-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RW6q4xPnYSLu1Utgp7oaZDhmvlIj43WrV1GP/2reQL7arPogs1ZExkFl+ZxEur/B /HOrlGLdwOMH5sQx3L5pvA== 0000895345-00-000167.txt : 20000307 0000895345-00-000167.hdr.sgml : 20000307 ACCESSION NUMBER: 0000895345-00-000167 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 20000301 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: OPTIKA INC CENTRAL INDEX KEY: 0001014920 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 954154552 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-48917 FILM NUMBER: 558317 BUSINESS ADDRESS: STREET 1: 7450 CAMPUS DR 2ND FLOOR STREET 2: STE 200 CITY: COLORADO SPRINGS STATE: CO ZIP: 80920 BUSINESS PHONE: 7195489800 MAIL ADDRESS: STREET 1: 7450 CAMPUS DR 2ND FLOOR STREET 2: STE 200 CITY: COLORADO SPRINGS STATE: CO ZIP: 80920 FORMER COMPANY: FORMER CONFORMED NAME: OPTIKA IMAGING SYSTEMS INC DATE OF NAME CHANGE: 19960520 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: WEISEL THOMAS PARTNERS GROUP LLC/CA CENTRAL INDEX KEY: 0001080163 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 943310171 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: ONE MONTGOMERY STREET 3700 CITY: SAN FRANCISCO STATE: CA ZIP: 94104 MAIL ADDRESS: STREET 1: ONE MONTGOMERY STREET STREET 2: SUITE 3700 CITY: SAN FRANCISCO STATE: CA ZIP: 94104 SC 13D 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934* Optika Inc. - --------------------------------------------------------------------------- (Name of Issuer) Common Stock (Par Value $ 0.001 Per Share) (Upon Conversion of Series A Convertible Preferred Stock and Exercise of Warrants) - --------------------------------------------------------------------------- (Title of Class of Securities) 6839731 10 1 - --------------------------------------------------------------------------- (CUSIP Number) F. William Reindel David A. Baylor Fried, Frank, Harris, Shriver & Jacobson One Montgomery Street One New York Plaza Suite 3700 New York, NY 10004 San Francisco, CA 94101 (212) 859-8000 (415) 364-2500 - --------------------------------------------------------------------------- (Name, Address and Telephone Number of Persons Authorized to Receive Notices and Communications) February 23, 2000 - --------------------------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box |_|. *The remainder of this cover page will be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page will not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but will be subject to all other provisions of the Act (however, see the Notes). SCHEDULE 13D CUSIP No. 6839731 10 1 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON THOMAS WEISEL PARTNERS GROUP LLC 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [X] 3 SEC USE ONLY 4 SOURCE OF FUNDS AF 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE NUMBER OF 7 SOLE VOTING POWER SHARES 0 BENEFICIALLY 8 SHARED VOTING POWER OWNED BY EACH 987,191 (1,594,138 SHARES AFTER EIGHT YEARS)* REPORTING 9 SOLE DISPOSITIVE POWER PERSON WITH 0 10 SHARED DISPOSITIVE POWER 987,191 (1,594,138 SHARES AFTER EIGHT YEARS)* 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 987,191 (1,594,138 SHARES AFTER EIGHT YEARS)* 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [ ] EXCLUDES CERTAIN SHARES 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 11.5% (17.4% AFTER EIGHT YEARS)** 14 TYPE OF REPORTING PERSON OO - HC * Represents the number of shares of Common Stock into which the Series A Preferred Stock and Warrants held by the Reporting Person are initially convertible or exercisable (and the number of such shares into which such securities are convertible or exercisable on the eighth anniversary of the issue date assuming that the Series A Preferred Stock is not earlier converted or redeemed). ** Represents percent of class outstanding, initially and after eight years, based on 7,589,129 shares of Common Stock issued and outstanding as represented by the Issuer in the Securities Purchase Agreement (defined herein). SCHEDULE 13D CUSIP No. 6839731 10 1 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON THOMAS WEISEL CAPITAL PARTNERS LLC 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [X] 3 SEC USE ONLY 4 SOURCE OF FUNDS AF 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE NUMBER OF 7 SOLE VOTING POWER SHARES 0 BENEFICIALLY 8 SHARED VOTING POWER OWNED BY EACH 987,191 (1,594,138 SHARES AFTER EIGHT YEARS)* REPORTING 9 SOLE DISPOSITIVE POWER PERSON WITH 0 10 SHARED DISPOSITIVE POWER 987,191 (1,594,138 SHARES AFTER EIGHT YEARS)* 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 987,191 (1,594,138 SHARES AFTER EIGHT YEARS)* 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [ ] EXCLUDES CERTAIN SHARES 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 11.5% (17.4% AFTER EIGHT YEARS)** 14 TYPE OF REPORTING PERSON OO * Represents the number of shares of Common Stock into which the Series A Preferred Stock and Warrants held by the Reporting Person are initially convertible or exercisable (and the number of such shares into which such securities are convertible or exercisable on the eighth anniversary of the issue date assuming that the Series A Preferred Stock is not earlier converted or redeemed. ** Represents percent of class outstanding based on 7,589,129 shares of Common Stock issued and outstanding as represented by the Issuer in the Securities Purchase Agreement (defined herein). SCHEDULE 13D CUSIP No. 6839731 10 1 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON THOMAS WEISEL CAPITAL PARTNERS, L.P. 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [X] 3 SEC USE ONLY 4 SOURCE OF FUNDS WC 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE NUMBER OF 7 SOLE VOTING POWER SHARES 0 BENEFICIALLY 8 SHARED VOTING POWER OWNED BY EACH 854,212 (1,379,401 SHARES AFTER EIGHT YEARS)* REPORTING 9 SOLE DISPOSITIVE POWER PERSON WITH 0 10 SHARED DISPOSITIVE POWER 854,212 (1,379,401 SHARES AFTER EIGHT YEARS)* 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 854,212 (1,379,401 SHARES AFTER EIGHT YEARS)* 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [ ] EXCLUDES CERTAIN SHARES 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 10.1% (15.4% AFTER EIGHT YEARS)** 14 TYPE OF REPORTING PERSON* PN * Represents the number of shares of Common Stock into which the Series A Preferred Stock and Warrants held by the Reporting Person are initially convertible or exercisable (and the number of such shares into which such securities are convertible or exercisable on the eighth anniversary of the issue date assuming that the Series A Preferred Stock is not earlier converted or redeemed. ** Represents percent of class outstanding based on 7,589,129 shares of Common Stock issued and outstanding as represented by the Issuer in the Securities Purchase Agreement (defined herein). ITEM 1. SECURITY AND ISSUER. ------------------- This statement on Schedule 13D relates to the common stock, par value $.001 per share (the "Common Stock") of Optika Inc., a Delaware corporation (the "Company"). All capitalized terms not otherwise defined herein have the meaning given to them in the Securities Purchase Agreement (as defined below). The principal executive offices of the Company are at 7450 Campus Drive, 2nd Floor, Colorado Springs, Colorado 80920. ITEM 2. IDENTITY AND BACKGROUND. ----------------------- This statement is being filed by Thomas Weisel Capital Partners, L.P. ("TWCP L.P."), Thomas Weisel Capital Partners LLC ("TWCP LLC") which is the general partner of TWCP L.P. and certain other investment limited partnerships (the "Other Partnerships" and, together with TWCP L.P., the "Limited Partnerships"), and Thomas Weisel Partners Group LLC ("TW Group" and, together with TWCP L.P. and TWCP LLC, the "Filing Persons").1 - ------------------- 1 Neither the present filing nor anything contained herein will be construed as an admission that any Filing Person constitutes a "person" for any purpose other than for compliance with Section 13(d) of the Securities Exchange Act of 1934, as amended. In addition to the Limited Partnerships referenced above, RKB Capital, L.P. ("RKB") was also a purchaser under the Securities Purchase Agreement, by and among the Company, the Limited Partnerships and RKB (the "Securities Purchase Agreement"), which is filed as Exhibit 2 hereto and incorporated herein by reference. Each Filing Person is organized under the laws of Delaware. TWCP L.P. was formed for the purpose of making equity investments in growth companies. TWCP LLC is a registered investment adviser and the sole general partner of each of the Limited Partnerships. The managing member of TWCP LLC is TW Group. TW Group is a holding company that (directly and indirectly through subsidiaries or affiliated companies or both) is a privately held investment banking firm. The principal business address of each Filing Person is One Montgomery Street, Suite 3700, San Francisco, California 94104. Other than TW Group, which is governed by the executive committee, the members of which are described below, and other than TWCP LLC, of which Derek Lemke-von Ammon and Alan B. Menkes (who are also members of the executive committee of TW Group) are executive officers, none of the other Filing Persons have executive officers or directors. The business and affairs of TWCP L.P. and the Other Partnerships are managed by its general partner, TWCP LLC whose business and affairs are managed by its managing member TW Group. The business and affairs of TW Group are managed by the executive committee of TW Group. The name, business address, present principal occupation or employment and citizenship of each member of the executive committee of TW Group are set forth in Schedule I hereto incorporated herein by reference. During the last five years, none of the Filing Persons, nor, to the knowledge of each of the Filing Persons, any of the Other Partnerships or the persons listed on Schedule I (i) has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree, or final order enjoining future violations of, or prohibiting or mandating activities subject to federal or state securities laws or finding any violation with respect to such laws. The Filing Persons have entered into a Joint Filing Agreement, dated as of February 29, 2000, a copy of which is attached hereto as Exhibit 1. Neither the fact of this filing nor anything contained herein (including the reference to RKB) shall be deemed an admission by the Filing Persons that they constitute a "group" as such term is used in Section 13(d)(1)(k) of the rules and regulations under the Securities Exchange Act of 1934, as amended (together with such rules and regulations, the "Exchange Act"). ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. ------------------------------------------------- As more fully described herein, on February 23, 2000 (the "Closing Date"), the Limited Partnerships purchased (severally and not jointly), pursuant to the Securities Purchase Agreement (i) an aggregate of 695,258 shares of the Company's Series A Convertible Preferred Stock, par value $0.001 per share (the "Preferred Stock") and (ii) warrants (the "Warrants") to purchase an aggregate of 291,933 shares of the Company's Common Stock for an aggregate purchase price of $14,250,007.97 and RKB purchased 36,593 shares of Preferred Stock and Warrants to purchase an aggregate of 15,365 shares of Common Stock for an aggregate purchase price of $750,010.13. Neither the individuals listed on Schedule I hereto nor any Filing Person hereunder beneficially owns any securities of the Company other than those described above. The funds used by the Limited Partnerships to purchase the Preferred Stock and Warrants were obtained by such entities from capital contributions by their partners and from the available funds of such entities. None of the individuals listed on Schedule I hereto has contributed any funds or other consideration towards the purchase of the securities of the Company except insofar as they may have partnership interests in any of the Filing Persons and have made capital contributions to any of the Filing Persons, as the case may be. ITEM 4. PURPOSE OF TRANSACTION. ----------------------- 1. General ------- The purpose of the acquisition of the Preferred Stock and Warrants by the Limited Partnerships was to acquire an equity interest in the Company. The principal terms and conditions of the securities acquired by the Limited Partnerships and RKB are set forth in the Certificate of Designation for the shares of Preferred Stock, the Warrant Agreement providing for the issuance of the Warrants and the Securities Purchase Agreement. 2. Terms of Preferred Stock ------------------------ Dividends --------- Under the terms of the Certificate of Designation which is filed as Exhibit 3 hereto and incorporated herein by reference, so long as any shares of Preferred Stock remain outstanding, if the Company pays a dividend (cash or otherwise) on shares of Common Stock, then at the same time the Company is required to declare and pay a dividend on each share of Preferred Stock equal (in form and amount) to the dividend that would be payable on the shares of Common Stock into which such share of Preferred Stock may be converted on the record date for such dividends (or if no record date is established, at the date such dividend is declared). There are no other dividends payable with respect to the Preferred Stock. Liquidation Event ----------------- If the Company shall liquidate, dissolve or wind-up (a "Liquidation"), holders of Preferred Stock are entitled to receive for each share of Preferred Stock the greater of the Liquidation Preference (as defined below) as of the date of Liquidation for such share and the amount the holder of such share of Preferred Stock would have received upon such Liquidation if such shares were converted immediately prior to such Liquidation into shares of Common Stock. The "Liquidation Preference" is $20.496 per share (as adjusted for any stock dividends, combinations or splits with respect to such share) at the date of such issuance of the Preferred Stock (the "Closing") plus an amount equal to dividends thereon which are deemed to cumulate and accrue from and after the date of issuance of such share at a rate of 8% per annum, compounded semi-annually on each six month anniversary after the Closing Date. Other Liquidation Event ----------------------- If the Company shall (i) dispose, lease or sell substantially all of its assets to any person, (ii) consummate a transaction, other than a Public Company Liquidation Event, as defined below, in which a person or group (as defined under Sections 13(d) and 14(d) of the Exchange Act) becomes the "beneficial owner" (as defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act) of more than 50% of the voting power of the Company or (iii) cause a recapitalization of the Company involving an extraordinary distribution or dividend to the holders of Common Stock then the Company is required to offer to repurchase all outstanding shares of Preferred Stock for an amount in cash per share of Preferred Stock equal to the greater of the (x) then current Liquidation Preference of the Preferred Stock and (y) the amount a holder of each share would be entitled to receive on a Liquidation in respect of the aggregate number of shares of Common Stock into which such share of Preferred Stock is then convertible assuming that such transaction constitutes a Liquidation for these purposes. If the Company shall consummate a transaction which is the same as described in (ii) above and the consideration to be paid to the holders of Common Stock consists solely of common stock of a corporation which has an aggregate public float (as determined under the Certificate of Designation) of at least $250 million (a "Public Company Liquidation Event") and the shares of which are listed on a national exchange or freely tradeable without restrictions, then the Company shall offer to repurchase all outstanding shares of Preferred Stock for an amount in cash per share of Preferred Stock equal to the Liquidation Preference of the Preferred Stock then in effect. Conversion ---------- Under the terms of the Certificate of Designation, the holders of Preferred Stock shall have the right following the Closing Date at any time in whole and from time to time in part, at such holder's option, to convert any or all outstanding shares of Preferred Stock into a number of shares of Common Stock, determined by dividing the Liquidation Preference as of the conversion date by $20.496, subject to customary anti-dilution adjustments. As a result of such conversion rights, the total shares of Preferred Stock issued to the Limited Partnerships on the Closing Date are convertible into 695,258 shares of Common Stock and, assuming the Preferred Stock is not earlier redeemed or converted, 1,302,205 shares of Common Stock on the eighth anniversary of the issue date. Redemption ---------- Under the terms of the Certificate of Designation, the Company shall at any time following the first anniversary of the Closing Date, have the right to redeem all, but not less than all, of the then outstanding shares of Preferred Stock within seventy (70) days following any date for which the market price per share of Common Stock for each of at least twenty (20) out of twenty-two (22) consecutive trading days preceding such date is equal to or greater than $40.992 (subject to appropriate adjustments). Any such redemption must be effected for an amount in cash per share of Preferred Stock equal to the Liquidation Preference of the Preferred Stock then in effect. Under the terms of the Certificate of Designation, the Company shall, on the eighth anniversary of the Closing Date (such date, the "Mandatory Redemption Date") redeem all, but not less than all, of the then outstanding shares of Preferred Stock. Any such redemption must be effected for an amount in cash per share of Preferred Stock equal to the Liquidation Preference of the Preferred Stock then in effect as of the Mandatory Redemption Date. 3. Terms of Warrants ----------------- Pursuant to the Warrant Agreement, dated as of the Closing Date, among the Company, RKB and the Limited Partnerships (the "Warrant Agreement"), the Company issued Warrants to the Limited Partnerships to purchase an aggregate of 291,933 shares of Common Stock with an exercise price of $22.448 per share (such exercise price will be adjusted in accordance with customary anti-dilution provisions). The Warrant Agreement permits the Warrants to be exercised at any time in whole and from time to time in part during the term of the Warrants with a cash payment to the Company or cashlessly. The Warrants will expire on the eighth anniversary of the Closing Date. 4. Board Representation; Voting Rights ----------------------------------- Pursuant to the Certificate of Designation, and for so long as any of the Preferred Stock is outstanding, the holders of a majority of the outstanding shares of Preferred Stock shall be entitled to designate one director for election to the Board of Directors of the Company as a Class I director and, voting separately as a series, shall have the exclusive right to vote for the election of such designee to the Board of Directors for so long as the purchasers under the Securities Purchase Agreement and their affiliates own in excess of the Ownership Threshold (as defined below). In the event the Certificate of Designation is no longer in effect, under the Securities Purchase Agreement, from the Closing Date, and for so long as the purchasers and their affiliates beneficially own in the aggregate Preferred Stock, Warrants and Common Stock issuable upon conversion or exercise thereof representing greater than 15% of the Common Stock (assuming such conversion and exercise) acquired by the purchasers in the aggregate at the Closing (and adjusting for stock splits, stock combinations and like transactions) (such ownership threshold referred to as the "Ownership Threshold"), TWCP L.P. will continue to have the right to nominate one director (the "Purchaser's Designee") to the Company's board of directors. The Company will include such nominee in the slate of directors recommended by the Company and will use reasonable efforts to secure the election of such nominee. On the Closing Date, Mr. Alan B. Menkes, Co-Head of Private Equity of TW Group and a member of the executive committee thereof, was appointed to the Board of Directors as the Purchaser's Designee. The Purchaser's Designee has the right to sit on all committees of the Board of Directors and Mr. Menkes was appointed to each of the Audit Committee and the Compensation Committee of the Board of Directors. In the event any Purchaser's Designee is not elected, then, at the request of TWCP L.P., the appointment of the Purchaser's Designee or any other person designated by TWCP L.P. shall serve as a non-voting observer (a "Non-Voting Observer") to the Board of Directors of the Company. The Non-Voting Observer shall serve on the Board of Directors on as nearly equivalent basis as is possible (other than the right to vote) as would have been the case if the Purchaser's Designee had been elected to the Board of Directors. The Purchaser's Designee shall have the right to serve on the Board of Directors or as a Non-Voting Observer until the purchasers and their affiliates beneficially own in the aggregate Preferred Stock, Warrants and Common Stock less than the Ownership Threshold. So long as the purchasers and their affiliates own in excess of the Ownership Threshold, TWCP L.P. shall have the right to consult with and advise management of the Company on significant business issues. 5. By-laws Amendment ----------------- Pursuant to the Securities Purchase Agreement, the by-laws of the Company were amended to require that the Board of Directors consist of eight directors for so long as required by the Securities Purchase Agreement and to provide that for so long as the Certificate of Designation is in effect its provisions shall govern to the extent any provisions of the by-laws are inconsistent with the Certificate of Designation. 6. Management Stockholders Agreements ---------------------------------- Pursuant to the Securities Purchase Agreement, the Limited Partnerships and the Company entered into a Management Stockholders Agreement with each of Mark K. Ruport, Steven M. Johnson, James Hale, Thomas M. Rafferty, Mark R. Fey and Jeanne C. Logozzo (each a "Designated Shareholder") which subject to certain exceptions provided therein, provides for from February 9, 2000 until August 9, 2000, except for Mark Ruport for whom such period shall extend from February 9, 2000 until February 9, 2001, the agreement of the Designated Stockholders not to transfer any shares of Common Stock (including upon exercise of options) held by them without the consent of the Limited Partnerships. This restriction on transfers will terminate automatically if the Designated Stockholder's employment with the Company terminates. 7. Other Plans and Proposals ------------------------- Except as described above or otherwise described in this Schedule 13D, neither the Filing Persons nor the Other Partnerships or the persons listed on Schedule I currently have any plans or proposals which relate to or would result in any transaction, event or action enumerated in the paragraphs of Item 4 of the Form of Schedule 13D promulgated under the Act. Each of the Filing Persons expects to evaluate on an ongoing basis the Company's financial condition, business, operations and prospects, the market price of the Common Stock, conditions in the securities markets generally, general economic and industry conditions and other factors. Accordingly, each Filing Person reserves the right to change its plans and intentions at any time, as it deems appropriate. In particular, any one or more of Filing Persons (and their respective affiliates) may purchase additional shares of Common Stock, Warrants or Preferred Stock or other securities of the Company or may sell or transfer shares of Common Stock, Warrants or Preferred Stock (or any of the shares of Common Stock into which such Preferred Stock is converted) beneficially owned by them from time to time in public or private transactions and/or may enter into privately negotiated derivative transactions with institutional counterparties to hedge the market risk of some or all of their positions in the shares of Common Stock, Preferred Stock or other securities and/or may cause any of the Limited Partnerships to distribute in kind to their respective partners or members, as the case may be, shares of Common Stock or Preferred Stock or other securities owned by such Limited Partnerships. To the knowledge of each Filing Person, each of the persons listed on Schedule I hereto may make similar evaluations from time to time or on an ongoing basis and have similar reservations. ITEM 5. INTERESTS IN SECURITIES OF THE ISSUER. ------------------------------------- (a) Based on the information disclosed by the Company in the Securities Purchase Agreement, as of February 8, 2000, there were 7,589,129 shares of Common Stock issued and outstanding. As of February 23, 2000, TWCP L.P. beneficially owns 854,212 shares or 10.1% of Common Stock which represents the number of shares of Common Stock into which the Preferred Stock and Warrants held are initially convertible or exercisable and 1,379,401 shares or 15.4% of Common Stock which represents the number of shares of Common Stock into which such securities are convertible or exercisable on the eighth anniversary of the issue date assuming that the Preferred Stock is not earlier converted or redeemed. As of February 23, 2000, TWCP LLC and TW Group may be deemed to beneficially own 987,191 shares, or 11.5%, of Common Stock which represents the number of shares of Common Stock into which the Preferred Stock and Warrants held by the Limited Partnerships are initially convertible or exercisable and 1,594,138 shares, or 17.4%, of Common Stock which represents the number of shares of Common Stock into which such securities held by the Limited Partnerships are convertible or exercisable on the eighth anniversary of the issue date assuming that the Preferred Stock is not earlier converted or redeemed. TWCP LLC and TW Group disclaim beneficial ownership of the shares of Common Stock beneficially owned by the Limited Partnerships to the extent of the interests in the Limited Partnerships held by persons other than TWCP LLC and TW Group and their affiliates. None of the Filing Persons or, to the knowledge of the Filing Persons, the Other Partnerships or the persons listed on Schedule I hereto beneficially owns any shares of Common Stock other than as set forth herein. (b) Each Filing Person shares the power to vote or direct the vote and to dispose or to direct the disposition of shares of Common Stock beneficially owned by such Filing Person as indicated above as indicated in responses on the cover pages hereto. (c) Except as described in this Schedule 13D, no transactions in the shares of Common Stock were effected by the Filing Persons, or, to their knowledge, any of the Other Partnerships or the persons listed on Schedule I hereto, during the past sixty days. (d) Except for the Other Partnerships, no other person is known by any Filing Person to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, any shares of Common Stock beneficially owned by any Filing Person. (e) Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. ------------------------------------------------------------- The responses set forth in Items 3 and 4 of this Schedule 13D are incorporated herein by this reference in their entirety. The Company has agreed to reimburse the purchasers for their fees and expenses incurred in connection with the transactions contemplated by the Securities Purchase Agreement provided that such fees and expenses do not exceed $175,000, in the aggregate. Registration Rights Agreement - ----------------------------- The Registration Rights Agreement, dated February 23, 2000, by and among the Company, the Founders and Investors party thereto, the Limited Partnerships and RKB (the "Registration Rights Agreement") is attached hereto as Exhibit 6 and is incorporated in and made a part of this Schedule 13D in its entirety by this reference. The Registration Rights Agreement provides, subject to the limitations described therein, (i) the Limited Partnerships and RKB on (A) three separate occasions with the right to demand registration on Form S-1 or any similarly long-form registration statement (each a "Long-Form Registration") under the Securities Act of 1933, as amended (the "Securities Act"), and (B) with an unlimited number of demand registrations on Form S-2 or S-3 or any similar short-form registration statement (a "Short-Form Registration") under the Securities Act to effect a registration of shares of Common Stock and securities convertible into, or exercisable or exchangeable for, shares of Common Stock ("Common Stock Equivalents") held by the Limited Partnerships and RKB, (ii) holders of Investors' Shares (as defined therein) with on (A) two separate occasions the right to demand a Long-Form Registration and (B) an unlimited number of Short-Form Registrations to effect a registration of shares of Common Stock with respect to shares or Common Stock and Common Stock Equivalents held by the Investors' Shares and (iii) all holders of registrables shares the right to include shares of Common Stock and Common Stock Equivalents then held by such holders of registrable shares (subject to applicable cutbacks) in any other registration by the Company of its equity securities under the Securities Act. The Company will pay certain expenses in connection with such registration as provided in the Registration Rights Agreement. Other than as set forth in this Item 6 and Items 3, 4, and 5 above, none of the Filing Persons is a party to any contract, arrangement, understanding or relationship with respect to any securities of the issuer, and none of the securities as to which this Schedule 13D relates is pledged or is otherwise subject to a contingency the occurrence of which would give another person voting power or investment power over such securities. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. -------------------------------- Exhibit 1 Joint Filing Agreement, dated as of February 29, 2000 Exhibit 2 Securities Purchase Agreement, dated as of February 9, 2000, by and among the Company, the Limited Partnerships and RKB Exhibit 3 Certificate of Designation of Series A Convertible Preferred Stock Exhibit 4 Management Stockholder Agreements for each of Jeanne C. Logozzo, Steven M. Johnson, Marc R. Fey, James Hale, Thomas M. Rafferty and Mark K. Ruport Exhibit 5 Warrant Agreement, dated as of February 23, 2000, by and among the Company, Limited Partnerships and RKB Exhibit 6 Registration Rights Agreement, dated as of February 23, 2000, by and among the Company, the Founders and Investors party thereto and the Limited Partnerships and RKB SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. February 29, 2000 THOMAS WEISEL PARTNERS GROUP LLC By: /s/ David Baylor ------------------------------------------ Name: David Baylor Title: Partner THOMAS WEISEL CAPITAL PARTNERS LLC By: Thomas Weisel Partners Group LLC, its managing member By: /s/ Marianne Winkler ------------------------------------------ Name: Marianne Winkler Title: Chief Financial Officer THOMAS WEISEL CAPITAL PARTNERS, L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, its managing member By: /s/ Marianne Winkler ------------------------------------------ Name: Marianne Winkler Title: Chief Financial Officer EXHIBITS Exhibit 1 Joint Filing Agreement, dated as of February 29, 2000 Exhibit 2 Securities Purchase Agreement, dated as of February 9, 2000, by and among the Company, the Limited Partnerships and RKB Exhibit 3 Certificate of Designation of Series A Convertible Preferred Stock Exhibit 4 Management Stockholder Agreements for each of Jeanne C. Logozzo, Steven M. Johnson, Marc R. Fey, James Hale, Thomas M. Rafferty and Mark K. Ruport Exhibit 5 Warrant Agreement, dated as of February 23, 2000, by and among the Company, Limited Partnerships and RKB Exhibit 6 Registration Rights Agreement, dated as of February 23, 2000, by and among the Company, the Founders and Investors party thereto and the Limited Partnerships and RKB SCHEDULE I The name of each executive committee member of Thomas Weisel Partners Group LLC is set forth below. The business address of each person listed below is One Montgomery Street, Suite 3700, San Francisco, California 94104 (except for William Shutzer which is 390 Park Avenue, 17th Floor, New York, New York 10022). Each person is a citizen of the United States of America. The present principal occupation or employment of each of the listed persons is set forth below. Name Present Principal Occupation - --------------------------------------------------------------------------- Thomas W. Weisel Chief Executive Officer - --------------------------------------------------------------------------- Frank M. Dunlevy Co-Head of Investment Banking - --------------------------------------------------------------------------- Timothy J. Heekin Head of Trading - --------------------------------------------------------------------------- Derek Lemke-von Ammon Co-Head of Private Equity - --------------------------------------------------------------------------- Alan B. Menkes Co-Head of Private Equity - --------------------------------------------------------------------------- J. Sanford Miller Chief Administrative and Strategic Officer - --------------------------------------------------------------------------- William Shutzer Co-Head of Investment Banking - --------------------------------------------------------------------------- Mark Shafir Co-Head of Investment Banking and M&A EX-99.1 2 EXHIBIT 1 Joint Filing Agreement The undersigned hereby agree that the Statement on Schedule 13D filed herewith (and any amendments thereto), relating to the common stock, par value $0.001 per share, of Optika Inc., is being filed jointly with the Securities and Exchange Commission pursuant to Rule 13d-1(k)(1) under the Securities Exchange Act of 1934, as amended, on behalf of each such person. Dated: February 29, 2000 THOMAS WEISEL PARTNERS GROUP LLC By: /s/ David Baylor ------------------------------------------ Name: David Baylor Title: Partner THOMAS WEISEL CAPITAL PARTNERS LLC By: Thomas Weisel Partners Group LLC, its managing member By: /s/ Marianne Winkler ------------------------------------------ Name: Marianne Winkler Title: Chief Financial Officer THOMAS WEISEL CAPITAL PARTNERS, L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, its managing member By: /s/ Marianne Winkler ------------------------------------------ Name: Marianne Winkler Title: Chief Financial Officer EX-99.2 3 EXHIBIT 2 EXECUTION COPY -------------- SECURITIES PURCHASE AGREEMENT by and among OPTIKA INC. THOMAS WEISEL CAPITAL PARTNERS L.P. and The Parties Listed On The Signature Page Hereto As of February 9, 2000 TABLE OF CONTENTS PAGE ARTICLE I ISSUANCE AND SALE OF PREFERRED STOCK AND WARRANTS.........1 1.1. Issuance, Purchase and Sale.........................1 1.2. The Closing; Deliveries.............................2 1.3 Capitalized Terms...................................2 ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY..............2 2.1. Organization; Subsidiaries...........................2 2.2. Due Authorization....................................4 2.3. Capitalization.......................................5 2.4. SEC Reports..........................................6 2.5. Financial Statements.................................6 2.6. Absence of Certain Changes...........................7 2.7. Litigation...........................................8 2.8. Title to Properties; Insurance.......................8 2.9. Consents; No Violations..............................9 2.10. Holding Company Act and Investment Company Act......10 2.11. Taxes...............................................10 2.12. Employee Benefit Plans..............................11 2.13. Intellectual Property...............................13 2.14. Compliance with Laws................................16 2.15. Commitments.........................................17 2.16. Brokers or Finders..................................18 2.17. Related Party Transactions..........................18 2.18. Section 203 of the DGCL; Takeover Statute...........19 2.19. Proprietary Information of Third Parties............19 2.20. Disclosure..........................................20 2.21. Year 2000...........................................20 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS..........21 3.1. Acquisition for Investment..........................21 3.2. Restricted Securities...............................21 3.3. No Brokers or Finders...............................21 3.4. Accredited Investor.................................21 3.5 Organization........................................21 3.6. Due Authorization...................................21 3.7. Consents; No Violations.............................22 3.8. Availability of Funds...............................22 3.9 Trading Price.......................................22 ARTICLE IV COVENANTS.................................................22 4.1. Conduct of Business by the Company Pending the Closing.............................................22 4.2. No Solicitation.....................................25 4.3. Press Releases; Interim Public Filings..............25 4.4. Consents; Approvals.................................25 4.5. Listing.............................................26 4.6. Board Representation; VCOC..........................26 4.7. Committees..........................................28 4.8. Certificate of Designation..........................29 4.9. Cooperation.........................................29 4.10. Covenants to Provide Information....................29 4.11. Reserve Shares......................................30 4.12. Notice of Breach....................................30 4.13. Transfer Taxes......................................31 4.14. Indemnification.....................................31 4.15. Use of Proceeds.....................................31 4.16. Registration Rights Agreement.......................31 4.17. Future Issuances....................................31 ARTICLE V CONDITIONS................................................32 5.1. Conditions to Obligations of the Purchasers and the Company.........................................32 5.2. Conditions to Obligations of the Purchasers.........32 5.3. Conditions to Obligations of the Company............33 ARTICLE VI TERMINATION...............................................34 6.1. Termination.........................................34 6.2. Effect of Termination...............................35 ARTICLE VII SURVIVAL; CERTAIN REMEDIES................................35 7.1. Survival............................................35 7.2. Indemnification.....................................35 ARTICLE VIII MISCELLANEOUS.............................................36 8.1. Defined Terms; Interpretations......................36 8.2. Fees and Expenses...................................43 8.3. Public Announcements................................43 8.4. Restrictive Legends.................................44 8.5. Further Assurances..................................44 8.6. Successors and Assigns..............................44 8.7. Entire Agreement....................................44 8.8. Notices.............................................45 8.9. Amendments..........................................46 8.10. Counterparts........................................46 8.11. Headings............................................46 8.12. Nouns and Pronouns..................................46 8.13. Governing Law.......................................47 8.14. Submission to Jurisdiction..........................47 8.15. Waiver of Jury Trial................................47 8.16. Severability........................................47 Exhibit 1.2(b) Form of Warrant Agreement Exhibit 2.2 Form of Certificate of Designation Exhibit 5.1(iii) Consents Exhibit 5.2(iv) Form of Management Stockholders Agreement Exhibit 5.2(v) Form of Registration Rights Agreement Exhibit 5.2(viii) Form of Opinion of The E*Law Group INDEX OF DEFINED TERMS SECTION Affiliate...............................................................8.1 Agreement..........................................................preamble Board...................................................................8.1 Board of Directors......................................................8.1 Certificate of Designation..............................................2.2 Claim Notice.........................................................7.2(c) Closing..............................................................1.2(a) Closing Date.........................................................1.2(a) Code....................................................................8.1 Commitments............................................................2.15 Common Stock.......................................................recitals Company............................................................preamble Company Intellectual Property...........................................8.1 Compensation and Benefit Plans..........................................8.1 Consents................................................................4.4 DGCL....................................................................8.1 Encumbrances.........................................................2.1(b) Environmental Claim......................................................38 Environmental Laws......................................................8.1 Environmental Permits....................................................17 ERISA...................................................................8.1 ERISA Affiliate.........................................................8.1 Exchange Act............................................................8.1 Existing Rights Agreement..............................................4.16 GAAP....................................................................2.5 Governmental Entity.....................................................8.1 Hazardous Materials......................................................39 HSR Act.................................................................8.1 Intellectual Property...................................................8.1 IRS.....................................................................8.1 Knowledge...............................................................8.1 Latest Balance Sheet....................................................2.5 Laws....................................................................8.1 Leased Real Property....................................................8.1 Licenses............................................................2.14(a) Litigation...........................................................2.7(a) Losses..................................................................8.1 M&A Transaction.........................................................4.2 Material Adverse Effect.................................................8.1 Multi-Employer Plan.................................................2.12(c) NASDAQ..................................................................8.1 Non-Listed Commitments.................................................2.15 Non-Voting Observer..................................................4.6(d) Options.................................................................2.3 Owned Real Property.....................................................8.1 Ownership Threshold..................................................4.6(b) PCBs.....................................................................39 Permitted Encumbrances..................................................8.1 Person..................................................................8.1 Preferred Stock....................................................recitals Purchase Price..........................................................1.1 Purchaser..........................................................preamble Purchaser Indemnified Person.........................................7.2(a) Purchasers.........................................................preamble Purchasers' Deductible...............................................7.2(a) Purchasers' Designee.................................................4.6(b) Purchasers' Designee Notice..........................................4.6(c) Purchasers' Expenses....................................................8.2 Quarterly Financials................................................4.10(a) Registration Rights Agreement.....................................5.2(a)(v) Related Parties.........................................................8.1 Release.................................................................8.1 Return..................................................................8.1 SEC.....................................................................8.1 SEC Reports.............................................................2.4 Securities Act..........................................................8.1 Shareholders Agreements..........................................5.2(a)(iv) Significant Shareholders................................................8.1 Subsidiaries.........................................................2.1(b) Subsidiary...........................................................2.1(b) Tax.....................................................................8.1 Taxes...................................................................8.1 Terminating Breach...................................................6.1(d) Third Party.............................................................8.1 Transaction Documents...................................................8.1 TWCP...............................................................preamble Warrant Agreement....................................................1.2(b) Warrants...........................................................recitals SECURITIES PURCHASE AGREEMENT THIS SECURITIES PURCHASE AGREEMENT, dated as of February 9, 2000 (this "Agreement"), by and among OPTIKA INC., a Delaware corporation (the "Company"), Thomas Weisel Capital Partners, L.P., a Delaware limited partnership ("TWCP") and the entities listed on the signature pages hereto under the caption "Purchasers" (TWCP and each such entity, a "Purchaser" and collectively with TWCP, the "Purchasers"). W I T N E S S E T H : WHEREAS, upon the terms and subject to the conditions set forth in this Agreement, the Company wishes to sell to the Purchasers, and the Purchasers wish to purchase from the Company, (i) an aggregate of 731,851 shares of Series A Convertible Preferred Stock, par value $0.001 per share (the "Preferred Stock") of the Company, the terms of which are set forth in the Certificate of Designation in the form of Exhibit 2.2 hereto and (ii) warrants (the "Warrants") to purchase an aggregate of 307,298 shares of the Company's Common Stock, par value $0.001 per share (the "Common Stock"), the terms of which are set forth in the Warrant Agreement attached in the form of Exhibit 1.2(b); WHEREAS, the Purchasers and the Company desire to provide for the purchase and sale of the Preferred Stock and Warrants to establish certain rights and obligations in connection therewith, including the execution and delivery by the Company and the Purchasers of the Registration Rights Agreement in the form of Exhibit 5.2(v); and WHEREAS, concurrently with the execution and delivery of this Agreement, each of the Designated Stockholders are executing and delivering a Shareholders Agreement with the Purchasers in the form of Exhibit 5.2(iv). NOW, THEREFORE, in consideration of the premises and the mutual representations, warranties, covenants and agreements set forth in this Agreement, the parties hereto agree as follows: ARTICLE I ISSUANCE AND SALE OF PREFERRED STOCK AND WARRANTS 1.1. Issuance, Purchase and Sale. Upon the terms and conditions set forth herein, at the Closing, the Company shall sell to the Purchasers, and the Purchasers shall purchase from the Company, the Preferred Stock and Warrants for an aggregate purchase price of $15,000,018.10, (the "Purchase Price"). Each Purchaser shall, in exchange for the payment by such Purchaser of the portion of the Purchase Price set forth opposite such Purchaser's name on Schedule A receive the number of shares of Preferred Stock and Warrants to purchase the number of shares of Common Stock set forth opposite such Purchaser's name on Schedule A. The designations of the Purchasers hereunder are several and not joint and no Purchaser shall have any liability to any Person for the performance or non-performance by any other Purchaser hereunder. The parties agree that the aggregate Purchase Price shall be allocated for income tax purposes between the Preferred Stock and the Warrants as set forth in Schedule B hereto. 1.2. The Closing; Deliveries. (a) The closing of the purchase and sale of the Preferred Stock and Warrants hereunder (the "Closing") shall take place at the offices of the Company at 9:00 a.m. on February 23, 2000 or such earlier date as may be specified by notice within two business days of the Closing and mutually agreed to by the Company and the Purchasers, in each case, subject to the satisfaction or waiver of the conditions to the Closing set forth in Article V (other than those conditions that by their nature are to be satisfied at such Closing, but subject to the satisfaction or waiver of those conditions) (the date of the Closing, a "Closing Date"). (b) At the Closing, the Company shall deliver to the Purchasers certificates representing the shares of Preferred Stock and Warrants being purchased by the Purchasers at the Closing, each registered in the name of the Purchaser or its nominee or designee in such amounts as each Purchaser shall inform the Company prior to the Closing. Delivery of such certificates shall be made against receipt by the Company of the Purchase Price payable in connection with the Closing, which shall be paid by wire transfer of immediately available funds to an account designated at least three business days prior to the applicable Closing Date by the Company. The Warrants shall be in the form attached as an exhibit to the Warrant Agreement (the "Warrant Agreement"), attached in the form of Exhibit 1.2(b) 1.3 Capitalized Terms. Capitalized terms not otherwise defined herein shall have the meaning ascribed to such terms in Section 8.1. ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company hereby represents and warrants to the Purchasers, as of the date hereof and as of the Closing Date, as follows: 2.1. Organization; Subsidiaries. (a) The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate power and authority to carry on its business as it is now being conducted. The Company is duly qualified and licensed as a foreign corporation to do business, and is in good standing (and has paid all relevant franchise or analogous Taxes), in each jurisdiction where the character of its assets owned or held under lease or the nature of its business makes such qualification necessary, except where the failure to so qualify or be licensed do not and could not individually or in the aggregate reasonably be expected to have a Material Adverse Effect. The minute books (containing the records of meetings of stockholders, the Board of Directors, and any committees of the Board of Directors), stock record books and certificate books of the Company contain true, complete and accurate records in all material respects of all corporate actions taken at any such meetings and other corporate governance matters, the stock ownership of the Company and the transfer of the shares of its capital stock since January 1, 1997. Complete and correct copies of all of the foregoing have previously been made available to the Purchasers. (b) Schedule 2.1(b) sets forth a complete and correct list of each corporation, limited liability company, partnership, business association or other Person with respect to which the Company has, directly or indirectly, ownership of or rights with respect to securities or other interests having the power to elect a majority of such Person's board of directors or analogous or similar governing body, or otherwise having the power to direct the management, business or policies of that corporation, limited liability company, partnership, business association or other Person (each, a "Subsidiary" and, collectively, the "Subsidiaries"). Except as set forth on Schedule 2.1(b), the Company owns, either directly or indirectly through one or more Subsidiaries, all of the capital stock or other equity interests of the Subsidiaries free and clear of all liens, charges, claims, security interests, restrictions, options, proxies, voting trusts or other encumbrances ("Encumbrances"), other than transfer restrictions imposed by applicable federal and state securities laws. Except as set forth on Schedule 2.1(b) all of the issued and outstanding shares of capital stock or other equity interests of each Subsidiary held directly or indirectly by the Company have been duly authorized and are validly issued, fully paid and nonassessable. No shares of capital stock or other equity interests of any Subsidiary are entitled to preemptive rights. Except as set forth on Schedule 2.1(b) or disclosed in the SEC Reports, there are no outstanding subscription rights, options, warrants, convertible or exchangeable securities or other rights of any character whatsoever relating to issued or unissued capital stock or other equity interests of any Subsidiary, or any Commitments of any character whatsoever relating to issued or unissued capital stock or other equity interests of any Subsidiary or pursuant to which the Company or any Subsidiary is or may become bound to issue or grant additional shares of its capital stock or other equity interests or related subscription rights, options, warrants, convertible or exchangeable securities or other rights, or to grant preemptive rights. Except as set forth on Schedule 2.1(b) or disclosed in the SEC Reports, there are no voting trusts, stockholders agreements, proxies or other Commitments or understandings to which any Subsidiary is a party with respect to the voting or transfer of any capital stock or other equity interest of any Subsidiary. Except for (i) the Subsidiaries, (ii) assets held in benefit plans, (iii) corporate treasury transactions and (iv) as set forth on Schedule 2.1(b), the Company does not own, directly or indirectly, any interest in any corporation, limited liability company, partnership, business association or other Person. (c) Each Subsidiary is a corporation, limited liability company, partnership, business association or other Person duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and has the requisite power and authority to carry on its business as it is now being conducted. Except as set forth on Schedule 2.1(c), each Subsidiary is duly qualified and licensed to do business, and is in good standing (and has paid all relevant franchise or analogous taxes), in each jurisdiction where the character of its assets owned or held under lease or the nature of the business conducted by it makes such qualification necessary, except where the failure of any such Subsidiary to so qualify or be licensed individually or in the aggregate do not and could not reasonably be expected to have a Material Adverse Effect. The minute books or other records (containing the records of meetings of stockholders or other holders of other equity interests, the board of directors or other similar governing body, and any committees thereof), the stock ownership or analogous records and the certificate books of each of the Subsidiaries contain in all material respects true, complete and accurate records of all actions taken at any such meetings and other governance matters, the stock or other equity ownership of each of such Subsidiaries and the transfer of the shares of its capital stock or other equity interest since January 1, 1997. Complete and correct copies of all of the foregoing have previously been made available to the Purchasers. 