be issued in the name of the undersigned or as otherwise indicated below.
-----------------------------------------
Signature
-----------------------------------------
Name for Registration
-----------------------------------------
Mailing Address
EXHIBIT B
FORM OF REGISTRATION RIGHTS AGREEMENT
[Filed as Exhibit 10.3 to the registrant's current report on Form 8-K filed on
May 19, 2003]
EXHIBIT C
FORM OF OPINION OF COUNSEL TO THE COMPANY
(a) The Company is a corporation duly incorporated, validly existing under
the laws of the state of Washington and has paid all excise taxes required by
the Washington Department of Revenue.
(b) Each of the Purchase Agreement, the Registration Rights Agreement and
the Warrant has been duly executed and delivered by the Company and constitutes
a valid and binding obligation of the Company, enforceable against the Company
in accordance with its terms.
(c) The Shares have been duly authorized, and when issued to and paid for
by the Investors in compliance with the provisions of the Purchase Agreement and
the Resolutions, the Shares will be validly issued, fully paid and nonassessable
and the Warrant will be validly issued. The issuance of the Warrant Shares upon
exercise of the Warrant in accordance with its terms has been duly authorized
and, when issued to and paid for by the Investors in compliance with the
provisions of the Warrant, the Warrant Shares will be validly issued, fully paid
and nonassessable.
(d) When issued in accordance with the terms of the Purchase Agreement,
the Antidilution Warrants will constitute valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms. The
Antidilution Shares have been duly authorized, and, when issued to and paid for
by the Investors in compliance with the provisions of the Antidilution Warrants,
the Antidilution Shares will be validly issued, fully paid and nonassessable.
(e) The execution, delivery and performance of and compliance with the
Agreements, and the issuance of the Securities, have been duly authorized by all
necessary corporate action of the Company.
(f) The offer and sale of the Securities by the Company to the Investors
as contemplated by the Purchase Agreement are exempt from the registration
requirements of the Securities Act of 1933, as amended.
(g) The execution, delivery and performance of the Agreements does not,
and the issuance of the Securities as contemplated by the Purchase Agreement
will not, (i) conflict with or violate the Company's Articles of Incorporation
or its Bylaws, (ii) constitute a breach of or
EXHIBIT C
FORM OF OPINION OF COUNSEL TO THE COMPANY
Page 2
constitute a default under any Material Contract, (iii) conflict with or violate
any judgment, order or decree of any court or governmental authority of which we
have knowledge applicable to the Company or any of its properties, or (iv)
result in a material violation of, or conflict with, any federal or Washington
statute, rule or regulation that we have examined for purposes of rendering this
opinion.
(h) No consent, permit, authorization, approval of or notice to any
governmental authority or, to our knowledge, any third party to any Material
Contract, is required in connection with the execution and delivery of the
Agreements, the issuance and sale of the Securities as contemplated by the
Purchase Agreement or the consummation of the other transactions contemplated by
the Agreements under (i) any Material Contract, (ii) any judgment, order or
decree of any court or governmental authority of which we have knowledge
applicable to the Company or any of its properties, or (iii) any federal or
Washington statute, rule or regulation that we have examined for purposes of
rendering this opinion, other than (x) consents that have already been obtained,
(y) such approval by the Company's shareholders of the issuance of the
Securities contemplated under Rule 4350(i) of the National Association of
Securities Dealers, Inc. qualification requirements as may be required and (z)
those under applicable federal securities laws that will be made after Closing.