2.2. Due Authorization. The Company has all right, corporate power and authority to enter into this Agreement and each of the other Transaction Documents to which it is a party and to consummate the transactions contemplated hereby and thereby. The execution and delivery by the Company of this Agreement and each of the other Transaction Documents to which it is a party, the issuance and sale of the Preferred Stock and the Warrants by the Company and the compliance by the Company with each of the provisions of this Agreement and each of the other Transaction Documents to which it is a party (including the reservation and issuance of the shares of Common Stock on any conversion of the Preferred Stock or any exercise of the Warrants (collectively, the "Common Shares") and the consummation by the Company of the transactions contemplated hereby and thereby) (a) are within the corporate power and authority of the Company and (b) have been duly authorized by all requisite corporate proceedings on the part of the Board of Directors and, if applicable, to the stockholders of the Company. This Agreement has been, and each of the other Transaction Documents to which the Company is a party when executed and delivered by the Company will be, duly and validly executed and delivered by the Company, and this Agreement constitutes, and each of such other Transaction Documents (other than the Preferred Shares) when executed and delivered by the Company will constitute, a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except as enforceability against the Company may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws now or hereafter in effect relating to the rights of creditors generally and by legal and equitable limitations on the enforceability of specific remedies (regardless of whether enforcement is considered in a proceeding in equity or at law). The shares of Preferred Stock and all Common Shares issuable upon conversion of the Preferred Stock and exercise of the Warrants have been validly reserved for issuance, and upon payment of the Purchase Price in the case of the Preferred Stock and Warrants and upon conversion of the Preferred Stock or the exchange of the Warrants in the case of the Common Shares, such shares of Preferred Stock, Warrants and Common Shares, as the case may be, will be duly and validly issued and outstanding, fully paid, and nonassessable and issued free of preemptive rights. The terms, designations, powers, preferences and relative participation, optional and other special rights, qualifications, limitations and restrictions of the Preferred Stock will be set forth in the Certificate of Designation of the Preferred Stock (the "Certificate of Designation"), the form of which is attached as Exhibit 2.2. 2.3. Capitalization. The authorized capital stock of the Company consists of (i) 25,000,000 shares of Common Stock, par value $0.001 per share, and (ii) 2,000,000 shares of preferred stock, par value $0.001 per share. As of the date hereof, (a) 7,589,129 shares of Common Stock were issued and outstanding, (b) options ("Options") to purchase an aggregate of 2,270,437 shares of Common Stock under the Company's 1994 Employee Stock Option Plan (the "Company Option Plan") were outstanding, 2,270,437 shares of Common Stock were reserved for issuance upon the exercise of outstanding Options and 57,545 shares were reserved for future grant not authorized prior to the date of this Agreement under the Company Option Plan, (c) warrants ("Settlement Warrants") to purchase an aggregate of 9,738 shares of Common Stock upon exercise were outstanding, (d) 583 shares of Common Stock ("Restricted Stock") were reserved for issuance under the Company's Employee Stock Purchase Plan (the "Stock Purchase Plan"), (e) no shares of Common Stock were held by the Company in its treasury or by any of the Subsidiaries of the Company and (f) except for the Preferred Stock designated by the Certificate of Designation, no shares of preferred stock of the Company have been issued or are outstanding. The Company has not adopted any shareholders rights plan with respect to its Common Stock. The Company has no outstanding bonds, debentures, notes or other obligations or securities entitling the holders thereof to vote (or which are convertible or exercisable for securities having the right to vote) with the stockholders of the Company on any matter. A complete and correct list of each outstanding Option and Settlement Warrants, the holders and the exercise price thereof is set forth on Schedule 2.3, and, as to each such Option, whether the same is vested. Since December 31, 1999, the Company (i) has not issued any shares of Common Stock other than (x) upon exercise of Options or Warrants, and (y) the issuance of at least 85% of fair market value of 39,336 shares of Restricted Stock under the Company's Stock Purchase Plan, (ii) has granted at fair market value Options to purchase an aggregate of 210,500 shares of Common Stock under the Company Option Plan and (iii) has not split, combined or reclassified any of its shares of capital stock. All of the issued and outstanding shares of Common Stock have been duly authorized and are validly issued, fully paid and nonassessable and free of preemptive rights. Except as set forth on Schedule 2.3 or pursuant to the Transaction Documents, there are no outstanding subscription rights, options, warrants, convertible or exchangeable securities or other rights of any character whatsoever relating to issued or unissued capital stock of the Company, or any Commitments of any character whatsoever relating to issued or unissued capital stock of the Company or pursuant to which the Company or any of the Subsidiaries is or may become bound to issue or grant additional shares of its capital stock or related subscription rights, options, warrants, convertible or exchangeable securities or other rights, or to grant preemptive rights. Except as set forth on Schedule 2.3, (i) the Company has not agreed to register any securities under the Securities Act or under any state securities law or granted registration rights to any Person or entity and (ii) there are no voting trusts, stockholders agreements, proxies or other Commitments or understandings in effect to which the Company is a party or of which it has Knowledge with respect to the voting or transfer of any of the shares of Common Stock. To the extent that any options, warrants or any of the other rights described above are outstanding, neither the issuance and sale of the Preferred Stock and the Warrants, nor any issuance of Common Shares on conversion or exercise thereof will result in an adjustment of the exercise or conversion price or number of shares issuable upon the exercise or conversion of any such options, warrants or other rights. 2.4. SEC Reports. The Company has timely filed all registration statements, proxy or information statements, reports and other documents required to be filed by it with the SEC under the Exchange Act from and after July 25, 1996 (collectively, the "SEC Reports"). Each SEC Report was as of their respective dates in compliance as to form in all material respects with the applicable requirements of the Securities Act and did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. 2.5. Financial Statements. Each of the consolidated balance sheets of the Company included or incorporated by reference into the SEC Reports (including the related notes and schedules) fairly presents the consolidated financial position of the Company and its consolidated Subsidiaries as of its date, and each of the consolidated statements of earnings and cash flows of the Company included or incorporated by references into the SEC Reports (including any related schedules and or notes) fairly presents the results of operations, earnings or cash flows, as the case may be, of the Company and its consolidated Subsidiaries for the respective periods set forth therein, in each case in accordance with generally accepted accounting principles ("GAAP") consistently applied for the periods involved, except as noted therein and subject, as to interim statements, to normal year-end audit adjustments, none of which has had or would be reasonably expected to have a Material Adverse Effect. Except as set forth on Schedule 2.5 or disclosed in the SEC Reports, neither the Company nor any Subsidiary has any liability or obligation (whether accrued, absolute, contingent, unliquidated or otherwise, whether known or unknown, whether due or to become due and regardless of when asserted), except (i) liabilities and obligations in the respective amounts reflected or reserved against in the Company's consolidated balance sheet as of December 31, 1999 (the "Latest Balance Sheet"), (ii) liabilities and obligations incurred in the ordinary course of business since December 31, 1999 which individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect or (iii) under Commitments in accordance with the terms and conditions thereof which are not required by GAAP to be reflected on the Latest Balance Sheet except Commitments that are required to be disclosed pursuant to Section 2.15 and are not so disclosed. 2.6. Absence of Certain Changes. Except as set forth on Schedule 2.6, as disclosed in the SEC Reports, or pursuant to the transactions contemplated by this Agreement and the other Transaction Documents, since September 30, 1999: (i) the business of the Company and the Subsidiaries taken as a whole has been conducted in the ordinary course of business consistent with past practice, (ii) the Company and its Subsidiaries have not (a) suffered any change, event or development or series of changes, events or developments which individually or in the aggregate has had or could reasonably be expected to have a Material Adverse Effect, (b) suffered any damage, destruction or casualty loss to its physical properties (whether or not covered by insurance) which individually or in the aggregate has resulted or could reasonably be expected to result in a Material Adverse Effect or (c) been the subject of any material Litigation or threatened or commenced investigation by a Governmental Entity and (iii) there has not been (a) any declaration, setting aside or payment of any dividend or other distribution with respect to the capital stock of the Company or its Subsidiaries (other than wholly-owned Subsidiaries) or any repurchase, redemption or any other acquisition by the Company or its Subsidiaries of any outstanding shares of capital stock or other securities of, or other ownership interests in, the Company or its Subsidiaries, (b) any material change in accounting principles, practices or methods, (c) any entry into or amendment of any employment agreement with, or any increase in the rate or terms (including, without limitation, any acceleration of the right to receive payment) of compensation payable or to become payable by the Company or any of its Subsidiaries to, their respective directors, officers or employees, except increases in the ordinary course of business in accordance with the past practice of the Company, (d) any increase in the rate or terms (including, without limitation, any acceleration of the right to receive payment) of any bonus, insurance, pension or other employee benefit plan or arrangement covering any such directors, officers or employees, except increases in the ordinary course of business in accordance with the past practice of the Company, or (e) any material revaluation by the Company or any of its Subsidiaries of any of their respective assets, including, without limitation, write-downs of inventory or write-offs of accounts receivable except in the ordinary course of business in accordance with the Company's past practices prior to December 31, 1999. 2.7. Litigation. (a) Except as set forth on Schedule 2.7(a) or as disclosed in the SEC Reports, there is no material claim, action, suit, investigation or proceeding ("Litigation") pending or, to the Knowledge of the Company, threatened against the Company or any of the Subsidiaries or involving any of their respective properties or assets by or before any court, arbitrator or other Governmental Entity. (b) Except as set forth on Schedule 2.7(b) or as disclosed in the SEC Reports, neither the Company nor any of the Subsidiaries is in default under or in breach of any order, judgment or decree of any court, arbitrator or other Governmental Entity, and neither the Company nor any of the Subsidiaries is a party or subject to any order, judgment or decree of any court, arbitrator or other Governmental Entity. 2.8. Title to Properties; Insurance. (a) Except as set forth on Schedule 2.8(a), the Company and the Subsidiaries have good and valid title to, or, in the case of property leased by them, a valid and subsisting leasehold interest in, their respective material properties and assets, free of all Encumbrances except for Permitted Encumbrances. (b) The SEC Reports list all Owned Real Property. With respect to the Owned Real Property, (i) the Company and its Subsidiaries have good and marketable title in fee simple to the Owned Real Property, free and clear of all Encumbrances except for Permitted Encumbrances, (ii) there are no outstanding options or rights of first refusal in favor of any other Person to purchase the Owned Real Property or any portion thereof or interest therein, and (iii) there are no leases, subleases, licenses, options, rights, concessions or other Commitments affecting any portion of the Owned Real Property. (c) The SEC Reports list all material Leased Real Property. With respect to the Leased Real Property, the Company and the Subsidiaries have good and valid leasehold estates in the Leased Real Property, free and clear of all Encumbrances except for Permitted Encumbrances and Encumbrances set forth on Schedule 2.8(a). Except as set forth on Schedule 2.8(c), (A) each lease or sublease relating to the Leased Real Property is legal, valid, binding and enforceable in accordance with its terms against the Company and to the Company's Knowledge, against the other parties thereto, and in full force and effect and (B) the execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement will not cause a breach or require any third party consent or notification under any such lease or sublease. (d) Schedule 2.8(d) sets forth a complete and correct list of all insurance coverage carried by the Company and the Subsidiaries, including for each policy the type and scope of coverage, the carrier and the amount of coverage, including directors' and officers' liability insurance. All of the material assets of the Company and the Subsidiaries and all aspects of the Company's and the Subsidiaries' businesses that are of insurable character are covered by insurance with reputable insurers against risks of liability, casualty and fire and other losses and liabilities customarily obtained by other similarly situated public companies to cover comparable businesses and assets in amounts, scope and coverage (and with deductibles) which are consistent with prudent industry practice by other similarly situated public companies. Neither the Company nor any of the Subsidiaries is in default in a material respect with respect to any of its obligations under any insurance policy maintained by it. All such policies are in full force and effect and no premiums with respect thereto are past due and owed. Except as set forth on Schedule 2.8(d), there are no claims by the Company or any of the Subsidiaries under any of such policies to which any insurance company is denying liability or defending under a reservation of rights or similar clause. Except as set forth on Schedule 2.8(d), neither the Company nor any of the Subsidiaries has received notice of any pending or threatened termination of any of such policies or any premium increases for the current policy period with respect to any of such policies, and the consummation of the transactions contemplated by this Agreement or any of the other Transaction Documents will not result in any such termination or premium increase. The Company maintains a directors' and officers' insurance policy with both the National Union Fire Insurance Company and the Federal Insurance Company (complete and correct copies of which have previously been delivered to the Purchasers), which will both, upon the election or appointment of either the Preferred Stock Designee or the Purchaser's Designee, include such designee as a covered person. 2.9. Consents; No Violations. Except as set forth on Schedule 2.9, neither the execution, delivery or performance by the Company of this Agreement or any of the other Transaction Documents to which it is a party nor the consummation of the transactions contemplated hereby or thereby will (a) conflict with, or result in a breach or a violation of, any provision of the certificate of incorporation or by-laws of the Company or any Subsidiary; (b) constitute, with or without notice or the passage of time or both, a breach, violation or default, create an Encumbrance, or give rise to any right of termination, modification, cancellation, prepayment, suspension, limitation, revocation or acceleration, under (i) any Law or (ii) any Commitment to which the Company or any of the Subsidiaries is a party or pursuant to which any of them or any of their assets or properties is subject, except, with respect to the matters set forth in this clause (b), for breaches, violations, defaults, Encumbrances, or rights of termination, modification, cancellation, prepayment, suspension, limitation, revocation or acceleration, which, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect or adversely affect the ability of the Company to consummate the transactions contemplated by this Agreement or any other Transaction Document to which it is a party; or (c) require any consent, approval or authorization of, notification to, filing with, or exemption or waiver by, any Governmental Entity or any other Person on the part of the Company or any of the Subsidiaries except for filings required under the Exchange Act and, in the case of Restructuring Rights Agreement, the Securities Act and state "blue sky" laws. 2.10. Holding Company Act and Investment Company Act. Neither the Company nor any of the Subsidiaries is: (i) a "public utility company" or a "holding company," or an "affiliate" or a "subsidiary company" of a "holding company," or an "affiliate" of such a "subsidiary company," as such terms are defined in the Public Utility Holding Company Act of 1935, as amended, or (ii) a "public utility," as defined in the Federal Power Act, as amended, or (iii) an "investment company" or an "affiliated person" thereof or an "affiliated person" of any such "affiliated person," as such terms are defined in the Investment Company Act of 1940, as amended. 2.11. Taxes. (a) Except as disclosed in Schedule 2.11(a), the Company and each of the Subsidiaries has timely filed all Returns required by Law to have been filed by it and has paid all Taxes required to be paid by it including, without limitation, any Tax levied upon any of its properties, assets, income or franchises. All such Returns were complete and correct in all material respects. All amounts required to be collected or withheld by the Company and each of the Subsidiaries has been collected or withheld and any such amounts that are required to be remitted to any taxing authority have been duly remitted. The accruals and reserves for Taxes on the Latest Balance Sheet are complete and adequate in all material respects to cover any liability of the Company and each of its Subsidiaries for Taxes for periods through December 31, 1999. The accruals and reserves for deferred tax liabilities on the Latest Balance Sheet are adequate to cover any such liability in accordance with GAAP. (b) Schedule 2.11(b) contains a list of states, territories and jurisdictions (whether foreign or domestic) in which the Company or any of the Subsidiaries currently files an income, franchise, sales or use Return. Except as set forth on Schedule 2.11(b), (i) neither the IRS nor any other taxing authority has asserted in writing any claim involving a material amount of Taxes, or to the Knowledge of the Company, is threatening to assert any claims involving a material amount of Taxes, against the Company or any of the Subsidiaries, (ii) neither the Company nor any of the Subsidiaries has been a member of a consolidated, combined or unitary group for federal or state or foreign income Tax purposes that included any member other than the current members of the consolidated federal income tax group of which the Company is the common parent, (iii) there are no Returns with respect to which an audit or examination is in progress or with respect to which a written notification of intent to audit or examine has been received by the Company or any of the Subsidiaries from the IRS or any other taxing authority that relate to Taxes for which the Company or any of the Subsidiaries could be liable, (iv) neither the Company nor any of the Subsidiaries is or has been a party to any Tax sharing agreement (except for agreements with Subsidiaries providing for the sharing of liabilities on a pro rata basis) that will remain in effect and under which the Company or any such Subsidiary could have any material liability for Taxes, (v) there are no liens for Taxes upon any assets of the Company or any of the Subsidiaries (other than liens for Taxes not yet due and payable), except for liens which individually or in the aggregate do not and could not reasonably be expected to have a Material Adverse Effect, (vi) neither the Company nor any of the Subsidiaries has agreed or is required to include in income during the current year or any future taxable period any material adjustment pursuant to Section 481 of the Code (or similar provisions of foreign, state or local law) by reason of a change in accounting method or otherwise, and the IRS has not proposed any such adjustment, and (vii) complete copies of all income Tax Returns filed by the Company and each of the Subsidiaries for taxable periods commencing on or after January 1, 1994 have been provided to, or made available to, the Purchasers. 2.12. Employee Benefit Plans. (a) Schedule 2.12 sets forth a complete and correct list of (i) all of the Compensation and Benefit Plans that are intended to qualify with the applicable requirements of Article 401(a) of the Code and (ii) all employment, severance and change of control agreements with employees, former employees, officers, former officers, directors, former directors or the beneficiaries of any of the foregoing or pursuant to which the Company or any Subsidiary has or may have any liability in excess of $100,000. Except with respect to any Multi-Employer Plan, the Company has heretofore delivered or made available to the Purchasers true and complete copies of all Compensation and Benefit Plans and any amendments thereto (or if a Compensation and Benefit Plan is not in written form, a written description thereof), any related trust or other funding agreement or vehicle, the most recent reports or summaries required under ERISA or the Code and, with respect to each Compensation and Benefit Plan intended to qualify under Article 401 of the Code, the most recent determination letter received from the IRS. (b) Except where the failure to do so could not individually or in the aggregate reasonably be expected to have a Material Adverse Effect, the Company and each Subsidiary have performed all obligations required to be performed by them under each Compensation and Benefit Plan and neither the Company nor any Subsidiary is in default under or in violation of, any Compensation and Benefit Plan. Each Compensation and Benefit Plan has in all material respects been established, operated, maintained and administered, as the case may be, in accordance with its terms and is in compliance in all material respects with all applicable Laws, statutes, orders, rules and regulations, including, but not limited to, ERISA and the Code. (c) At no time during the seven (7) year period immediately preceding the date of this Agreement has the Company, or any ERISA Affiliate contributed to or been required to contribute to, or incurred any withdrawal liabilities (within the meaning of Section 4201 of ERISA) to any "Multi-Employer Plan" within the meaning of Sections 3(37) or 4001(a)(3) of ERISA (a "Multi-Employer Plan"). (d) Neither the Company, any Subsidiary, nor any ERISA Affiliate presently sponsors, maintains or contributes to, nor is the Company, any Subsidiary or any ERISA Affiliate required to sponsor, maintain or contribute to, nor has the Company, any Subsidiary or any ERISA Affiliate (other than where the Company, such Subsidiary or such ERISA Affiliate has no continuing material obligation or liability) ever sponsored, maintained, contributed to or been required to contribute to, any Compensation and Benefit Plan which is an "employee pension benefit plan" within the meaning of Article 3(2) of ERISA and which is subject to Title IV of ERISA. (e) Neither the Company, any Subsidiary nor any ERISA Affiliate (i) maintains or contributes to any Compensation and Benefit Plan which provides, or has any liability to provide, life insurance, medical or dental benefits to any employee upon his retirement or termination of employment, except as may be required by Article 4980B of the Code or as would not reasonably be expected to have individually or in the aggregate a Material Adverse Effect; or (ii) has ever represented to, promised or contracted with (whether in oral or written form) any employee (either individually or to employees as a group) that such employee would be provided with life insurance, medical or dental benefits upon retirement or termination of employment, except to the extent required by Article 4980B of the Code or as would not reasonably be expected to have individually or in the aggregate a Material Adverse Effect. (f) There are no pending, or to the Knowledge of the Company, threatened claims by or on behalf of any Compensation and Benefit Plan by any employee or beneficiary covered under any such Compensation and Benefit Plan, or otherwise involving any such Compensation and Benefit Plan, that individually or in the aggregate could reasonably be expected to have a Material Adverse Effect. (g) Except as otherwise set forth on Schedule 2.12(g), there is no Commitment covering any employee or former employee of the Company or any Subsidiary that, individually or in the aggregate, would be reasonably likely to give rise to the payment of any amount that would result in a material loss of tax deductions pursuant to the terms of Article 162(m) of the Code. (h) Except where the failure to do so could not individually or in the aggregate reasonably be expected to have a Material Adverse Effect, the Company and each Subsidiary (i) is in compliance with all applicable federal, state and local laws, rules and regulations (domestic and foreign) respecting employment, employment practices, labor, terms and conditions of employment and wages and hours, in each case, with respect to employees; (ii) has withheld all amounts required by Law or by Commitment to be withheld from the wages, salaries and other payments to employees; (iii) is not liable for any arrears of wages or any taxes or any penalty for failure to comply with any of the foregoing; and (iv) is not liable for any payment to any trust or other fund or to any Governmental Entity with respect to unemployment compensation benefits, social security or other benefits for employees. (i) No work stoppage or labor strike against the Company or any Subsidiary by employees is pending, or to the knowledge of the Company, threatened. Except for such matters that could not individually or in the aggregate reasonably be expected to have a Material Adverse Effect, neither the Company nor any Subsidiary (i) is involved in, or to the knowledge of the Company, threatened with any labor dispute, grievance, or Litigation relating to labor matters involving any employees, including, without limitation, violation of any federal, state or local labor, safety or employment laws (domestic or foreign), charges of unfair labor practices or discrimination complaints or (ii) has engaged in any unfair labor practices within the meaning of the National Labor Relations Act or the Railway Labor Act. (j) Except as set forth in Schedule 2.12(j) the execution, delivery and performance by the Company of the transactions contemplated by this Agreement and the other Transaction Documents to which it is a party will not (either alone or upon the occurrence of any additional or subsequent events) constitute an event under any Compensation and Benefit Plan, trust or loan that will or may result in any payment (whether of severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting, distribution, increase in benefits or obligation to fund benefits with respect to any employee. No payment or benefit which will or may be made by the Company, any Subsidiary, the Purchasers or any of their respective Affiliates in connection with the transactions contemplated by this Agreement or any of the other Transaction Documents with respect to any employee will be characterized as an "excess parachute payment" within the meaning of Article 280G(b)(1) of the Code. 2.13. Intellectual Property. (a) Each item of Company Intellectual Property which is a patent, patent application, trademark, trademark application, service mark, service mark application, logo, trade name, domain name, corporate name, copyright registration, copyright application, mask work registration, mask work application, license, sublicense, is set forth on Schedule 2.13(a). (b) Except as disclosed on Schedule 2.13(b): (i) the Company or a Subsidiary owns or has the right to use pursuant to a valid license, sub-license or other agreement all Company Intellectual Property, except where the absence of any thereof could not individually or in the aggregate reasonably be expected to have a Material Adverse Effect and the consummation of the transactions contemplated hereby will not alter or impair any such rights; (ii) to the Company's Knowledge, neither the Company nor any of the Subsidiaries has interfered with, infringed upon or misappropriated any Intellectual Property rights of third parties, except for interferences, infringements and misappropriations which could not individually or in the aggregate reasonably be expected to have a Material Adverse Effect, and neither the Company nor any Subsidiary has received any written claim, demand or notice alleging any such interference, infringement or misappropriation (including any claim that the Company must license or refrain from using any Intellectual Property rights of any third party); (iii) to the Company's Knowledge, no third party has interfered with, infringed upon or misappropriated any Intellectual Property rights of the Company or any Subsidiary, except for interferences, infringements and misappropriations which could not individually or in the aggregate reasonably be expected to have a Material Adverse Effect except as set forth on Schedule 2.13(b): (iv) each item of Company Intellectual Property will be owned or available for use by the Company on identical terms and conditions immediately subsequent to the Closing hereunder; (v) all registered patents, trademarks, service marks and copyrights listed on Schedule 2.13(a) are valid and subsisting and in full force and effect and are not subject to any taxes or other fees except for periodic filing and maintenance fees; (vi) the Company is not aware of any notice, claim or assertion that any item of Company Intellectual Property is invalid nor is the Company aware of any facts that would cause a reasonable person to conclude that any item of Company Intellectual Property is invalid; (vii) Company Intellectual Property is all the Intellectual Property that is necessary for the Company's business as currently conducted; and (viii) the Company has taken commercially reasonable action to maintain and protect each item of Company Intellectual Property. (c) With respect to each item of Company Intellectual Property, except as set forth in Schedule 2.13(c): (i) the Company possess all right, title and interest in and to the item, free and clear of any Encumbrance, license or other restriction; (ii) the item is not subject to any outstanding injunction, judgment, order, decree, ruling or charge; (iii) no action, suit, proceeding, hearing, investigation, charge, complaint, claim or demand is pending or, to the knowledge of the Company, is threatened which challenges the legality, validity, enforceability, use or ownership of the item; (iv) the Company has never agreed to indemnify any person for or against any interference, infringement, misappropriation or other conflict with respect to the item; (v) each license, sublicense, agreement or permission disclosed on Schedule 2.13(a) is legal, valid, binding, enforceable and in full force and effect and will continue to be legal, valid, binding, enforceable against the Company, and, to the Company's Knowledge, the other party thereto and in full force and effect on identical terms following the Closing; (vi) no party to any license, sublicense, agreement or permission disclosed on Schedule 2.13(a) is in breach or default, and no event has occurred which with notice or lapse of time would constitute a breach or default or permit termination, modification or acceleration thereunder; (vii) no party to any license, sublicense, agreement or permission disclosed on Schedule 2.13(a) has repudiated in writing any provision thereof; (viii) with respect to any sublicense disclosed on Schedule 2.13(a), the representations and warranties set forth in subsections (v) through (vii) above are true and correct with respect to the underlying license; (ix) with respect to each license, sublicense, agreement or permission disclosed on Schedule 2.13(a), the underlying item of Intellectual Property is not subject to any outstanding injunction, judgment, order, decree, ruling or charge; (x) with respect to each license, sublicense, agreement or permission disclosed on Schedule 2.13(a), no action, suit, proceeding, hearing, investigation, charge, complaint, claim or demand is pending or to the Company's Knowledge is threatened which challenges the legality, validity or enforceability of the underlying item of Intellectual Property; and (xi) with respect to each license, sublicense, agreement or permission disclosed on Schedule 2.13(a), the Company has not granted any sublicense or similar right with respect to the license, sublicense, agreement or permission. (d) The continued operation of the Company's business as presently conducted will not interfere with, infringe upon, misappropriate, or otherwise come into conflict with, any Intellectual Property rights of third parties. (e) The Company is not aware that any of its employees is obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would interfere with the use such employee's best efforts to promote the interest of the Company or that would conflict with the Company's business as presently conducted or the Company Intellectual Property. (f) Neither the execution nor delivery of this Agreement nor the carrying on of the Company's business as currently conducted by the employees of the Company, nor the conduct of the Company's business as presently conducted, will, to the Company's knowledge, conflict with or result in a breach of the terms, conditions of provisions of, or constitute a default under, any contract, covenant or instrument under which any or such employees is now obligated. (g) The Company does not and will not need, in order to conduct the Company's business as presently conducted, to utilize any inventions of any of its employees, former employees (or persons it currently intends to hire) made while not employed by the Company and the rights to which have not been fully assigned to the Company. (h) The Company has obtained valid and effective assignments from all of its employees, former employees, independent contractors, and former independent contractors (collectively defined herein as "Inventors") of all of such Inventors' rights in any Intellectual Property developed by such Inventors while employed by or under contract with the Company. (i) For each item of Company Intellectual Property which is an application, including but not limited to patent applications, trademark applications, service mark applications, copyright applications, or mask work applications, the Company has the right to require the applicant to transfer ownership to the Company of the application and of the registration once it issues. (j) The Company has taken reasonable precautions to protect the secrecy, confidentiality, and value of its trade secrets, and has entered into confidential information/non-disclosure agreements with each of its officers, employees, and independent contractors. 2.14. Compliance with Laws. (a) Except as set forth on Schedule 2.14(a) or as disclosed in the SEC Reports, the Company and the Subsidiaries are in compliance in all material respects with all Laws, and since September 30, 1999 neither the Company nor any Subsidiary has received any notice of any alleged violation of Law applicable to it that could reasonably be expected to have a Material Adverse Effect. The Company and the Subsidiaries have all material licenses, franchise permits, consents, registrations, certificates, and other governmental or regulatory permits, authorizations or approvals required for the operation of the business as presently conducted and for the ownership, lease or operation of the Company's and its Subsidiaries' properties except where the failure to do so could not reasonably be expected to have a Material Adverse Effect (collectively, "Licenses"). Except as set forth on Schedule 2.14(a), the Company and the Subsidiaries have all Licenses, and all of such Licenses are valid and in full force and effect, and the Company and the Subsidiaries have duly performed and are in compliance in all material respects with all of their obligations under such Licenses. No event has occurred with respect to any of such Licenses that allows, or after notice or lapse of time or both would allow, the suspension, limitation, revocation, non-renewal or termination thereof that, individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect, and no terminations of any License or proceedings to suspend, limit, revoke or terminate any License have been threatened. The Company has made available for inspection by the Purchasers copies of all material correspondence between the Company or any of the Subsidiaries, on the one hand, and the SEC on the other hand. (b) Neither the Company nor any Subsidiary has offered or agreed to offer anything of value to any government official, political party or candidate for governmental or political office (or any person that the Company knows, or has reason to know, will offer anything of value to any governmental official, political party or candidate for governmental or political office), such that the Company or any of the Subsidiaries have violated the Foreign Corrupt Practices Act of 1977, as amended. (c) Except as set forth on Schedule 2.14(c) and except as would not, individually or in the aggregate, have a Material Adverse Effect: (i) the Company and each of its Subsidiaries is in compliance with applicable Environmental Laws; (ii) the Company and each of its Subsidiaries has obtained or has applied for all applicable environmental, health and safety permits, licenses, variances, approvals and authorizations required under Environmental Laws (collectively, the "Environmental Permits") necessary for the conduct of its operations; (iii) there is no Environmental Claim pending or, to the knowledge of the Company, threatened (A) against the Company or any of its Subsidiaries, (B) against any Person whose liability for any Environmental Claim has been retained or assumed contractually by the Company or any of its Subsidiaries, or (C) against any real property which the Company or any of its Subsidiaries owns, leases or operates; and (iv) to the Knowledge of the Company, there have been no Releases of any Hazardous Materials that would be reasonably likely to form the basis of any Environmental Claim against the Company or any of its Subsidiaries. 2.15. Commitments. Schedule 2.15 sets forth a complete and correct list of each written and, if material, oral contract, agreement, understanding, arrangement and commitment of any nature whatsoever, including all amendments thereof and supplements thereto ("Commitments") of the following types to which the Company or any Subsidiary is a party or by or to which the Company or any Subsidiary or any of their properties may be bound or subject as of the date hereof: (i) Commitments containing covenants purporting to limit the freedom of the Company or any Subsidiary to compete in any line of business in any geographic area or to hire any individual or group of individuals, (ii) Commitments or related series of Commitments relating to capital expenditures in excess of $3,000,000, (iii) (x) Commitments or related series of Commitments relating to the lease or sublease of or sale or purchase of personal property involving any annual expense or price in excess of $3,000,000, and (y) each material lease or sublease of real property or Commitments relating to the sale or purchase of material real property, (iv) Commitments relating to indentures, mortgages, promissory notes, loan agreements, guarantees, letters of credit or other agreements or instruments of the Company or any Subsidiary or Commitments for or relating to the borrowing or the lending of money by or to the Company or any Subsidiary in excess of $3,000,000 or providing for any right of first refusal or the creation of any Encumbrance upon any of the assets or properties of the Company or any Subsidiary, (v) Commitments relating to the acquisition or disposition of any operating business or the capital stock of any Person that has not been consummated or that has been consummated but contains representations, warranties, covenants, guarantees, indemnities or other obligations that remain in effect, (vi) Commitments relating to any material Litigation, (vii) Commitments under which the Company or any Subsidiary agrees to indemnify any Person, (viii) Commitments in respect of any joint venture, partnership or other similar arrangement, (ix) Commitments with any Governmental Entity; (x) other Commitments or related series of Commitments which involve payments of over $3,000,000 or which are otherwise material (excluding license and maintenance contracts entered with customers of the Company entered into in the ordinary course of business consistent with past practice (such excluded Commitments, "Non-Listed Commitments"). All such listed Commitments and all Non-Listed Commitments are valid and binding obligations of the Company and each Subsidiary, as the case may be, and, to the Knowledge of the Company, are the valid and binding obligation of each other party thereto except where the failure to be so valid and binding individually or in the aggregate do not and could not reasonably be expected to have a Material Adverse Effect. Neither the Company nor any Subsidiary nor, to the Knowledge of the Company, any other party is in material violation of or in material default in respect of, nor has there occurred an event or condition which with the passage of time or giving of notice (or both) would constitute a default under, any listed Commitment or Non-Listed Commitment, except for default which individually and in the aggregate do not and could not be reasonably expected to have a Material Adverse Effect. 2.16. Brokers or Finders. No agent, broker, investment banker or other Person is or will be entitled to any broker's or finder's fee or any other commission or similar fee in connection with any of the transactions contemplated by this Agreement or the other Transaction Documents based on arrangements made by or on behalf of the Company or any of the Subsidiaries, or any Affiliate of any of the foregoing. 2.17. Related Party Transactions. Except as disclosed in the SEC Reports and Schedule 2.17, there are no transactions and Commitments between or involving the Company or any of the Subsidiaries, on the one hand, and any Related Party, on the other hand, engaged in or entered into since December 31, 1998 (including those initiated prior to such date and continued or continuing following such date). 2.18. Section 203 of the DGCL; Takeover Statute. The Board of Directors shall have adopted a resolution to the effect that the restrictions contained in Section 203 of the DGCL applicable to a "business combination" (as defined in such Section) will not apply to the execution, delivery or performance of this Agreement or any of the other Transaction Documents or the consummation of the transactions contemplated hereby or thereby. The execution, delivery and performance of this Agreement or any of the other Transaction Documents and the consummation of the transactions contemplated hereby or thereby will not cause to be applicable to the Company any "fair price," "moratorium," "control share acquisition" or other similar antitakeover statute or regulation enacted under state or federal laws. 2.19. Proprietary Information of Third Parties. Except as set forth on Schedule 2.19, and except as would not, individually or in the aggregate, have a Material Adverse Effect: (i) to the Company's Knowledge, no Third Party has claimed that any Person employed by or affiliated with the Company has (a) violated or may be violating any of the terms or conditions of his employment, non-competition or non-disclosure agreement with such Third Party, (b) disclosed or may be disclosing or utilized or may be utilizing any trade secret or proprietary information or documentation of such Third Party or (c) interfered or may be interfering in the employment relationship between such Third Party and any of its present or former employees. No Third Party has requested information from the Company which suggests that such a claim might be contemplated; (ii) to the Company's Knowledge, no Person employed by or affiliated with the Company has employed or proposes to employ any trade secret or any information or documentation proprietary to any former employer, and to the best of the Company's Knowledge, no Person employed by or affiliated with the Company has violated any confidential relationship which such Person may have had with any Third Party, in connection with the development, manufacture or sale of any product or proposed product or the development, manufacture or sale of any product or proposed product or the development or sale of any service or proposed service of the Company, and the Company has no reason to believe there will be any such employment or violation; and (iii) none of the execution or delivery of this Agreement, or the carrying on of the business of the Company as officers, employees or agents by any officer, director or key employee of the Company, or the conduct or proposed conduct of the business of the Company, will conflict with or result in a breach of the terms, conditions or provisions of or constitute a default under any contract, covenant or instrument under which any such Person is obligated. 2.20. Disclosure. Neither this Agreement nor any other Transaction Document, nor any schedule or exhibit hereto or thereto, nor any certificate furnished to the Purchasers by or on behalf of the Company in connection with the transactions contemplated hereby and thereby, contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein not misleading. The financial information disclosed by the Company to the Purchasers with respect to the financial condition, results of operation and cash flows of the Company for the year ending December 31, 1999 attached as Exhibit 2.20 hereto have been reasonably prepared in accordance with GAAP consistently applied for the period involved, and reflect the best currently available estimates and judgment of the Company's management as to the financial performance of the Company and the Subsidiaries for such period and to be reflected in the Company's SEC Reports for such period and any public announcements and conferences with analysts with respect thereto. 2.21. Year 2000. (a) The Company has conducted an inventory and assessment of all software, computers, network equipment, technical infrastructure, production equipment and other equipment and systems that are material to the operation of its business and that rely on, utilize or perform date or time processing ("Systems") to insure that the Systems are Year 2000 Compliant. (b) Any failure of any of the Company's System to be Year 2000 Compliant has not had and is not reasonably expected to have a Material Adverse Effect. (c) In addition to upgrading its own Systems, the Company has contacted certain significant suppliers to determine whether their Systems are Year 2000 Compliant. The Company has not received any information which would indicate that the Systems of its suppliers are not Year 2000 Compliant to the extent the same could reasonably be expected to result in any significant disruption to the Company's sources of supplies. (d) "Year 2000 Compliant" means a System has at all times: (i) consistently and accurately handled and processed date and time information and data values before, during and after January 1, 2000, including but not limited to accepting date input, providing date output, and performing calculations on or utilizing dates or portions of dates; (ii) function accurately and in accordance with its specifications without interruption, abnormal endings, degradation, change in operation or other impact, or disruption of other systems, resulting from processing date or time data with values, before, during and after January 1, 2000; (iii) respond to and process two-digit date input in a way that resolves any ambiguity as to century; and (iv) store and provide output of date information in ways that are unambiguous as to century. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS The Purchasers, severally and not jointly, hereby represent and warrant to the Company, as of the date hereof and as of the Closing Date, as follows: 3.1. Acquisition for Investment. Each Purchaser is acquiring the Preferred Stock and the Warrants for its own account, for investment and not with a view to the distribution thereof within the meaning of the Securities Act. 3.2. Restricted Securities. Each Purchaser understands that (i) the Preferred Stock, the Warrants and any Common Shares issuable upon conversion or exercise thereof will not be registered under the Securities Act or any state securities Laws by reason of their issuance by the Company in a transaction exempt from the registration requirements thereof and (ii) the shares of the Preferred Stock, the Warrants and any Common Shares issuable upon conversion or exercise thereof may not be sold unless such disposition is registered under the Securities Act and applicable state securities Laws or is exempt from registration thereunder. 3.3. No Brokers or Finders. No agent, broker, investment banker or other Person is or will be entitled to any broker's or finder's fee or any other commission or similar fee in connection with the transactions contemplated by this Agreement or the other Transaction Documents based on arrangements made by or on behalf of the Purchasers. 3.4. Accredited Investor. Each Purchaser is an "accredited investor" (as defined in Rule 501(a) under the Securities Act). 3.5 Organization. Each Purchaser is a limited partnership duly organized, validly existing and in good standing under the Laws of the State of Delaware (except for RKB Capital, L.P., which is organized, validly existing and in good standing under the Laws of the State of Minnesota) and has the requisite power and authority to carry on its business as it is now being conducted. 3.6. Due Authorization. Each Purchaser has all right, power and authority to enter into this Agreement and the other Transaction Documents to which it is a party and to consummate the transactions contemplated hereby and thereby. The execution and delivery by each Purchaser of this Agreement and the other Transaction Documents to which it is a party and the consummation by it of the transactions contemplated hereby and thereby (a) are within its power and authority and (b) have been duly authorized by all necessary action on the part of such entity. This Agreement constitutes, and each of the other Transaction Documents to which it is a party will constitute upon execution and delivery by each Purchaser, a valid and binding agreement of such entity enforceable against such entity in accordance with their respective terms, except as enforceability against each Purchaser may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws now or hereafter in effect relating to the rights of creditors generally and by legal and equitable limitations on the enforceability of specific remedies (regardless of whether enforcement is considered in a proceeding in equity or at law). 3.7. Consents; No Violations. Neither the execution, delivery or performance by each Purchaser of this Agreement and the other Transaction Documents nor the consummation of the transactions contemplated hereby or thereby will (a) conflict with, or result in a breach or a violation of, any provision of the organizational documents of such entity; (b) constitute, with or without notice or the passage of time or both, a breach, violation or default, create an Encumbrance, or give rise to any right of termination, modification, cancellation, prepayment, suspension, limitation, revocation or acceleration, under (i) any Law, or (ii) any Commitment of such entity, or to which such entity or any of its assets or properties is subject, except, with respect to the matters set forth in clause (ii), for breaches, violations, defaults, Encumbrances, or rights of termination, modification, cancellation, prepayment, suspension, limitation, revocation or acceleration, which, individually or in the aggregate, could not have a Material Adverse Effect on the ability of such entity to consummate the transactions contemplated hereby; or (c) require any consent, approval or authorization of, notification to, filing with, or exemption or waiver by, any Governmental Entity or any other Person on the part of such entity. 3.8. Availability of Funds. The Purchasers have or will have available at the Closing, sufficient funds to pay the Purchase Price for the Preferred Stock and the Warrants. 3.9 Trading Price. The Purchasers acknowledge that no representations and warranties made by the Company in Article II herein (including, without limitation, any reference to a Material Adverse Effect) shall be deemed a representation as to the current or prospective trading price of the shares of the Company's Common Stock. ARTICLE IV COVENANTS 4.1. Conduct of Business by the Company Pending the Closing. (a) The Company covenants and agrees that, during the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement or the Closing, unless the Purchasers otherwise agree in writing, the Company shall, and shall cause each of the Subsidiaries to, (i) conduct its business only in the ordinary course and consistent with past practice; (ii) use reasonable best efforts to preserve and maintain its assets and properties and its relationships with its customers, suppliers, advertisers, distributors, agents, officers and employees and other Persons with which it has significant business relationships; (iii) use reasonable best efforts to maintain all of the material assets it owns or uses in the ordinary course of business consistent with past practice; (iv) maintain insurance in full force and effect substantially comparable in amount, scope and coverage to that in effect on the date of this Agreement; (v) use reasonable best efforts to preserve the goodwill and ongoing operations of its business; (vi) maintain its books and records in the usual, regular and ordinary manner, on a basis consistent with past practice; (vii) perform and comply in all material respects with its Commitments; and (viii) comply in all material respects with applicable Laws. Except as expressly contemplated by this Agreement or as set forth on Schedule 4.1, between the date of this Agreement and the Closing, the Company shall not, and shall cause each of the Subsidiaries not to, do any of the following without the prior written consent of the Purchasers: (A) create any Encumbrance other than (i) Permitted Encumbrances and (ii) Encumbrances securing indebtedness permitted by clause (D) of this Section 4.1(a); (B) acquire or dispose of (by merger, consolidation, or acquisition of stock or assets) any Person, business, business line or any material amount of assets; (C) (i) except as provided in Schedule 4.1(a)(C) hereto, incur any additional indebtedness other than indebtedness incurred in the ordinary course of business under the Company's existing revolving credit agreement and pursuant to capital leases not exceeding $750,000 in the aggregate, or (ii) make any loans, advances or capital contributions to, or investments in, any Person other than (x) to a Subsidiary or (y) advances in the ordinary course of business to Persons that are not Related Parties not exceeding $750,000 to any one such Person; (D) change any method of accounting or accounting practice used by the Company or any Subsidiary, other than such changes required by GAAP; (E) (i) except as provided in Schedule 4.1(a)(E) hereto, grant or amend any stock-related or performance awards; (ii) except with respect to agreements which are terminable at will by the Company without any material penalty to the Company, enter into or amend any legally binding employment, severance, consulting or salary continuation agreements with any officers, directors or employees or grant any increases in compensation or benefits to employees other than increases to officers and employees in the ordinary course of business consistent with the past practice of the Company; (iii) adopt, amend or terminate any employee benefit plan or arrangement; (F) except as set forth in Schedule 2.17, enter into any transaction or Commitment with any Related Party; (G) allow the lapse of any of the Company's or any Subsidiary's rights of ownership or use of any material Intellectual Property right except in the ordinary course of business consistent with past practice; (H) (i) repurchase, redeem or otherwise acquire or exchange any share of Common Stock or other equity interests except for repurchases of unvested shares pursuant to the terms of the Company's Option Plan, (ii) except as provided in Schedule 4.1(a)(E) hereto, issue or sell any additional shares of the capital stock of, or other equity interests in, the Company or any Subsidiary, or securities convertible into or exchangeable for such shares or other equity interests, or issue or grant any subscription rights, options, warrants or other rights of any character relating to shares of such capital stock, such other equity interests or such securities, except pursuant to the Transaction Documents and except for issuances of Common Stock pursuant to the exercise of Options or (iii) declare, set aside, make or pay any dividend, or make any distribution, in respect of any shares of capital stock of the Company; (I) amend the Company's certificate of incorporation or by-laws, except with respect to the filing of the Certificate of Designation or for other non-material changes, or amend any Subsidiary's charter or by-laws or other organizational documents in any respect materially adverse to the Company; (K) make any material change in the Company's or any Subsidiary's Tax accounting methods, any material new election with respect to Taxes or any material modification or revocation of any existing election with respect to Taxes or settle or otherwise dispose of any material Tax audit, dispute, or other Tax proceeding, except in the ordinary course of business; (L) effect any stock split, reverse stock split, stock dividend, subdivision, reclassification or similar transaction, or otherwise change its capitalization as it exists on the date hereof; (M) directly or indirectly redeem, purchase or otherwise acquire any shares of its capital stock or the capital stock of any of its Subsidiaries; (N) sell, lease, assign, transfer or otherwise dispose of (by merger or otherwise) any of its property, business or assets (including, without limitation, receivables, leasehold interests or Intellectual Property and including any sale leaseback transaction) except for (i) the sale of inventory in the ordinary course of business, and (ii) other asset sales for fair value in the ordinary course of business provided that the proceeds of such other asset sales do not exceed $3,000,000 in the aggregate prior to the Closing; (O) make any advance, loan, extension of credit or capital contribution to, or purchase or acquire (by merger or otherwise) any stock, bonds, notes, debentures or other securities of, or any assets constituting a business unit of, or make any other investment in, any person, firm or entity, except (a) extensions of trade credit and endorsements of negotiable instruments and other negotiable documents in the ordinary course of business, (b) investments in cash and cash equivalents, (c) payroll and travel advances in the ordinary course of business and, (d) investments in wholly owned Subsidiaries; or (P) agree or publicly announce any intention to take any of the actions restricted by this Section 4.1. 4.2. No Solicitation. From the date of this Agreement until the earlier of the termination of this Agreement or the Closing, other than in connection with the transactions contemplated hereby, neither the Company nor any of the Subsidiaries shall solicit, propose or facilitate (including by way of providing information regarding the Company or any of the Subsidiaries or their respective businesses to any Person), directly or indirectly, any inquiries, discussions, offers or proposals for, continue or enter into negotiations looking toward, or enter into or consummate any Commitment or understanding in connection with any offer or proposal regarding, any issuance of capital stock or securities convertible into capital stock, except as permitted under Section 4.1. In addition, the Company agrees not to enter into, consummate or in any way commit to any purchase or acquisition of all or any material portion of the Company and the Subsidiaries taken as a whole, the business or assets of the Company and the Subsidiaries taken as a whole, or any capital stock of or equity interests in (whether newly issued or currently outstanding) the Company or any of the Subsidiaries, and (b) any merger, business combination or recapitalization involving the Company or any of the material Subsidiaries or their respective businesses (each such transaction an "M&A Transaction"). The Company agrees to promptly inform the Purchasers of the identity of any Person making any M&A Transaction and the nature and terms of any such M&A Transaction and to keep the Purchasers promptly and fully informed as to the status thereof whether made before or after the date of this Agreement. 4.3. Press Releases; Interim Public Filings. Subject to Section 8.3, the Company shall deliver to the Purchasers complete and correct copies of all press releases and public filings relating to the Transaction Documents, the transactions contemplated thereby and Company corporate matters made between the date hereof and the Closing, and shall give the Purchasers the reasonable opportunity to review and comment on such releases and filings, in each case prior to release in the form in which it will be issued. 4.4. Consents; Approvals. The Company shall use its reasonable best efforts, not requiring the expenditure of a material sum or the making of some other material accommodation, to obtain all consents, waivers, exemptions, approvals, authorizations or orders (collectively, "Consents") (including, without limitation (i) Consents required to avoid any breach, violation, default, encumbrance or right of termination, modification, cancellation, prepayment, suspension, limitation, revocation or acceleration set forth on Schedule 2.9 or required to be set forth thereon, (ii) all Consents pursuant to the Company's or any Subsidiary's financing documents, including, without limitation, all indentures and credit agreements of the Company or any Subsidiary, and (iii) all United States and foreign governmental and regulatory rulings and approvals), and the Company shall make all filings (including, without limitation, all filings with United States and foreign governmental or regulatory agencies), required or desirable in connection with the authorization, execution and delivery of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby; provided, however, no payment (other than filing fees related to the matters contemplated hereby) or other accommodation shall be made by the Company in connection with obtaining any of the foregoing without the Purchasers' prior written consent. The Purchasers shall cooperate with the Company in obtaining such Consents. The Company also shall use its reasonable best efforts, not requiring the expenditure of a material sum or the making of some other material accommodation, to obtain all necessary state securities laws or blue sky permits and approvals required to carry out the transactions contemplated hereby and shall furnish all information as may be reasonably requested in connection with any such action. 4.5. Listing. The Company shall use its best efforts to continue to have its Common Stock quoted on the NASDAQ national market system or other comparable national exchange prior to the Closing, and for so long as any shares of Preferred Stock, Warrants or any Common Shares issued upon conversion or exercise of the Preferred Stock and Warrants are outstanding. Prior to the Closing, the Company shall prepare and submit to the NASDAQ a listing application covering the shares of Common Stock issuable upon conversion of the Preferred Stock and exercise of the Warrants and shall obtain approval for the listing of such shares, subject to official notice of issuance. 4.6. Board Representation; VCOC. (a) Section 4 of the Certificate of Designation provides that the holders of Preferred Stock and Warrants shall be entitled to elect one director (the "Preferred Stock Designee") to the Board of Directors of the Company subject to the terms set forth therein. For so long as the Purchasers and their Affiliates, as holders of the Preferred Stock and Warrants maintain ownership at the Ownership Threshold, shall have the right under this Agreement and the Certificate of Designation to designate the Preferred Stock Designee, TWCP shall have the right, separately enforceable by it without further action required or permitted by any of the Purchasers or their Affiliates, to designate such Preferred Stock Designee. (b) In the event the Certificate of Designation is no longer in effect, and so long as the Purchasers and their Affiliates beneficially own in the aggregate Preferred Stock, Warrants and Common Shares issuable upon conversion or exercise thereof representing (and assuming conversion and exercise of all such Preferred Stock and Warrants) greater than 15% of the Common Shares (assuming such conversion and exercise) acquired by the Purchasers in the aggregate at the Closing (and adjusting for stock splits, stock combinations and like transactions) (such ownership threshold referred to as the "Ownership Threshold"), TWCP shall have the right to designate hereunder, at all times and from time to time, one director of the Company (individuals designated pursuant to this paragraph, the "Purchasers' Designee"). In the event of a vacancy caused by the disqualification, removal, resignation or other cessation of service of any Purchasers' Designee from the Board, the Board shall elect as a director (to serve until the term of such Purchaser Designee would have expired) a new Purchasers' Designee who has been designated by TWCP in an additional Purchasers' Designee Notice that has been provided to the Company at least seven (7) days prior the date of a regular meeting of the Board. TWCP shall nominate each Purchasers' Designee pursuant to an additional Purchasers' Designee Notice in advance of each meeting of shareholders at which such Purchasers' Designee is to be elected. (c) TWCP shall provide notice to the Company (the "Purchasers' Designee Notice") as required by Section 4.6(a) above for each Purchasers' Designee, which notice shall contain the following information: (i) the name of the Person it has designated to become director, and (ii) all information required by Regulation 14A and Schedule 14A under the Exchange Act with respect to each such Purchasers' Designee. Subject to Section 4.6(c) below, the Purchasers' Designee may be any person designated by TWCP, including persons who are officers, directors or employees of the Purchasers or their Affiliates. (d) The Company agrees to include the Purchasers' Designee to be added to or retained on the Board pursuant to this Agreement in the slate of nominees recommended by the Board to the Company's shareholders for election as director and shall use its reasonable efforts to cause the election or reelection of a Purchasers' Designee to the Board at each meeting of shareholders at which the Purchasers' Designee is up for election, including soliciting proxies in favor of the election of such Persons, it being understood that efforts consistent with those used for other members of the slate recommended by the Board shall be deemed reasonable. In the event that, notwithstanding the provisions of this Section 4.6(d), the Purchasers' Designee is not elected to the Board then, at the written request of TWCP made within 30 days after the date of the shareholder meeting at which the Purchasers' Designee was not elected, the Company shall cause, at the request of TWCP, the appointment of the Purchaser's Designee or any other Person designated by TWCP, as a non-voting observer (a "Non-Voting Observer") to the Board of the Company; it being understood that TWCP may from time to time change the designation of such Non-Voting Observer. The Company shall afford to any Purchasers' Designee who serves as a Non-Voting Observer, on as nearly equivalent basis as is possible (other than the right to vote) as would have been the case if the Purchasers' Designee had been elected to the Board, the opportunity to meaningfully participate in, express views with respect to and have influence on the deliberations of the Board, including through receipt, at the same time as the Board receives the same, of all information and material as is distributed to the Board. (e) So long as the Purchasers and their Affiliates beneficially own in the aggregate Preferred Stock, Warrants and Common Shares exceeding the Ownership Threshold, without the prior written consent of TWCP, the Board of Directors shall not amend the provisions of the by-laws of the Company, as amended in accordance with Section 5.2(x) specifying that the size of the entire Board shall consist of eight members. (f) So long as the Purchasers and their Affiliates beneficially own in the aggregate Preferred Stock, Warrants and Common Shares exceeding the Ownership Threshold, TWCP shall have the right to consult with and advise management of the Company on significant business issues, including finances and accounts of the Company and management's proposed annual operating plans, and meet with management at the Company's facilities at mutually agreeable times for such consultation and advice, including to review progress in achieving said plans subject to the execution of a mutually acceptable non-disclosure agreement. The Company agrees to consider the advice given and any proposals made by TWCP, provided the Company should be under no obligation to accept or follow such advice. (g) The rights set forth in this Section 4.6 are intended to satisfy the requirement of contractual management rights for purposes of qualifying TWCP's interests in the Company as venture capital investments for purposes of the Department of Labor's "plan assets" regulations, and in the event such rights are not satisfactory for such purpose as to TWCP, the Company and the Purchasers shall reasonably cooperate in good faith to agree upon mutually satisfactory management rights which satisfy such regulations. (h) Unless otherwise agreed by the Company, the Purchasers shall cause the Purchasers' Designee then serving on the Board or as a Non-Voting Observer to resign from the Board or as a Non-Voting Observer immediately at any time after the Purchasers and their Affiliates beneficially own in the aggregate Preferred Stock, Warrants and Common Shares less than the Ownership Threshold. 4.7. Committees. (a) The Preferred Stock Designee or Purchaser's Designee, as the case may be, shall be granted representation (as of the Closing Date) on all Board committees, including the audit and compensation committees. In the event that a Non-Voting Observer is serving on the Board as the representative for the Purchasers, such Non-Voting Observer shall be afforded, on as nearly equivalent basis as is possible (other than the right to vote) the opportunity to meaningfully participate in and express views with respect to the deliberations of the committees. (b) The Board will not establish an executive committee authorized to exercise the power of the Board generally unless the Purchasers are granted representation on such committee proportional to its representation on the Board, nor will the Board establish or employ committees (unless the Purchasers are granted proportional representation thereon) as a means designed to circumvent or having the effect of circumventing the rights of the Purchasers under this Agreement to representation on the Board. 4.8. Certificate of Designation. The Company shall, prior to or concurrently with the Closing, cause the Certificate of Designation to be filed with the Secretary of State of the State of Delaware as set forth in the form of the Certificate of Designation attached hereto as Exhibit 2.2. 4.9. Cooperation. Each of the Purchasers and the Company agrees to use its reasonable best efforts to take, or cause to be taken, as promptly as practicable all such further actions as shall be necessary to make effective and consummate the transactions contemplated by this Agreement. 4.10. Covenants to Provide Information. The Company covenants and agrees with each Purchaser that so long as the Purchasers and their Affiliates own in the aggregate Preferred Shares, Warrants and Common Shares in excess of the Ownership Threshold, the Company shall deliver to each Purchaser: (a) Within 45 days after the end of each quarterly fiscal period, (i) unaudited balance sheets and an income statement as of the end of such period, together with statements of retained earnings and cash flow for such period ("Quarterly Financials"), together with such analysis and comparisons to budget as are routinely provided to the Board. (b) Within 90 days after the end of each fiscal year, commencing with the first fiscal year ending after the Closing, (i) audited balance sheets and an income statement as of the end of such fiscal year, together with statements of retained earnings and cash flow for such fiscal year, all in reasonable detail and certified by a recognized national firm of independent accountants selected by the Board of Directors of the Company as presenting fairly the financial position and results of operations of the Company and as having been prepared in accordance with GAAP consistently applied, including their opinion thereon in the form included in the Company's Annual Report on Form 10-K, and (ii) the accounting firm's management letter. (c) Promptly upon becoming available, (i) copies of all financial statements, reports, material press releases, notices, proxy statements and other documents sent by the Company to its shareholders or released to the public and copies of all regular and periodic reports, if any, filed by the Company with any securities regulatory agency or any securities exchange and (ii) any other financial or other information available to management of the Company as the Purchasers shall have reasonably requested on a timely basis. (d) If for any period the Company shall have any subsidiary or subsidiaries whose accounts are consolidated with those of the Company, then, in respect of such period, the financial statements and information delivered pursuant to the foregoing paragraphs (a), (b) and (c) of this Section 4.10 shall be the consolidated and consolidating financial statements of the Company and all such consolidated subsidiaries. (e) At least 30 days prior to the beginning of each fiscal year, an annual budget for the Company for such fiscal year (displaying anticipated statements of income and cash flows and balance sheets), and promptly upon preparation thereof any other significant budgets prepared by the Company and any revisions of such annual budget. (f) Promptly (but in any event within ten business days) after the discovery or receipt of notice of (i) any default under any material agreement to which the Company and/or any of its Subsidiaries is a party, which default could reasonably be expected to have a Material Adverse Effect on the Company or any of its Subsidiaries, (ii) any other event which could reasonably be expected to have a Material Adverse Effect on the condition (financial or otherwise), results of operations, or business of the Company or any of its Subsidiaries (including, without limitation, the filing of any material litigation against the Company or any of its Subsidiaries a statement certified by a senior executive officer of the Company specifying the nature and period of existence thereof and what actions the Company has taken and proposes to take with respect thereto. (g) With reasonable promptness, such other information and financial data concerning the Company as the Purchasers may reasonably request. 4.11. Reserve Shares. The Company will at all times reserve and keep available, solely for issuance and delivery upon conversion of the Preferred Stock and the exercise of the Warrants, the number of shares of Common Stock from time to time issuable upon conversion of all shares of the Preferred Stock and exercise of the Warrants at the time outstanding. All Common Shares issuable upon conversion of the Preferred Stock and the exercise of the Warrants shall be duly authorized and, when issued upon such conversion or exercise, shall be validly issued, fully paid and nonassessable. 4.12. Notice of Breach. From the date hereof through the Closing, as promptly as practicable, and in any event not later than two business days after senior management of the Company becomes aware thereof, the Company shall provide the Purchasers with written notice of (a) any representation or warranty of the Company contained in this Agreement or any other Transaction Document being untrue or inaccurate in any material respect at any time from the date hereof to the Closing, or (b) any failure of the Company to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by the Company under this Agreement or any other Transaction Document. 4.13. Transfer Taxes. The Company shall be responsible for liability with respect to any transfer, stamp or similar Taxes which may be payable in connection with the execution, delivery and performance of this Agreement including, without limitation, any such Taxes with respect to the issuance of the Preferred Stock, the Warrants or the Common Shares. 4.14. Indemnification. So long as a Preferred Designee is a director, except for amendments or modifications required by Law, the Company shall not amend or modify any rights to indemnification now existing in favor of the present and former directors, officers or employees of the Company and its Subsidiaries provided in the certificate of incorporation and by-laws of the Company or any Subsidiary in a manner adverse to any such director, officer or employee, and the Company shall maintain officers' and directors' liability insurance carrying the directors of the Company with coverage no less favorable than presently in effect. 4.15. Use of Proceeds. The proceeds from the sale of the Preferred Stock and Warrants shall be used for general corporate purposes as shall be determined by the Board of Directors. 4.16. Registration Rights Agreement. The Company will use its reasonable best efforts prior to Closing to amend and restate the Registration Rights Agreement and the amended and restated registration rights agreement, dated May 6, 1996, as amended (the "Existing Rights Agreement"), so that all of the registrable securities under both agreements are covered by a single agreement, the terms of which are approved by the mutual consent of the Company and the requisite holders of registrable securities under each of the Registration Rights Agreement and the Existing Rights Agreement. 4.17. Future Issuances. The Company agrees that it shall be a condition of its issuance of any additional Common Stock (or securities convertible into or exercisable or exchangeable for Common Stock) pursuant to any employee benefit plan (other than the issuance of additional shares of Common Stock upon exercise of options outstanding as of the date hereof) that the person receiving such securities, if after receipt thereof such person beneficially owns in excess of 1% of the outstanding shares, to agree not to effect any public sale or distribution of equity securities of the Company, including any public sale pursuant to Rule 144 under the Securities Act, or any securities convertible into or exchangeable or exercisable for such securities, during the period commencing thirty days prior to and ending 90 days after the effective date of any underwritten demand registration or any underwritten piggyback registration under the Registration Rights Agreement. ARTICLE V CONDITIONS 5.1. Conditions to Obligations of the Purchasers and the Company. The respective obligations of the Purchasers and the Company to consummate the transactions contemplated hereunder shall be subject to the satisfaction or waiver at or prior to the Closing of each of the following conditions: (i) No statute, rule or regulation or order of any court or administrative agency shall be in effect which prohibits the consummation of the transactions to be consummated at the Closing; (ii) Any waiting period (and any extension thereof) under the HSR Act applicable to this Agreement and the transactions contemplated hereby shall have expired or been terminated; and (iii) Any material required filings or Consents set forth on Schedule 5.1(iii), if any, shall have been made or obtained. 5.2. Conditions to Obligations of the Purchasers. (a) The obligation of the Purchasers to consummate the transactions contemplated hereunder shall be subject to the satisfaction or waiver by the Purchasers at or prior to the Closing of each of the following conditions: (i) Each of the representations and warranties of the Company contained in this Agreement shall be true and correct (disregarding for this purpose all references in such representations and warranties to any materiality and Material Adverse Effect qualifications) as of the Closing (except to the extent such representations and warranties are made as of a particular date, in which case such representations and warranties shall have been true and correct in all material respects as of such date), except for failures to be true and correct which individually or in the aggregate would not reasonably be expected to have a Material Adverse Effect, (ii) The Company in all material respects shall have performed, satisfied and complied with each of its covenants and agreements set forth in this Agreement to be performed, satisfied and complied with prior to or at the Closing; (iii) The Company shall have delivered to the Purchasers an officer's certificate certifying as to the Company's compliance with the conditions set forth in clauses (i) and (ii) of this Section 5.2; (iv) The Designated Shareholders and the Company shall have entered into Management Stockholders Agreements in the form of Exhibit 5.2(iv) (the "Shareholders Agreements"), with each of Mark K. Ruport, Steven M. Johnson, James Hale, Thomas M. Rafferty, Marc R. Fey and Jeanne C. Logozzo and the Shareholders Agreements shall be in full force and effect; (v) The Company shall have executed and delivered a Registration Rights Agreement in the form of Exhibit 5.2(v) (the "Registration Rights Agreement"), and the Registration Rights Agreement shall be in full force and effect; (vi) The Certificate of Designation shall have been duly filed with the Secretary of State of the State of Delaware and shall be in full force and effect; (vii) The Shares initially issuable upon conversion or exercise, as the case may be, of the Preferred Stock and Warrants shall have been duly authorized and reserved for issuance and such Shares shall have been listed on the NASDAQ, subject to official notice of issuance; (viii) The Purchaser shall have received at the Closing an opinion of the E*Law Group, outside counsel to the Company, in the form of Exhibit 5.2(viii); (ix) There shall not have occurred since September 30, 1999 any change or development or series of changes or developments (including without limitation as a result of any change in the Law) which has resulted in or could reasonably be expected to result individually or in the aggregate in a Material Adverse Effect; and (x) The Board of Directors shall have amended the by-laws of the Company to provide that (i) the Board of Directors consists of eight directors, one of whom shall be the Preferred Designee and (ii) the provisions of the Certificate of Designation, to the extent inconsistent with the by-laws, shall be expressly controlling. 5.3. Conditions to Obligations of the Company. The obligation of the Company to consummate the transactions contemplated hereunder shall be subject to the satisfaction or waiver at or prior to the Closing of each of the following conditions: (a) Each of the representations and warranties of the Purchasers contained in this Agreement shall be true and correct (disregarding for this purpose all references in such representations and warranties to any materiality and/or Material Adverse Effect qualifications) as of the Closing (except to the extent such representations and warranties are made as of a particular date, in which case such representations and warranties shall have been true and correct in all material respects as of such date), except for failures to be true and correct which individually or in the aggregate would not reasonably be expected to have a Material Adverse Effect on the ability of the Purchasers to fulfill their obligations hereunder; (b) The Purchasers in all material respects shall have performed, satisfied and complied with each of its covenants and agreements set forth in this Agreement to be performed, satisfied and complied with prior to or at the Closing, disregarding for this purpose all references in such covenants and agreements to any materiality or similar qualifications; (c) The Purchasers shall have delivered to the Company an officer's certificate certifying as to the Purchasers' compliance with the conditions set forth in clauses (a) and (b) of this Section 5.3. ARTICLE VI TERMINATION 6.1. Termination. This Agreement may be terminated at any time prior to the Closing, upon written notice of such termination by the terminating party to the other party setting forth the basis for such termination: (a) by mutual written consent of the Company and the Purchasers at any time prior to the Closing; or (b) by either the Purchasers or the Company if the Closing shall not have been consummated by March 15, 2000 (provided that the right to terminate this Agreement under this Section 6.1(b) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the cause of or resulted in the failure of the Closing to occur on or before such date); or (c) by either the Purchasers or the Company if a court of competent jurisdiction or governmental, regulatory or administrative agency or commission shall have issued a nonappealable final order, decree or ruling or taken any other action having the effect of permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement; or (d) by the Purchaser or the Company, (i) if any representation or warranty of the other set forth in this Agreement shall be untrue in any material respect when made to the extent that such first party did not have actual knowledge of such breach as of the date of this Agreement, or (ii) upon a breach in any material respect of any covenant or agreement on the part of the other set forth in this Agreement, in each case which would constitute a failure of the condition to Closing of the first party (either (i) or (ii) above being a "Terminating Breach"); provided, that, if such Terminating Breach is curable within ten business days after notice of a party's intent to terminate this Agreement, through the exercise of reasonable efforts, and for so long as the other party continues to exercise such reasonable efforts during such ten business day cure period, the termination shall be effective immediately following notice and such ten business day cure period and only if the Terminating Breach is not cured as of such time. 6.2. Effect of Termination. In the event of the termination of this Agreement pursuant to Section 6.1, this Agreement shall forthwith become void and there shall be no liability on the part of any party hereto provided that Sections 7.2, 8.3, 8.8, 8.13, 8.14 and 8.15 and this Section 6.2 shall survive any termination of this Agreement. ARTICLE VII SURVIVAL; CERTAIN REMEDIES 7.1. Survival. If the Closing shall occur, the representations and warranties of the parties hereto contained in this Agreement or in any of the other Transaction Documents shall expire on the tenth business day following the date the Company files with the SEC its Form 10-K for the fiscal year ended December 31, 2000, except that the representations and warranties set forth in Sections 2.11, 2.12 and 2.14(c), shall survive until the expiration of the applicable statute of limitations (including any extensions thereof). After the expiration of such periods, any claim by a party hereto based upon any such representation or warranty shall be of no further force and effect, except to the extent a party has asserted a claim in accordance with this Article VII for breach of any such representation or warranty prior to the expiration of such period, in which event any representation or warranty to which such claim relates shall survive with respect to such claim until such claim is resolved as provided in this Article VII. The covenants and agreements of the parties hereto contained in this Agreement or in any of the other Transaction Documents shall survive the Closing until performed in accordance with their terms. 7.2. Indemnification. (a) The Company shall indemnify, defend and hold harmless the Purchasers, their Affiliates, and their respective officers, directors, partners, members, employees, agents, representatives, successors and assigns (each a "Purchasers' Indemnified Person") from and against all Losses incurred or suffered by a Purchaser Indemnified Person arising from (i) the breach of any of the representations or warranties made by the Company in this Agreement or any other Transaction Document (without giving effect to any qualification as to materiality or Material Adverse Effect contained in such representations and warranties), (ii) the breach of any covenant or agreement made by the Company in this Agreement or any other Transaction Document or (iii) any claims, investigations or litigation brought by any Person or Governmental Entity related to the transactions contemplated by this Agreement. Notwithstanding anything to the contrary in this Agreement, no indemnification payment by the Company to the Purchasers pursuant to this Section 7.2(a) with respect to any Losses otherwise payable hereunder pursuant to clause (i) above as a result of any one or more breaches of the representations made by the Company in this Agreement or any other Transaction Document shall be payable (x) until such time or the cumulative Losses directly or indirectly incurred or suffered by the Purchasers shall exceed $1,000,000 (the "Purchasers' Deductible") and then, (y) only to the extent the Purchasers' Losses exceed such Purchasers' Deductible and (z) up to a maximum of $15,000,000. (b) A party seeking indemnification under this Section 7.2 shall, promptly upon becoming aware of the facts indicating that a claim for indemnification may be warranted, give to the party from whom indemnification is being sought a notice of claim relating to such Loss (a "Claim Notice"). Each Claim Notice shall specify the nature of the claim, the applicable provision(s) of this Agreement or other instrument under which the claim for indemnity arises, and, if possible, the amount or the estimated amount thereof. No failure or delay in giving a Claim Notice (so long as the same is given prior to expiration of the representation or warranty upon which the claim is based) and no failure to include any specific information relating to the claim (such as the amount or estimated amount thereof) or any reference to any provision of this Agreement or other instrument under which the claim arises shall affect the obligation of the party from whom indemnification is sought. ARTICLE VIII MISCELLANEOUS 8.1. Defined Terms; Interpretations. The following terms, as used herein, shall have the following meanings: "Affiliate" shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations under the Exchange Act. "Agreement" shall have the meaning ascribed thereto in the preamble. "Board" or "Board of Directors" shall mean the Board of Directors of the Company. "Certificate of Designation" shall have the meaning ascribed thereto in Section 2.2. "Closing" shall have the meaning ascribed thereto in Section 1.2(a). "Closing Date" shall have the meaning ascribed thereto in Section 1.2(a). "Code" shall mean the Internal Revenue Code of 1986, as amended. "Commitments" shall have the meaning ascribed thereto in Section 2.15. "Common Shares" shall have the meaning ascribed thereto in Section 2.2. "Common Stock" shall have the meaning ascribed thereto in the recitals. "Company" shall have the meaning ascribed thereto in the preamble. "Company Affiliates" shall have the meaning ascribed thereto in Section 4.2. "Company Intellectual Property" shall mean all Intellectual Property which is used or is proposed to be used by the Company in its business as currently conducted. "Compensation and Benefit Plans" shall mean all material bonus, vacation, deferred compensation, pension, retirement, profit-sharing, thrift, savings, employee stock ownership, stock bonus, stock purchase, restricted stock and stock option plans, all employment or severance contracts, all medical, dental, disability, health and life insurance plans, all other material employee benefit and fringe benefit plans, contracts or arrangements and any applicable "change of control" or similar provisions in any plan, contract or arrangement sponsored, maintained or contributed to by the Company or any of its Subsidiaries for the benefit of officers, former officers, employees, former employees, directors, former directors, or the beneficiaries of any of the foregoing or pursuant to which the Company or any of its Subsidiaries or ERISA Affiliates has or may have any liability, contingent or otherwise. "Consents" shall have the meaning ascribed thereto in Section 4.4. "Designated Shareholders" shall mean Mark K. Ruport, Steven M. Johnson, James Hale, Thomas M. Rafferty, Marc R. Fey and Jeanne C. Logozzo. "DGCL" shall mean the Delaware General Corporation Law. "Encumbrances" shall have the meaning ascribed thereto in Section 2.1(b). "Environmental Claim" shall mean any and all administrative or judicial actions, suits, demands, information requests, directives, claims, liens, investigations, proceedings or notices of noncompliance, violation or status as a potentially responsible person or otherwise liable party by any Person (including any Governmental Entity) relating to or alleging potential liability (including, without limitation, potential responsibility for or liability for enforcement, investigatory costs, cleanup costs, response costs, removal costs, natural resources damages, property damages, personal injuries, fines or penalties) relating to (A) the presence, or Release or threatened Release into the environment, of any Hazardous Materials at any location; or (B) circumstances forming the basis of any violation or alleged violation of any Environmental Law; or (C) any and all claims by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief relating to any Environmental Laws. "Environmental Laws" shall mean, all applicable federal, state and local laws, rules, requirements, regulations and judicial or administrative opinions, orders or decrees, and any common law causes of action, in each case relating to pollution, the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or protection of human or employee health or safety including, without limitation, laws and regulations relating to Releases of Hazardous Materials. "Environmental Permits" shall have the meaning ascribed thereto in Section 2.14(d)(ii). "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. "ERISA Affiliate" shall mean each business or entity which is a member of a "controlled group of corporations," under "common control" or a member of an "affiliated service group" with the Company or any of its Subsidiaries within the meaning of Article 414(b), (c) or (m) of the Code, or required to be aggregated with the Company under Article 414(o) of the Code, or is under "common control" with the Company, within the meaning of Article 4001(a)(14) of ERISA, and the regulations promulgated and proposed thereunder. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any successor federal statute, and the rules and regulations of the SEC thereunder, all as the same shall be in effect at the time. Reference to a particular section of the Exchange Act shall include reference to the comparable section, if any, of any such successor federal statute. "Existing Rights Agreement" shall have the meaning ascribed thereto in Section 4.16. "GAAP" shall have the meaning ascribed thereto in Section 2.5. "Governmental Entity" shall mean any supernational, national, foreign, federal, state or local judicial, legislative, executive, administrative or regulatory body or authority. "Hazardous Materials" means (A) any petroleum or any by-products or fractions thereof, asbestos or asbestos-containing materials, urea formaldehyde foam insulation, any form of natural gas, explosives, polychlorinated biphenyls ("PCBs"), radioactive materials, ionizing radiation or electromagnetic field radiation; (B) any chemicals, materials or substances which are included in the definition of "wastes," "hazardous substances," "hazardous wastes," "hazardous materials," "extremely hazardous substances," "toxic substances," "toxic pollutants," "pollutants," "contaminants," or words of similar import under any Environmental Law; and (C) any other chemical, material or substance, regulated under any Environmental Law. "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder. "Intellectual Property" shall mean (i) all inventions and discoveries (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all patents, patent applications and patent disclosures, together with all reissuances, continuations, continuations-in-part, divisions, revisions, extensions and reexaminations thereof, (ii) all trademarks, service marks, trade dress, logos, trade names, domain names and corporate names, together with all translations, derivations and combinations thereof and including all goodwill associated therewith, and all applications, registrations and renewals in connection therewith and, to the extent any applications constitute intent-to-use applications for which no verified statement of use has been filed, the business, or portion thereof, pertaining thereto, (iii) all copyrightable works, all copyrights and all applications, registrations and renewals in connection therewith, (iv) all mask works and all applications, registrations and renewals in connection therewith, (v) all know-how, trade secrets and confidential business information (including ideas, research and development, formulas, compositions, manufacturing and production process and techniques, methods, schematics, technology, flow charts, block diagrams, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information and business and marketing plans and proposals), (vi) all computer software (including data and related documentation), (vii) all management information systems, (viii) all other proprietary rights, (ix) all copies and tangible embodiments thereof (in whatever form or medium), and (x) all licenses, sublicenses, permissions, and agreements in connection therewith. "IRS" shall mean the Internal Revenue Service. "Knowledge", with respect to the Company, shall mean the actual knowledge of each member of the Board of Directors of the Company and the actual knowledge, after reasonable inquiry, of each executive officer of the Company. "Laws" shall include all foreign, federal, state, and local laws, statutes, ordinances, rules, regulations, orders, judgments, decrees and bodies of law, including, without limitation, (i) any of the foregoing promulgated by any Governmental Entity and (ii) Environmental Laws. "Leased Real Property" shall mean the real property leased or subleased by the Company or any Subsidiary, together with, to the extent leased or subleased by the Company or any Subsidiary, all buildings and other structures, facilities or improvements currently or hereafter located thereon, all fixtures, systems, equipment and items of personal property of the Company or any Subsidiary attached or appurtenant thereto, and all easements, licenses, rights and appurtenances relating to the foregoing. "Licenses" shall have the meaning ascribed thereto in Section 2.14(a). "Litigation" shall have the meaning ascribed thereto in Section 2.7. "Losses" shall mean each and all of the following items: claims, losses, liabilities, obligations, payments, damages, charges, judgments, fines, penalties, amounts paid in settlement, costs and expenses (including, without limitation, interest which may be imposed in connection therewith, costs and expenses of investigation, actions, suits, proceedings, demands, assessments and fees, expenses and disbursements of counsel, consultants and other experts). "M&A Transaction" shall have the meaning ascribed thereto in Section 4.2. "Material Adverse Effect" shall mean a material adverse effect on the business, operations, results of operations, assets, financial condition or prospects of the Company and its Subsidiaries taken as a whole, it being understood and agreed that for purposes of this Agreement, adverse events or circumstances which result from general economic or financial market conditions or conditions generally affecting the industry in which the Company operates shall not constitute a Material Adverse Effect. "Multi-Employer Plan" shall have the meaning ascribed thereto in Section 2.12(c). "NASDAQ" shall mean the National Association of Securities Dealers Automated Quotation National Market System. "Owned Real Property" shall mean the real property owned by the Company or any Subsidiary, together with all buildings and other structures, facilities or improvements currently or hereafter located thereon, all fixtures, systems, equipment and items of personal property of the Company or any Subsidiary attached or appurtenant thereto and all easements, licenses, rights and appurtenances relating to the foregoing. "Permitted Encumbrances" shall mean, with respect to any asset, (i) any imperfection of title with respect to such asset which does not materially interfere with the present occupancy or use of such asset and the continuation of the present occupancy or use of such asset; (ii) such covenants, conditions, restrictions, easements, encroachments or Encumbrances that are not created pursuant to mortgages or other financing or security documents, and any other state of facts, which do not, individually or in the aggregate, materially interfere with the present occupancy or use of such asset; (iii) mechanic's, materialmen's, landlord and similar Encumbrances with respect to amounts not yet due and payable or which are being contested in good faith through appropriate proceedings; (iv) Encumbrances for Taxes not yet delinquent; and (v) Encumbrances securing rental payments under capital lease arrangements; and (vi) Encumbrances securing the Company's indebtedness under the Loan and Security Agreement, dated March 2, 1998, as amended and other capital leases in the ordinary course of business. "Person" shall mean any individual, firm, corporation, trust, limited liability company, partnership, company or other entity, including any Governmental Entity. "Preferred Stock" shall have the meaning ascribed thereto in the recitals. "Preferred Stock Designee" shall have the meaning ascribed thereto in Section 4.6(a). "Purchasers" shall have the meaning ascribed thereto in the preamble and, for purposes of Article II herein, any information delivered to the representatives of such Purchaser shall be deemed received by the Purchasers. "Purchasers' Designee" shall have the meaning ascribed thereto in Section 4.6(b). "Purchasers' Designee Notice" shall have the meaning ascribed thereto in Section 4.6(c). "Purchasers' Expenses" shall have the meaning ascribed thereto in Section 8.2. "Purchasers' Indemnified Person" shall have the meaning ascribed thereto in Section 7.2(a). "Quarterly Financials" shall have the meaning ascribed thereto in Section 4.10(a). "Related Parties" shall mean (i) Affiliates of the Company and (ii) directors or officers of the Company and their Affiliates (including any family members of directors and officers), but shall not include the Subsidiaries or the directors or officers of the Subsidiaries (except for directors or officers of the Subsidiaries who are also directors or officers of the Company). "Release" shall means any release, spill, emission, leaking, injection, deposit, disposal, discharge, dispersal, leaching or migration into the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata). "Return" shall mean any report, return, statement, estimate, declaration, notice, form or other information required to be supplied to a taxing authority in connection with Taxes. "SEC" shall mean the Securities and Exchange Commission. "SEC Reports" shall have the meaning ascribed thereto in Section 2.4. "Securities Act" shall mean the Securities Act of 1933, as amended, or any successor federal statute, and the rules and regulations of the SEC thereunder, all as the same shall be in effect at the time. Reference to a particular section of the Securities Act shall include reference to the comparable section, if any, of such successor federal statute. "Shareholders Agreement" shall have the meaning ascribed thereto in Section 5.2(a)(iv). "Subsidiaries" shall have the meaning ascribed thereto in Section 2.1(b). "Subsidiary" shall have the meaning ascribed thereto in Section 2.1(b). "Systems" shall have the meaning ascribed thereto in Section 2.21(a). "Tax" and "Taxes" shall mean any federal, state, local or foreign income, gross receipts, property, sales, use, value added, license, excise, franchise, capital, net worth, estimated, withholding, employment, payroll, premium, withholding, alternative or added minimum, ad valorem, inventory, asset, gains, transfer or excise tax, or any other tax, levy, custom, duty, impost, governmental fee or other like assessment or charge of any kind whatsoever, (including any taxes of any other Person owing by contract, as a transferee or successor, under Treas. Reg. ss. 1.1502-6 or analogous state, local, or foreign law provision, or otherwise) together with any interest, penalty or additions to tax, imposed by any Governmental Entity. "Terminating Breach" shall have the meaning ascribed thereto in Section 6.1(d). "Third Party" shall mean any Person (or group of Persons) other than the Purchasers. "Transaction Documents" shall mean this Agreement, the Shareholders Agreement, the Certificate of Designation, the Registration Rights Agreement, the Warrant Agreement, the certificates evidencing the shares of Preferred Stock and Warrants purchased hereunder and all other contracts, agreements, schedules, certificates and other documents being delivered pursuant to or in connection with this Agreement or such other documents or the transactions contemplated hereby or thereby. "Warrant Agreement" shall have the meaning ascribed thereto in Section 1.2(b). "Warrants" shall have the meaning ascribed thereto in the recitals. 8.2. Fees and Expenses. Only in the event of and at the Closing, as an adjustment to the Purchase Price, the Company shall reimburse the Purchasers in cash for its fees and expenses incurred in connection with this Agreement and the transactions contemplated hereby (including, without limitation, the fees and disbursements of its attorneys, accountants, consultants and other advisors) (collectively, "Purchasers' Expenses"); provided, however, that the portion of the Purchasers' Expenses for which Purchasers are reimbursed shall not exceed $175,000 in the aggregate. 8.3. Public Announcements. The Purchaser and the Company shall consult with each other before issuing any press release with respect to this Agreement or the transactions contemplated hereby and neither shall issue any such press release or make any such public statement without the prior consent of the other, which consent shall not be unreasonably withheld; provided, however, that a party may, without the prior consent of the other party, issue such press release or make such public statement as may upon the advice of counsel be required by Law or the rules and regulations of the NASDAQ, if it has used reasonable efforts to consult with the other party prior thereto. 8.4. Restrictive Legends. No shares of Preferred Stock, Warrants or Common Shares may be transferred without registration under the Securities Act and applicable state securities laws unless counsel to the Company shall advise the Company that such transfer may be effected without such registration. Each certificate representing any of the foregoing shall bear legends in substantially the following form: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS. 8.5. Further Assurances. At any time or from time to time after the Closing, the Company, on the one hand, and the Purchasers, on the other hand, agree to cooperate with each other, and at the request of the other party, to execute and deliver any further instruments or documents and to take all such further action as the other party may reasonably request in order to evidence or effectuate the consummation of the transactions contemplated hereby or by the other Transaction Documents and to otherwise carry out the intent of the parties hereunder or thereunder. 8.6. Successors and Assigns. This Agreement shall bind and inure to the benefit of the Company and the Purchasers and the respective successors, permitted assigns, heirs and personal representatives of the Company and the Purchasers, provided that the Company may not assign its rights or obligations under this Agreement to any Person without the prior written consent of the Purchasers, and provided further that the Purchasers may not assign its rights or obligations under this Agreement to any Person (other than a direct or indirect wholly-owned Affiliate of the Purchasers) without the prior written consent of the Company, which consent shall not be unreasonably withheld or delayed. In addition, and whether or not any express assignment has been made, the provisions of this Agreement which are for the Purchasers' benefit as a purchaser or holder of Preferred Stock, Warrants or Shares are also for the benefit of, and enforceable by, any subsequent holder of such Preferred Stock, Warrants or Shares. 8.7. Entire Agreement. This Agreement and the other Transaction Documents and the Confidentiality Agreement contain the entire agreement among the parties with respect to the subject matter hereof and supersede all prior and contemporaneous arrangements or understandings with respect thereto. 8.8. Notices. All notices, requests, consents and other communications hereunder to any party shall be deemed to be sufficient if contained in a written instrument delivered in person or sent by telecopy, nationally recognized overnight courier or first class registered or certified mail, return receipt requested, postage prepaid, addressed to such party at the address set forth below or such other address as may hereafter be designated in writing by such party to the other parties: (i) if to the Company, to: Optika Inc. 7450 Campus Drive, 2nd Floor Colorado Springs, Colorado 80920 Telecopy: (719) 531-0199 Attention: Steven Johnson Vice President and Chief Financial Officer with a copy to (which shall not constitute notice): E*Law Group 3555 W. 110th Place Westminster, Colorado 80031 Telecopy: (303) 410-0468 Attention: Jeremy W. Makarechian, Esq. and to: Morrison & Foerster LLP 370 17th Street, Suite 5200 Denver, Colorado 30202 Telecopy: (303) 592-1510 Attention: Warren L. Troupe, Esq. (ii) if to the Purchasers, Thomas Weisel Capital Partners, L.P. c/o Thomas Weisel Capital Partners, L.L.C. One Montgomery Street, Suite 3700 San Francisco, California 94104 Telecopy: (415) 364-2698 Attention: Marianne Winkler RKB Capital, L.P. 150 West Lake Street Wayzata, Minnesota 55391 Telecopy: (612) 404-9266 Attention: Peter Schleider with copies to (which shall not constitute notice): Fried, Frank, Harris, Shriver & Jacobson One New York Plaza New York, New York 10004 Telecopy: (212) 859-8587 Attention: F. William Reindel, Esq. All such notices, requests, consents and other communications shall be deemed to have been given or made if and when delivered personally or by overnight courier to the parties at the above addresses or sent by electronic transmission, with confirmation received, to the telecopy numbers specified above (or at such other address or telecopy number for a party as shall be specified by like notice). 8.9. Amendments. The terms and provisions of this Agreement may be modified or amended, or any of the provisions hereof waived, temporarily or permanently, in a writing executed and delivered by the Company and the Purchasers. No waiver of any of the provisions of this Agreement shall be deemed to or shall constitute a waiver of any other provision hereof (whether or not similar). No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof. Any consent or waiver (whether or not contemplated by this Agreement) to be made by the Purchasers shall be made by a majority in interest of the Purchasers on behalf of all the Purchasers. 8.10. Counterparts. This Agreement may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. 8.11. Headings. The headings of the sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of this Agreement. 8.12. Nouns and Pronouns. Whenever the context may require, any pronouns used herein shall include the corresponding masculine, feminine or neuter forms, and the singular form of names and pronouns shall include the plural and vice versa. 8.13. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW. 8.14. Submission to Jurisdiction. Each of the parties hereto hereby irrevocably and unconditionally consents to submit to the exclusive jurisdiction of the courts of the State of New York and of the United States of America, in each case located in the County of New York, for any Litigation arising out of or relating to this Agreement or the other Transaction Documents and the transactions contemplated hereby and thereby (and agrees not to commence any Litigation relating hereto or thereto except in such courts), and further agrees that service of any process, summons, notice or document by U.S. registered mail to its respective address set forth in this Agreement shall be effective service of process for any Litigation brought against it in any such court. Each of the parties hereto hereby irrevocably and unconditionally waives any objection to the laying of venue of any Litigation arising out of this Agreement or the transactions contemplated hereby in the courts of the State of New York or the United States of America, in each case located in the County of New York, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such Litigation brought in any such court has been brought in an inconvenient forum. 8.15. Waiver of Jury Trial. THE COMPANY AND THE PURCHASERS HEREBY WAIVE ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, PROCEEDING OR LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTION DOCUMENTS. 8.16. Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid, but if any provision of this Agreement is held to be invalid or unenforceable in any respect, such invalidity or unenforceability shall not render invalid or unenforceable any other provision of this Agreement. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written. Optika Inc. By: /s/ Mark K. Ruport ----------------------------- Name: Mark K. Ruport Title: President & CEO [Optika Signature Page - Stock Purchase Agreement] PURCHASERS - ---------- THOMAS WEISEL CAPITAL PARTNERS, L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, Its managing member By: /s/ Deborah Bernstein ------------------------------------------------- Name: Deborah Bernstein Title: Authorized Signatory TWP CEO FOUNDERS' CIRCLE (AI), L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, Its managing member By: /s/ Deborah Bernstein ------------------------------------------------- Name: Deborah Bernstein Title: Authorized Signatory TWP CEO FOUNDERS' CIRCLE (QP), L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, Its managing member By: /s/ Deborah Bernstein ------------------------------------------------- Name: Deborah Bernstein Title: Authorized Signatory THOMAS WEISEL CAPITAL PARTNERS EMPLOYEE FUND, L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, Its managing member By: /s/ Deborah Bernstein ------------------------------------------------- Name: Deborah Bernstein Title: Authorized Signatory TWP 2000 C0-INVESTMENT FUND, L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, Its managing member By: /s/ Deborah Bernstein ------------------------------------------------- Name: Deborah Bernstein Title: Authorized Signatory [Purchasers Signature Page - Securities Purchase Agreement] PURCHASERS RKB CAPITAL, L.P. By: /s/ Peter Schleider ------------------------------------ Name: Peter Schleider Title: General Partner [Purchasers Signature Page - Securities Purchase Agreement] EX-99.3 4 EXHIBIT 3 OPTIKA INC. CERTIFICATE OF DESIGNATION OF SERIES A CONVERTIBLE PREFERRED STOCK Pursuant to Section 151(g) of the General Corporation Law of the State of Delaware, Optika Inc. (the "Corporation"), a corporation organized and existing under the General Corporation Law of the State of Delaware ("DGCL"), DOES HEREBY CERTIFY that: Pursuant to the authority conferred upon the Board of Directors of the Corporation by Article IVB of the Second Amended and Restated Certificate of Incorporation of the Corporation (the "Certificate of Incorporation"), and in accordance with the provisions of Section 151(g) of the DGCL, the Board of Directors of the Corporation on February 21, 2000, adopted the following resolution creating a series of Preferred Stock designated as Series A Convertible Preferred Stock. RESOLVED, that pursuant to the authority vested in the Board of Directors of the Corporation in accordance with the DGCL and the provisions of the Certificate of Incorporation, a series of the class of authorized Preferred Stock, par value $0.001 per share, of the Corporation is hereby created and that the designation and number of shares thereof and the voting powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations and restrictions thereof, are as follows (capitalized terms used herein shall have the meanings set forth in Section 12 hereof or otherwise in this Certificate of Designation): SECTION 1. DESIGNATION; NUMBER; RANK. (a) Designation; Number. The shares of such series shall be designated "Series A Convertible Preferred Stock" (the "Series A Preferred Stock"). The number of shares constituting the Series A Preferred Stock shall be 731,851. (b) Rank. The Series A Preferred Stock shall, with respect to rights on liquidation, dissolution or winding up, rank senior to the Common Stock, par value $0.001 per share, of the Corporation (the "Common Stock") and all other capital stock of the Corporation issued prior to or on or after the date hereof. SECTION 2. DIVIDENDS. So long as any shares of Series A Preferred Stock remain outstanding, if the Corporation pays a dividend in cash, securities or other property on shares of Common Stock then, at the same time, the Corporation shall declare and pay a dividend on each outstanding share of Series A Preferred Stock in the same amount and form as would be paid on the shares of Common Stock into which such share of Series A Preferred Stock would be converted if such shares were converted into shares of Common Stock on the record date for such Common Stock dividends (or if no record date is established, at the date such dividend is declared), it being understood that the holders of Series A Preferred Stock shall participate in Common Stock dividends as aforesaid without having to convert to shares of Series A Preferred Stock held by such holders. SECTION 3. LIQUIDATION, DISSOLUTION OR WINDING UP. (a) (i) If the Corporation shall (A) commence a voluntary case under the Federal bankruptcy laws or any other applicable Federal or state bankruptcy, insolvency or similar law, or (B) consent to the entry of an order for relief in an involuntary case under such law or to the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Corporation, or of any substantial part of its property, or (C) make an assignment for the benefit of its creditors, or (D) admit in writing its inability to pay its debts generally as they become due, or (ii)(x) if a decree or order for relief in respect of the Corporation shall be entered by a court having jurisdiction in the premises in an involuntary case under the Federal bankruptcy laws or any other applicable Federal or state bankruptcy, insolvency or similar law, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Corporation or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and (y) any such decree or order shall be unstayed and in effect for a period of 60 consecutive days and on account of any such event the Corporation shall liquidate, dissolve or wind up or (iii) if the Corporation shall otherwise liquidate, dissolve or wind up, after payment or provision for the payment for the debts and other liabilities of the Corporation (each, a "Liquidation"), no distribution shall be made to the holders of shares of Junior Stock or Parity Stock unless, prior thereto, the holders of shares of Series A Preferred Stock shall have received, in cash, with respect to each share of Series A Preferred Stock, the greater of (A) the Liquidation Preference with respect to such share of the Series A Preferred Stock; and (B) the amount which would have been paid upon any such Liquidation in respect of the aggregate number of shares of Common Stock into which such share of Series A Preferred Stock is then convertible, it being understood that holders of Series A Preferred Stock may be deemed to participate in the amount receivable by the holders of Common Stock as aforesaid in this clause (B) without having to convert the shares of Series A Preferred Stock held by such holders (the greater of the amounts set forth in clause (A) and (B) above with respect to any share of Series A Preferred Stock, the "Preference Amount," and the aggregate such amount for all outstanding shares of Series A Preferred Stock, the "Aggregate Preference Amount"). (b) If, upon any such Liquidation, whether voluntary or involuntary, the assets to be distributed to the holders of the Series A Preferred Stock shall be insufficient to permit payment of the full amount of the Preference Amount with respect to each share of Series A Preferred Stock, then the entire assets of the Corporation to be distributed among the holders of the Series A Preferred Stock shall be distributed ratably among such holders in accordance with the number of shares of Series A Preferred Stock held by each such holder in proportion to the ratio that the Preference Amount payable on each such share bears to the Aggregate Preference Amount. (c) After the payment to the holders of shares of the Series A Preferred Stock of the full amount of any liquidating distribution to which they are entitled under this Article 3, the holders of the Series A Preferred Stock as such shall have no right or claim to any of the remaining assets of the Corporation. (d) Whenever the distribution provided for in this Section 3 shall be payable in securities or property other than cash, the value of such distribution shall be the Fair Market Value of such securities or property. SECTION 4. VOTING RIGHTS. In addition to any voting rights provided by law, the holders of shares of Series A Preferred Stock shall have the voting rights set forth in this Section 4: (a) (i) Right to Vote as a Single Class with Holders of Common Stock. So long as any of the Series A Preferred Stock is outstanding, each share of Series A Preferred Stock shall entitle the holder thereof to vote on all matters submitted to a vote of the stockholders of the Corporation, voting together as a single class with the holders of Common Stock. The holders of each share of Series A Preferred Stock shall be entitled to vote with respect to each share of Series A Preferred Stock held by each such holder a number of votes equal to the number of votes which could be cast in such vote by a holder of the number of shares of Common Stock into which such share of Series A Preferred Stock is then convertible on the record date for such vote without such holder being required to convert such shares. Fractional votes shall not, however, be permitted and any fractional voting rights available on an as-converted basis (after aggregation of all shares of Common Stock into which shares of Series A Preferred Stock held by each holder could be converted) shall be rounded to the nearest whole number (with one-half being rounded upward). (ii) Right to Elect a Director. On the Issue Date, the Board of Directors shall cause the total number of directors then constituting the whole Board of Directors to be fixed at eight. The holders of the outstanding shares of Series A Preferred Stock shall be entitled to designate one director for election to the Board of Directors of the Corporation as a Class I director and, voting separately as a series, shall have the exclusive right to vote for the election of such designee to the Board of Directors for so long as the Purchasers under the Securities Purchase Agreement and their affiliates own in excess of the Ownership Threshold (as defined in the Securities Purchase Agreement). Any such designee may be removed with or without cause by the holders of the Series A Preferred Stock. (iii) No Right to Class Vote on Certain Transactions. Subject to the rights of holders of shares of Series A Preferred Stock set forth in Sections 4(a)(i), 8 and 10, the Corporation may, without the consent of any holder of Series A Preferred Stock, consolidate with or merge with or into, or convey, transfer or lease all or substantially all its assets as an entirety to, any Person, provided that: (A) the successor, transferee or lessee (if not the Corporation) is organized and existing under the laws of the United States of America or any State thereof or the District of Columbia and the Series A Preferred Stock shall be converted into or exchanged for and shall become shares of, or interests in, such successor, transferee or lessee, having in respect of such successor, transferee, or lessee substantially the same powers, preferences and relative, participating, optional or other special rights and the qualifications, limitations or restrictions thereof, that the Series A Preferred Stock has immediately prior to such transaction; and (B) the Corporation delivers to the transfer agent an officers' certificate and provides reasonable evidence that such consolidation, merger, conveyance, transfer or lease complies with this Certificate of Designation. In the event of any consolidation or merger or conveyance, transfer or lease of all or substantially all of the assets of the Corporation that is permitted pursuant to this subparagraph (iii), the successor resulting from such consolidation or into which the Corporation is merged or the transferee or lessee to which such conveyance, transfer or lease is made, will succeed to, and be substituted for, and may exercise every right and power of, the Corporation with respect to the Series A Preferred Stock (or the shares or interests into, or for which, the Series A Preferred Stock is converted or exchanged), and thereafter, except in the case of a lease, the predecessor (if still in existence) shall be released from its obligations and covenants with respect to the Series A Preferred Stock. (b) Actions Not to be Taken Without Vote of Holders of Series A Preferred Stock. So long as any shares of Series A Preferred Stock are outstanding, the affirmative vote of the holders of a majority of the shares of Series A Preferred Stock outstanding at the time of such vote shall be required in order to: (i) authorize, increase the authorized number of shares of, or issue (including on conversion, exercise or exchange of any convertible, exercisable or exchangeable securities or by reclassification) (A) any shares of any class or classes or series within a class of the Corporation's capital stock ranking prior to (either as to dividends or upon Liquidation) the Series A Preferred Stock, or (B) any Parity Stock; (ii) increase the authorized number of shares of, or issue (including on conversion, exercise or exchange of any convertible, exercisable or exchangeable securities or by reclassification) any shares of, Series A Preferred Stock other than as authorized by this Certificate of Designation; or (iii) reclassify any shares of Series A Preferred Stock or authorize, adopt or approve an amendment to the Certificate of Incorporation or this Certificate of Designation which would increase or decrease the par value of the shares of Series A Preferred Stock, or alter or change the powers, preferences or special rights of the Series A Preferred Stock. (c) Exercise of Voting Rights. (i) The foregoing rights of holders of shares of Series A Preferred Stock to take any actions (A) as provided in Section 4(a)(i) may be exercised at any annual meeting of stockholders or at a special meeting of stockholders held for such purpose or at any adjournment thereof and (B) as provided in Sections 4(a)(ii) and 4(b) may be exercised at any annual meeting of holders of Series A Preferred Stock or at a special meeting of holders of Series A Preferred Stock held for such purpose or at any adjournment thereof. The Chairman of the Board of the Corporation may call, and if the holders of Series A Preferred Stock are to vote separately as a single class, upon the written request of holders of record of 20% of the outstanding shares of Series A Preferred Stock, addressed to the Secretary of the Corporation, at the principal office of the Corporation, the Chairman of the Board of the Corporation shall call, a special meeting of the holders of shares of Series A Preferred Stock entitled to vote as provided herein. The Corporation shall use its best efforts to hold such meeting within 10, but in any event not later than 20, days after delivery of such request to the Secretary, upon the notice specified by the requesting holders of Series A Preferred Stock or if not so specified as provided by law and in the By-Laws of the Corporation for the holding of meetings of stockholders. (ii) At each meeting of stockholders at which the holders of shares of Series A Preferred Stock shall have the right, voting separately as a single class, to take any action, the presence in person or by proxy of the holders of record of one-half of the total number of shares of Series A Preferred Stock then outstanding and entitled to vote on the matter shall be necessary and sufficient to constitute a quorum. At any such meeting or at any adjournment thereof, in the absence of a quorum of the holders of shares of Series A Preferred Stock, a majority of the holders of such shares present in person or by proxy shall have the power to adjourn the meeting as to the actions to be taken by the holders of shares of Series A Preferred Stock from time to time and place to place without notice other than announcement at the meeting until a quorum shall be present. (iii) For the taking of any action as provided in Sections 4(a)(ii) or 4(b) by the holders of shares of Series A Preferred Stock, each such holder shall have one vote for each share of such stock standing in his name on the transfer books of the Corporation as of any record date fixed for such purpose or, if no such date be fixed, at the close of business on the Business Day next preceding the day on which notice is given, or if notice is waived, at the close of business on the Business Day next preceding the day on which the meeting is held. SECTION 5. RESTRICTIONS ON DISTRIBUTIONS IN RESPECT OF COMMON STOCK. (a) For so long as any shares of Series A Preferred Stock shall remain outstanding, (A) upon the occurrence and during the continuance of any default by the Corporation in respect of its obligations in favor of any holders of the Series A Preferred Stock, including any obligation to redeem shares of Series A Preferred Stock under Section 5 or repurchase shares of Series A Preferred Stock under Section 10 and (B) from the date of an Other Liquidation Event or Public Company Liquidation Event to the Other Liquidation Event Payment Date, the Corporation shall not declare or pay any dividends or make any distributions, whether in cash, securities or other property, upon, nor shall the Corporation redeem, purchase or otherwise acquire for consideration any shares of Parity Stock or Junior Stock, other than the repurchase of shares of capital stock or securities convertible into or exchangeable for capital stock of the Corporation held by directors or employees of the Corporation pursuant to employee benefit plans approved by the Board of Directors. (b) The Corporation shall not permit any subsidiaries of the Corporation to purchase or otherwise acquire for consideration any shares of capital stock of the Corporation unless the Corporation could, pursuant to clause (a) of this Section 5, purchase such shares at such time and in such manner. SECTION 6. REDEMPTION. (a) Optional Redemption. (i) Subject to the rights of holders of shares of Series A Preferred Stock set forth in Section 8 hereof, the Corporation shall, at any time following the first anniversary of the Issue Date, have the right, at its sole option and election made in accordance with clause (a)(ii) below, to redeem, to the extent the Corporation shall have the funds legally available therefor, all, but not less than all, of the then outstanding shares of Series A Preferred Stock within 70 days following any date (the "Redemption Trigger Date") on which the Market Price per share of Common Stock for each of at least 20 out of 22 consecutive Trading Days immediately preceding such date is equal to or greater than $40.992 (subject to appropriate adjustment for stock dividends, splits, combinations and similar events affecting the Common Stock) (the "Trigger Price") for an amount in cash per share of Series A Preferred Stock equal to the Liquidation Preference of such share (the "Optional Redemption Price") as of the Optional Redemption Date (as defined below). (ii) Notice of any redemption of shares of Series A Preferred Stock pursuant to clause (a)(i) shall be mailed, first class postage prepaid, to each holder of shares of Series A Preferred Stock, at such holder's address as it appears on the transfer books of the Corporation, specifying (x) the Optional Redemption Price and (y) the redemption date (the "Optional Redemption Date"); and calling upon such holder to surrender to the Corporation, in the manner and at the place designated, such holder's certificate or certificates representing the shares to be redeemed (the "Optional Redemption Notice"). The Optional Redemption Notice shall be mailed not more than 35 days following the applicable Redemption Trigger Date. The Optional Redemption Date shall be determined by the Corporation but in no event shall be earlier than the 10th day following the date of receipt by the holders of Series A Preferred Stock of the Redemption Notice or later than the 35th day following the Redemption Notice. The Redemption Notice shall be revocable by the Corporation by notice to the holders of Series A Preferred Stock received by such holders on or prior to the fifth Business Day prior to the Optional Redemption Date. (b) Mandatory Redemption. (i) Subject to the rights of holders of shares of Series A Preferred Stock set forth in Section 8 hereof, the Corporation shall, on the eighth anniversary of the Issue Date (such date, the "Mandatory Redemption Date"), redeem, to the extent the Corporation shall have the funds legally available therefor, all, but not less than all, of the then outstanding shares of Series A Preferred Stock for an amount in cash per share of Series A Preferred Stock equal to the Liquidation Preference of such share (the "Mandatory Redemption Price") as of the Mandatory Redemption Date. If the funds of the Corporation legally available for redemption of shares of Series A Preferred Stock on the Mandatory Redemption Date are insufficient to redeem the total number of shares to be redeemed on such date, those funds which are legally available will be used to redeem the maximum possible number of such shares ratably among the holders of such shares to be redeemed based upon the number of shares of Series A Preferred Stock held by each such holder. The shares of Series A Preferred Stock not redeemed shall remain outstanding and entitled to all the rights and preferences provided in this Certificate of Designation at any time. Thereafter, when sufficient additional funds of the Corporation are legally available for the redemption of shares of Series A Preferred Stock that remain outstanding, such funds shall immediately be used to redeem the entire balance of the shares of Series A Preferred Stock that the Corporation has become obliged to redeem on the Mandatory Redemption Date but which the Corporation has not redeemed. (ii) Notice of any redemption of shares of Series A Preferred Stock pursuant to clause (b)(i) shall be mailed, first class postage prepaid, to each holder of shares of Series A Preferred Stock, at such holder's address as it appears on the transfer books of the Corporation, specifying (x) the number of shares of Series A Preferred Stock to be redeemed, (y) the Mandatory Redemption Price and (z) the Mandatory Redemption Date; and calling upon such holder to surrender to the Corporation, in the manner and at the place designated, such holder's certificate or certificates representing the shares to be redeemed (the "Mandatory Redemption Notice"). The Mandatory Redemption Notice shall be mailed not less than 25 and not more than 45 days prior to the Mandatory Redemption Date. (c) Payment of Redemption Price. On the date of any redemption pursuant to this Section 6, (i) the Corporation shall pay, in cash or by wire transfer of immediately available funds to an account designated by each holder, the Optional Redemption Price or the Mandatory Redemption Price, as the case may be, for each of its shares of Series A Preferred Stock, and (ii) after payment has been made in accordance with clause (i) above, all rights of the holders thereof as holders of Series A Preferred Stock of the Corporation shall cease. SECTION 7. STATUS OF CONVERTED OR REDEEMED STOCK. Any shares of Series A Preferred Stock converted, redeemed, purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares of Series A Preferred Stock shall upon their cancellation, and upon the filing of any document required by the DGCL, become authorized but unissued shares of Preferred Stock, $0.001 par value, of the Corporation and may be reissued as part of another series of Preferred Stock, $0.001 par value, of the Corporation. SECTION 8. CONVERSION. (a) Right to Convert. Subject to the provisions for adjustment hereinafter set forth, the holders of Series A Preferred Stock shall have the right following the Issue Date at any time in whole and from time to time in part, at such holder's option, to convert any or all outstanding shares (and fractional shares) of Series A Preferred Stock into Common Stock as set forth hereinafter. Each share of Series A Preferred Stock shall be convertible into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Liquidation Preference as of the Conversion Date by the Conversion Price as of the Conversion Date. The Conversion Price shall be the Initial Conversion Price (as defined in paragraph (e) below) as adjusted in accordance with clauses (f) and (g) of this Section 8. (b) Mechanics of Conversion. Conversion of the Series A Preferred Stock may be effected by any such holder upon the surrender to the Corporation at the principal office of the Corporation or at the office of any agent or agents of the Corporation, as may be designated by the Board of Directors of the Corporation (the "Transfer Agent"), of the certificate(s) for such Series A Preferred Stock to be converted, accompanied by a written notice (the date of such notice being referred to as the "Conversion Date") stating that such holder elects to convert all or a specified whole number of such shares in accordance with the provisions of this Section 8 and specifying the name or names in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. In case any holder's notice shall specify a name or names other than that of such holder, such notice shall be accompanied by payment of all transfer taxes payable upon the issuance of shares of Common Stock in such name or names. Other than such taxes, the Corporation will pay any and all transfer, issue, stamp and other taxes (other than taxes based on income) that may be payable in respect of any issue or delivery of shares of Common Stock on conversion of Series A Preferred Stock pursuant hereto. As promptly as practicable, and in any event within five Business Days after the surrender of such certificate or certificates and the receipt of such notice relating thereto and, if applicable, payment of all transfer taxes which are the responsibility of the holder as set forth above (or the demonstration to the satisfaction of the Corporation that such taxes have been paid), the Corporation shall deliver or cause to be delivered (i) certificates representing the number of validly issued, fully paid and nonassessable full shares of Common Stock, to which the holder of shares of Series A Preferred Stock being converted shall be entitled and (ii) if less than the full number of shares of Series A Preferred Stock evidenced by the surrendered certificate or certificates is being converted, a new certificate or certificates, of like tenor, for the number of shares evidenced by such surrendered certificate or certificates less the number of shares being converted. Such conversion shall be deemed to have been made at the close of business on the Conversion Date so that the rights of the holder thereof as to the shares being converted shall cease except for the rights pursuant to Section 8(c) to receive shares of Common Stock, in accordance herewith, and payment for any fractional share and the person entitled to receive the shares of Common Stock shall be treated for all purposes as having become the record holder of such shares of Common Stock at such time. In case any shares of Series A Preferred Stock are to be redeemed pursuant to Section 6, such right of conversion shall continue in effect through the close of business on the Business Day preceding the applicable redemption date and thereafter shall cease and terminate as to the shares of Series A Preferred Stock to be redeemed unless the Corporation shall default in making payment of the amount payable upon such redemption. (c) Fractional Shares. In connection with the conversion of any shares of Series A Preferred Stock into Common Stock, no fractions of shares of Common Stock shall be issued, but in lieu thereof the Corporation shall pay a cash adjustment in respect of such fractional interest in an amount equal to such fractional interest multiplied by the Market Price per share of Common Stock on the Trading Day on which such shares of Series A Preferred Stock are deemed to have been converted. If more than one share of Series A Preferred Stock shall be surrendered for conversion by the same holder at the same time, the number of full shares of Common Stock issuable on conversion thereof shall be computed on the basis of the total number of shares of Series A Preferred Stock so surrendered. Promptly upon conversion, the Corporation shall pay to the holder of shares of Series A Preferred Stock so converted, out of funds legally available, an amount in cash, or by wire transfer of same day funds, in lieu of any fractional interest of such holder. (d) Reservation of Stock Issuable Upon Conversion. The Corporation shall at all times reserve and keep available for issuance upon the conversion of the Series A Preferred Stock, free from any preemptive rights, such number of its authorized but unissued shares of Common Stock as will from time to time be sufficient to permit the conversion of all outstanding shares of Series A Preferred Stock issued pursuant to this Certificate of Designation into Common Stock, and shall take all actions required to increase the authorized number of shares of Common Stock if necessary to permit the conversion of all outstanding shares of Series A Preferred Stock. (e) Initial Conversion Price. The initial Conversion Price shall equal $20.496 (the "Initial Conversion Price"). (f) (i) Adjustment to Conversion Price for Stock Dividends and for Combinations or Subdivisions of Common Stock. (i) In case the Corporation shall at any time or from time to time after the Issue Date (A) pay a dividend or make a distribution on the outstanding shares of Common Stock in shares of Common Stock, (B) subdivide or split the outstanding shares of Common Stock, (C) combine or reclassify the outstanding shares of Common Stock into a smaller number of shares or (D) issue by reclassification of the shares of Common Stock any shares of capital stock of the Corporation, then, and in each such case, the Conversion Price in effect immediately prior to such event or the record date therefor, whichever is earlier, shall be adjusted so that the holder of any shares of Series A Preferred Stock thereafter surrendered for conversion shall be entitled to receive the number of shares of Common Stock or other securities of the Corporation which after the happening of any of the events described above such shares of Series A Preferred Stock would have been entitled had such shares of Series A Preferred Stock been surrendered for conversion immediately prior to the happening of such event or the record date therefor, whichever is earlier. An adjustment made pursuant to this clause (i) shall become effective (x) in the case of any such dividend or distribution, immediately after the close of business on the record date for the determination of holders of shares of Common Stock entitled to receive such dividend or distribution, or (y) in the case of such subdivision, split, reclassification or combination, at the close of business on the day upon which such corporate action becomes effective. Such adjustment shall be made successively whenever an event listed above shall occur. No adjustment shall be made pursuant to this clause (i) in connection with any transaction to which clause (g) applies. (ii) In case the Corporation shall issue shares of Common Stock (or rights, warrants or other securities convertible into or exercisable or exchangeable for shares of Common Stock) (collectively, "Additional Shares") after the Issue Date at a price per share (or having a conversion or exercise price per share) less than the Current Market Price as of the date of issuance of such shares (or, in the case of convertible or exchangeable securities, less than the Current Market Price as of the date of issuance of the rights, warrants or other securities in respect of which shares of Common Stock were issued), then, and in each such case, the Conversion Price shall be reduced to an amount determined by multiplying (A) the Conversion Price in effect on the day immediately prior to the date of issuance of such Additional Shares by (B) a fraction, the numerator of which shall be the sum of (1) the number of shares of Common Stock Outstanding immediately prior to such sale or issue multiplied by the then applicable Current Market Price per share and (2) the aggregate consideration receivable by the Corporation for the total number of shares of Common Stock so issued (or into or for which the rights, warrants or other convertible securities may convert or be exercisable or exchangeable), and the denominator of which shall be the sum of (x) the total number of shares of Common Stock Outstanding immediately prior to such sale or issue and (y) the number of Additional Shares issued (or into or for which the rights, warrants or convertible securities may be converted, exercised or exchanged), multiplied by the Current Market Price. An adjustment made pursuant to this clause (ii) shall be made on the next Business Day following the date on which any such issuance is made and shall be effective retroactively to the close of business on the date of such issuance of Additional Shares. For purposes of this clause (ii), the aggregate consideration receivable by the Corporation in connection with the issuance of shares of Common Stock or of rights, warrants or convertible securities shall be deemed to be equal to the sum of the aggregate offering price (before deduction of underwriting discounts or commissions and expenses payable to third parties) of all such Common Stock, rights, warrants and convertible securities plus the aggregate amount (as determined on the date of issuance), if any, payable upon exercise or conversion of any such rights, warrants and convertible securities into shares of Common Stock. If, subsequent to the date of issuance of such right, warrants or other convertible securities, the exercise or conversion price thereof is reduced, such aggregate amount shall be recalculated and the Conversion Price shall be adjusted retroactively to give effect to such reduction. On the expiration of any option or the termination of any right to convert or exchange any securities into Additional Shares, the Conversion Price then in effect hereunder shall forthwith be increased to the Conversion Price which would have been in effect at the time of such expiration or termination (but taking into account other adjustments made following the time of issuance of such securities) had such security, to the extent outstanding immediately prior to such expiration or termination, never been issued. In case any portion of the consideration to be received by the Corporation shall be in a form other than cash, the Fair Market Value of such non-cash consideration shall be utilized in the foregoing computation. If Common Stock is sold as a unit with other securities, the aggregate consideration received for such Common Stock shall be deemed to be net of the Fair Market Value of such other securities. The issuance or reissuance of (i) any shares of Common Stock or rights, warrants or other securities convertible into shares of Common Stock (whether treasury shares or newly issued shares) (A) pursuant to a dividend or distribution on, or subdivision, split, combination or reclassification of, the outstanding shares of Common Stock requiring an adjustment in the Conversion Price pursuant to clause (i) of this clause (f); (B) pursuant to any restricted stock or stock option plan or stock purchase program of the Corporation involving the grant of options or rights to acquire Common Stock to directors, officers and employees and, in the case of options, consultants and service providers, of the Corporation and its subsidiaries so long as (x) the granting of such options or rights has been approved by the Board of Directors and (y) the aggregate consideration receivable by the Corporation in connection with such options shall be no less than fair market value, as determined by the Board of Directors, and in connection with such rights under the employee stock purchase plan of the Corporation shall be no less than 85% of the fair market value, as determined by the Board of Directors, in each case of the Common Stock underlying such options or rights on the date of grant; (C) pursuant to any option, warrant, right, or convertible security outstanding as of the Issue Date, or (ii) the Series A Preferred Stock and the Warrants issuable pursuant to the Securities Purchase Agreement and any shares of Common Stock issuable upon conversion or exercise thereof, shall not be deemed to constitute an issuance of Common Stock or convertible securities by the Corporation to which this clause (f)(ii) applies; provided that, notwithstanding clause (i)(C), the Conversion Price shall be appropriately reduced to the extent that the number of shares into which any such security may be converted, exercised or exchanged is increased or the price therefor is reduced after the Issue Date. No adjustment shall be made pursuant to this clause (f)(ii) in connection with any transaction to which clause (g) applies. (iii) In case the Corporation shall fix a record date for the issuance on a pro rata basis of rights, options or warrants to the holders of its Common Stock (or other securities convertible into or exercisable or exchangeable for shares of Common Stock) entitling such holders to subscribe for or purchase shares of Common Stock (or securities convertible into or exercisable or exchangeable for shares of Common Stock) at a price per share of Common Stock (or having a conversion, exercise or exchange price per share of Common Stock, in the case of a security convertible into, or exerciseable or exchangeable for, shares of Common Stock) less than the Current Market Price on such record date, the maximum number of shares of Common Stock issuable upon exercise of such rights, options or warrants (or conversion of such convertible securities) shall be deemed to have been issued and outstanding as of such record date and the Conversion Price shall be adjusted pursuant to paragraph 8(f)(ii) hereof, as though such maximum number of shares of Common Stock had been so issued for an aggregate consideration payable by the holders of such rights, options, warrants or other securities prior to their receipt of such shares of Common Stock. Such adjustment shall be made successively whenever such record date is fixed; and in the event that such rights, options or warrants are not so issued or expire in whole or in part unexercised, or in the event of a change in the number of shares of Common Stock to which the holders of such rights, options or warrants are entitled (other than pursuant to adjustment provisions therein comparable to those contained in this paragraph 8(f)), the Conversion Price shall again be adjusted as follows: (A) in the event that all of such rights, options or warrants expire unexercised, the Conversion Price shall be the Conversion Price that would then be in effect if such record date had not been fixed; (B) in the event that less than all of such rights, options or warrants expire unexercised, the Conversion Price shall be adjusted pursuant to paragraph 8(f)(ii) to reflect the maximum number of shares of Common Stock issuable upon exercise of such rights, options or warrants that remain outstanding (without taking into effect shares of Common Stock issuable upon exercise of rights, options or warrants that have lapsed or expired); and (C) in the event of a change in the number of shares of Common Stock to which the holders of such rights, options or warrants are entitled, the Conversion Price shall be adjusted to reflect the Conversion Price which would then be in effect if such holder had initially been entitled to such changed number of shares of Common Stock. Notwithstanding the foregoing, in case the Corporation shall issue rights, options or warrants ("Stockholder Rights") to all holders of its Common Stock entitling the holders thereof to subscribe for or purchase shares of Common Stock, which rights or warrants (i) are deemed to be transferred with such shares of Common Stock, (ii) are not exercisable and (iii) are also issued in respect of future issuances of Common Stock, in each case in clauses (i) through (iii) until the occurrence of a specified event or event ("Trigger Event"), such Stockholder Rights shall for purposes of this clause (iii) not be deemed issued or distributed until the occurrence of the earliest Trigger Event and the conversion price shall not be reduced until the occurrence of such earliest Trigger Event. (iv) In case the Corporation shall fix a record date for the making of a distribution to all holders of any class of Common Stock (including any such distribution made in connection with a consolidation or merger in which the Corporation is the continuing corporation) of evidences of indebtedness, assets or other property, the Conversion Price to be in effect after such record date shall be determined by multiplying the Conversion Price in effect immediately prior to such record date by a fraction, (A) the numerator of which shall be the Conversion Price immediately prior to such distributions less the Fair Market Value of the portion of the assets, other property or evidence of indebtedness so to be distributed which is applicable to one share of Common Stock and (B) the denominator of which shall be the Conversion Price immediately prior to such distributions. Such adjustments shall be made successively whenever such a record date is fixed; and in the event that such distribution is not so made, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such record date had not been fixed. An adjustment to the Conversion Price also shall be made in respect of dividends and distributions paid exclusively in cash to all holders of any class of Common Stock (excluding any dividend or distribution in connection with the Liquidation of the Corporation, whether voluntary or involuntary, and any cash that is distributed upon a merger, consolidation or other transaction for which an adjustment pursuant to paragraph 8(g) is made) or in the case where the Corporation effects any repurchase of its Common Stock where the sum of (1) all such cash dividends and distributions made within the preceding 12 months in respect of which no adjustment has been made and (2) any cash and the Fair Market Value of other consideration paid in respect of any repurchases of Common Stock by the Corporation or any of its subsidiaries within the preceding 12 months in respect of which no adjustment has been made, exceeds 5% of the Corporation's market capitalization (being the product of the then Current Market Price of the Common Stock times the aggregate number of shares of Common Stock then outstanding on the record date for such distribution). The Conversion Price to be in effect after such adjustment shall be determined by subtracting from the Conversion Price in effect prior to such adjustment an amount equal to the quotient of (A) the sum of clause (1) and clause (2) above and (B) the number of shares of Common Stock outstanding on the date such adjustment is to be determined. (v) The term "dividend," as used in this clause (f), shall mean a dividend or other distribution upon the capital stock of the Corporation. (vi) Anything in this clause (f) to the contrary notwithstanding, the Corporation shall not be required to give effect to any adjustment in the Conversion Price (x) if, in connection with any event which would otherwise require an adjustment pursuant to this clause (f), the holders of Series A Preferred Stock have received the dividend or distribution to which such holders are entitled under Section 2 hereof or (y) unless and until the net effect of one or more adjustments (each of which shall be carried forward), determined as above provided, shall have resulted in a change of the Conversion Price such that the number of shares of Common Stock receivable upon conversion of each share of Series A Preferred Stock would differ by at least one two-hundredth of one share of Common Stock, and when the cumulative net effect of more than one adjustment so determined shall be to change the Conversion Price by at least one two-hundredth of one share of Common Stock, such change in Conversion Price shall thereupon be given effect. All calculations under this Section 8 shall be made to the nearest four decimal points. (vii) The certificate of any firm of independent public accountants of recognized national standing selected by the Board of Directors of the Corporation (which may be the firm of independent public accountants regularly employed by the Corporation) shall be presumptively correct for any computation made under this clause (f). (viii) If the Corporation shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution, and shall thereafter and before the distribution to stockholders legally abandon its plan to pay or deliver such dividend or distribution, then thereafter no adjustment in the number of shares of Common Stock issuable upon exercise of the right of conversion granted by this clause (f) or in the Conversion Price then in effect shall be required by reason of the taking of such record. (ix) If any event occurs as to which the provisions of this Section 8(f) are not strictly applicable or if strictly applicable would not fairly protect the rights of the holders of the Series A Preferred Stock in accordance with the essential intent and principles of such provisions, the Board of Directors shall make an adjustment in the application of such provisions, in accordance with such essential intent and principles, so as to protect such rights of the holders of the Series A Preferred Stock. (g) Adjustment to Conversion Price for Reclassification and Reorganization. In the case of any consolidation or merger or reclassification in connection therewith of the Corporation with or into another corporation (a "Transaction") occurring at any time, each share of Series A Preferred Stock then outstanding shall thereafter be convertible into, in lieu of the Common Stock issuable upon such conversion prior to consummation of such Transaction, the kind and amount of shares of stock and other securities and property receivable (including cash) upon the consummation of such Transaction by a holder of that number of shares of Common Stock into which one share of Series A Preferred Stock was convertible immediately prior to such Transaction. In case securities or property other than Common Stock shall be issuable or deliverable upon conversion as aforesaid, then all references in this Section 8 shall be deemed to apply, so far as appropriate and nearly as may be, to such other securities or property. The Corporation, or the person formed by the consolidation or resulting from the merger or which acquires such assets or which acquires the Corporation's shares, as the case may be, shall make provisions in its certificate or articles of incorporation or other constituent document to establish such rights and such rights shall be clearly provided for in the definitive transaction documents relating to such Transaction. The certificate or articles of incorporation or other constituent document shall provide for adjustments, which, for events subsequent to the effective date of the certificate or articles of incorporation or other constituent document, shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 8. The provisions of this Section 8(g) shall similarly apply to successive reclassifications, consolidations, mergers, sales, transfers or share exchanges. (h) Notice of Record Date. In case at any time or from time to time (i) the Corporation shall pay any stock dividend or make any other non-cash distribution to the holders of its Common Stock, or offer for subscription pro rata to the holders of its Common Stock any additional shares of stock of any class or any other right, or (ii) there shall be any capital reorganization or reclassification of the Common Stock of the Corporation or consolidation or merger of the Corporation with or into another corporation, or any sale or conveyance to another corporation of the property of the Corporation as an entirety or substantially as an entirety, (iii) there shall be a Liquidation of the Corporation, or (iv) an Other Liquidation Event or Public Company Liquidation Event shall occur, then, in any one or more of said cases the Corporation shall give at least 20 days' prior written notice (the time of mailing of such notice shall be deemed to be the time of giving thereof) to the registered holders of the Series A Preferred Stock at the addresses of each as shown on the books of the Corporation maintained by the Transfer Agent thereof of the date on which (A) a record shall be taken for such stock dividend, distribution or subscription rights or (B) such reorganization, reclassification, consolidation, merger, sale or conveyance or Liquidation shall take place, as the case may be; provided that, in the case of any Transaction to which clause (g) applies the Corporation shall give at least 30 days' prior written notice as aforesaid. Such notice shall also specify the date as of which the holders of the Common Stock of record shall participate in said dividend, distribution or subscription rights or shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale or conveyance or participate in such Liquidation, as the case may be. Failure to give such notice shall not invalidate any action so taken. SECTION 9. REPORTS AS TO ADJUSTMENTS. Upon any adjustment of the Conversion Price then in effect and any increase or decrease in the number of shares of Common Stock issuable upon the operation of the conversion provisions set forth in Section 8, then, and in each such case, the Corporation shall promptly deliver to the holders of the Series A Preferred Stock and the Transfer Agent of the Common Stock, a certificate signed by the President or a Vice President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Corporation, setting forth in reasonable detail the event requiring the adjustment and the method by which such adjustment was calculated and specifying the Conversion Price then in effect following such adjustment and the increased or decreased number of shares issuable upon a conversion following such adjustment, and shall set forth in reasonable detail the method of calculation of each and a brief statement of the facts requiring such adjustment. Where appropriate, such notice to holders of the Series A Preferred Stock may be given in advance and included as part of the notice required under the provisions of Section 8(h). SECTION 10. OTHER LIQUIDATION EVENT. (a) Offer to Repurchase. Upon the occurrence of an Other Liquidation Event or a Public Company Liquidation Event, the Corporation shall make an offer (an "Other Liquidation Event Offer") to each holder of shares of Series A Preferred Stock to repurchase any and all of each such holder's shares of Series A Preferred Stock at an offer price per share of Series A Preferred Stock in cash equal to (i) the Liquidation Preference then in effect in the event of a Public Company Liquidation Event or (ii) the Preference Amount in the event of an Other Liquidation Event (calculating clause (B) of the definition of Preference Amount for these purposes as the amount of cash and the Fair Market Value of any other consideration which is receivable upon, and/or retained by the holder upon, any such Other Liquidation Event in respect of the aggregate number of shares of Common Stock into which such share of Series A Preferred Stock is then convertible). The Corporation shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of shares of Series A Preferred Stock as a result of an Other Liquidation Event or Public Company Liquidation Event, and the Corporation shall not be in violation of this Certificate of Designation by reason of any act required by such rule or other applicable law. (b) Within 20 days following any Other Liquidation Event or Public Company Liquidation Event, the Corporation shall mail a notice to each holder of shares of Series A Preferred Stock stating: (i) that the Other Liquidation Event Offer is being made pursuant to this Section 10 and that all shares of Series A Preferred Stock tendered will be accepted for payment; (ii) the purchase price and the purchase date, which shall be at least 30 but no more than 60 days from the date on which the Corporation mails notice of the Other Liquidation Event or Public Company Liquidation Event (the "Other Liquidation Event Payment Date"); (iii) that any shares of Series A Preferred Stock not accepted for payment and purchased pursuant to the Other Liquidation Event Offer will continue to accrue dividends as provided in this Certificate of Designation; (iv) that, unless the Corporation defaults in the payment of the Other Liquidation Event Payment, all shares of Series A Preferred Stock accepted for payment pursuant to the Other Liquidation Event Offer shall cease to accrue dividends after the Other Liquidation Event Payment Date; (v) that holders of shares of Series A Preferred Stock electing to have any or all shares of Series A Preferred Stock purchased pursuant to a Other Liquidation Event Offer shall be required to surrender the shares of Series A Preferred Stock to the Corporation or its designated agent for such purpose, at the address specified in the notice prior to the close of business on the third Business Day preceding the Other Liquidation Event Payment Date; and (vi) that holders of shares of Series A Preferred Stock will be entitled to withdraw their election if the Corporation or its designated agent for such purpose, receives, not later than the close of business on the second Business Day preceding the Other Liquidation Event Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the holder of shares of Series A Preferred Stock, the number of shares of Series A Preferred Stock delivered for purchase, and a statement that such holder is withdrawing his election to have such shares purchased. (c) On the Other Liquidation Event Payment Date, the Corporation shall, to the extent lawful, (i) accept for payment all shares of Series A Preferred Stock tendered pursuant to the Other Liquidation Event Offer and (ii) deposit with the Paying Agent an amount equal to the payment due in accordance with paragraph (a) of this Section 10 in respect of all shares of Series A Preferred Stock so tendered. The Corporation shall promptly pay, in cash or by wire transfer of immediately available funds, to each holder of shares of Series A Preferred Stock so tendered the Other Liquidation Event Payment for such shares. The Corporation shall publicly announce the results of the Other Liquidation Event Offer on or as soon as practicable after the Other Liquidation Event Payment Date. SECTION 11. CERTAIN COVENANTS. (a) Any registered holder of Series A Preferred Stock may proceed to protect and enforce its rights and the rights of such holders by any available remedy by proceeding at law or in equity to protect and enforce any such rights, whether for the specific enforcement of any provision in this Certificate of Designation or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. (b) So long as any of the Series A Preferred Stock is outstanding, in the event the Corporation is not required to file quarterly and annual financial reports with the Commission pursuant to Section 13 or Section 15(d) of the Exchange Act, the Corporation will furnish the holders of the Series A Preferred Stock with reports containing the same information as would be required in such reports. SECTION 12. DEFINITIONS. For the purpose of this Certificate of Designation of Series A Convertible Preferred Stock, the following terms shall have the meanings indicated: "Board of Directors" shall mean the board of directors of the Corporation. "Business Day" shall mean any day other than a Saturday, Sunday, or a day on which banking institutions in New York City, New York are authorized or obligated by law or executive order to close. "Commission" shall mean the Securities and Exchange Commission. "Conversion Date" shall have the meaning as set forth in Section 8(b) hereof. "Conversion Price" shall mean the Initial Conversion Price, subject to adjustment as provided in Section 8. "Current Market Price," shall mean, as to shares of Common Stock or any other class of capital stock or securities of the Corporation or any other issuer which are publicly traded, the average of the daily Market Prices of the Common Stock for fifteen consecutive Trading Days immediately preceding the date for which such value is to be computed. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any successor federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. Reference to a particular section of the Exchange Act shall include reference to the comparable section, if any, of any such successor federal statute. "Fair Market Value" shall mean, as to shares of Common Stock or any other class of capital stock or securities of the Corporation or any other issuer which are publicly traded, the Current Market Price of such shares or securities. The "Fair Market Value" of any security which is not publicly traded or of any other property shall mean the fair value thereof as determined by an independent investment banking firm experienced in the valuation of such securities or property selected in good faith by the Board of Directors or a committee thereof and reasonably acceptable to holders of a majority of the shares of Series A Preferred Stock. "Initial Conversion Price" shall have the meaning as set forth in Section 8(e) hereof. "Issue Date" shall mean February 23, 2000. "Junior Stock" shall mean the Common Stock and any other capital stock or any rights, warrants or other securities convertible into or exercisable or exchangeable for Common Stock or any other capital stock of the Corporation ranking junior upon liquidation, dissolution or winding up) to the Series A Preferred Stock. "Liquidation Preference" with respect to a share of Series A Preferred Stock shall mean (i) $20.496 (as adjusted for any stock dividends, splits, combinations and similar events with respect to such share of Series A Preferred Stock) (the "Initial Liquidation Preference"), plus (ii) an amount equal to dividends thereon which shall be deemed to cumulate and accrue from and after the Issue Date on the then current Liquidation Preference of such share at a rate of 8% per annum, compounding semi-annually on each six-month anniversary of the Issue Date, through and including the date on which all payments required to be made hereunder on such share are made in respect of any Liquidation or earlier redemption or repurchase by the Corporation or conversion of such share of Series A Preferred Stock; provided that upon the occurrence and during the continuance of any default by the Corporation in respect of its payment obligations in favor of the Series A Preferred Stock hereunder (including any default arising from the Corporation not having funds legally available to effect its obligation), the aforesaid dividend rate shall be 10% rather than 8%. "Market Price" when used with reference to shares of Common Stock or other securities on any date, shall mean (i) if such Common Stock or other security is listed or authorized for trading on any national securities exchange, the closing price of such Common Stock or other security on such date, (ii) if such shares of Common Stock or other security are not so listed, the price of the last trade, as reported on the Nasdaq National Market, not identified as having been reported late to such system, or (iii) if such shares of Common Stock or other securities are so traded as provided in clause (ii), but not so quoted, the average of the last bid and ask prices, as those prices are reported on the Nasdaq National Market, or (iv) if such shares of Common Stock or other securities are not listed or authorized for trading on a national securities exchange or the Nasdaq National Market or any comparable system, the average of the closing bid and asked prices as furnished by two members of the National Association of Securities Dealers, Inc. selected from time to time by the Corporation for that purpose. If the Common Stock or such other securities are not publicly held or so listed or publicly traded, "Market Price" shall mean the Fair Market Value per share of Common Stock or of such other securities as determined in good faith by the Board of Directors based on an opinion of an independent investment banking firm experienced in the valuation of such securities selected in good faith by the Board of Directors or a committee thereof and reasonably acceptable to holders of a majority of the shares of Series A Preferred Stock. "Other Liquidation Event" shall mean the occurrence of any of the following: (i) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation and other than pursuant to a Liquidation), in one or more related transactions, of all or substantially all of the properties and assets of the Corporation and its subsidiaries taken as a whole to any Person (as such term is used in Section 13(d)(3) of the Exchange Act), (ii) the consummation of any transaction or other event (including, without limitation, any acquisition of shares, merger or consolidation) other than a Public Company Liquidation Event, the result of which is that any "Person" or "Group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) becomes the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that a Person shall be deemed to have beneficial ownership of all shares that such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of shares of capital stock representing or convertible, exercisable or exchangeable for more than 50% of the voting power of the Corporation, and (iii) any event which would result in a Conversion Price adjustment pursuant to the third sentence of Section 8(f)(iv) assuming for these purposes that the percentage of market capitalization referred to therein was 25%. "Outstanding" shall mean, when used with reference to Common Stock, at any date as of which the number of shares thereof is to be determined, fully diluted shares of Common Stock (calculated as prescribed by generally accepted accounting principles), except shares then owned or held by or for the account of the Company or any subsidiary thereof and except options shall not be included until the same are exercised. "Parity Stock" shall mean any capital stock or any rights, warrants or other securities convertible into or exercisable or exchangeable for shares of any capital stock of the Corporation ranking on a parity (upon liquidation, dissolution or winding up) with the Series A Preferred Stock. "Person" shall mean any individual, firm, corporation, partnership or other entity, and shall include any successor (by merger or otherwise) of such entity. "Public Company Liquidation Event" shall mean the consummation of any transaction or other event the result of which is the same as described in clause (ii) of the definition of Other Liquidation Event and in which the consideration to be paid to the holders of Common Stock of the Corporation consists solely of common shares of a corporation which has an aggregate public float (immediately prior to such transaction) and as determined by multiplying the Current Market Price of the common shares of such corporation by the aggregate number of such common shares then outstanding and not held by affiliates of such corporation) of at least $250 million, provided that such shares are (A) either listed or authorized for trading on a national securities exchange or on the Nasdaq National Market and (B) freely tradeable without restriction by the holders of common shares. "Securities Purchase Agreement" shall mean that certain agreement dated as of February 9, 2000 among the Corporation and the purchasers party thereto. "Trading Day" means a Business Day or, if the Common Stock is listed or admitted to trading on any national securities exchange or the Nasdaq National Market, a day on which such exchange or the Nasdaq National Market is open for the transaction of business. IN WITNESS WHEREOF, the officers named below, acting for and on behalf of Optika Inc., have hereunto subscribed their names on this 23rd day of February, 2000. OPTIKA INC. By: /s/ Steven M. Johnson ---------------------------- Name: Steven M. Johnson Title: Vice President Attest: By: /s/ Mark K. Ruport ---------------------------- Name: Mark K. Ruport Title: President EX-99.4 5 EXHIBIT 4 MANAGEMENT STOCKHOLDER AGREEMENT MANAGEMENT STOCKHOLDERS AGREEMENT, dated February 9, 2000 (this "Agreement"), among Jeanne C. Logozzo (the "Management Stockholder") and Thomas Weisel Capital Partners, L.P. ("TWCP"), TWP CEO Founders' Circle (AI), L.P., CEO Founders' Circle (QP), L.P., Thomas Weisel Capital Partners Employee Fund, L.P., TWP 2000 Co-Investment Fund, L.P. (collectively, "Purchasers"). WHEREAS, Optika Inc., a Delaware corporation (the "Company"), and Purchasers, are contemporaneously herewith entering into a Securities Purchase Agreement, dated as of the date hereof (the "Purchase Agreement"), which provides, among other things, for the acquisition by Purchasers of certain securities of the Company upon the terms and subject to the conditions set forth therein (capitalized terms used herein and not otherwise defined have the meaning set forth in the Purchase Agreement); WHEREAS, as a condition to its willingness to enter into the Purchase Agreement, Purchasers have requested that the Management Stockholder make certain agreements with respect to the shares of Common Stock owned of record or beneficially (including shares of Common Stock issuable upon the exercise of any outstanding options) by the Management Stockholder as of the date hereof or acquired hereafter (the "Shares"), upon the terms and subject to the conditions hereof; and WHEREAS, in order to induce Purchasers to enter into the Purchase Agreement, the Management Stockholder is willing to make certain agreements with respect to the Shares. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements set forth herein, the parties hereto agree as follows: 1. The Management Stockholder hereby represents and warrants that the shares of Common Stock and shares of Common Stock underlying options indicated next to the Management Stockholder's signature below are all of the Shares owned of record or beneficially by the Management Stockholder as of the date hereof. Except as otherwise provided herein, from the date hereof until the six month anniversary of the date hereof, the Management Stockholder agrees not to sell, transfer, pledge, assign, hypothecate, encumber, tender or otherwise dispose of, or enter into any contract with respect to the sale, transfer, pledge, assignment, hypothecation, encumbrance, tender or other disposition of, any Shares (a "Transfer") without the consent of the Purchasers. This restriction on Transfers will terminate automatically if the Management Stockholder's employment with the Company terminates. 2. (a) The Purchasers hereby consent to Transfers by the Management Stockholder to: (i) any spouse, parent, issue (in direct line of descent), brother or sister of the Management Stockholder, or (ii) a trust solely for the benefit of the Management Stockholder, any spouse, parent, issue (in direct line of descent), brother or sister of the Management Stockholder, or (iii) any corporation, partnership or other entity (other than a trust) (an "Entity") which is controlled by the Management Stockholder, or (iv) to any donee or donees as a bona fide gift or gifts, (the person or persons to which the Shares are transferred in accordance with this Section 2 being herein referred to as the "Permitted Transferee"); provided, that, for any Transfer to the Permitted Transferee to be effective hereunder, (1) the Permitted Transferee (which, in the case of a trust, shall include each person having authority to sell or dispose of such Shares proposed to be transferred to the trust) shall agree with the Purchasers in writing to be bound by all the terms of this Agreement applicable to the Management Stockholder as if the Permitted Transferee originally had been a party to this Agreement; and (2) all of the holders of any interest in any Entity Permitted Transferee shall agree with the Purchasers in writing not to transfer any interest they then own or may hereafter acquire in the Entity Permitted Transferee except to a person described in paragraph (i), (ii), (iii) or (iv) above with has made the same agreement in writing to the Purchasers, so long as the Entity Permitted Transferee shall own any shares of Shares. Any reference herein to the Management Stockholder shall also be to the Permitted Transferee from and after the date the Transfer is effected in accordance with this Section 2. 3. Holdoff Agreement. For so long as the Management Stockholder owns beneficially or of record 1% or more of the Common Stock of the Company (including shares issuable upon exercise of options), the Management Stockholder agrees not to effect any public sale or distribution of equity securities of the Company, including any public sale pursuant to Rule 144 under the Securities Act, or any securities convertible into or exchangeable or exercisable for such securities, during the period commencing thirty days prior to and ending 90 days after the effective date of any underwritten demand registration or any underwritten piggyback registration under the Registration Rights Agreement to be entered into among the Purchasers and the Company and the other parties thereto. 4. Specific Performance. The Management Stockholder acknowledges and agrees that if the Management Stockholder fails to perform any obligations under this Agreement, immediate and irreparable harm or injury would be caused to the Purchasers for which money damages would not be an adequate remedy. In such event, the Management Stockholder agrees that the Purchasers shall have the right, in addition to any other rights they may have, to specific performance of this Agreement. Accordingly, if the Purchasers should institute an action or proceeding seeking specific enforcement of the provisions hereof, the Management Stockholder hereby waives the claim or defense that the Purchasers have an adequate remedy at law and hereby agrees not to assert in any such action or proceeding the claim or defense that such a remedy at law exists. The Management Stockholder further agrees to waive any requirements for the securing or posting of any bond in connection with obtaining any such equitable relief. 5. Parties in Interest. This Agreement shall inure to the benefit of and be binding upon the parties named herein and their respective successors and assigns. 6. Entire Agreement; Amendments. This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements and understandings, oral or written, with respect to such subject matter. This Agreement may be amended only in writing. 7. Governing Law. This agreement shall be governed by and construed in accordance with the laws of the State of New York without giving effect to the principles of conflicts of law. 8. Counterparts. This Agreement may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, and all such counterparts together shall constitute one agreement. IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly executed and delivered on the day and year first above written. Management Stockholder Common Stock: None --------------- Management Stockholder Option Shares: 100,000 --------------- By: /s/ Jeanne C. Logozzo ------------------------------------------------------ Management Stockholder THOMAS WEISEL CAPITAL PARTNERS, L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, its managing member By: /s/ Deborah Bernstein ----------------------------------------------------- Name: Deborah Bernstein Title: Authorized Signatory TWP CEO FOUNDERS' CIRCLE (AI), L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, its managing member By: /s/ Deborah Bernstein ----------------------------------------------------- Name: Deborah Bernstein Title: Authorized Signatory TWP CEO FOUNDERS' CIRCLE (QP), L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, its managing member By: /s/ Deborah Bernstein ----------------------------------------------------- Name: Deborah Bernstein Title: Authorized Signatory THOMAS WEISEL CAPITAL PARTNERS EMPLOYEE FUND, L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, its managing member By: /s/ Deborah Bernstein ----------------------------------------------------- Name: Deborah Bernstein Title: Authorized Signatory TWP 2000 C0-INVESTMENT FUND, L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, its managing member By: /s/ Deborah Bernstein ----------------------------------------------------- Name: Deborah Bernstein Title: Authorized Signatory MANAGEMENT STOCKHOLDER AGREEMENT MANAGEMENT STOCKHOLDERS AGREEMENT, dated February 9, 2000 (this "Agreement"), among Steven M. Johnson (the "Management Stockholder") and Thomas Weisel Capital Partners, L.P. ("TWCP"), TWP CEO Founders' Circle (AI), L.P., CEO Founders' Circle (QP), L.P., Thomas Weisel Capital Partners Employee Fund, L.P., TWP 2000 Co-Investment Fund, L.P. (collectively, "Purchasers"). WHEREAS, Optika Inc., a Delaware corporation (the "Company"), and Purchasers, are contemporaneously herewith entering into a Securities Purchase Agreement, dated as of the date hereof (the "Purchase Agreement"), which provides, among other things, for the acquisition by Purchasers of certain securities of the Company upon the terms and subject to the conditions set forth therein (capitalized terms used herein and not otherwise defined have the meaning set forth in the Purchase Agreement); WHEREAS, as a condition to its willingness to enter into the Purchase Agreement, Purchasers have requested that the Management Stockholder make certain agreements with respect to the shares of Common Stock owned of record or beneficially (including shares of Common Stock issuable upon the exercise of any outstanding options) by the Management Stockholder as of the date hereof or acquired hereafter (the "Shares"), upon the terms and subject to the conditions hereof; and WHEREAS, in order to induce Purchasers to enter into the Purchase Agreement, the Management Stockholder is willing to make certain agreements with respect to the Shares. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements set forth herein, the parties hereto agree as follows: 1. The Management Stockholder hereby represents and warrants that the shares of Common Stock and shares of Common Stock underlying options indicated next to the Management Stockholder's signature below are all of the Shares owned of record or beneficially by the Management Stockholder as of the date hereof. Except as otherwise provided herein, from the date hereof until the six month anniversary of the date hereof, the Management Stockholder agrees not to sell, transfer, pledge, assign, hypothecate, encumber, tender or otherwise dispose of, or enter into any contract with respect to the sale, transfer, pledge, assignment, hypothecation, encumbrance, tender or other disposition of, any Shares (a "Transfer") without the consent of the Purchasers. This restriction on Transfers will terminate automatically if the Management Stockholder's employment with the Company terminates. 2. (a) The Purchasers hereby consent to Transfers by the Management Stockholder to: (i) any spouse, parent, issue (in direct line of descent), brother or sister of the Management Stockholder, or (ii) a trust solely for the benefit of the Management Stockholder, any spouse, parent, issue (in direct line of descent), brother or sister of the Management Stockholder, or (iii) any corporation, partnership or other entity (other than a trust) (an "Entity") which is controlled by the Management Stockholder, or (iv) to any donee or donees as a bona fide gift or gifts, (the person or persons to which the Shares are transferred in accordance with this Section 2(a) being herein referred to as the "Permitted Transferee"); provided, that, for any Transfer to the Permitted Transferee to be effective hereunder, (1) the Permitted Transferee (which, in the case of a trust, shall include each person having authority to sell or dispose of such Shares proposed to be transferred to the trust) shall agree with the Purchasers in writing to be bound by all the terms of this Agreement applicable to the Management Stockholder as if the Permitted Transferee originally had been a party to this Agreement; and (2) all of the holders of any interest in any Entity Permitted Transferee shall agree with the Purchasers in writing not to transfer any interest they then own or may hereafter acquire in the Entity Permitted Transferee except to a person described in paragraph (i), (ii), (iii) or (iv) above with has made the same agreement in writing to the Purchasers, so long as the Entity Permitted Transferee shall own any shares of Shares. Any reference herein to the Management Stockholder shall also be to the Permitted Transferee from and after the date the Transfer is effected in accordance with this Section 2. (b) Limited Transfer Exemption. Notwithstanding any other provision of this Agreement to the contrary, Steven M. Johnson may transfer up to 40,000 Shares during the six month period following the date hereof. 3. Holdoff Agreement. For so long as the Management Stockholder owns beneficially or of record 1% or more of the Common Stock of the Company (including shares issuable upon exercise of options), the Management Stockholder agrees not to effect any public sale or distribution of equity securities of the Company, including any public sale pursuant to Rule 144 under the Securities Act, or any securities convertible into or exchangeable or exercisable for such securities, during the period commencing thirty days prior to and ending 90 days after the effective date of any underwritten demand registration or any underwritten piggyback registration under the Registration Rights Agreement to be entered into among the Purchasers and the Company and the other parties thereto. 4. Specific Performance. The Management Stockholder acknowledges and agrees that if the Management Stockholder fails to perform any obligations under this Agreement, immediate and irreparable harm or injury would be caused to the Purchasers for which money damages would not be an adequate remedy. In such event, the Management Stockholder agrees that the Purchasers shall have the right, in addition to any other rights they may have, to specific performance of this Agreement. Accordingly, if the Purchasers should institute an action or proceeding seeking specific enforcement of the provisions hereof, the Management Stockholder hereby waives the claim or defense that the Purchasers have an adequate remedy at law and hereby agrees not to assert in any such action or proceeding the claim or defense that such a remedy at law exists. The Management Stockholder further agrees to waive any requirements for the securing or posting of any bond in connection with obtaining any such equitable relief. 5. Parties in Interest. This Agreement shall inure to the benefit of and be binding upon the parties named herein and their respective successors and assigns. 6. Entire Agreement; Amendments. This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements and understandings, oral or written, with respect to such subject matter. This Agreement may be amended only in writing. 7. Governing Law. This agreement shall be governed by and construed in accordance with the laws of the State of New York without giving effect to the principles of conflicts of law. 8. Counterparts. This Agreement may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, and all such counterparts together shall constitute one agreement. IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly executed and delivered on the day and year first above written. Management Stockholder Common Stock: 1,000 --------------- Management Stockholder Option Shares: 230,636 --------------- By: /s/ Steven M. Johnson ------------------------------------------------------ Management Stockholder THOMAS WEISEL CAPITAL PARTNERS, L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, its managing member By: /s/ Deborah Bernstein ----------------------------------------------------- Name: Deborah Bernstein Title: Authorized Signatory TWP CEO FOUNDERS' CIRCLE (AI), L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, its managing member By: /s/ Deborah Bernstein ----------------------------------------------------- Name: Deborah Bernstein Title: Authorized Signatory TWP CEO FOUNDERS' CIRCLE (QP), L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, its managing member By: /s/ Deborah Bernstein ----------------------------------------------------- Name: Deborah Bernstein Title: Authorized Signatory THOMAS WEISEL CAPITAL PARTNERS EMPLOYEE FUND, L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, its managing member By: /s/ Deborah Bernstein ----------------------------------------------------- Name: Deborah Bernstein Title: Authorized Signatory TWP 2000 C0-INVESTMENT FUND, L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, its managing member By: /s/ Deborah Bernstein ----------------------------------------------------- Name: Deborah Bernstein Title: Authorized Signatory MANAGEMENT STOCKHOLDER AGREEMENT MANAGEMENT STOCKHOLDERS AGREEMENT, dated February 9, 2000 (this "Agreement"), among Marc R. Fey (the "Management Stockholder") and Thomas Weisel Capital Partners, L.P. ("TWCP"), TWP CEO Founders' Circle (AI), L.P., CEO Founders' Circle (QP), L.P., Thomas Weisel Capital Partners Employee Fund, L.P. and TWP 2000 Co-Investment Fund, L.P. (collectively, "Purchasers"). WHEREAS, Optika Inc., a Delaware corporation (the "Company"), and Purchasers, are contemporaneously herewith entering into a Securities Purchase Agreement, dated as of the date hereof (the "Purchase Agreement"), which provides, among other things, for the acquisition by Purchasers of certain securities of the Company upon the terms and subject to the conditions set forth therein (capitalized terms used herein and not otherwise defined have the meaning set forth in the Purchase Agreement); WHEREAS, as a condition to its willingness to enter into the Purchase Agreement, Purchasers have requested that the Management Stockholder make certain agreements with respect to the shares of Common Stock owned of record or beneficially (including shares of Common Stock issuable upon the exercise of any outstanding options) by the Management Stockholder as of the date hereof or acquired hereafter (the "Shares"), upon the terms and subject to the conditions hereof; and WHEREAS, in order to induce Purchasers to enter into the Purchase Agreement, the Management Stockholder is willing to make certain agreements with respect to the Shares. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements set forth herein, the parties hereto agree as follows: 1. The Management Stockholder hereby represents and warrants that the shares of Common Stock and shares of Common Stock underlying options indicated next to the Management Stockholder's signature below are all of the Shares owned of record or beneficially by the Management Stockholder as of the date hereof. Except as otherwise provided herein, from the date hereof until the six month anniversary of the date hereof, the Management Stockholder agrees not to sell, transfer, pledge, assign, hypothecate, encumber, tender or otherwise dispose of, or enter into any contract with respect to the sale, transfer, pledge, assignment, hypothecation, encumbrance, tender or other disposition of, any Shares (a "Transfer") without the consent of the Purchasers. This restriction on Transfers will terminate automatically if the Management Stockholder's employment with the Company terminates. 2. (a) The Purchasers hereby consent to Transfers by the Management Stockholder to: (i) any spouse, parent, issue (in direct line of descent), brother or sister of the Management Stockholder, or (ii) a trust solely for the benefit of the Management Stockholder, any spouse, parent, issue (in direct line of descent), brother or sister of the Management Stockholder, or (iii) any corporation, partnership or other entity (other than a trust) (an "Entity") which is controlled by the Management Stockholder, or (iv) to any donee or donees as a bona fide gift or gifts, (the person or persons to which the Shares are transferred in accordance with this Section 2(a) being herein referred to as the "Permitted Transferee"); provided, that, for any Transfer to the Permitted Transferee to be effective hereunder, (1) the Permitted Transferee (which, in the case of a trust, shall include each person having authority to sell or dispose of such Shares proposed to be transferred to the trust) shall agree with the Purchasers in writing to be bound by all the terms of this Agreement applicable to the Management Stockholder as if the Permitted Transferee originally had been a party to this Agreement; and (2) all of the holders of any interest in any Entity Permitted Transferee shall agree with the Purchasers in writing not to transfer any interest they then own or may hereafter acquire in the Entity Permitted Transferee except to a person described in paragraph (i), (ii), (iii) or (iv) above with has made the same agreement in writing to the Purchasers, so long as the Entity Permitted Transferee shall own any shares of Shares. Any reference herein to the Management Stockholder shall also be to the Permitted Transferee from and after the date the Transfer is effected in accordance with this Section 2. (b) Limited Transfer Exemption. Notwithstanding any other provision of this Agreement to the contrary, Marc R. Fey may transfer up to 40,000 Shares during the six month period following the date hereof. 3. Holdoff Agreement. For so long as the Management Stockholder owns beneficially or of record 1% or more of the Common Stock of the Company (including shares issuable upon exercise of options), the Management Stockholder agrees not to effect any public sale or distribution of equity securities of the Company, including any public sale pursuant to Rule 144 under the Securities Act, or any securities convertible into or exchangeable or exercisable for such securities, during the period commencing thirty days prior to and ending 90 days after the effective date of any underwritten demand registration or any underwritten piggyback registration under the Registration Rights Agreement to be entered into among the Purchasers and the Company and the other parties thereto. 4. Specific Performance. The Management Stockholder acknowledges and agrees that if the Management Stockholder fails to perform any obligations under this Agreement, immediate and irreparable harm or injury would be caused to the Purchasers for which money damages would not be an adequate remedy. In such event, the Management Stockholder agrees that the Purchasers shall have the right, in addition to any other rights they may have, to specific performance of this Agreement. Accordingly, if the Purchasers should institute an action or proceeding seeking specific enforcement of the provisions hereof, the Management Stockholder hereby waives the claim or defense that the Purchasers have an adequate remedy at law and hereby agrees not to assert in any such action or proceeding the claim or defense that such a remedy at law exists. The Management Stockholder further agrees to waive any requirements for the securing or posting of any bond in connection with obtaining any such equitable relief. 5. Parties in Interest. This Agreement shall inure to the benefit of and be binding upon the parties named herein and their respective successors and assigns. 6. Entire Agreement; Amendments. This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements and understandings, oral or written, with respect to such subject matter. This Agreement may be amended only in writing. 7. Governing Law. This agreement shall be governed by and construed in accordance with the laws of the State of New York without giving effect to the principles of conflicts of law. 8. Counterparts. This Agreement may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, and all such counterparts together shall constitute one agreement. IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly executed and delivered on the day and year first above written. Management Stockholder Common Stock: 115,000 --------------- Management Stockholder Option Shares: 90,000 --------------- By: /s/ Marc R. Fey ----------------------------------------------------- Management Stockholder THOMAS WEISEL CAPITAL PARTNERS, L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, its managing member By: /s/ Deborah Bernstein ----------------------------------------------------- Name: Deborah Bernstein Title: Authorized Signatory TWP CEO FOUNDERS' CIRCLE (AI), L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, its managing member By: /s/ Deborah Bernstein ----------------------------------------------------- Name: Deborah Bernstein Title: Authorized Signatory TWP CEO FOUNDERS' CIRCLE (QP), L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, its managing member By: /s/ Deborah Bernstein ----------------------------------------------------- Name: Deborah Bernstein Title: Authorized Signatory THOMAS WEISEL CAPITAL PARTNERS EMPLOYEE FUND, L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, its managing member By: /s/ Deborah Bernstein ----------------------------------------------------- Name: Deborah Bernstein Title: Authorized Signatory TWP 2000 C0-INVESTMENT FUND, L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, its managing member By: /s/ Deborah Bernstein ----------------------------------------------------- Name: Deborah Bernstein Title: Authorized Signatory MANAGEMENT STOCKHOLDER AGREEMENT MANAGEMENT STOCKHOLDERS AGREEMENT, dated February 9, 2000 (this "Agreement"), among James Hale (the "Management Stockholder") and Thomas Weisel Capital Partners, L.P. ("TWCP"), TWP CEO Founders' Circle (AI), L.P., CEO Founders' Circle (QP), L.P., Thomas Weisel Capital Partners Employee Fund, L.P., TWP 2000 Co-Investment Fund, L.P. (collectively, "Purchasers"). WHEREAS, Optika Inc., a Delaware corporation (the "Company"), and Purchasers, are contemporaneously herewith entering into a Securities Purchase Agreement, dated as of the date hereof (the "Purchase Agreement"), which provides, among other things, for the acquisition by Purchasers of certain securities of the Company upon the terms and subject to the conditions set forth therein (capitalized terms used herein and not otherwise defined have the meaning set forth in the Purchase Agreement); WHEREAS, as a condition to its willingness to enter into the Purchase Agreement, Purchasers have requested that the Management Stockholder make certain agreements with respect to the shares of Common Stock owned of record or beneficially (including shares of Common Stock issuable upon the exercise of any outstanding options) by the Management Stockholder as of the date hereof or acquired hereafter (the "Shares"), upon the terms and subject to the conditions hereof; and WHEREAS, in order to induce Purchasers to enter into the Purchase Agreement, the Management Stockholder is willing to make certain agreements with respect to the Shares. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements set forth herein, the parties hereto agree as follows: 1. The Management Stockholder hereby represents and warrants that the shares of Common Stock and shares of Common Stock underlying options indicated next to the Management Stockholder's signature below are all of the Shares owned of record or beneficially by the Management Stockholder as of the date hereof. Except as otherwise provided herein, from the date hereof until the six month anniversary of the date hereof, the Management Stockholder agrees not to sell, transfer, pledge, assign, hypothecate, encumber, tender or otherwise dispose of, or enter into any contract with respect to the sale, transfer, pledge, assignment, hypothecation, encumbrance, tender or other disposition of, any Shares (a "Transfer") without the consent of the Purchasers. This restriction on Transfers will terminate automatically if the Management Stockholder's employment with the Company terminates. 2. (a) The Purchasers hereby consent to Transfers by the Management Stockholder to: (i) any spouse, parent, issue (in direct line of descent), brother or sister of the Management Stockholder, or (ii) a trust solely for the benefit of the Management Stockholder, any spouse, parent, issue (in direct line of descent), brother or sister of the Management Stockholder, or (iii) any corporation, partnership or other entity (other than a trust) (an "Entity") which is controlled by the Management Stockholder, or (iv) to any donee or donees as a bona fide gift or gifts, (the person or persons to which the Shares are transferred in accordance with this Section 2 being herein referred to as the "Permitted Transferee"); provided, that, for any Transfer to the Permitted Transferee to be effective hereunder, (1) the Permitted Transferee (which, in the case of a trust, shall include each person having authority to sell or dispose of such Shares proposed to be transferred to the trust) shall agree with the Purchasers in writing to be bound by all the terms of this Agreement applicable to the Management Stockholder as if the Permitted Transferee originally had been a party to this Agreement; and (2) all of the holders of any interest in any Entity Permitted Transferee shall agree with the Purchasers in writing not to transfer any interest they then own or may hereafter acquire in the Entity Permitted Transferee except to a person described in paragraph (i), (ii) , (iii) or (iv) above with has made the same agreement in writing to the Purchasers, so long as the Entity Permitted Transferee shall own any shares of Shares. Any reference herein to the Management Stockholder shall also be to the Permitted Transferee from and after the date the Transfer is effected in accordance with this Section 2. 3. Holdoff Agreement. For so long as the Management Stockholder owns beneficially or of record 1% or more of the Common Stock of the Company (including shares issuable upon exercise of options), the Management Stockholder agrees not to effect any public sale or distribution of equity securities of the Company, including any public sale pursuant to Rule 144 under the Securities Act, or any securities convertible into or exchangeable or exercisable for such securities, during the period commencing thirty days prior to and ending 90 days after the effective date of any underwritten demand registration or any underwritten piggyback registration under the Registration Rights Agreement to be entered into among the Purchasers and the Company and the other parties thereto. 4. Specific Performance. The Management Stockholder acknowledges and agrees that if the Management Stockholder fails to perform any obligations under this Agreement, immediate and irreparable harm or injury would be caused to the Purchasers for which money damages would not be an adequate remedy. In such event, the Management Stockholder agrees that the Purchasers shall have the right, in addition to any other rights they may have, to specific performance of this Agreement. Accordingly, if the Purchasers should institute an action or proceeding seeking specific enforcement of the provisions hereof, the Management Stockholder hereby waives the claim or defense that the Purchasers have an adequate remedy at law and hereby agrees not to assert in any such action or proceeding the claim or defense that such a remedy at law exists. The Management Stockholder further agrees to waive any requirements for the securing or posting of any bond in connection with obtaining any such equitable relief. 5. Parties in Interest. This Agreement shall inure to the benefit of and be binding upon the parties named herein and their respective successors and assigns. 6. Entire Agreement; Amendments. This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements and understandings, oral or written, with respect to such subject matter. This Agreement may be amended only in writing. 7. Governing Law. This agreement shall be governed by and construed in accordance with the laws of the State of New York without giving effect to the principles of conflicts of law. 8. Counterparts. This Agreement may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, and all such counterparts together shall constitute one agreement. IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly executed and delivered on the day and year first above written. Management Stockholder Common Stock: None --------------- Management Stockholder Option Shares: 200,000 --------------- By: /s/ James Hale ------------------------------------------------------ Management Stockholder THOMAS WEISEL CAPITAL PARTNERS, L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, its managing member By: /s/ Deborah Bernstein ----------------------------------------------------- Name: Deborah Bernstein Title: Authorized Signatory TWP CEO FOUNDERS' CIRCLE (AI), L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, its managing member By: /s/ Deborah Bernstein ----------------------------------------------------- Name: Deborah Bernstein Title: Authorized Signatory TWP CEO FOUNDERS' CIRCLE (QP), L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, its managing member By: /s/ Deborah Bernstein ----------------------------------------------------- Name: Deborah Bernstein Title: Authorized Signatory THOMAS WEISEL CAPITAL PARTNERS EMPLOYEE FUND, L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, its managing member By: /s/ Deborah Bernstein ----------------------------------------------------- Name: Deborah Bernstein Title: Authorized Signatory TWP 2000 C0-INVESTMENT FUND, L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, its managing member By: /s/ Deborah Bernstein ----------------------------------------------------- Name: Deborah Bernstein Title: Authorized Signatory MANAGEMENT STOCKHOLDER AGREEMENT MANAGEMENT STOCKHOLDERS AGREEMENT, dated February 9, 2000 (this "Agreement"), among Thomas M. Rafferty (the "Management Stockholder") and Thomas Weisel Capital Partners, L.P. ("TWCP"), TWP CEO Founders' Circle (AI), L.P., CEO Founders' Circle (QP), L.P., Thomas Weisel Capital Partners Employee Fund, L.P., TWP 2000 Co-Investment Fund, L.P. (collectively, "Purchasers"). WHEREAS, Optika Inc., a Delaware corporation (the "Company"), and Purchasers, are contemporaneously herewith entering into a Securities Purchase Agreement, dated as of the date hereof (the "Purchase Agreement"), which provides, among other things, for the acquisition by Purchasers of certain securities of the Company upon the terms and subject to the conditions set forth therein (capitalized terms used herein and not otherwise defined have the meaning set forth in the Purchase Agreement); WHEREAS, as a condition to its willingness to enter into the Purchase Agreement, Purchasers have requested that the Management Stockholder make certain agreements with respect to the shares of Common Stock owned of record or beneficially (including shares of Common Stock issuable upon the exercise of any outstanding options) by the Management Stockholder as of the date hereof or acquired hereafter (the "Shares"), upon the terms and subject to the conditions hereof; and WHEREAS, in order to induce Purchasers to enter into the Purchase Agreement, the Management Stockholder is willing to make certain agreements with respect to the Shares. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements set forth herein, the parties hereto agree as follows: 1. The Management Stockholder hereby represents and warrants that the shares of Common Stock and shares of Common Stock underlying options indicated next to the Management Stockholder's signature below are all of the Shares owned of record or beneficially by the Management Stockholder as of the date hereof. Except as otherwise provided herein, from the date hereof until the six month anniversary of the date hereof, the Management Stockholder agrees not to sell, transfer, pledge, assign, hypothecate, encumber, tender or otherwise dispose of, or enter into any contract with respect to the sale, transfer, pledge, assignment, hypothecation, encumbrance, tender or other disposition of, any Shares (a "Transfer") without the consent of the Purchasers. This restriction on Transfers will terminate automatically if the Management Stockholder's employment with the Company terminates. 2. (a) The Purchasers hereby consent to Transfers by the Management Stockholder to: (i) any spouse, parent, issue (in direct line of descent), brother or sister of the Management Stockholder, or (ii) a trust solely for the benefit of the Management Stockholder, any spouse, parent, issue (in direct line of descent), brother or sister of the Management Stockholder, or (iii) any corporation, partnership or other entity (other than a trust) (an "Entity") which is controlled by the Management Stockholder, or (iv) to any donee or donees as a bona fide gift or gifts, (the person or persons to which the Shares are transferred in accordance with this Section 2 being herein referred to as the "Permitted Transferee"); provided, that, for any Transfer to the Permitted Transferee to be effective hereunder, (1) the Permitted Transferee (which, in the case of a trust, shall include each person having authority to sell or dispose of such Shares proposed to be transferred to the trust) shall agree with the Purchasers in writing to be bound by all the terms of this Agreement applicable to the Management Stockholder as if the Permitted Transferee originally had been a party to this Agreement; and (2) all of the holders of any interest in any Entity Permitted Transferee shall agree with the Purchasers in writing not to transfer any interest they then own or may hereafter acquire in the Entity Permitted Transferee except to a person described in paragraph (i), (ii), (iii) or (iv) above with has made the same agreement in writing to the Purchasers, so long as the Entity Permitted Transferee shall own any shares of Shares. Any reference herein to the Management Stockholder shall also be to the Permitted Transferee from and after the date the Transfer is effected in accordance with this Section 2. 3. Holdoff Agreement. For so long as the Management Stockholder owns beneficially or of record 1% or more of the Common Stock of the Company (including shares issuable upon exercise of options), the Management Stockholder agrees not to effect any public sale or distribution of equity securities of the Company, including any public sale pursuant to Rule 144 under the Securities Act, or any securities convertible into or exchangeable or exercisable for such securities, during the period commencing thirty days prior to and ending 90 days after the effective date of any underwritten demand registration or any underwritten piggyback registration under the Registration Rights Agreement to be entered into among the Purchasers and the Company and the other parties thereto. 4. Specific Performance. The Management Stockholder acknowledges and agrees that if the Management Stockholder fails to perform any obligations under this Agreement, immediate and irreparable harm or injury would be caused to the Purchasers for which money damages would not be an adequate remedy. In such event, the Management Stockholder agrees that the Purchasers shall have the right, in addition to any other rights they may have, to specific performance of this Agreement. Accordingly, if the Purchasers should institute an action or proceeding seeking specific enforcement of the provisions hereof, the Management Stockholder hereby waives the claim or defense that the Purchasers have an adequate remedy at law and hereby agrees not to assert in any such action or proceeding the claim or defense that such a remedy at law exists. The Management Stockholder further agrees to waive any requirements for the securing or posting of any bond in connection with obtaining any such equitable relief. 5. Parties in Interest. This Agreement shall inure to the benefit of and be binding upon the parties named herein and their respective successors and assigns. 6. Entire Agreement; Amendments. This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements and understandings, oral or written, with respect to such subject matter. This Agreement may be amended only in writing. 7. Governing Law. This agreement shall be governed by and construed in accordance with the laws of the State of New York without giving effect to the principles of conflicts of law. 8. Counterparts. This Agreement may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, and all such counterparts together shall constitute one agreement. IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly executed and delivered on the day and year first above written. Management Stockholder Common Stock: None --------------- Management Stockholder Option Shares: 120,000 --------------- By: /s/ Thomas M. Rafferty ------------------------------------------------------ Management Stockholder THOMAS WEISEL CAPITAL PARTNERS, L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, its managing member By: /s/ Deborah Bernstein ----------------------------------------------------- Name: Deborah Bernstein Title: Authorized Signatory TWP CEO FOUNDERS' CIRCLE (AI), L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, its managing member By: /s/ Deborah Bernstein ----------------------------------------------------- Name: Deborah Bernstein Title: Authorized Signatory TWP CEO FOUNDERS' CIRCLE (QP), L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, its managing member By: /s/ Deborah Bernstein ----------------------------------------------------- Name: Deborah Bernstein Title: Authorized Signatory THOMAS WEISEL CAPITAL PARTNERS EMPLOYEE FUND, L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, its managing member By: /s/ Deborah Bernstein ----------------------------------------------------- Name: Deborah Bernstein Title: Authorized Signatory TWP 2000 C0-INVESTMENT FUND, L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, its managing member By: /s/ Deborah Bernstein ----------------------------------------------------- Name: Deborah Bernstein Title: Authorized Signatory MANAGEMENT STOCKHOLDER AGREEMENT MANAGEMENT STOCKHOLDERS AGREEMENT, dated February 9, 2000 (this "Agreement"), among Mark K. Ruport (the "Management Stockholder") and Thomas Weisel Capital Partners, L.P. ("TWCP"), TWP CEO Founders' Circle (AI), L.P., CEO Founders' Circle (QP), L.P., Thomas Weisel Capital Partners Employee Fund, L.P. and TWP 2000 Co-Investment Fund, L.P. (collectively, "Purchasers"). WHEREAS, Optika Inc., a Delaware corporation (the "Company"), and Purchasers, are contemporaneously herewith entering into a Securities Purchase Agreement, dated as of the date hereof (the "Purchase Agreement"), which provides, among other things, for the acquisition by Purchasers of certain securities of the Company upon the terms and subject to the conditions set forth therein (capitalized terms used herein and not otherwise defined have the meaning set forth in the Purchase Agreement); WHEREAS, as a condition to its willingness to enter into the Purchase Agreement, Purchasers have requested that the Management Stockholder make certain agreements with respect to the shares of Common Stock owned of record or beneficially (including shares of Common Stock issuable upon the exercise of any outstanding options) by the Management Stockholder as of the date hereof or acquired hereafter (the "Shares"), upon the terms and subject to the conditions hereof; and WHEREAS, in order to induce Purchasers to enter into the Purchase Agreement, the Management Stockholder is willing to make certain agreements with respect to the Shares. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements set forth herein, the parties hereto agree as follows: 1. The Management Stockholder hereby represents and warrants that the shares of Common Stock and shares of Common Stock underlying options indicated next to the Management Stockholder's signature below are all of the Shares owned of record or beneficially by the Management Stockholder as of the date hereof. Except as otherwise provided herein, from the date hereof until the one year anniversary of the date hereof, the Management Stockholder agrees not to sell, transfer, pledge, assign, hypothecate, encumber, tender or otherwise dispose of, or enter into any contract with respect to the sale, transfer, pledge, assignment, hypothecation, encumbrance, tender or other disposition of, any Shares (a "Transfer") without the consent of the Purchasers. This restriction on Transfers will terminate automatically if the Management Stockholder's employment with the Company terminates. 2. (a) The Purchasers hereby consent to Transfers by the Management Stockholder to: (i) any spouse, parent, issue (in direct line of descent), brother or sister of the Management Stockholder, or (ii) a trust solely for the benefit of the Management Stockholder, any spouse, parent, issue (in direct line of descent), brother or sister of the Management Stockholder, or (iii) any corporation, partnership or other entity (other than a trust) (an "Entity") which is controlled by the Management Stockholder, or (iv) to any donee or donees as a bona fide gift or gifts, (the person or persons to which the Shares are transferred in accordance with this Section 2(a) being herein referred to as the "Permitted Transferee"); provided, that, for any Transfer to the Permitted Transferee to be effective hereunder, (1) the Permitted Transferee (which, in the case of a trust, shall include each person having authority to sell or dispose of such Shares proposed to be transferred to the trust) shall agree with the Purchasers in writing to be bound by all the terms of this Agreement applicable to the Management Stockholder as if the Permitted Transferee originally had been a party to this Agreement; and (2) all of the holders of any interest in any Entity Permitted Transferee shall agree with the Purchasers in writing not to transfer any interest they then own or may hereafter acquire in the Entity Permitted Transferee except to a person described in paragraph (i), (ii), (iii) or (iv) above with has made the same agreement in writing to the Purchasers, so long as the Entity Permitted Transferee shall own any shares of Shares. Any reference herein to the Management Stockholder shall also be to the Permitted Transferee from and after the date the Transfer is effected in accordance with this Section 2. (b) Limited Transfer Exemption. Notwithstanding any other provision of this Agreement to the contrary, Mark K. Ruport may Transfer up to 40,000 Shares during the six month period following the date hereof and up to an additional 40,000 Shares within the six month period thereafter. 3. Holdoff Agreement. For so long as the Management Stockholder owns beneficially or of record 1% or more of the Common Stock of the Company (including shares issuable upon exercise of options), the Management Stockholder agrees not to effect any public sale or distribution of equity securities of the Company, including any public sale pursuant to Rule 144 under the Securities Act, or any securities convertible into or exchangeable or exercisable for such securities, during the period commencing thirty days prior to and ending 90 days after the effective date of any underwritten demand registration or any underwritten piggyback registration under the Registration Rights Agreement to be entered into among the Purchasers and the Company and the other parties thereto. 4. Specific Performance. The Management Stockholder acknowledges and agrees that if the Management Stockholder fails to perform any obligations under this Agreement, immediate and irreparable harm or injury would be caused to the Purchasers for which money damages would not be an adequate remedy. In such event, the Management Stockholder agrees that the Purchasers shall have the right, in addition to any other rights they may have, to specific performance of this Agreement. Accordingly, if the Purchasers should institute an action or proceeding seeking specific enforcement of the provisions hereof, the Management Stockholder hereby waives the claim or defense that the Purchasers have an adequate remedy at law and hereby agrees not to assert in any such action or proceeding the claim or defense that such a remedy at law exists. The Management Stockholder further agrees to waive any requirements for the securing or posting of any bond in connection with obtaining any such equitable relief. 5. Parties in Interest. This Agreement shall inure to the benefit of and be binding upon the parties named herein and their respective successors and assigns. 6. Entire Agreement; Amendments. This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements and understandings, oral or written, with respect to such subject matter. This Agreement may be amended only in writing. 7. Governing Law. This agreement shall be governed by and construed in accordance with the laws of the State of New York without giving effect to the principles of conflicts of law. 8. Counterparts. This Agreement may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, and all such counterparts together shall constitute one agreement. IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly executed and delivered on the day and year first above written. Management Stockholder Common Stock: 10,000 -------------- Management Stockholder Option Shares: 433,646* -------------- By: /s/ Marc K. Ruport ------------------------------------------------------- Management Stockholder - ---------------------- * An additional 176,354 options are controlled by his former spouse and are not beneficially owned by the Management Stockholder. THOMAS WEISEL CAPITAL PARTNERS, L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, its managing member By: /s/ Deborah Bernstein ----------------------------------------------------- Name: Deborah Bernstein Title: Authorized Signatory TWP CEO FOUNDERS' CIRCLE (AI), L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, its managing member By: /s/ Deborah Bernstein ----------------------------------------------------- Name: Deborah Bernstein Title: Authorized Signatory TWP CEO FOUNDERS' CIRCLE (QP), L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, its managing member By: /s/ Deborah Bernstein ----------------------------------------------------- Name: Deborah Bernstein Title: Authorized Signatory THOMAS WEISEL CAPITAL PARTNERS EMPLOYEE FUND, L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, its managing member By: /s/ Deborah Bernstein ----------------------------------------------------- Name: Deborah Bernstein Title: Authorized Signatory TWP 2000 C0-INVESTMENT FUND, L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, its managing member By: /s/ Deborah Bernstein ----------------------------------------------------- Name: Deborah Bernstein Title: Authorized Signatory EX-99.5 6 EXHIBIT 5 EXECUTION COPY -------------- WARRANT AGREEMENT Dated as of February 23, 2000 by and between OPTIKA INC., THOMAS WEISEL CAPITAL PARTNERS, L.P. and THE PARTIES LISTED ON THE SIGNATURE PAGE HERETO WARRANT AGREEMENT TABLE OF CONTENTS* - --------------------- * This Table of Contents does not constitute a part of this Agreement or have any bearing upon the interpretation of any of its terms or provisions. Page SECTION 1. DEFINITIONS...................................................1 SECTION 2. WARRANT CERTIFICATES..........................................3 SECTION 3. ISSUANCE OF WARRANTS..........................................3 SECTION 4. EXECUTION OF WARRANT CERTIFICATES.............................4 SECTION 5. REGISTRATION..................................................4 SECTION 6. REGISTRATION OF TRANSFERS AND EXCHANGES.......................4 SECTION 7. TERMS OF WARRANTS; EXERCISE OF WARRANTS.......................6 SECTION 8. PAYMENT OF TAXES..............................................7 SECTION 9. MUTILATED OR MISSING WARRANT CERTIFICATES.....................7 SECTION 10. RESERVATIONS OF WARRANT SHARES...............................8 SECTION 11. ADJUSTMENT OF NUMBER OF WARRANT SHARES.......................8 (a) Initial Exercise........................................8 (b) Adjustment to Exercise Price for Stock Dividends and for Combinations or Subdivisions of Common Stock.........................................9 (c) Adjustment in connection with Reclassification and Reorganization..................................13 (d) No Amendments..........................................13 (e) Voluntary Increases....................................13 (f) When Issuance or Payment May Be Deferred...............14 (g) Form of Warrants.......................................14 (h) Other Dilutive Events..................................14 (i) Adjustment in Warrant Shares...........................14 SECTION 12. FRACTIONAL INTERESTS........................................15 SECTION 13. NOTICES TO WARRANT HOLDERS; RIGHTS OF WARRANT HOLDERS.......15 SECTION 14. OBTAINING STOCK EXCHANGE LISTINGS...........................16 SECTION 15. NOTICES TO THE COMPANY......................................16 SECTION 16. SUPPLEMENTS AND AMENDMENTS..................................17 SECTION 17. SUCCESSORS..................................................17 SECTION 18. TERMINATION.................................................17 SECTION 19. GOVERNING LAW...............................................17 SECTION 20. BENEFITS OF THIS AGREEMENT..................................17 SECTION 21. HEADINGS....................................................17 SECTION 22. SUBMISSION TO JURISDICTION..................................18 SECTION 23. WAIVER OF JURY TRIAL........................................18 SECTION 24. SERVICE OF PROCESS..........................................18 SECTION 25. COUNTERPARTS................................................18 EXHIBIT A. FORM OF WARRANT CERTIFICATE................................A-1 EXHIBIT B. FORM OF TRANSFER...........................................B-1 WARRANT AGREEMENT, dated as of February 23, 2000, by and between OPTIKA INC., a Delaware corporation (the "Company"), and Thomas Weisel Capital Partners, L.P., a limited partnership organized under the laws of Delaware ("TWCP") and the entities listed on the signature pagers hereto (each such entity and TWCP, a "Purchaser" and collectively with TWCP, the "Purchasers"). RECITALS -------- WHEREAS, the Company has entered into a Securities Purchase Agreement, dated as of February 9, 2000 (the "Purchase Agreement"), with the Purchasers, pursuant to which the Company has agreed to sell to the Purchasers (i) an aggregate of 731,851 shares of Series A Convertible Preferred Stock, par value $0.001 per share (the "Preferred Stock") of the Company, and (ii) warrants (the "Warrants") to purchase up to an aggregate of 307,298 shares (subject to adjustment as provided in Section 11 hereof), exercisable at any time at an exercise price of $22.448 per share, of the Company's Common Stock, par value $.001 per share (the "Common Stock"), and (the shares of Common Stock issuable on exercise of the Warrants being herein called the "Warrant Shares"); WHEREAS, the parties hereto desire to enter into this Agreement in order to set forth the terms and conditions of the Warrants; NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereto agree as follows: SECTION 1. DEFINITIONS. As used in this Agreement, the following capitalized terms will have the respective meanings: "Affiliate" of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agreement" and all references thereto means this Agreement as it may from time to time be amended or supplemented. "Board of Directors" means the board of directors of the Company. "Business Day" shall mean any day other than a Saturday, Sunday, or a day on which banking institutions in New York City, New York are authorized or obligated by law or executive order to close. "Commission" means the Securities and Exchange Commission. "Common Stock" shall have the meaning set forth in the Recitals. "Company" shall have the meaning set forth in the first paragraph of this Agreement. "Conversion Right" shall have the meaning set forth in Section 7 hereof. "Current Market Price," shall mean, as to shares of Common Stock or any other class of capital stock or securities of the Company or any other issuer which are publicly traded, the average of the daily Market Prices of the Common Stock for the fifteen consecutive Trading Days immediately preceding the date for which such value is to be computed. "Exercise Price" shall have the meaning set forth in Section 7 hereof. "Exercise Rate" shall have the meaning set forth in Section 11 hereof. "Expiration Date" shall have the meaning set forth in Section 7 hereof. "Fair Market Value" shall mean, as to shares of Common Stock or any other class of capital stock or securities of the Company or any other issuer which are publicly traded, the Current Market Price of such shares or securities. The "Fair Market Value" of any security which is not publicly traded or of any other property shall mean the fair value thereof as determined by an independent investment banking firm experienced in the valuation of such securities or property selected in good faith by the Board of Directors or a committee thereof and reasonably acceptable to holders of a majority of the Warrant Shares. "Issue Date" shall mean February 23, 2000. "Market Price" when used with reference to shares of Common Stock or other securities on any date, shall mean (i) if such Common Stock or other security is listed or authorized for trading on any national securities exchange, the closing price of such Common Stock or other security on such date, (ii) if such shares of Common Stock or other security are not so listed, the price of the last trade, as reported on the Nasdaq National Market, not identified as having been reported late to such system, or (iii) if such shares of Common Stock or other securities are so traded as provided in clause (ii), but not so quoted, the average of the last bid and ask prices, as those prices are reported on the Nasdaq National Market, or (iv) if such shares of Common Stock or other securities are not listed or authorized for trading on a national securities exchange or the Nasdaq National Market or any comparable system, the average of the closing bid and asked prices as furnished by two members of the National Association of Securities Dealers, Inc. selected from time to time by the Company for that purpose. If the Common Stock or such other securities are not publicly held or so listed or publicly traded, "Market Price" shall mean the Fair Market Value per share of Common Stock or of such other securities as determined in good faith by the Board of Directors based on an opinion of an independent investment banking firm experienced in the valuation of such securities selected in good faith by the Board of Directors or a committee thereof and reasonably acceptable to holders of a majority of the Warrant Shares. "Outstanding" shall mean, when used with reference to Common Stock, at any date as of which the number of shares thereof is to be determined, fully diluted shares of Common Stock (calculated as prescribed by generally accepted accounting principles), except shares then owned or held by or for the account of the Company or any subsidiary thereof and except options shall not be included until the same are exercised. "Person" means any individual, firm, corporation, partnership or other entity and shall include any successor (by merger or otherwise of such entity). "Purchasers" shall have the meaning set forth in the first paragraph of this Agreement. "Register Office" shall have the meaning set forth in Section 6 hereof. "Securities Act" means the Securities Act of 1933, as amended. "Senior Financial Officer" means the chief financial officer, principal accounting officer, treasurer or controller of the Company. "Trading Day" means a Business Day or, if the Common Stock is listed or admitted to trading on any national securities exchange or the Nasdaq National Market, a day on which such exchange or the Nasdaq National Market is open for the transaction of business. "Transfer Agent" shall have the meaning set forth in Section 10 hereof. "Transfer Notice" shall have the meaning set forth in Section 6 hereof. "Warrant holder(s)" or "holders of Warrant certificates" means, in each case, registered holders of Warrant certificates. "Warrants" shall have the meaning set forth in the Recitals. "Warrant Shares" shall have the meaning set forth in the Recitals. SECTION 2. WARRANT CERTIFICATES. The Warrant certificates to be issued and delivered pursuant to this Agreement shall be in registered form only and shall be substantially in the form set forth in Exhibit A attached hereto. SECTION 3. ISSUANCE OF WARRANTS. The Company, simultaneously with the Closing (as defined in the Purchase Agreement), shall deliver to the Purchasers duly executed Warrant certificates registered in the name of the Purchasers for the purchase of an aggregate of 307,298 shares of Common Stock, with each Purchaser receiving Warrant certificates for the purchase of the number of shares of Common Stock set forth opposite the name of such Purchaser on Schedule A to the Purchase Agreement. SECTION 4. EXECUTION OF WARRANT CERTIFICATES. Warrant certificates evidencing Warrants to purchase initially an aggregate of up to 307,298 shares of Common Stock shall be duly executed, on the date of this Agreement, by the Company and delivered to the registered holder of the Warrants in accordance with the provisions of Section 3 hereof. Warrant certificates shall be signed on behalf of the Company by any two authorized officers. Each such signature upon the Warrant certificates may be in the form of a facsimile signature and may be imprinted or otherwise reproduced on the Warrant certificates and, for that purpose, the Company may adopt and use the facsimile signature of any person who shall have been an authorized officer, notwithstanding the fact that at the time the Warrant certificates shall be delivered or disposed of such person shall have ceased to hold such office. In case any officer of the Company who shall have signed any of the Warrant certificates shall cease to hold such office before such Warrant certificates shall have been an authorized officer delivered or disposed of by the Company, such Warrant certificates nevertheless may be delivered or disposed of as though such person had not ceased to hold such office. Any Warrant certificate may be signed on behalf of the Company by any person who, at the actual date of the execution of such Warrant certificate, shall be a proper officer of the Company to sign such Warrant certificate, although at the date of the execution of this Agreement such person did not hold such office. SECTION 5. REGISTRATION. The Company shall number and register the Warrant certificates in a register as they are issued by the Company. The Company may deem and treat the registered holder(s) of the Warrant certificates as the absolute owner(s) thereof (notwithstanding any notation of ownership or other writing thereon made by anyone), for all purposes, and the Company shall not be affected by any notice to the contrary. SECTION 6. REGISTRATION OF TRANSFERS AND EXCHANGES. The Company shall cause to be kept at its principal corporate office (the "Register Office") a register in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Warrant certificates and of transfers or exchanges of Warrant certificates at the Warrant holder's option. The Company shall from time to time register the transfer of any outstanding Warrant certificates upon the records to be maintained by it for that purpose, upon surrender thereof. Upon any such registration of transfer, a new Warrant certificate shall be issued to the transferee(s) and the surrendered Warrant certificate shall be canceled by the Company. Canceled Warrant certificates shall thereafter be disposed of in a manner satisfactory to the Company in accordance with any applicable laws. Whenever any Warrant certificates are surrendered for exchange, the Company shall execute and deliver the Warrant certificates that the Warrant holder making the exchange is entitled to receive. All Warrant certificates issued upon any registration of transfer or exchange of Warrant certificates shall be the valid obligations of the Company, evidencing the same obligations, and entitled to the same benefits under this Agreement, as the Warrant certificates surrendered for such registration of transfer or exchange. Every Warrant certificate surrendered for registration of transfer or exchange shall (if so required by the Company) be duly endorsed, or be accompanied by a written instrument of transfer in the form of Exhibit B attached hereto, duly executed by the Warrant holder or his attorney duly authorized in writing. No service charge will be made for any registration of transfer or exchange upon surrender of Warrant certificates or any issuance of Warrant certificates pursuant to Section 3 or this Section 6, but the Company may require payment of a sum sufficient to cover any stamp or other governmental charge or tax which may be imposed in connection with any such transfer or exchange. Any Warrant certificate when duly endorsed in blank (with signature guaranteed) shall be deemed negotiable. The holder of any Warrant certificate duly endorsed in blank may be treated by the Company and all other Persons dealing therewith as the absolute owner thereof for any purpose and as the Person entitled to exercise the rights represented thereby, or to the transfer thereof on the register of Warrants maintained by the Company, any notice to the contrary notwithstanding; but until such transfer on such register, the Company may treat the registered Warrant holder as the owner for all purposes. In addition to any other legend which may be required by applicable law, each Warrant certificate representing Warrants and each certificate representing Warrant Shares issued upon exercise of the Warrant shall have endorsed, to the extent appropriate, upon its face the following words: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY JURISDICTION. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, ASSIGNED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO (I) A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES THAT IS EFFECTIVE UNDER SUCH ACT OR APPLICABLE STATE SECURITIES LAW, OR (II) ANY EXEMPTION FROM REGISTRATION UNDER SUCH ACT, OR APPLICABLE STATE SECURITIES LAW, RELATING TO THE DISPOSITION OF SECURITIES, INCLUDING RULE 144 PROVIDED, IF SO REQUESTED BY THE COMPANY, AN OPINION OF COUNSEL IS FURNISHED TO THE COMPANY, IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND/OR APPLICABLE STATE SECURITIES LAW IS AVAILABLE. Prior to any transfer or attempted transfer of any Warrants, the holder of such Warrants shall give 10 days' prior written notice (a "Transfer Notice") to the Company of such holder's intention to effect such transfer, describing the manner and circumstances of the proposed transfer, and, if requested by the Company, obtain from counsel to such holder, who shall be reasonably satisfactory to the Company, an opinion that the proposed transfer of such Warrants may be effected without registration under the Securities Act. After receipt of the Transfer Notice and opinion, the Company shall, within five days thereof, so notify the holder of such Warrants and such holder shall thereupon, subject to compliance with the other restrictions on transfer contained herein, be entitled to transfer such Warrants, in accordance with the terms of the Transfer Notice. Each Warrant issued upon such transfer shall bear the restrictive legends set forth above, unless, in the opinion of counsel to such holder (which opinion must be reasonably satisfactory to the Company and its counsel), such legend is not required in order to ensure compliance with the Securities Act. The holder of the Warrants giving the Transfer Notice shall not be entitled to transfer such Warrants until receipt of notice from the Company under this Section 6. SECTION 7. TERMS OF WARRANTS; EXERCISE OF WARRANTS. Subject to the terms of this Agreement, the Warrants may be exercised at any time after the date hereof in whole and from time to time in part until 5:00 p.m. (ET) on February 23, 2008 (the "Expiration Date"). Each Warrant, when exercised in accordance with the terms hereof and upon payment in cash of the exercise price of $22.448 per share (the "Exercise Price") will entitle the holder thereof to acquire from the Company (and the Company shall issue to such holder of a Warrant) one fully paid and nonassessable share of the Company's authorized but unissued Common Stock (subject to adjustment as provided in Section 11). No cash dividend shall be paid to a holder of Warrant Shares issuable upon the exercise of Warrants unless such holder was, as of the record date for the declaration of such dividend, the record holder of such Warrant Shares. A Warrant may be exercised upon surrender to the Company at the Register Office of the certificate or certificates evidencing the Warrants to be exercised with the form of election to purchase on the reverse thereof duly filled in and signed, together with payment to the Company of the Exercise Price for each Warrant Share then exercised. In lieu of payment of the Exercise Price pursuant to the preceding paragraph, the Warrant holder shall have the right to require the Company to convert the Warrants, in whole or in part and at any time or times (the "Conversion Right"), into shares of Common Stock by surrendering to the Company the certificate or certificates evidencing the Warrant to be converted with the form of notice of conversion on the reverse thereof duly filled in and signed. Upon exercise of the Conversion Right, the Company shall deliver to the Warrant holder (without payment by the holder of the Warrant of any Exercise Price) that number of shares of Common Stock which is equal to the quotient obtained by dividing (x) the value of the number of Warrants being exercised at the time the Warrants are exercised (determined by subtracting the aggregate Exercise Price for all such Warrants immediately prior to the exercise of the Warrants from the aggregate Current Market Price (as defined in Section 11) of that number of Warrant Shares purchasable upon exercise of such Warrants immediately prior to the exercise of the Warrants (taking into account all applicable adjustments pursuant to Section 11) by (y) the Current Market Price of one share of Common Stock immediately prior to the exercise of the Warrants. Subject to the provisions of Section 8 hereof, upon surrender of the Warrant certificate or certificates, the Company shall issue and deliver with all reasonable dispatch, to or upon the written order of the Warrant holder and in such name or names as the Warrant holder may designate, a certificate or certificates for the number of Warrant Shares issuable or other securities or property to which such holder is entitled hereunder upon the exercise of such Warrants, including, at the Company's option, any cash payable in lieu of fractional interests as provided in Section 12 hereof. Such certificate or certificates shall be deemed to have been issued and any Person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares as of the date of the surrender of such Warrants and payment of the Exercise Price. The Company may issue fractional shares of Common Stock upon exercise of any Warrants in accordance with Section 12 hereof. The Warrants shall be exercisable on or prior to the Expiration Date, at the election of the holders thereof, either at any time in whole or from time to time in part (in whole shares) and, in the event that a certificate evidencing Warrants is exercised in respect of fewer than all of the Warrant Shares issuable on exercise of such certificate at any time prior to the Expiration Date, a new certificate evidencing the remaining Warrant or Warrants will be issued, and the Company will duly execute and deliver the required new Warrant certificate or certificates pursuant to the provisions of Section 4 and this Section 7. All Warrant certificates surrendered upon exercise of Warrants shall be canceled by the Company. Such canceled Warrant certificates shall then be disposed of in a manner satisfactory to the Company and in accordance with any applicable law. The Company shall account promptly in writing with respect to Warrants exercised and all monies received for the purchase of the Warrant Shares through the exercise of such Warrants. In the event that the Company shall purchase or otherwise acquire Warrants, the Company may elect to have the Warrants canceled and retired. The Company shall keep copies of this Agreement and any notices given or received hereunder available for inspection by the registered Warrant holders during normal business hours and upon reasonable notice at the Register Office. SECTION 8. PAYMENT OF TAXES. The Company will pay all taxes and other governmental charges attributable to the initial issuance of Warrant Shares upon the exercise of Warrants; provided, however, that the Company shall not be required to pay any such taxes or charges which may be payable in respect of any transfer involved in the issue of any Warrant certificates or any certificates for Warrant Shares in a name other than that of the registered holder of a Warrant certificate surrendered upon the exercise of a Warrant, and the Company shall not be required to issue or deliver such Warrant certificates unless or until the Person or Persons requesting the issuance thereof shall have paid to the Company the amount of such taxes or charges or shall have established to the satisfaction of the Company that such taxes or charges have been paid. SECTION 9. MUTILATED OR MISSING WARRANT CERTIFICATES. In case any of the Warrant certificates shall be mutilated, lost, stolen or destroyed, the Company may in its discretion issue in exchange and substitution for and upon cancellation of the mutilated Warrant certificate, or in lieu of and substitution for the Warrant certificate lost, stolen or destroyed, a new Warrant certificate of like tenor and representing an equivalent number of Warrants, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction of such Warrant certificate and indemnity and security therefor, if requested, also reasonably satisfactory to the Company. Applicants for such substitute Warrant certificates shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company may prescribe. SECTION 10. RESERVATIONS OF WARRANT SHARES. The Company (i) shall at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Common Stock, for the purpose of enabling it to satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the maximum number of shares of Common Stock which would then be deliverable upon the exercise of all outstanding Warrants if all such outstanding Warrants were then exercisable and (ii) shall not take any action which results in any adjustment of the number of Warrant Shares if the total number of Warrant Shares issuable after the action upon the exercise of all of the Warrant Shares would exceed the total number of shares of Common Stock then authorized by the Company's certificate of incorporation and available for the purpose of issue upon such exercise. The transfer agent for the Preferred Stock (which may be the Company if it is acting as transfer agent) (the "Transfer Agent") and every subsequent transfer agent for any shares of the Company's capital stock issuable upon the exercise of any of the rights of purchase aforesaid will be irrevocably authorized and directed at all times to reserve such number of authorized shares as shall be required for such purpose. The Company will keep a copy of this Agreement on file with the Transfer Agent for any shares of the Company's capital stock issuable upon the exercise of the rights of purchase represented by the Warrants. The Company will supply such Transfer Agent with duly executed stock certificates for purposes of honoring all outstanding Warrants upon exercise thereof in accordance with the terms of this Agreement and the Company will provide or otherwise make available any cash which may be payable as provided in Section 12 hereof. The Company will furnish such Transfer Agent a copy of all notices of adjustments and certificates related thereto which are transmitted to each Warrant holder pursuant to Section 13 hereof. The Company covenants that all Warrant Shares which may be issued upon exercise of Warrants have been duly authorized and will, upon payment of the Exercise Price or upon the exercise of the Conversion Right and issuance, be duly and validly issued, fully paid and nonassessable, free of preemptive rights and free from all taxes, liens, charges and security interests with respect to the issue thereof. SECTION 11. ADJUSTMENT OF NUMBER OF WARRANT SHARES. (a) Initial Exercise. Each Warrant will initially be exercisable by the holder thereof into one share of Common Stock at the Exercise Price. (b) Adjustment to Exercise Price for Stock Dividends and for Combinations or Subdivisions of Common Stock. (i) In case the Company shall at any time or from time to time after the Closing Date (A) pay a dividend or make a distribution on the outstanding shares of Common Stock in shares of Common Stock, (B) subdivide or split the outstanding shares of Common Stock, (C) combine or reclassify the outstanding shares of Common Stock into a smaller number of shares or (D) issue by reclassification of the shares of Common Stock any shares of capital stock of the Company, then, and in each such case, the Exercise Price in effect immediately prior to such event or the record date therefor, whichever is earlier, shall be adjusted so that the holder of any Warrants thereafter exercised shall be entitled to receive the number of shares of Common Stock or other securities of the Company which after the happening of any of the events described above such Warrants would have been exercisable had such Warrants been exercised immediately prior to the happening of such event or the record date therefor, whichever is earlier. An adjustment made pursuant to this clause (i) shall become effective (x) in the case of any such dividend or distribution, immediately after the close of business on the record date for the determination of holders of shares of Common Stock entitled to receive such dividend or distribution, or (y) in the case of such subdivision, split, reclassification or combination, at the close of business on the day upon which such corporate action becomes effective. Such adjustment shall be made successively whenever an event listed above shall occur. No adjustment shall be made pursuant to this clause (i) in connection with any transaction to which clause (c) applies. (ii) In case the Company shall issue shares of Common Stock (or rights, warrants or other securities convertible into or exercisable or exchangeable for shares of Common Stock) (collectively, "Additional Shares") after the Closing Date at a price per share (or having a conversion or exercise price per share) less than the Current Market Price as of the date of issuance of such shares (or, in the case of convertible or exchangeable securities, less than the Current Market Price as of the date of issuance of the rights, warrants or other securities in respect of which shares of Common Stock were issued), then, and in each such case, the Exercise Price shall be reduced to an amount determined by multiplying (A) the Exercise Price in effect on the day immediately prior to the date of issuance of such Additional Shares by (B) a fraction, the numerator of which shall be the sum of (1) the number of shares of Common Stock Outstanding immediately prior to such sale or issue multiplied by the then applicable Current Market Price per share and (2) the aggregate consideration receivable by the Company for the total number of shares of Common Stock so issued (or into or for which the rights, warrants or other convertible securities may convert or be exercisable or exchangeable), and the denominator of which shall be the sum of (x) the total number of shares of Common Stock Outstanding immediately prior to such sale or issue and (y) the number of Additional Shares issued (or into or for which the rights, warrants or convertible securities may be converted, exercised or exchanged), multiplied by the Current Market Price. An adjustment made pursuant to this clause (ii) shall be made on the next Business Day following the date on which any such issuance is made and shall be effective retroactively to the close of business on the date of such issuance of Additional Shares. For purposes of this clause (ii), the aggregate consideration receivable by the Company in connection with the issuance of shares of Common Stock or of rights, warrants or convertible securities shall be deemed to be equal to the sum of the aggregate offering price (before deduction of underwriting discounts or commissions and expenses payable to third parties) of all such Common Stock, rights, warrants and convertible securities plus the aggregate amount (as determined on the date of issuance), if any, payable upon exercise or conversion of any such rights, warrants and convertible securities into shares of Common Stock. If, subsequent to the date of issuance of such right, warrants or other convertible securities, the exercise or conversion price thereof is reduced, such aggregate amount shall be recalculated and the Exercise Price shall be adjusted retroactively to give effect to such reduction. On the expiration of any option or the termination of any right to convert or exchange any securities into Additional Shares, the Exercise Price then in effect hereunder shall forthwith be increased to the Exercise Price which would have been in effect at the time of such expiration or termination (but taking into account other adjustments made following the time of issuance of such securities) had such security, to the extent outstanding immediately prior to such expiration or termination, never been issued. In case any portion of the consideration to be received by the Company shall be in a form other than cash, the Fair Market Value of such non-cash consideration shall be utilized in the foregoing computation. If Common Stock is sold as a unit with other securities, the aggregate consideration received for such Common Stock shall be deemed to be net of the Fair Market Value of such other securities. The issuance or reissuance of (i) any shares of Common Stock or rights, warrants or other securities convertible into shares of Common Stock (whether treasury shares or newly issued shares) (A) pursuant to a dividend or distribution on, or subdivision, split, combination or reclassification of, the outstanding shares of Common Stock requiring an adjustment in the Exercise Price pursuant to clause (i) of this clause (b); (B) pursuant to any restricted stock or stock option plan or stock purchase program of the Company involving the grant of options or rights to acquire Common Stock to directors, officers and employees and, in the case of options, consultants and service providers, of the Company and its subsidiaries so long as (x) the granting of such options or rights has been approved by the Board of Directors and (y) the aggregate consideration receivable by the Company in connection with such options shall be no less than fair market value, as determined by the Board of Directors, and in connection with such rights under the employee stock purchase plan of the Corporation shall be no less than 85% of the fair market value, as determined by the Board of Directors, of the Common Stock underlying such options or rights on the date of grant; (C) pursuant to any option, warrant, right, or convertible security outstanding as of the Closing Date, or (ii) the Series A Preferred Stock issuable pursuant to the Purchase Agreement and any shares of Common Stock issuable upon conversion or exercise thereof, shall not be deemed to constitute an issuance of Common Stock or convertible securities by the Company to which this clause (b)(ii) applies; provided that, notwithstanding clause (i)(C), the Exercise Price shall be appropriately reduced to the extent that the number of shares into which any such security may be converted, exercised or exchanged is increased or the price therefor is reduced after the Issue Date. No adjustment shall be made pursuant to this clause (b)(ii) in connection with any transaction to which clause (c) applies. (iii) In case the Company shall fix a record date for the issuance on a pro rata basis of rights, options or warrants to the holders of its Common Stock (or other securities convertible into or exercisable or exchangeable for shares of Common Stock) entitling such holders to subscribe for or purchase shares of Common Stock (or securities convertible into or exercisable or exchangeable for shares of Common Stock) at a price per share of Common Stock (or having a conversion, exercise or exchange price per share of Common Stock, in the case of a security convertible into, or exerciseable or exchangeable for, shares of Common Stock) less than the Current Market Price on such record date, the maximum number of shares of Common Stock issuable upon exercise of such rights, options or warrants (or conversion of such convertible securities) shall be deemed to have been issued and outstanding as of such record date and the Exercise Price shall be adjusted pursuant to paragraph 11(b)(ii) hereof, as though such maximum number of shares of Common Stock had been so issued for an aggregate consideration payable by the holders of such rights, options, warrants or other securities prior to their receipt of such shares of Common Stock. Such adjustment shall be made successively whenever such record date is fixed; and in the event that such rights, options or warrants are not so issued or expire in whole or in part unexercised, or in the event of a change in the number of shares of Common Stock to which the holders of such rights, options or warrants are entitled (other than pursuant to adjustment provisions therein comparable to those contained in this paragraph 11(b)), the Exercise Price shall again be adjusted as follows: (A) in the event that all of such rights, options or warrants expire unexercised, the Exercise Price shall be the Exercise Price that would then be in effect if such record date had not been fixed; (B) in the event that less than all of such rights, options or warrants expire unexercised, the Exercise Price shall be adjusted pursuant to paragraph 11(b)(ii) to reflect the maximum number of shares of Common Stock issuable upon exercise of such rights, options or warrants that remain outstanding (without taking into effect shares of Common Stock issuable upon exercise of rights, options or warrants that have lapsed or expired); and (C) in the event of a change in the number of shares of Common Stock to which the holders of such rights, options or warrants are entitled, the Exercise Price shall be adjusted to reflect the Exercise Price which would then be in effect if such holder had initially been entitled to such changed number of shares of Common Stock. Notwithstanding the foregoing, in case the Company shall issue rights, options or warrants ("Stockholder Rights") to all holders of its Common Stock entitling the holders thereof to subscribe for or purchase shares of Common Stock, which rights or warrants (i) are deemed to be transferred with such shares of Common Stock, (ii) are not exercisable and (iii) are also issued in respect of future issuances of Common Stock, in each case in clauses (i) through (iii) until the occurrence of a specified event or event ("Trigger Event"), such Stockholder Rights shall for purposes of this clause (iii) not be deemed issued or distributed until the occurrence of the earliest Trigger Event and the conversion price shall not be reduced until the occurrence of such earliest Trigger Event. (iv) In case the Company shall fix a record date for the making of a distribution to all holders of any class of Common Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing corporation) of evidences of indebtedness, assets or other property, the Exercise Price to be in effect after such record date shall be determined by multiplying the Exercise Price in effect immediately prior to such record date by a fraction, (A) the numerator of which shall be the Exercise Price immediately prior to such distributions less the Fair Market Value of the portion of the assets, other property or evidence of indebtedness so to be distributed which is applicable to one share of Common Stock and (B) the denominator of which shall be the Exercise Price immediately prior to such distributions. Such adjustments shall be made successively whenever such a record date is fixed; and in the event that such distribution is not so made, the Exercise Price shall again be adjusted to be the Exercise Price which would then be in effect if such record date had not been fixed. An adjustment to the Exercise Price also shall be made in respect of dividends and distributions paid exclusively in cash to all holders of any class of Common Stock (excluding any dividend or distribution in connection with the Liquidation (as defined in the Certificate of Designation for the Series A Convertible Preferred Stock of the Company) of the Company and any cash that is distributed upon a merger, consolidation or other transaction for which an adjustment pursuant to paragraph 11(c) is made) or in the case where the Company effects any repurchase of its Common Stock where the sum of (1) all such cash dividends and distributions made within the preceding 12 months in respect of which no adjustment has been made and (2) any cash and the Fair Market Value of other consideration paid in respect of any repurchases of Common Stock by the Company or any of its subsidiaries within the preceding 12 months in respect of which no adjustment has been made, exceeds 5% of the Company's market capitalization (being the product of the then Current Market Price of the Common Stock times the aggregate number of shares of Common Stock then outstanding on the record date for such distribution). The Exercise Price to be in effect after such adjustment shall be determined by subtracting from the Exercise Price in effect prior to such adjustment an amount equal to the quotient of (A) the sum of clause (1) and clause (2) above and (B) the number of shares of Common Stock outstanding on the date such adjustment is to be determined. (v) The term "dividend," as used in this clause (b), shall mean a dividend or other distribution upon the capital stock of the Company. (vi) Anything in this clause (b) to the contrary notwithstanding, the Company shall not be required to give effect to any adjustment in the Exercise Price unless and until the net effect of one or more adjustments (each of which shall be carried forward), determined as above provided, shall have resulted in a change of the Exercise Price such that the number of shares of Common Stock receivable upon the exercise of each Warrant would differ by at least one two-hundredth of one share of Common Stock, and when the cumulative net effect of more than one adjustment so determined shall be to change the Exercise Price by at least one two-hundredth of one share of Common Stock, such change in Exercise Price shall thereupon be given effect. All calculations under this Section 11 shall be made to the nearest four decimal points. (vii) The certificate of any firm of independent public accountants of recognized national standing selected by the Board of Directors of the Company (which may be the firm of independent public accountants regularly employed by the Company) shall be presumptively correct for any computation made under this clause (b). (viii) If the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution, and shall thereafter and before the distribution to stockholders legally abandon its plan to pay or deliver such dividend or distribution, then thereafter no adjustment in the number of shares of Common Stock issuable upon exercise of the right of Exercise granted by this clause (b) or in the Exercise Price then in effect shall be required by reason of the taking of such record. (ix) If any event occurs as to which the provisions of this Section 11(b) are not strictly applicable or if strictly applicable would not fairly protect the rights of the holders of the Warrants in accordance with the essential intent and principles of such provisions, the Board of Directors shall make an adjustment in the application of such provisions, in accordance with such essential intent and principles, so as to protect such rights of the holders of the Warrants (c) Adjustment in connection with Reclassification and Reorganization. In the case of any consolidation or merger or reclassification in connection therewith of the Company with or into another corporation (a "Transaction") occurring at any time, each Warrant then outstanding shall thereafter be exercisable for, in lieu of the Common Stock issuable upon such conversion prior to consummation of such Transaction, the kind and amount of shares of stock and other securities and property receivable (including cash) upon the consummation of such Transaction by a holder of that number of shares of Common Stock for which such Warrant was exercisable immediately prior to such Transaction. In case securities or property other than Common Stock shall be issuable or deliverable upon conversion as aforesaid, then all references in this Section 11 shall be deemed to apply, so far as appropriate and nearly as may be, to such other securities or property. The Company, or the person formed by the consolidation or resulting from the merger or which acquires such assets or which acquires the Company's shares, as the case may be, shall make provisions in its certificate or articles of incorporation or other constituent document to establish such rights and such rights shall be clearly provided for in the definitive transaction documents relating to such Transaction. The certificate or articles of incorporation or other constituent document shall provide for adjustments, which, for events subsequent to the effective date of the certificate or articles of incorporation or other constituent document, shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 11. The provisions of this Section 11(c) shall similarly apply to successive reclassifications, consolidations, mergers, sales, transfers or share exchanges. (d) No Amendments. The Company will not, by amendment of its certificate of incorporation or through any consolidation, merger, reorganization, transfer of assets, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Agreement, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Warrant holders thereof against dilution or other impairment. Without limiting the generality of the foregoing, the Company (i) will take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock on the exercise of the Warrants from time to time outstanding and (ii) will not take any action which results in any adjustment of the number of Warrant Shares if the total number of shares of Common Stock issuable after the action upon the exercise of all of the Warrants would exceed the total number of shares of Common Stock then authorized by the Company's certificate of incorporation and available for the purposes of issue upon such exercise. (e) Voluntary Increases. The Company may, but shall not be obligated to, make such increases in the number of Warrant Shares, in addition to those required by paragraphs (a) through (c) of this Section 11, as it considers to be advisable in order that any event treated for United States federal income tax purposes as a dividend of stock or stock rights shall not be taxable to the recipients or if that is not possible, to diminish any income taxes that are otherwise payable because of such event. (f) When Issuance or Payment May Be Deferred. In any case in which this Section 11 shall require that an adjustment in the Exercise Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event (i) issuing to the holder of any Warrant exercised after such record date the Warrant Shares and other capital stock of the Company, if any, issuable upon such exercise over and above the Warrant Shares and other capital stock of the Company, if any, issuable upon such exercise on the basis of the Exercise Price and (ii) paying to such holder any amount in cash in lieu of a fractional share pursuant to Section 13 hereof; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional Warrant Shares, other capital stock and cash upon the occurrence of the event requiring such adjustment. (g) Form of Warrants. Irrespective of any adjustments in the Exercise Price or kind of shares or other assets purchasable upon the exercise of the Warrants, Warrants theretofore or thereafter issued may continue to express the same price and number and kind of shares or other assets as are stated in the Warrants initially issuable pursuant to this Agreement. (h) Other Dilutive Events. If any corporate action shall occur as to which the provisions of this Section 11 are not strictly applicable but as to which the failure to make any adjustment would adversely affect the purchase rights or value represented by the Warrants in accordance with the essential intent and principles of such Section 11 (which are to place the Warrant holder in a position as nearly equal as possible to the position the Warrant holder would have occupied had the Warrant holder purchased shares of Common Stock on the date hereof) then, in each such case, the Company shall appoint a firm of independent certified public accountants of recognized national standing (which may be the regular auditors of the Company) to give their opinion upon the adjustment, if any, on a basis consistent with the essential intent and principles established in this Section 11, necessary to preserve, without dilution, the purchase rights represented by Warrants. Upon receipt of such opinion, the Company will promptly mail a copy thereof to Warrant holders and will make the adjustments described therein. (i) Adjustment in Warrant Shares. Except in connection with an adjustment pursuant to 11(c), upon each adjustment in the Exercise Price of which a Warrant is exercisable pursuant to this Section 11, the number of Warrant Shares covered by such Warrant shall be adjusted to equal a number of shares of Common Stock equal to the number of Warrant Shares before such adjustment multiplied by a fraction, of which the numerator is the Exercise Price before giving effect to such adjustment and the denominator of which is the Exercise Price immediately after giving effect to such adjustment. SECTION 12. FRACTIONAL INTERESTS. The Company shall not be required to issue fractional Warrant Shares on the exercise of Warrants, although it may do so in its sole discretion. If more than one Warrant shall be presented for exercise in full at the same time by the same holder, the number of full Warrant Shares which shall be issuable upon the exercise thereof shall be computed on the basis of the aggregate number of Warrant Shares purchasable on exercise of the Warrants so presented. If any fraction of a Warrant Share would, except for the provisions of this Section 13, be issuable upon the exercise of any such Warrants (or specified portion thereof), the Company shall pay to the Warrant holder an amount in cash equal to the Market Price per Warrant Share, as determined on the day immediately preceding the date the Warrant is presented for exercise, multiplied by such fraction, computed to the nearest whole cent. SECTION 13. NOTICES TO WARRANT HOLDERS; RIGHTS OF WARRANT HOLDERS. Upon any adjustment of the number of Warrant Shares pursuant to Section 11 hereof, the Company shall promptly thereafter (i) file with the Register Office a certificate of the Senior Financial Officer of the Company (unless the Purchasers request a certificate of a firm of independent public accountants of recognized standing selected by the Board of Directors (who may be the regular auditors of the Company)) setting forth the number of Warrant Shares (or portion thereof) issuable after such adjustment, upon exercise of a Warrant and (ii) give to each of the registered holders of the Warrant certificates at its address appearing on the Warrant register written notice of such adjustments by first-class mail, postage prepaid. Where appropriate, such notice may be given in advance and included as a part of the notice required to be mailed under the other provisions of this Section 13. In case the Company shall authorize: (a) the issuance of any dividend or other distribution on the Common Stock, whether in cash, capital stock, or other securities, evidences of indebtedness or other property; or (b) any action which would require an adjustment of the number of Warrant Shares pursuant to Section 11 hereof; or (c) any tender offer or exchange offer by the Company for shares of Common Stock, or Common Stock open market repurchase program; or (d) of the voluntary or involuntary dissolution, liquidation or winding up of the Company; then the Company shall cause to be filed with the Register Office and shall give to each of the registered holders of the Warrant certificates at the address appearing on the Warrant register, a written notice by first-class mail, postage prepaid, at least 20 days (or 10 days in any case specified in clause (b) above) prior to the applicable record date hereinafter specified, or, in the case of events for which there is no record date, at least 20 business days before the effective date of such event or the commencement of such tender offer, exchange offer, or repurchase program. Any written notice provided pursuant to this Section 13 shall state (i) the date as of which the holders of record of shares of Common Stock are entitled to receive any such rights, options, warrants or distribution are to be determined, or (ii) the commencement date of any tender offer, exchange offer or repurchase program for shares of Common Stock, or (iii) the date on which any such consolidation, merger, conveyance, transfer, reclassification, dissolution, liquidation or winding up is expected to become effective or consummated, and the date as of which it is expected that holders of record of shares of Common Stock shall be entitled to exchange such shares for securities or other property, if any, deliverable upon such consolidation, merger, conveyance, transfer, reclassification, dissolution, liquidation or winding up. The failure to give the notice required by this Section 13 or any defect therein shall not affect the legality or validity of any issuance, right, option, warrant, distribution, tender offer, exchange offer, repurchase program, consolidation, merger, conveyance, transfer, reclassification, dissolution, liquidation or winding up, or the vote upon any action. Nothing contained in this Agreement or in any of the Warrant certificates shall be construed as conferring upon the holders thereof the right to vote or to consent or to receive notice of meetings of stockholders or the election of Directors of the Company or any other matter, or any other rights of stockholders of the Company, including any right to receive dividends. In addition, the holders of Warrant certificates shall have no preemptive rights and shall not be entitled to share in the assets of the Company in the event of the liquidation, dissolution or winding up of the Company's affairs. SECTION 14. OBTAINING STOCK EXCHANGE LISTINGS. The Company shall also from time to time take all action reasonably necessary so that the Warrant Shares, immediately upon their issuance upon the exercise of Warrants, will be listed on or quoted on the Nasdaq National Market or any securities exchange or interdealer quotation system within the United States, if any, on which other shares of Common Stock are then listed or quoted. SECTION 15. NOTICES TO THE COMPANY. Any notice or demand authorized by this Agreement to be given or made by the Company or by the registered holder of any Warrant certificate to the Company shall be sufficiently given or made when deposited in the mail, first class or registered, postage prepaid, addressed, as follows: Optika Inc. 7450 Campus Drive, 2nd Floor Colorado Springs, CO 80920 Attention: Chief Financial Officer SECTION 16. SUPPLEMENTS AND AMENDMENTS. The Company may from time to time supplement or amend this Agreement without the approval of any holders of Warrant certificates in order to cure any ambiguity or to correct or supplement any provision contained herein which may be defective or inconsistent with any other provision herein, or to make any other provisions in regard to matters or questions arising hereunder which the Company may deem necessary or desirable and which shall not in any way adversely affect the interests of the holders of Warrant certificates. Any amendment or supplement to this Agreement that has an adverse effect on the interests of holders of Warrant certificates shall require the written consent of registered holders of two-thirds of the then outstanding Warrants. The consent of each holder of a Warrant affected shall be required for any amendment pursuant to which the Exercise Price would be increased or the number of Warrant Shares for or into which a Warrant may be exercised or convertible would be decreased. SECTION 17. SUCCESSORS. All the covenants and provisions of this Agreement by or for the benefit of the Company shall bind and inure to the benefit of their respective successors and assigns hereunder. SECTION 18. TERMINATION. This Agreement shall terminate on the earlier of date on which all Warrants have been exercised or after 5:00 p.m. (ET) on the Expiration Date. SECTION 19. GOVERNING LAW. THIS AGREEMENT AND EACH WARRANT CERTIFICATE ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. SECTION 20. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be construed to give to any Person other than the Company and the registered holders of Warrant certificates any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company and the registered holders of the Warrant certificates. SECTION 21. HEADINGS. The descriptive headings of the several Sections and paragraphs of this Agreement inserted for convenience only, do not constitute a part of this Agreement and shall not affect in any way the meanings or interpretation of this Agreement. SECTION 22. SUBMISSION TO JURISDICTION. If any action, proceeding or litigation shall be brought by the Purchaser or any holder of Warrants in order to enforce any right or remedy under this Agreement, the Company hereby consents and will submit, and will cause each of its subsidiaries to submit, to the jurisdiction of any state or federal court of competent jurisdiction sitting within the area comprising the Southern District of New York on the date of this Agreement. The Company hereby irrevocably waives any objection, including, but not limited to, any objection to the laying of venue or based on the grounds of forum non conveniens, which it may now or hereafter have to the bringing of any such action, proceeding or litigation in such jurisdiction. SECTION 23. WAIVER OF JURY TRIAL. THE PARTIES TO THIS AGREEMENT HEREBY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, PROCEEDING OR LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE WARRANTS. SECTION 24. SERVICE OF PROCESS. Nothing herein shall affect the right of any holder of a Warrant or Warrant Share to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against the Company in any other jurisdiction. SECTION 25. COUNTERPARTS. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, as of the day and year first above written. OPTIKA INC. By:/s/ Steven M. Johnson ------------------------------- Name: Steven M. Johnson Title: CFO PURCHASERS - ---------- THOMAS WEISEL CAPITAL PARTNERS, L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, its managing member By: /s/ Deborah Bernstein ----------------------------------------------------- Name: Deborah Bernstein Title: Authorized Signatory TWP CEO FOUNDERS' CIRCLE (AI), L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, its managing member By: /s/ Deborah Bernstein ----------------------------------------------------- Name: Deborah Bernstein Title: Authorized Signatory TWP CEO FOUNDERS' CIRCLE (QP), L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, its managing member By: /s/ Deborah Bernstein ----------------------------------------------------- Name: Deborah Bernstein Title: Authorized Signatory THOMAS WEISEL CAPITAL PARTNERS EMPLOYEE FUND, L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, its managing member By: /s/ Deborah Bernstein ----------------------------------------------------- Name: Deborah Bernstein Title: Authorized Signatory TWP 2000 C0-INVESTMENT FUND, L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, its managing member By: /s/ Deborah Bernstein ----------------------------------------------------- Name: Deborah Bernstein Title: Authorized Signatory [Purchasers' Signature Page -- Warrant Agreement] PURCHASERS - ---------- RKB CAPITAL, L.P. By: /s/ Peter Schleider ------------------------------ Name: Peter Schleider Title: General Partner [Purchasers Signature Page - Warrant Agreement] EXHIBIT A Form of Warrant Certificate [Face] No. ____ Warrant Certificate OPTIKA INC. This Warrant Certificate certifies that _____________, or registered assigns, is the registered holder of Warrants (the "Warrants") to purchase an aggregate of _________ shares of Common Stock, par value $.001 per share (the "Common Stock"), of OPTIKA INC. a Delaware corporation (the "Company"). Each Warrant entitles the holder upon exercise to purchase from the Company at any time after the date hereof a fully paid and nonassessable share of Common Stock (a "Warrant Share") upon surrender of this Warrant Certificate and payment in full for such Warrant Share at the Register Office of the Company, subject to the conditions set forth herein and in the Warrant Agreement referred to on the reverse hereof. The number of Warrant Shares purchasable upon exercise thereof are subject to adjustment upon the occurrence of certain events set forth in the Warrant Agreement. Reference is hereby made to the further provisions of this Warrant Certificate set forth on the reverse hereof, which provisions shall for all purposes have the same effect as though fully set forth at this place. This Warrant Certificate shall not be valid unless authenticated by countersignature of the Warrant Agent, as such term is used in the Warrant Agreement. THIS WARRANT CERTIFICATE SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS. EXERCISABLE AT ANY TIME UNTIL THE EXPIRATION DATE. IN WITNESS WHEREOF, Optika Inc. has caused this Warrant Certificate to be signed by its President and Vice President each by a facsimile of his signature, and has caused a facsimile of its corporate seal to be affixed hereunto or imprinted hereon. Dated: OPTIKA INC. By: ---------------------------- By: ---------------------------- [SEAL] Form of Warrant Certificate [Reverse] THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY JURISDICTION. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, ASSIGNED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO (I) A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES THAT IS EFFECTIVE UNDER SUCH ACT OR APPLICABLE STATE SECURITIES LAW, OR (II) ANY EXEMPTION FROM REGISTRATION UNDER SUCH ACT, OR APPLICABLE STATE SECURITIES LAW, RELATING TO THE DISPOSITION OF SECURITIES, INCLUDING RULE 144. The Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of Warrants having a term of eight years and entitling the holder on exercise to receive shares of Common Stock (the "Common Stock"), and are issued or to be issued pursuant to a Warrant Agreement, dated as of February 23, 2000 (the "Warrant Agreement"), between the Company and the other parties thereto, which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Company and the holders (the words "holders" or "holder" meaning the registered holders or registered holder) of the Warrants. All terms not otherwise defined herein shall have the meanings set forth in the Warrant Agreement. A copy of the Warrant Agreement may be obtained by the holder hereof upon written request to the Company. Warrants may be exercised at any time after the date hereof in whole and from time to time in part until the Expiration Date. The holder of Warrants evidenced by this Warrant Certificate may exercise such Warrants by surrendering this Warrant Certificate, with the form of election to purchase set forth hereon properly completed and executed, together with payment to the Company of the Exercise Price for each Warrant then exercised. In lieu of payment of the Exercise Price pursuant to the preceding sentence, the holder of the Warrants may convert the Warrants, in whole or in part and at any time or times, into shares of Common Stock by surrendering to the Company this Warrant Certificate with the form of notice of conversion set forth hereon properly completed and executed. In the event that upon any exercise of Warrants evidenced hereby the number of Warrants exercised shall be less than the total number of Warrants evidenced hereby, there shall be issued to the holder hereof or his assignee a new Warrant Certificate evidencing the number of Warrants not exercised. The Warrant Agreement provides that upon the occurrence of certain events the number of Warrant Shares may, subject to certain conditions, be adjusted. The Company will not be required to issue fractional Warrant Shares on the exchange of Warrants, although it may do so in its sole discretion. If fractional shares are not issued, the Company will pay the cash value of such fractional shares as determined in accordance with the provisions of the Warrant Agreement. Warrant certificates, when surrendered at the office of the Company by the registered holder thereof in person or by legal representative or attorney duly authorized in writing, may be exchanged, in the manner and subject to the limitations provided in the Warrant Agreement, but without payment of any service charge, for another Warrant certificate or Warrant certificates of like tenor evidencing in the aggregate a like number of Warrants. Upon due presentation for registration of transfer of this Warrant certificate at the office of the Company, a new Warrant certificate or Warrant certificates of like tenor and evidencing in the aggregate a like number of Warrants shall be issued to the transferee(s) in exchange for this Warrant certificate, subject to the limitations provided in the Warrant Agreement, without charge except for any tax or other governmental charge imposed in connection therewith. The Company may deem and treat the registered holder(s) thereof as the absolute owner(s) of this Warrant certificate (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, of any distribution to the holder(s) hereof, and for all other purposes, and the Company shall not be affected by any notice to the contrary. Neither the Warrants nor this Warrant certificate entitles any holder hereof to any rights of a stockholder of the Company. Form of Election to Purchase (To Be Executed Upon Exercise of Warrant) The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant certificate, to receive ____________ shares of Common Stock and hereby tenders for payment for such shares to the order of Optika Inc. in the amount of $____________ in accordance with the terms hereof. The undersigned requests that a certificate for such shares be registered in the name of _____________________________________, whose address is _________________________________ and that such shares be delivered to ______________________________ whose address is ________________________. If said number of Warrant Shares is less than all of the shares of Common Stock purchasable hereunder, the undersigned requests that a new Warrant certificate representing the remaining balance of such shares be registered in the name of _________________________, whose address is __________________________, and that such Warrant certificate be delivered to __________________________, whose address is _________________________. -------------------------------- (Signature) Date: ----------------- Form of Notice of Conversion (To Be Executed Upon Conversion of Warrant) The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant certificate, to convert Warrants represented hereby into ________ shares of Common Stock in accordance with the terms hereof. The undersigned requests that a certificate for such shares be registered in the name of _____________________________________, whose address is _________________________________ and that such shares be delivered to ______________________________ whose address is ________________________. If said number of Warrant Shares is less than all of the shares of Common Stock purchasable hereunder, the undersigned requests that a new Warrant certificate representing the remaining balance of such shares be registered in the name of _________________________, whose address is __________________________, and that such Warrant certificate be delivered to __________________________, whose address is __________________________. -------------------------------- (Signature) Date: ----------------- EXHIBIT B --------- Form of Transfer (To Be Executed Upon Transfer of Warrant) FOR VALUE RECEIVED, the undersigned registered holder of this Warrant certificate hereby sells, assigns and transfers unto the Assignee(s) named below (including the undersigned with respect to any Warrants constituting a part of the Warrants evidenced by this Warrant certificate not being assigned hereby) all of the rights of the undersigned under this Warrant certificate, with respect to the number of Warrants set forth below: Name of Assignee(s) Address Social Security or other Number of Warrants identifying number of assignee(s) and does hereby irrevocably constitute and appoint the Company as the undersigned's attorney to make such transfer on the register maintained by the Company for that purpose, with full power of substitution in the premises. Date: - ----------------------------- (Signature of Owner) - ----------------------------- (Street Address) - ----------------------------- (City) (State) (Zip Code) Signature Guaranteed by: - ----------------------------- Name: Title: EX-99.6 7 EXHIBIT 6 EXECUTION COPY -------------- REGISTRATION RIGHTS AGREEMENT Dated as of February 23, 2000 by and among Optika Inc. the Founders and Investors described herein Thomas Weisel Capital Partners, L.P. TWP CEO Founders' Circle (AI), L.P. TWP CEO Founders' Circle (QP), L.P. Thomas Weisel Capital Partners Employee Fund, L.P. TWP 2000 Co-Investment Fund, L.P. and RKB Capital, L.P. REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT, dated as of February 23, 2000 (this "Agreement"), by and between Optika Inc., a Delaware corporation (the "Company"), the holders of Founders Shares and Investors Shares listed on the signature pages hereto, and Thomas Weisel Capital Partners, L.P., TWP CEO Founders' Circle (AI), L.P., TWP CEO Founders' Circle (QP), L.P., Thomas Weisel Capital Partners Employee Fund, L.P., RKB Capital, L.P. and TWP 2000 Co-Investment Fund, L.P., as purchasers (together, the "Purchasers", and individually, each a "Purchaser"). WHEREAS, the Company proposes to issue and sell (i) an aggregate of 731,851 shares of Series A Convertible Preferred Stock, par value $0.001 per share (the "Preferred Stock") of the Company, the terms of which are set forth in the Certificate of Designation in the form of Exhibit 2.2 to the Purchase Agreement (as defined below) and (ii) warrants (the "Warrants"; and, together with the Preferred Stock, the "Securities") to purchase an aggregate of 307,298 shares of the Company's Common Stock, par value $0.001 per share (the "Common Stock"), the terms of which are set forth in the Warrant Agreement attached in the form of Exhibit 1.2(b) to the Purchase Agreement; WHEREAS, as an inducement to the Purchasers to enter into the Purchase Agreement, and as a condition to the closing of the transactions contemplated thereby, the Company agreed to provide the Purchasers with registration rights; WHEREAS, the Company has previously entered into that certain Amended and Restated Registration Agreement, dated November 22, 1995, as amended by the First Amendment thereto dated May 6, 1996 (as so amended, the "Existing Registration Agreement") pursuant to which the Company has granted to the holders of Founders' Shares (the "Founders") and the holders of Investors' Shares (the "Investors") certain registration rights on the terms set forth herein; WHEREAS, the Company and the Founders and the Investors who are, or may after the date hereof become, parties to the Agreement wish to effect an amendment and restatement of their respective rights and obligations under the Existing Registration Agreement so that, upon the effectiveness of such amendment at the Effective Date as set forth in Section 12(m) of this Agreement (i) the Existing Registration Agreement will terminate and be of no further force and effect; and (ii) all of the registration rights of the Founders and the Investors (whether or not signatories hereto) will thereafter be governed solely by this Agreement; NOW, THEREFORE, the parties agree as follows: Section 1. Certain Definitions. For purposes of this Agreement, the following terms shall have the following respective meanings: The term "broker-dealer" shall mean any broker or dealer registered with the Commission under the Exchange Act. "Closing" shall mean the date of the closing of the issuance and sale of Securities pursuant to the Purchase Agreement. "Commission" shall mean the United States Securities and Exchange Commission, or any other federal agency at the time administering the Exchange Act or the Securities Act, whichever is the relevant statute for the particular purpose. "Common Stock" shall have the meaning assigned thereto in the recitals to this Agreement and shall include any equity securities issued with respect to the Common Stock in connection with any recapitalization, reclassification, merger, consolidation or other reorganization. "Company" shall have the meaning assigned thereto in the first paragraph of this Agreement. "Controlling Person" shall have the meaning assigned thereto in Section 8(a) hereof. "Demand Exercise Notice" shall have meaning assigned thereto in Section 2(a) hereof. "Demand Registration" shall have meaning assigned thereto in Section 2(a) hereof. "Demand Registration Request" shall have the meaning assigned thereto in Section 2(a) hereof. "Demand Registration Statement" shall have the meaning assigned thereto in Section 2(a) hereof. "Effective Time" shall mean, in the case of (i) a Registration, the time and date as of which the Commission declares the related Registration Statement effective or as of which the related Registration Statement otherwise becomes effective; and (iii) a Market Making Registration, the time and date as of which the Commission declares the Market Making Registration Statement effective or as of which time the Market Making Registration otherwise becomes effective. "Electing Holder" shall mean any holder of Registrable Shares, as applicable, that has returned a completed and signed Notice and Questionnaire to the Company in accordance with Sections 5(a)(ii) hereof. "Exchange Act" shall mean the Securities Exchange Act of 1934, or any successor thereto, as the same shall be amended from time to time. "Existing Registration Agreement" shall have the same meaning set forth in the recitals hereto. "Founders" shall have the meaning assigned thereto in the recitals hereto. "Founders' Shares" shall mean at any time (i) the shares of Common Stock owned by each of the persons listed as a "Founder" on Schedule A hereto; (ii) with respect to shares of Common Stock previously held by a Founder, a transferee of such Founder who consents to be bound by this Agreement; (iii) any shares of Common Stock then outstanding that were issued upon exercise of the options held by such Founder; (iv) any shares of Common Stock then issuable upon exercise of the options held by such Founder; (v) any shares of Common Stock then outstanding which were issued as, or were issued directly or indirectly upon the conversion or exercise of other securities issued as, a dividend or other distribution with respect to or in replacement of other Founders' shares and (vi) any shares of Common Stock then issuable directly or indirectly upon the conversion or exercise of other securities which were issued as a dividend or other distribution with respect to or in replacement of other Founders' Shares; provided, that Founders' Shares shall not include any shares the sale of which has been registered pursuant to the Securities Act or sold to the public pursuant to Rule 144 promulgated by the Commission under the Securities Act. For purposes of this Agreement, a Person will be deemed to be a holder of Founders' Shares whenever such Person holds a security exercisable for or convertible into such Founders' Shares, whether or not such exercise or conversion has actually been effected. The term "holder" shall mean each of the Purchasers and other Persons who acquire Registrable Shares from time to time (including any successors or assigns), in each case for so long as such Person owns any Registrable Shares. "Indemnified Person" shall have the meaning assigned thereto in Sections 8(a) and 8(b). "Initiating Holders" shall have the meaning assigned thereto in Section 2(a) hereof. "Investors" shall have the meaning assigned thereto in the recitals hereto. "Investors' Shares" shall mean, at any time (i) the shares of Common Stock owned by each of the persons listed as an "Investor" on Schedule B hereto; (ii) shares of Common Stock acquired by an Investor from a Founder; (iii) any shares of Common Stock then outstanding which were issued as, or were issued directly or indirectly upon the conversion or exercise of other securities issued as, a dividend or other distribution with respect to or in replacement of other Investors' Shares; and (iv) any shares of Common Stock then issuable directly or indirectly upon the conversion or exercise of other securities which were issued as a dividend or other distribution with respect to or in replacement of other Investors' Shares; provided, that Investors' Shares shall not include any shares the sale of which has been registered pursuant to the Securities Act or sold to the public pursuant to Rule 144 promulgated by the Commission under the Securities Act. For purposes of this Agreement, a person will be deemed to be a Holder of Investors' Shares whenever such Person holds a security exercisable for or convertible into such Investors' Shares whether or not such exercise or conversion has actually been effected. "Majority Electing Holders" means, the holders of a majority in the number of shares of Common Stock elected to be included under such Registration Statement by the Electing Holders. "Market Making Period" shall have the meaning assigned thereto in Section 4(a) hereof. "Market Making Prospectus" shall mean the prospectus included in the Market Making Registration Statement relating to offers and sales of Market Making Securities by TWP in secondary transactions. "Market Making Registration" shall mean the registration of Market Making Securities in connection with offers and sales thereof by TWP in secondary transactions. "Market Making Registration Statement" shall mean a shelf registration statement on Form S-3 or other short form registration statement (which may be the Registration Statement if permitted by the rules and regulations of the Commission) pursuant to Rule 415 under the Securities Act or any similar rule that may be adopted by the Commission providing for the registration of, and the sale on a continuous or delayed basis in secondary transactions by TWP of, the Market Making Securities. "Market Making Request Date" shall have the meaning assigned thereto in Section 5(a) hereof. "Market Making Securities" shall mean any of the Common Stock issued by the Company. "NASD" shall have the meaning assigned thereto in Section 5(a)(xvii) hereof. "Notice and Questionnaire" means a Notice of Registration Statement and Selling Securityholder Questionnaire customary in form and substance for such a Registration. "Person" shall mean a corporation, association, partnership, limited liability company, trust, organization, business, individual, government or political subdivision thereof or governmental agency or any other entity. "Piggyback Registration" shall have the meaning assigned thereto in Section 3(a) hereof. "Piggyback Registration Statement" shall have the meaning assigned thereto in Section 3(a) hereof. "Purchase Agreement" shall mean the Securities Purchase Agreement, dated as of February 9, 2000, between the Company and the Purchasers. "Purchasers" shall have the meaning assigned thereto in recitals to this Agreement. "Registrable Shares" shall mean, at any time, (A) the Founders' Shares, (B) the Investors' Shares and (C) the shares of Common Stock into or for which the Securities are than convertible or exchangeable, as the case may be; provided, however, that any such shares of Common Stock referred to in clauses (A) through (C) above shall cease to be Registrable Shares when (i) in the circumstances contemplated by Section 2 (other than Section 2(f)) or Section 3, a Demand Registration Statement or a Piggyback Registration Statement registering such shares of Common Stock under the Securities Act has been declared or becomes effective and such shares of Common Stock shall have been sold or otherwise transferred by the holder thereof pursuant to and in a manner contemplated by such effective Registration Statement; or (ii) the Founders' Shares, the Investors' Shares or the shares of Common Stock underlying the Founders Shares, the Investors Shares and the Securities is sold pursuant to Rule 144 or Rule 144A under circumstances in which any legend borne by such Common Stock relating to restrictions on transferability thereof, under the Securities Act or otherwise, is removed by the Company or pursuant to the Warrant Agreement. "Registration Expenses" shall have the meaning assigned thereto in Section 6 hereof. "Requisite Holders" means Requisite Investor Holders or Requisite Purchaser Holders as the context may require. "Requisite Investor Holders" means the holders of Investors' Shares representing at least 70% of the total number of Investors' Shares then outstanding. "Requisite Purchaser Holders" means the holders of Securities representing or covering on conversion or exercise, in the aggregate, 25% or more of the total number of shares of Common Stock issuable on conversion or exercise of the Securities at the Closing. "Registration" shall have the meaning assigned thereto in Section 3(a) hereof. "Registration Statements" shall have the meaning assigned thereto in Section 3(a) hereof. "Rule 144," "Rule 144A", "Rule 405" and "Rule 415" shall mean, in each case, such rule promulgated under the Securities Act (or any successor provision), as the same shall be amended from time to time. "Secondary Offer Registration Statement" shall mean (i) any Registration Statement required to be filed by the Company pursuant to Section 2 or 3 hereof, and/or (ii) the Market Making Registration Statement required to be filed by the Company pursuant to Section 4 hereof, in each case, as applicable. As used herein, references to a Secondary Offer Registration Statement in the singular shall, if applicable, be deemed to be in the plural. "Securities" shall have the meaning assigned thereto in the recitals to this Agreement. "Securities Act" shall mean the Securities Act of 1933, or any successor thereto, as the same shall be amended from time to time. "TWP" shall mean Thomas Weisel Partners Group LLC and its affiliates. "Underwriters' Representative" shall mean the managing underwriter, or, in the case of a co-managed underwriting, the managing underwriter designated as the Underwriters' Representative by the co-managers. "Warrants" shall have the meaning assigned thereto in the recitals to this Agreement. Unless the context otherwise requires, any reference herein to a "Section" or "clause" refers to a Section or clause, as the case may be, of this Agreement, and the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Section or other subdivision. Section 2. Demand Registration of the Registrable Shares under the Securities Act. (a) If either the Requisite Investors Holders or the Requisite Purchaser Holders shall at any time make a written request (a "Demand Registration Request") to the Company in compliance with this Section 2, the Company shall cause to be filed with the Commission a registration statement (a "Demand Registration Statement") under the Securities Act covering all or any part of the Registrable Shares (a "Demand Registration"), as such holders (the "Initiating Holders") shall request in writing. (i) Any request made pursuant to this Section 2(a) by Requisite Purchaser Holders shall be addressed to the attention of the Secretary of the Company, and shall specify the number of Registrable Shares to be registered (which shall result in gross proceeds of not less than $10,000,000, assuming no reduction in the number of Registrable Shares that may be included in such Demand Registration pursuant to Section 2(e)); provided, however, that the holders of the Registrable Shares (other than Founders' Shares or Investors' Shares) may request registration of any amount of such Registrable Shares where such holders request registration of all of the remaining such Registrable Shares, the intended method of distribution thereof and that the request is for a Demand Registration pursuant to this Section 2(a). (ii) Any request made pursuant to this Section 2(a) by the Requisite Investor Holders shall be addressed to the Company, and shall specify the number of Restricted Shares to be registered (which shall result in gross proceeds of not less than (x) $750,000 if the Registration is required to be effected on Form S-1 or any similarly long-form registration statement under the Securities Act (a "Long-Form Registration") or (y) $250,000 if the Registration may be effected on Form S-2 or S-3 or any similar short-form registration statement under the Securities Act (a "Short-Form Registration"). (iii) As promptly as practicable, but no later than ten days after receipt of a Demand Registration Request, the Company shall give written notice (the "Demand Exercise Notice") of such Demand Registration Request to all holders of Registrable Shares. Following a request for a Demand Registration, the Company shall include in a Demand Registration (x) the Registrable Shares of the Initiating Holders and (y) the Registrable Shares of any other holders of Registrable Shares who shall have made a written request to the Company for inclusion in such registration (which request shall specify the maximum number of Registrable Shares intended to be disposed of by such holder) within 30 days after the receipt of the Demand Exercise Notice. The Company shall, as expeditiously as possible, use its best efforts to effect such registration under the Securities Act (including, without limitation, by means of a shelf registration pursuant to Rule 415 under the Securities Act if so requested and if the Company is then eligible to use such registration) of the Registrable Shares which the Company has been so requested to register, for distribution in accordance with such intended method of distribution by the holders electing to include Registrable Shares therein. (b) Following receipt of a request for a Demand Registration, the Company shall: (i) file the Demand Registration Statement with the Commission as promptly as reasonably practicable, and, subject to Section 2(a), shall use all reasonable efforts to have the Demand Registration Statement declared effective under the Securities Act as soon as reasonably practicable, in each instance giving due regard to the need to prepare current financial statements, conduct due diligence and complete other actions that are reasonably necessary to effect a registered public offering; and (ii) use all reasonable efforts to keep the relevant registration statement continuously effective, for up to 180 days or until such earlier date as of which all the Registrable Shares under the Demand Registration Statement shall have been disposed of in the manner described in the Registration Statement, or such longer period as in the judgment of counsel for the underwriters a prospectus is required by law to be delivered in connection with sales of Registrable Shares by an underwriter or dealer in accordance with the plan of distribution included in such Demand Registration Statement ; provided, however, that such obligation to maintain the continuous effectiveness of the registration statement shall not apply if such registration statement is on Form S-1 or an equivalent form which does not permit incorporation by reference. (c) (i) The Company shall not be obligated to effect more than three Demand Registrations by Requisite Purchaser Holders pursuant to Section 2(a) which are Long-Form Registration; provided that the Company shall be obligated to effect an unlimited number of Demand Registrations by the Requisite Purchaser Holders pursuant to Section 2(c) which are Short-Form Registrations. For purposes of the preceding sentence, a Demand Registration shall not be deemed to have been effected (i) unless a Demand Registration Statement with respect thereto has become effective, (ii) if after such Demand Registration Statement has become effective, such Demand Registration Statement or the related offer, sale or distribution of Registrable Shares thereunder is interfered with by any stop order, injunction or other order or requirement of the Commission or other governmental agency or court for any reason not attributable to the holder of the Registrable Shares and such interference is not thereafter eliminated or (iii) if the conditions to closing specified in any underwriting agreement entered into in connection with such registration are not satisfied or waived, other than by reason of a failure on the part of the holder of the Registrable Shares. If the Company shall have complied with its obligations under this Agreement, a right to demand a registration pursuant to this Section 2 shall be deemed to have been satisfied upon the earlier of (x) the date as of which all of the Registrable Shares included therein shall have been distributed pursuant to the Registration Statement, and (y) the date as of which such Demand Registration shall have been continuously effective for a 180-day period or other period specified in Section 2(b)(ii) following the effectiveness of such Demand Registration Statement, provided no stop order or similar order, or proceedings for such an order, is thereafter entered or initiated. (ii) (x) The holders of Investors' Shares may request two Long-Form Demand Registrations pursuant to paragraph 2(a) for which the Company will pay all Registration Expenses. A registration will not count as a Long-Form Demand Registration under this paragraph (x) until it has become effective and will not count as a Long-Form Demand Registration under this paragraph (i) unless the Holders of Investors' Shares initially requesting such registration are able to register and sell at least 50% of the Registrable Shares requested to be included in such registration; provided that in any event the Company will pay all Registration Expenses in connection with any such registration initiated as a Long-Form Demand Registration. (y) In addition to the rights provided by paragraph (x) of this Section 2(c), if the number of prior Long-Form Demand Registrations pursuant to such paragraph (x) equals two, the holders of Investors' Shares shall be entitled to request pursuant to paragraph 2(a) an unlimited number of additional Long-Form Demand Registrations provided that the holders of securities to be registered thereunder agree to pay their pro rata share (as determined in accordance with the number of shares requested to be registered in such registration) of all associated Registration Expenses in connection with such registration, whether or not such registration becomes effective. Notwithstanding the terms of the preceding sentence, if the failure of a registration initiated pursuant to this paragraph (y) to become effective is the result of a breach by the Company of any of its obligations under this Agreement, the Company shall pay all Registration Expenses in connection with such registration. (z) In addition to the Long-Form Demand Registrations that may be requested pursuant to Section 2(a), the holders of Investors' Shares will be entitled to request pursuant to paragraph 2(a) an unlimited number of Short-Form Demand Registrations. The Corporation will pay all Registration Expenses incurred in connection with such registration if the aggregate offering value of all Registrable Shares requested to be registered in such registration pursuant to Section 2(a) is reasonably expected to equal at least $750,000, whether or not such registration becomes effective. If the aggregate offering value of all Registrable Shares requested to be registered in such registration pursuant to Section 2(a) is not reasonably expected to equal at least $750,000, the holders of securities to be registered thereunder shall pay their pro rata share (as determined in accordance with the percentage of shares requested to be registered in such registration) of all associated Registration Expenses in connection with such registration, whether or not such registration becomes effective. Notwithstanding the terms of the preceding sentence, if the failure of such registration to become effective is the result of a breach by the Company of any of its obligations under this Agreement, the Company shall pay all Registration Expenses in connection with such registration. (d) In connection with any Demand Registration, the Majority Electing Holders shall have the right to select the underwriter or underwriters and manager or managers to administer such offering; provided, however, that each Person so selected shall be acceptable to the Company in its reasonable judgment. (e) If the Underwriters' Representative in connection with any underwritten offering described in this Section 2 shall have informed the Company that in its opinion the total number of shares of Common Stock that the holders of the Registrable Shares, and any other Persons desiring to participate in such registration, intend to include in such offering is such as to materially and adversely affect the success and pricing of such offering, then the Company shall include in such Demand Registration (a) first, all Registrable Shares requested to be included in such registration by the Electing Holders of Registrable Shares; provided that if the number of shares of Common Stock so elected to be included in such registration by all Electing Holders of Registrable Shares exceeds the number recommended by the Underwriters' Representative, then the number of Registrable Shares to be so included in such registration will be reduced pro rata in accordance with the number of shares requested to be included by each Electing Holder, to such number recommended by the Underwriters' Representative; provided, further, that on no more than two occasions if the Initiating Holders are holders of Purchasers' Shares and on no more than two occasions if the Initiating Holders are holders of Investors' Shares, the Initiating Holders may specify that (x) if such Initiating Holders are holders of Registrable Shares (other than Investors' Shares or Founders' Shares) (all such non-excluded Registrable Shares, the "Purchasers' Shares"), such reduction will be effected first by reducing the number of Investors' Shares pro rata in accordance with the number of Investors' Shares to be included therein until the number of Investors' Shares to be so included are reduced to zero and then by reducing the number of Purchasers' Shares pro rata in accordance with the number of Purchasers' Shares to be included therein, and (y) if such Initiating Holders are holders of Investors' Shares, such reduction will be effected first by reducing the number of Purchasers' Shares pro rata in accordance with the number of Purchasers' Shares to be included therein until the number of Purchasers' Shares to be so included is reduced to zero and then by reducing the number of Investors' Shares pro rata in accordance with the number of Investors' Shares to be included therein; and (b) second, if all Registrable Shares so elected to be included by the Electing Holders are so included, such additional number of shares of Common Stock that the Company or any other Persons entitled to participate in such registration desire to include in such registration and that the Underwriters' Representative has informed the Company may be included in such registration without adversely affecting the success and pricing of the offering of all Registrable Shares so requested to be included therein; provided that the number of shares of Common Stock to be offered for the account of all such other Persons participating in such registration shall be reduced or limited to the extent necessary so that the total number of shares of Common Stock requested to be included in such offering does not exceed the maximum number of shares of Common Stock recommended by such Underwriters' Representative. (f) Notwithstanding anything herein to the contrary, the Company shall not be obligated to take any action to effect any such registration, qualification or compliance pursuant to this Section 2 if (i) the Board of Directors determines in the exercise of its reasonable judgment that effecting such Demand Registration at such time would require disclosure of a material fact that the Board determines in good faith would have a material adverse effect on any proposal or plan by the Company or any of its subsidiaries to engage in a significant transaction, then, in which case the Company may defer such Demand Registration for a single period not to exceed 90 days once every 12 months and (ii) in any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such registration, qualification or compliance unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act. Section 3. Piggyback Registration. (a) If at any time the Company proposes to register (including for this purpose a registration effected by the Company for the account of the Company or shareholders of the Company other than the holders of the Registrable Shares, whether or not pursuant to the Existing Registration Agreement) shares of Common Stock or securities convertible or exercisable into shares of Common Stock under the Securities Act in connection with the public offering solely for cash on Form S-1, S-2 or S-3 (or any replacement or successor forms), as soon as practicable (but in no event less than 10 business days prior to the date of filing any related Registration Statement), the Company shall promptly give the holders of the Registrable Shares written notice of such registration (a "Piggyback Registration," and, collectively with a Demand Registration, a "Registration"). Upon the written request of the holders of the Registrable Shares given within 10 days following the date of such notice, the Company shall use all reasonable efforts to cause to be included in such registration statement (a "Piggyback Registration Statement," and, collectively with the Demand Registration Statement, the "Registration Statements"), and use all reasonable efforts to cause to be registered under the Securities Act all the Registrable Shares that the holders of the Registrable Shares shall have requested to be registered. The Company shall have the absolute right to withdraw or cease to prepare or file any Piggyback Registration Statement for any offering referred to in this Section 3 without any obligation or liability to the holder of the Registrable Shares; provided, that the Company shall promptly notify the holders of the Registrable Shares in writing of any such action. (b) If the Piggyback Registration Statement relates to an underwritten offering of Common Stock or securities convertible or exercisable into shares of Common Stock for the account of the Company and if the Underwriters' Representative of such underwritten offering shall inform the Company that in its opinion the inclusion in such underwritten distribution of all or a specified number of such Registrable Shares or of any other shares of Common Stock requested to be included therein would materially and adversely effect the success and pricing of such offering or of such distribution then the Company shall include in such Piggyback Registration (a) first, all shares of Common Stock requested to be included in such registration for the account of the Company, (b) second, all Registrable Shares requested to be included therein by holders of Founders Shares, and (c) third, all Registrable Securities requested to be included therein by the holders of Purchasers' Shares and Investors' Shares, provided that if the number of Registrable Shares otherwise includable under clause (b) or (c) above is to be reduced, such number shall be reduced by reducing the number of Registrable Shares otherwise includable pro rata in accordance with the number of Registrable Shares requested to be included by the Holders of Founders' Shares (in the case of clause (b)), and by the holders of Purchasers' Shares and Investors' Shares (in the case clause (c)). If the Piggyback Registration Statement relates to an underwritten offering of Common Stock or securities convertible or exercisable into Common Stock otherwise than for the account of the Company and if the Underwriters' Representative of such underwritten offering shall inform the Company that in its opinion the inclusion in such underwritten distribution of all or a specified number of such shares of Common Stock to be included therein would materially and adversely affect the success and pricing of such offering or of such distribution then the Company shall include in such Piggyback Registration (a) first, all shares of Common Stock requested to be included in such registration for the account of the persons (other than holders of Purchasers' Shares or Investors' Shares) who requested such registration, (b) second, all Registrable Shares requested to be included in such Registration by the holders of Purchasers' Shares and Investors' Shares pro rata in accordance with the number of Registrable Shares requested be included therein and (c) third, all shares of Common Stock requested to be included therein for the account of the Company. The Company may decline to file a Piggyback Registration Statement referred to in this Section 3(b) after giving notice to the holders of the Registrable Shares, or withdraw such a Piggyback Registration Statement after filing, or otherwise abandon any such proposed underwritten offering; provided that the Company shall promptly notify the holders of the Registrable Shares in writing of any such action. (c) The Electing Holders with respect to any Registration may not participate in any underwritten offering under Sections 2(a) or 3(a) hereof unless it completes and executes all customary questionnaires (including a Notice and Questionnaire as contemplated by Section 5(a)(ii)), powers of attorney, custody agreements, underwriting agreements and other customary documents required under the terms of such underwriting arrangements (if any). In connection with any underwritten offering under Sections 2(a) or 3(a), each of the Electing Holders and the Company shall be a party to the underwriting agreement with the underwriters and may be required to make certain customary representations and warranties (in the case of the Electing Holders as to the Registrable Shares being sold by the Electing Holder in such underwritten offering and the plan of distribution thereof) and provide certain customary indemnifications for the benefit of the underwriters. (d) The holders of the Registrable Shares shall be entitled to have their Registrable Shares included in an unlimited number of Piggyback Registrations pursuant to this Section 3. (e) Notwithstanding the foregoing the Company shall not be obligated to take any action pursuant to this Section 3 in any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such registration, qualification or compliance unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act. Section 4. Registration of Registrable Shares under a Market Making Shelf Registration Statement. The Company agrees with TWP that if TWP and the Company mutually agree that TWP or an affiliate should act as a market-maker with respect to Market Making Securities,: (a) If requested in writing by TWP, at any time that the Purchasers determine that TWP is or may be deemed to be an affiliate (as defined under Rule 405) of the Company, the Company shall prepare the Market Making Prospectus and Market Making Registration Statement in a form approved by TWP and file such Market Making Prospectus and Market Making Registration Statement pursuant to the Securities Act not later 60 days after the date of such request (the "Market Making Request Date"), to make no further amendment or any supplement to the Market Making Registration Statement or the Market Making Prospectus during the Market Making Period (as defined below) which shall be disapproved by TWP promptly after reasonable notice thereof, to use all reasonable efforts to cause the Market Making Registration Statement to become effective under the Securities Act 115 days after the Market Making Request Date, to advise TWP, promptly after the Company receives notice thereof, of the time when the Market Making Registration Statement, or any amendment thereto, has been filed or becomes effective during the Market Making Period, or any supplement to the Market Making Prospectus or any amended Market Making Prospectus has been filed during such period, and to furnish TWP with copies thereof; to advise TWP, promptly after the Company receives notice thereof during the Market Making Period, of the issuance by the Commission of any stop order or of any order preventing or suspending the use of any preliminary Market Making Prospectus or Market Making Prospectus, of the suspension of the qualification of the Market Making Securities for offering or sale in any jurisdiction, of the initiation or threatening of any proceeding for any such purpose, or of any request by the Commission for the amending or supplementing of the Market Making Registration Statement or Market Making Prospectus or for additional information; and, in the event of the issuance of any stop order or of any order preventing or suspending the use of any preliminary Market Making Prospectus or Market Making Prospectus or suspending any such qualification during the Market Making Period, to use promptly its reasonable efforts to obtain the withdrawal of such order (the period beginning on such date as the Purchasers determine that TWP is or may be deemed to be an affiliate of the Company and continuing for as long as may be required under applicable law, in the reasonable judgment of TWP after consultation with the Company, in order to offer and sell Market Making Securities as contemplated by the Market Making Prospectus, is herein called the "Market Making Period"); (b) Promptly from time to time to take such action as TWP may reasonably request to qualify the Market Making Securities for offering and sale during the Market Making Period under the securities laws of such jurisdictions as TWP may request and to comply with such laws so as to permit the continuance of sales and dealings therein in such jurisdictions during such period, provided that in connection therewith the Company shall not be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction; (c) To furnish TWP with copies of the Market Making Prospectus in such quantities as TWP may from time to time reasonably request during the Market Making Period, and, if at any time during such period any event shall have occurred as a result of which the Market Making Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such Market Making Prospectus is to be delivered during such period, not misleading, or, if for any other reason it shall be necessary during such period to amend or supplement the Market Making Prospectus or to amend the Market Making Registration Statement in order to comply with the Securities Act, to file under the Exchange Act any document incorporated by reference in such Market Making Prospectus in order to comply with the Securities Act or the Exchange Act, to notify TWP immediately and upon its request to file such document and to prepare and furnish without charge to TWP as many copies as it may from time to time during such period reasonably request of an amended Market Making Prospectus or a supplement to the Market Making Prospectus which will correct such statement or omission or effect such compliance; (d) During the Market Making Period, to furnish to TWP copies of all reports or other communications (financial or other) furnished to shareholders generally, and to deliver to TWP (i) as soon as they are available, copies of any reports and financial statements furnished to or filed with the Commission or any national securities exchange on which any class of securities of the Company is listed; and (ii) such additional information concerning the business and financial condition of the Company as TWP may from time to time reasonably request (such financial statements to be on a consolidated basis to the extent the accounts of the Company and its subsidiaries are consolidated in reports furnished to its shareholders generally or to the Commission); and (e) To use its reasonable efforts to furnish or cause to be furnished to TWP upon its request at reasonable intervals, when the Market Making Registration Statement or the Market Making Prospectus shall be amended or supplemented during the Market Making Period, written opinions of counsel for the Company, a letter from the independent accountants who have certified the financial statements included in the Market Making Registration Statement as then amended and certificates of officers of the Company, in each case in form and substance reasonably satisfactory to TWP, all to the effect specified in subsection (xvi) of Section 5(a) hereof (as modified to relate to the Market Making Registration Statement and the Market Making Prospectus as then amended or supplemented). Notwithstanding the foregoing provisions, if at any time the Company determines in the exercise of its reasonable judgment that it is in possession of material, non-public information that it would not be required to disclose publicly in the absence of a registration of Market Making Securities under the Securities Act, the Company may, upon 15 business days' prior written notice to TWP, cease to comply with any of its obligations under this Section 4, whereupon TWP shall cease using the Market Making Prospectus or any amendment or supplement thereto until it receives notice from the Company that it may resume using such document. Section 5. Registration Procedures. If the Company files a registration statement pursuant to Sections 2, 3 or 4, the following provisions shall apply: (a) In connection with the Company's obligations with respect to any Registration or any Market Making Registration, as applicable, the Company shall use its best efforts to cause the applicable Secondary Offer Registration Statement to permit the disposition (x) of Registrable Shares by the holders thereof in the case of a Registration, and , of Market Making Securities by TWP, in each case in accordance with the intended method or methods of disposition thereof provided for in the applicable Secondary Offer Registration Statement. In connection therewith, the Company shall, as soon as reasonably possible (or as otherwise specified): (i) (A) prepare and file with the Commission, as soon as practicable, but in any case within the time periods specified in Sections 2, 3 or 4, as applicable, a Secondary Offer Registration Statement on any form which may be utilized by the Company, which shall (x) register all the Registrable Shares, in the case of a Registration Statement, and all of the Market Making Securities, in the case of a Market Making Registration, and in each case to be included therein for resale (if applicable) by the holders thereof in accordance with such method or methods of disposition as may be specified by the holders of the applicable Registrable Shares or TWP in the case of a Market Making Registration and (y) be, in the case of a Market Making Registration, in a form approved by TWP, and (B) use its commercially reasonable efforts to cause such Secondary Offer Registration Statement to become effective as soon as practicable after such filing, but in any case within the time periods specified in Sections 2, 3 or 4 hereof, as applicable; (ii) not less than 30 calendar days prior to the Effective Time of any applicable Registration Statement, mail the Notice and Questionnaire to the holders of the applicable Registrable Shares; no holder shall be entitled to be named as a selling securityholder in any Registration Statement as of the Effective Time thereof, and no holder shall be entitled to use the prospectus forming a part thereof for resales of Registrable Shares at any time, unless such holder has returned a completed and signed Notice and Questionnaire to the Company by the deadline for response set forth therein; provided, however, holders of Registrable Shares shall have at least 28 calendar days from the date on which the Notice and Questionnaire is first mailed to such holders to return a completed and signed Notice and Questionnaire to the Company; (iii) as soon as practicable (A) prepare and file with the Commission such amendments and supplements to the Secondary Offer Registration Statement and the prospectus included therein as may be necessary to effect and maintain the effectiveness of such Secondary Offer Registration Statement for the period specified in Sections 2, 3 or 4 hereof, as applicable, and as may be required by the applicable rules and regulations of the Commission and the instructions applicable to the form of such Secondary Offer Registration Statement, and, in the case of an amendment to or supplement of the Market Making Registration Statement, in a form approved by TWP and (B) furnish to the Electing Holders, in the case of any Registration, and TWP, in the case of a Market Making Registration, copies of any such supplement or amendment simultaneously with or prior to its being used or filed with the Commission; (iv) comply with the provisions of the Securities Act with respect to the disposition of all of the Registrable Shares or Market Making Securities, as applicable, covered by such Secondary Offer Registration Statement in accordance with the intended methods of disposition provided for therein by the Electing Holders, in the case of any Registration, or TWP, in the case of a Market Making Registration; (v) provide (A) with respect to any Registration, the Electing Holders and not more than one counsel for all the Electing Holders; (B) with respect to a Market Making Registration, TWP and its counsel; and (C) in either case, the underwriters (which term, for purposes of this Agreement shall include a Person deemed to be an underwriter within the meaning of Section 2(11) of the Securities Act), if any, thereof, the sales or placement agent, if any, therefor, and counsel for such underwriters or agent, the opportunity to participate in the preparation of such Secondary Offer Registration Statement, each prospectus included therein or filed with the Commission and each amendment or supplement thereto; (vi) for a reasonable period prior to the filing of such Secondary Offer Registration Statement, and throughout the applicable periods specified in Sections 2, 3 or 4 hereof, as applicable, make available at reasonable times at the Company's principal place of business or such other reasonable place for inspection by the Persons referred to in Section 5(a)(v) who shall certify to the Company that they have a current intention to sell the Registrable Shares pursuant to any Registration, or Market Making Securities pursuant to the Market Making Registration, as applicable, such financial and other information and books and records of the Company, and cause the officers, employees, counsel and independent certified public accountants of the Company to respond to such inquiries, as shall be reasonably necessary, in the judgment of the respective counsel referred to in such Section 5(a)(v), to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act; provided; however, that each such party shall be required to maintain in confidence and not to disclose to any other Person any information or records reasonably designated by the Company as being confidential until such time as, (A) such information becomes a matter of public record (whether by virtue of its inclusion in such registration statement or otherwise), or (B) such Person shall be required so to disclose such information pursuant to a subpoena or order of any court or other governmental agency or body having jurisdiction over the matter or otherwise pursuant to the request of any governmental agency (only after such Person shall have given the Company prompt prior written notice of such requirement), or (C) such information is required to be set forth in such Secondary Offer Registration Statement or the prospectus included therein or in an amendment to such Secondary Offer Registration Statement or an amendment or supplement to such prospectus in order that such Secondary Offer Registration Statement, prospectus, amendment or supplement, as the case may be, complies with applicable requirements of the federal securities laws and the rules and regulations of the Commission and does not contain an untrue statement of a material fact or omit to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing; (vii) promptly notify each of the Electing Holders or TWP, as applicable, any sales or placement agent therefor and any underwriter thereof (which notification may be made through any managing underwriter that is a representative of such underwriter for such purpose) and confirm such advice in writing, (A) when such Secondary Offer Registration Statement or the prospectus included therein or any prospectus amendment or supplement or post-effective amendment has been filed, and, with respect to such Secondary Offer Registration Statement or any post-effective amendment, when the same has become effective, (B) of the receipt of written comments from the Commission and from the blue sky or securities commissioner or regulator of any state with respect thereto or any request by the Commission for amendments or supplements to such Secondary Offer Registration Statement or prospectus or for additional information, (C) of the issuance by the Commission of any stop order suspending the effectiveness of such Secondary Offer Registration Statement or the initiation or threatening of any proceedings for that purpose, (D) if at any time during which such Secondary Offer Registration Statement is effective the representations and warranties of the Company contemplated by Section 5(a)(xv) or Section 7 cease to be true and correct in all material respects, (E) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Shares or the Market Making Securities, as applicable, for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, or (F) if at any time when a prospectus is required to be delivered under the Securities Act, such Secondary Offer Registration Statement, prospectus, prospectus amendment or supplement or post-effective amendment, or any document incorporated by reference in any of the foregoing, does not conform in all material respects to the applicable requirements of the Securities Act and the rules and regulations of the Commission thereunder or contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing; (viii) use commercially reasonable efforts to obtain the withdrawal of any order suspending the effectiveness of such Secondary Offer Registration Statement or any post-effective amendment thereto at the earliest practicable date; (ix) if requested by any managing underwriter or underwriters, any placement or sales agent, any Electing Holder or TWP, promptly incorporate in a prospectus supplement or post-effective amendment such information as is required by the applicable rules and regulations of the Commission and as such managing underwriter or underwriters, such agent, such Electing Holder or TWP specify should be included therein relating to the terms of the sale of such Registrable Shares, or Market Making Securities, as applicable, including information with respect to the number of Registrable Shares or other Market Making Securities being sold by TWP, such Electing Holder, TWP, or agent or underwriter, the offering price of such Registrable Shares or the Market Making Securities, as applicable, and any discount, commission or other compensation payable in respect thereof and the purchase price being paid therefor by such underwriters, and with respect to any other terms of the offering of the Registrable Shares, or Market Making Securities, as applicable, to be sold by such Electing Holder, TWP, or agent or to such underwriters, as applicable; and to make all required filings of such prospectus supplement or post-effective amendment promptly after notification of the matters to be incorporated in such prospectus supplement or post-effective amendment; (x) furnish to each Electing Holder, TWP, each placement or sales agent, if any, therefor, each underwriter, if any, thereof and the respective counsel referred to in Section 5(a)(v) a conformed copy of such Secondary Offer Registration Statement, each such amendment and supplement thereto (in each case, including all exhibits thereto (in the case of an Electing Holder of Registrable Shares, upon request) and documents incorporated by reference therein) and such number of copies of such Secondary Offer Registration Statement (excluding exhibits thereto and documents incorporated by reference therein unless specifically so requested by such Electing Holder, TWP, or agent or underwriter, as the case may be) and of the prospectus included in such Secondary Offer Registration Statement (including each preliminary prospectus and any summary prospectus), in conformity in all material respects with the applicable requirements of the Securities Act and the rules and regulations of the Commission thereunder, and such other documents, as TWP, such Electing Holder, TWP, agent, if any, and underwriter, if any, may reasonably request in order to facilitate the offering and disposition of the Registrable Shares owned by such Electing Holder or the Market Making Securities owned by TWP, to satisfy the prospectus delivery requirements of the Securities Act; and the Company hereby consents to the use of such prospectus (including such preliminary and summary prospectus) and any amendment or supplement thereto by each such Electing Holder, TWP and any such agent and underwriter, in each case in the form most recently provided to such party by the Company, in connection with the offering and sale of the Registrable Shares or the Market Making Securities covered by the prospectus (including such preliminary and summary prospectus) or any supplement or amendment thereto; (xi) use commercially reasonable efforts to (A) register or qualify the Registrable Shares, or the Market Making Securities as applicable, to be included in such Secondary Offer Registration Statement under such securities laws or blue sky laws of such jurisdictions as any Electing Holder, TWP and each placement or sales agent, if any, therefor and each underwriter, if any, thereof shall reasonably request, (B) keep such registrations or qualifications in effect and comply with such laws so as to permit the continuance of offers, sales and dealings therein in such jurisdictions during the period the Market Making Registration is required to remain effective under Section 4 or the applicable Registration Statement is required to remain effective under Sections 2 or 3 above, as applicable, (C) make reasonably available its employees and personnel (including senior executive officers of the Company) and otherwise provide reasonable assistance to the underwriters (taking into account the requirements of the marketing process) in the marketing of Registrable Shares in any underwritten offering, including participation in any road show related thereto, and (D) take any and all other actions as may be reasonable necessary or advisable to enable each such Electing Holder and TWP, as applicable, such agent, if any, and such underwriter, if any, to consummate the disposition in such jurisdictions of such Registrable Shares, or the Market Making Securities, as applicable; (xii) use commercially reasonable efforts to obtain the consent or approval of each governmental agency or authority, whether federal, state or local, which may be required of the Company or otherwise to effect any Registration or the Market Making Registration or the offering or sale in connection therewith or to enable the selling holder or holders or TWP to offer, or to consummate the disposition of, the Registrable Shares or the Market Making Securities, as applicable; (xiii) cooperate with the Electing Holders and the managing underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Shares to be sold, which certificates shall be printed, lithographed or engraved, or otherwise produced, and which shall not bear any restrictive legends; and, in the case of an underwritten offering, enable such Registrable Shares to be in such denominations and registered in such names as the managing underwriters may request at least two business days prior to any sale of the Registrable Shares; (xiv) enter into one or more underwriting agreements, engagement letters, agency agreements, "best efforts" underwriting agreements or similar agreements, as appropriate, including customary provisions relating to indemnification and contribution, and take such other actions in connection therewith as, in the case of a Registration, the Requisite Holders, or, in the case of a Market Making Registration, TWP shall request in order to expedite, or facilitate the disposition of such Registrable Shares or the Market Making Securities, as applicable; (xv) whether or not an agreement of the type referred to in Section 5(xiv) hereof is entered into and whether or not any portion of the offering contemplated by such Secondary Offer Registration Statement is an underwritten offering or is made through a placement or sales agent or any other entity, (A) make such representations and warranties to the Electing Holders, TWP and the placement or sales agent, if any, therefor and the underwriters, if any, thereof in form, substance and scope as are customarily made in connection with an offering of common stock pursuant to any appropriate agreement or a registration statement filed on the form applicable to the Registration or the Market Making Registration, as applicable; (B) obtain an opinion of counsel to the Company in customary form and covering such matters, of the type customarily covered by such an opinion, as the managing underwriters, if any, and in the case of a any Registration, as the Electing Holders or, in the case of a Market Making Registration, as TWP may reasonably request, addressed to such Electing Holders, TWP and the placement or sales agent, if any, therefor and the underwriters, if any, thereof and dated the effective date of such Secondary Offer Registration Statement (and if such Secondary Offer Registration Statement contemplates an underwritten offering of a part or all of the Registrable Shares or the Market Making Securities, as applicable, dated the date of the closing under the underwriting agreement relating thereto) and the date of filing of an amendment or supplement to such Secondary Offer Registration Statement or any other document that is incorporated in such Secondary Offer Registration Statement by reference and includes financial data with respect to a fiscal quarter or year, as the case may be (it being agreed that the matters to be covered by such opinion shall include the due incorporation and existence of the Company and its subsidiaries; the qualification of the Company and its subsidiaries to transact business as foreign corporations; the due authorization, execution and delivery of the relevant agreement of the type referred to in Section 5(a)(xiv) hereof; the due authorization, execution, authentication and issuance, and the validity and enforceability, of the Registrable Shares or the Market Making Securities, as applicable; the absence of material legal or governmental proceedings involving the Company or its subsidiaries; the absence of a breach by the Company or any of its subsidiaries of, or a default under, material agreements binding upon the Company or any subsidiary of the Company; the absence of governmental approvals required to be obtained by the Company in connection with any Registration or the Market Making Registration, as applicable, the offering and sale of the Registrable Shares, or the Market Making Securities, as applicable, this Agreement or any agreement of the type referred to in Section 5(a)(xiv) hereof, except such approvals as may be required under state securities or blue sky laws; the material compliance as to form of such Secondary Offer Registration Statement and any documents incorporated by reference therein with the requirements of the Securities Act and the rules and regulations of the Commission thereunder, respectively; and, as of the date of the opinion and of the Secondary Offer Registration Statement or most recent post-effective amendment thereto, as the case may be, the absence from such Secondary Offer Registration Statement and the prospectus included therein, as then amended or supplemented, and from the documents incorporated by reference therein (in each case other than the financial statements and other financial information contained therein) of an untrue statement of a material fact or the omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of such documents, in the light of the circumstances existing at the time that such documents were filed with the Commission under the Exchange Act)); (C) obtain a "cold comfort" letter or letters from the independent certified public accountants of the Company addressed to the selling Electing Holders, TWP, the placement or sales agent, if any, therefor or the underwriters, if any, thereof, dated (i) the effective date of such Secondary Offer Registration Statement and (ii) the effective date of any prospectus supplement to the prospectus included in such Secondary Offer Registration Statement or amendment or supplement to such Secondary Offer Registration Statement or any other document that is incorporated in such Secondary Offer Registration Statement by reference and includes unaudited or audited financial statements as of a date or for a period subsequent to that of the latest such statements included in such prospectus (and, if such Secondary Offer Registration Statement contemplates an underwritten offering pursuant to any prospectus supplement to the prospectus included in such Secondary Offer Registration Statement or post-effective amendment to such Secondary Offer Registration Statement which includes unaudited or audited financial statements as of a date or for a period subsequent to that of the latest such statements included in such prospectus, dated the date of the closing under the underwriting agreement relating thereto), such letter or letters to be in customary form and covering such matters of the type customarily covered by letters of such type; (D) deliver such documents and certificates, including officers' certificates, as may be reasonably requested, in the case of any Registration, by the Requisite Holders or, in the case of a Market Making Registration, by TWP, and, in either case, the placement or sales agent, if any, therefor and the managing underwriters, if any, thereof, dated the effective date of such Secondary Offer Registration Statement (and if such Secondary Offer Registration Statement contemplates an underwritten offering of a part or all of the Registrable Shares or the Market Making Securities, as applicable, dated the date of the closing under the underwriting agreement relating thereto) and the date of filing of an amendment or supplement to such Secondary Offer Registration Statement or any other document that is incorporated in such Secondary Offer Registration Statement by reference and includes financial data with respect to a fiscal quarter or year, as the case may be, to evidence the accuracy of the representations and warranties made pursuant to clause (A) above or those contained in Section 7 hereof and the compliance with or satisfaction of any agreements or conditions contained in the underwriting agreement or other agreement entered into by the Company; and (E) undertake such obligations relating to expense reimbursement, indemnification and contribution as are provided in Sections 6 and 8 hereof; (xvi) notify in writing each holder of Registrable Shares affected thereby and TWP, of any proposal by the Company to amend or waive any provision of this Agreement pursuant to Section 11(j) hereof and of any amendment or waiver effected pursuant thereto, each of which notices shall contain the text of the amendment or waiver proposed or effected, as the case may be; (xvii) in the event that any broker-dealer registered under the Exchange Act shall underwrite any Registrable Shares or the Market Making Securities, as applicable, or participate as a member of an underwriting syndicate or selling group or "assist in the distribution" (within the meaning of the Rules of Fair Practice and the By-Laws of the National Association of Securities Dealers, Inc. ("NASD") or any successor thereto, as amended from time to time) thereof, whether as a holder of such Registrable Shares or the Market Making Securities, as applicable, or as an underwriter, a placement or sales agent or a broker or dealer in respect thereof, or otherwise, assist such broker dealer in complying with the requirements of such Rules and By-Laws, including by (A) if such Rules or By-Laws shall so require, engaging a "qualified independent underwriter" (as defined in Rule 2720 (or any successor thereto)) to participate in the preparation of the Secondary Offer Registration Statement relating to such Registrable Shares or the Market Making Securities, as applicable, to exercise usual standards of due diligence in respect thereto and, if any portion of the offering contemplated by such Secondary Offer Registration Statement is an underwritten offering or is made through a placement or sales agent, to recommend the yield of such Registrable Shares or the Market Making Securities, as applicable, (B) indemnifying any such qualified independent underwriter to the extent of the indemnification of underwriters provided in Section 8 hereof (or to such other customary extent as may be requested by such underwriter), and (C) providing such information to such broker-dealer as may be required in order for such broker-dealer to comply with the requirements of the Rules of Fair Practice of the NASD; and (xviii) comply with all applicable rules and regulations of the Commission, and make generally available to its securityholders as soon as practicable but in any event not later than eighteen months after the effective date of such Secondary Offer Registration Statement, an income statement of the Company and its subsidiaries complying with Section 11(a) of the Securities Act (including, at the option of the Company, Rule 158 thereunder). (b) In the event that the Company would be required to provide notice pursuant to Section 5(a)(vii)(F) above to the Electing Holders, TWP, the placement or sales agent, if any, therefor and the managing underwriters, if any, thereof, the Company shall as promptly as reasonably practicable prepare and furnish to each such Person a reasonable number of copies of a prospectus supplemented or amended so that, as thereafter delivered to purchasers of Registrable Shares or Market Making Securities, as applicable, such prospectus shall conform in all material respects to the applicable requirements of the Securities Act and the rules and regulations of the Commission thereunder and shall not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. Each Electing Holder and TWP agrees, that upon receipt of any notice from the Company pursuant to Section 5(a)(vii)(F) hereof, such Electing Holder and TWP, shall forthwith discontinue the disposition of Registrable Shares or Market Making Securities, as applicable, pursuant to the Secondary Offer Registration Statement applicable to such Registrable Shares or Market Making Securities, as applicable, until such Electing Holder or TWP, as applicable, shall have received copies of such amended or supplemented prospectus, and if so directed by the Company, such Electing Holder or TWP shall deliver to the Company (at the Company's expense) all copies, other than permanent file copies, then in such Electing Holder's or TWP's possession of the prospectus covering such Registrable Shares or Market Making Securities, as applicable, at the time of receipt of such notice. (c) In addition to the information required to be provided in a Notice and Questionnaire by each Electing Holder as to which any Registration is being effected or to be provided by TWP in connection with the Market Making Registration pursuant to Section 4, the Company may require an Electing Holder or TWP, as applicable, to furnish to the Company such additional information regarding such Electing Holder or TWP and such Electing Holder's or TWP's intended method of distribution of the applicable Registrable Shares or Market Making Securities as applicable, as the Company may from time to time reasonably request in writing, but only to the extent that such information is required in order to comply with the Securities Act. Each such Electing Holder and TWP agrees to notify the Company as promptly as practicable of any inaccuracy or change in information previously furnished by such Electing Holder or TWP, as the case may be, to the Company or of the occurrence of any event in either case as a result of which any prospectus relating to such Registration or Market Making Registration, as applicable, contains or would contain an untrue statement of a material fact regarding such Electing Holder or TWP or such Electing Holder's or TWP's intended method of disposition of the Registrable Shares or Market Making Securities, as applicable, or omits to state any material fact regarding such Electing Holder or TWP or such Electing Holder's or TWP's intended method of disposition of the Registrable Shares or Market Making Securities, as applicable, required to be stated therein or necessary to make statements therein not misleading in light of the circumstances then existing, and promptly to furnish to the Company any additional information required to correct and update any previously furnished information or required so that such prospectus shall not contain, with respect to such Electing Holder or TWP or the disposition of the applicable Registrable Shares or Market Making Securities, as applicable, an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing. Section 6. Registration Expenses. The Company agrees to bear and to pay or cause to be paid promptly all expenses incident to the Company's performance of or compliance with this Agreement, including (a) all Commission and any NASD registration, filing and review fees and expenses, (b) all fees and expenses in connection with the qualification of the Registrable Shares and the Market Making Securities, as applicable, for offering and sale under the State securities and blue sky laws referred to in Section 5(a)(xi) hereof and determination of their eligibility for investment under the laws of such jurisdictions as any managing underwriters or the Electing Holders or TWP may designate, including any fees and disbursements of counsel for the Electing Holders, TWP or the underwriters in connection with such qualification and determination, (c) all expenses relating to the preparation, printing, production, distribution and reproduction of each registration statement required to be filed hereunder, each prospectus included therein or prepared for distribution pursuant hereto, each amendment or supplement to the foregoing, the expenses of preparing the Registrable Shares or Market Making Securities, as applicable, for delivery and the expenses of printing or producing any underwriting agreements, agreements among underwriters, selling agreements and blue sky or legal investment memoranda and all other documents in connection with the offering, sale or delivery of Registrable Shares or Market Making Securities, as applicable, to be disposed of (including certificates representing the Registrable Shares or the Market Making Securities), as applicable, (d) messenger, telephone and delivery expenses relating to the offering, sale or delivery of Registrable Shares or Market Making Securities, as applicable, and the preparation of documents referred in clause (c) above, (e) internal expenses (including all salaries and expenses of the Company's officers and employees performing legal or accounting duties), (f) fees, disbursements and expenses of counsel and independent certified public accountants of the Company (including the expenses of any opinions or "cold comfort" letters required by or incident to such performance and compliance), (g) fees, disbursements and expenses of any "qualified independent underwriter" engaged pursuant to Section 5(a)(xviii) hereof, (h) fees, disbursements and expenses of one counsel for the Electing Holders retained in connection with any Registration, as selected by the Majority Holders and one counsel for TWP retained in connection with a Market Making Registration, as selected by TWP; (i) fees, expenses and disbursements of any other Persons, including special experts, retained by the Company in connection with such registration (collectively, the "Registration Expenses"). To the extent that any Registration Expenses are incurred, assumed or paid by any holder of Registrable Shares, TWP or any placement or sales agent therefor or underwriter thereof, the Company shall reimburse such Person for the full amount of the Registration Expenses so incurred, assumed or paid promptly after receipt of a request therefor. Notwithstanding the foregoing, the holders of the Registrable Shares being registered or TWP, as applicable, shall pay agency fees and commissions and underwriting discounts and commissions attributable to the sale of the applicable Registrable Shares, or Common Stock and the fees and disbursements of any counsel or other advisors or experts retained by such holders (severally or jointly), other than the counsel and experts specifically referred to above. Section 7. Representations and Warranties. The Company represents and warrants to, and agrees with, each Purchaser each of the holders from time to time of Registrable Shares and TWP that: (a) Each registration statement covering Registrable Shares or Market Making Securities, as applicable, and each prospectus (including any preliminary or summary prospectus) contained therein or furnished pursuant to Section 5(a) hereof and any further amendments or supplements to any such registration statement or prospectus, when it becomes effective or is filed with the Commission, as the case may be, and, in the case of an underwritten offering of Registrable Shares or Market Making Securities, as applicable, at the time of the closing under the underwriting agreement relating thereto, will conform in all material respects to the applicable requirements of the Securities Act and the rules and regulations of the Commission thereunder and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and at all times subsequent to the Effective Time when a prospectus would be required to be delivered under the Securities Act, other than (A) from (i) such time as a notice has been given to the Purchasers, the holders of Registrable Shares or TWP, as applicable, pursuant to Section 5(a)(vii)(F) hereof until (ii) such time as the Company furnishes an amended or supplemented prospectus pursuant to Section 5(b) hereof, or (B) during any suspension of offering and sale pursuant hereto, each such registration statement, and each prospectus (including any preliminary or summary prospectus) contained therein or furnished pursuant to Section 5(a) hereof, as then amended or supplemented, will conform in all material respects to the applicable requirements of the Securities Act and the rules and regulations of the Commission thereunder and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by a holder of Registrable Shares or TWP, as applicable, expressly for use therein. (b) Any documents incorporated by reference in any prospectus referred to in Section 7(a) hereof, when they become or became effective or are or were filed with the Commission, as the case may be, will conform or conformed in all material respects to the requirements of the Securities Act or the Exchange Act, as applicable, and none of such documents will contain or contained an untrue statement of a material fact or will omit or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading. Section 8. Indemnification. (a) Indemnification by the Company. The Company agrees to indemnify and hold harmless (i) each of the Electing Holders of Registrable Shares included in a Registration Statement and TWP as holders of Market Making Securities included in a Market Making Registration Statement and each Person who participates as a placement or sales agent or as an underwriter in any offering or sale of such Registrable Shares or Market Making Securities, as applicable, (ii) each Person, if any, who controls (within the meaning of Section 15 or Section 20 of the Exchange Act) any such Person referred to in clause (i) (any of the Persons referred to in this clause (ii) being referred to herein as a "Controlling Person") and (iii) the respective officers, directors, partners, employees, representatives and agents of any Person referred to in clause (i) or any such Controlling Person (any such Person referred to in clause (i), (ii) or (iii) referred to for purposes of this Section 8(a) and Sections 8(c) through 8(e) as an "Indemnified Person"), against any losses, claims, damages or liabilities, joint or several, to which or such Indemnified Person may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Secondary Offer Registration Statement, or any preliminary, final or summary prospectus contained therein, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; and will reimburse each such Indemnified Person for any legal and other expenses reasonably incurred by such Indemnified Person in connection with investigating or defending any such action or claims as such expenses are incurred; provided, however, that the Company shall not be liable in any such case (i) to the extent that any such loss, claim, damage or liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in any such Registration Statement, or any preliminary, final or summary prospectus contained therein, or any amendment or supplement thereto, in reliance upon and in conformity with written information furnished to the Company by any Indemnified Person expressly for use therein or (ii) from the use or delivery by such Indemnified Person, Controlling Person or underwriter of a prospectus other than the most current prospectus made available to such Holder, Controlling Person or underwriter by the Company. (b) Indemnification by the Holders and any Agents and Underwriters in Connection with any Registration. The Company may require, as a condition to including any Registrable Share in any Registration Statement and to entering into any underwriting agreement with respect thereto, that the Company shall have received an undertaking reasonably satisfactory to it from each Electing Holder of such Registrable Shares and from each underwriter named (if any) in any such underwriting agreement, severally and not jointly, to indemnify and hold harmless (i) the Company and all other holders of Registrable Shares, (ii) each Controlling Person of any Person referred to in clause (i), and (iii) the respective officers, directors, partners, employees, representatives and agents of any Person referred to in clause (i) or any such Controlling Person (any Person referred to in clause (i), (ii) or (iii), referred to for purposes of this Section 8(b) and Sections 8(c) through 8(e) as an "Indemnified Person") against any losses, claims, damages or liabilities, joint or several, to which such Indemnified Person may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any untrue or alleged untrue statement of a material fact contained in such Registration Statement, or any preliminary, final or summary prospectus contained therein, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in such Registration Statement, or any preliminary, final or summary prospectus contained therein, or any amendment or supplement thereto, in reliance upon and in conformity with written information furnished to the Company by such Indemnified Person expressly for use therein; and will reimburse the Company for any legal and other expenses reasonably incurred by the Company in connection with investigating or defending any such actions or claims as such expenses are incurred; provided, however, that the liability of any Electing Holder pursuant to this subsection (b) shall not exceed the product of the number of Registrable Shares sold by such Electing Holder and the initial offering price therefor as set forth in the prospectus therefor. (c) Notifications and Other Indemnification Procedures. Promptly after receipt by an Indemnified Person (as defined under each of subsections (a) and (b) of this Section 8) of notice of the commencement of any action, such Indemnified Person shall, if a claim in respect thereof is to be made against an indemnifying party under such clause, notify such indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any Indemnified Person otherwise than under such subsection or to the extent it is not prejudiced as a proximate result of such failure. In case any such action is brought against any Indemnified Person and it shall notify an indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such Indemnified Person (who shall not, except with the consent of the Indemnified Person, be counsel to the indemnifying party), and, after notice from the indemnifying party to such Indemnified Person of its election so to assume the defense thereof, the indemnifying party shall not be liable to such Indemnified Person under such subsection for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such Indemnified Person, in connection with the defense thereof other than reasonable costs of investigation. Notwithstanding the foregoing, any Indemnified Person shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the Indemnified Person unless the Indemnified Person shall have been advised by counsel that representation of the Indemnified Person by counsel provided by the indemnifying party would be inappropriate due to actual or potential conflicting interests between the indemnifying party and the Indemnified Person, including situations in which there are one or more legal defenses available to the Indemnified Person that are different from or additional to those available to the indemnifying party; provided, however, that the indemnifying party shall not, in connection with any one such action or proceeding or separate but substantially similar actions or proceedings arising out of the same general allegations, be liable for the fees and expenses of more than one separate firm of attorneys at any time for all Indemnified Parties, except to the extent that local counsel, in addition to its regular counsel, is required in order to effectively defend against such action or proceeding. No indemnifying party shall, without the written consent of the Indemnified Person, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the Indemnified Person is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (i) includes an unconditional release of the Indemnified Person from all liability arising out of such action or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of any Indemnified Person. (d) Contribution. If the indemnification provided for in this Section 8 is unavailable to or insufficient to hold harmless an Indemnified Person under subsection (a), (b) or (c) above in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and the Indemnified Person on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party on the one hand or the Indemnified Person on the other and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties agree that it would not be just and equitable if contributions pursuant to this subsection (d) were determined by pro rata allocation (even if the Indemnified Persons were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this subsection (d). The amount paid or payable by an Indemnified Person as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such Indemnified Person in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (d), no Electing Holder shall be required to contribute any amount in excess of the amount by which the product of number of Registrable Shares sold by such Electing Holder and the initial offering price therefor as set forth in the prospectus therefor exceeds the amount of any damages which such Electing Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission, and no underwriter or sales agent shall be required to contribute any amount in excess of the amount by which the total price at which the shares of Common Stock underwritten or placed by it and distributed to the public were offered to the public exceeds the amount of any damages which such underwriter or sales agent has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. (e) The obligations of the Company and the Electing Holders under this Section 9 shall be in addition to any liability which the Company and the respective Electing Holders may otherwise have. Section 9. Underwritten Offerings. (a) Selection of Underwriters. If any of the Registrable Shares covered by the Registration are to be sold pursuant to an underwritten offering, the managing underwriter or underwriters thereof shall be designated by Majority Holders, provided that such designated managing underwriter or underwriters is or are reasonably acceptable to the Company. (b) Participation by Holders. Each holder of Registrable Shares hereby agrees with each other such holder that no such holder may participate in any underwritten offering hereunder unless such holder (i) agrees to sell such holder's Registrable Shares on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. Section 10. Rule 144 and Rule 144A. The Company covenants to the holders of Registrable Shares and the Purchasers that to the extent it shall be required to do so under the Exchange Act, the Company shall timely file the reports required to be filed by it under the Exchange Act or the Securities Act (including the reports under Sections 13 and 15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144 adopted by the Commission under the Securities Act) and the rules and regulations adopted by the Commission thereunder, shall make available to each holder of Registrable Shares and the Purchasers the information required by Rule 144A(d)(4), and shall take such further action as any holder of Registrable Shares or the Purchasers may reasonably request, all to the extent required from time to time to enable such holder to sell Registrable Shares or the Purchasers to sell Common Stock without registration under the Securities Act within the limitations of the exemptions provided by Rule 144 or Rule 144A under the Securities Act, as such Rules may be amended from time to time, or any similar or successor rule or regulation hereafter adopted by the Commission. Upon the request of any holder of Registrable Shares or the Purchasers in connection with that holder's or the Purchasers' sale pursuant to Rule 144 or Rule 144A, the Company shall deliver to such holder or the Purchasers a written statement as to whether it has complied with such requirements. Section 11. Holdoff Agreement. (a) The Company agrees not to effect any public sale or distribution of equity securities of the Company, including any public sale pursuant to Rule 144 under the Securities Act, or any securities convertibles into or exchangeable or exercisable for such securities, (a "Public Sale"), during the period commencing 30 days prior to and ending 90 days after the effective date of any underwritten Demand Registration or any underwritten Piggyback Registration (except as part of such underwritten registration or pursuant to registration on Form S-8 or any successor form), unless the underwriters managing the offering otherwise agree. (b) Each holder of Registrable Shares agrees not to effect any Public Sale (and in the case of Investors and Purchasers, such holders agree not to effect a distribution to their respective partners in connection with an underwritten demand registration in which the Purchasers (in the case of Investors) or the Investors (in the case of Purchasers) are participating under this Agreement, provided that the party agreeing not to distribute shall have received notice of such Registration at least 45 days prior to the effective date thereof) during the period commencing 30 days prior to and ending 90 days after the effective date of any underwritten registration for the account of the Company (except as part of such underwritten registration or pursuant to registration on Form S-8 or any successor form) or any Demand Registration, unless, in any such case, the underwriters managing the offering otherwise agree; provided that the holders of Investors' Shares shall not be subject to the agreement set forth in this subsection 11(b) until the first anniversary of the date hereof; provided further that nothing in this subsection 11(b) shall be deemed to restrict any distribution by the Investors or Purchasers to their respective partners of such securities otherwise than as expressly set forth above or to restrict the sale of such securities by the partners of the Investors or Purchasers after any such distribution. (c) The Company agrees to use its commercially reasonable efforts to cause any underwriters managing an offering referred to in the Existing Registration Agreement or otherwise to release the holders of Registrable Shares from any resale restrictions managed by such underwriters with respect to such offerings no later than and on terms no less favorable to the holders of Registrable Shares than imposed on other holders of shares of Common Stock who are so released from such resale restrictions. Section 12. Miscellaneous. (a) No Inconsistent Agreements. The Company represents, warrants, covenants and agrees that it has not granted, and shall not grant, registration rights with respect to Registrable Shares, Common Stock or any other securities which would be inconsistent with the terms contained in this Agreement. (b) Specific Performance. The parties hereto acknowledge that there would be no adequate remedy at law if the Company fails to perform any of its obligations hereunder and that the Purchasers, the holders from time to time of the Registrable Shares and TWP may be irreparably harmed by any such failure, and accordingly agree that the Purchasers, such holders and TWP, in addition to any other remedy to which they may be entitled at law or in equity, shall be entitled to compel specific performance of the respective obligations of the Company under this Agreement in accordance with the terms and conditions of this Agreement, in any court of the United States or any State thereof having jurisdiction. (c) Notices. All notices and communications provided for hereunder shall be in writing and sent (i) by telecopy if the sender on the same day sends a confirming copy of such notice by a recognized overnight delivery service (charges prepaid); or (ii) by registered or certified mail with return receipt requested (postage prepaid); or (iii) by a recognized overnight delivery service (with charges prepaid). Any such notice must be sent: If to the Purchasers: Thomas Weisel Capital Partners, L.P., TWP CEO Founders' Circle (AI), L.P., TWP CEO Founders' Circle (QP), L.P., Thomas Weisel Capital Partners Employee Fund, L.P., TWP 2000 Co-Investment Fund, L.P. c/o Thomas Weisel Capital Partners, L.P. One Montgomery Street, Suite 3700 San Francisco, CA 95104 Facsimile: (415) 364-2698 Attention: Marianne Winkler RKB Capital, L.P. 150 West Lake Street Wayzata, Minnesota 55391 Telecopy: (612) 404-9266 Attention: Peter Schleider with copies to: Fried, Frank, Harris, Shriver & Jacobson One New York Plaza New York, NY 10004-1980 Facsimile: (212) 859-8000 Attention: F. William Reindel, Esq. If to the Company: Optika Inc. 7450 Campus Drive, 2nd Floor Colorado Springs, CO 80920 Facsimile: (719) 531-0199 Attention: Steven Johnson Vice President and Chief Financial Officer with copies to: E* Law Group 3555 W. 110th Place Westminster, Colorado 80031 Telecopy: (303) 410-0468 Attention: Jeremy W. Makarechian, Esq. and to: Morrison & Foerster LLP 370 17th Street, Suite 5200 Denver, Colorado 30202 Telecopy: (303) 592-1510 Attention: Warren Troupe, Esq. If to any Investor or Founder: At the address specified for such Investor or Founder in the Existing Registration Agreement. Any party hereto may change the address for receipt of communications by giving written notice to the others. (d) Parties in Interest. All the terms and provisions of this Agreement shall be binding upon, shall inure to the benefit of and shall be enforceable by the parties hereto and the holders from time to time of the Registrable Shares and the respective successors and assigns of the parties hereto and such holders. In the event that any transferee of any holder of Registrable Shares shall acquire Registrable Shares, in any manner, whether by gift, bequest, purchase, operation of law or otherwise, such transferee shall, without any further writing or action of any kind, be deemed a beneficiary hereof for all purposes and such Registrable Shares shall be held subject to all of the terms of this Agreement, and by taking and holding such Registrable Shares such transferee shall be entitled to receive the benefits of, and be conclusively deemed to have agreed to be bound by all of the applicable terms and provisions of this Agreement. If the Company shall so request, any such successor, assign or transferee shall agree in writing to acquire and hold the Registrable Shares subject to all of the applicable terms hereof. (e) Survival. The respective indemnities, agreements, representations, warranties and each other provision set forth in this Agreement or made pursuant hereto shall remain in full force and effect regardless of any investigation (or statement as to the results thereof) made by or on behalf of the Purchasers or any holder of Registrable Shares, any director, officer or partner of the Purchasers or such holder, any agent or underwriter or any director, officer or partner thereof, or any Controlling Person of any of the foregoing, and shall survive delivery of and payment for the Securities pursuant to the Purchase Agreement and the transfer and registration of Common Stock by such holder or the Purchasers. (f) Governing Law. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. (g) Waiver of Jury Trial. THE ISSUER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, PROCEEDING OR LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE SECURITIES OR EXCHANGE NOTES. (h) Submission to Jurisdiction. If any action, proceeding or litigation shall be brought by the Purchasers or any holder of the Registrable Shares in order to enforce any right or remedy under this agreement or any of the Shares, the Company hereby consents and will submit, and will cause each of its subsidiaries to submit, to the jurisdiction of any state or federal court of competent jurisdiction sitting within the area comprising the Southern District of New York on the date of this Agreement. The Company hereby irrevocably waives any objection, including, but not limited to, any objection to the laying of venue or based on the grounds of forum non conveniens, which it may now or hereafter have to the bringing of any such action, proceeding or litigation in such jurisdiction. (i) Headings. The descriptive headings of the several Sections and paragraphs of this Agreement are inserted for convenience only, do not constitute a part of this Agreement and shall not affect in any way the meaning or interpretation of this Agreement. (j) Entire Agreement; Amendments. This Agreement and the other writings referred to herein or delivered pursuant hereto which form a part hereof contain the entire understanding of the parties with respect to its subject matter. This Agreement supersedes all prior agreements and understanding between the parties with respect to its subject matter. This Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) only by a written instrument duly executed by the Company and the holders of at least, in the case of an amendment that could reasonably be viewed as adversely affecting the rights of the holders of (A) Purchasers' Shares, then a majority in number of Purchasers' Shares and (B) Investors' Shares, then 70% of the Investors' Shares and (C) Founders' Shares, then a majority of Founders' Shares; provided, however, that any such amendment or waiver affecting solely provisions of this Agreement relating to the Market Making Registration may be effected by a written instrument duly executed solely by the Company and TWP. Each holder of any Registrable Shares at the time or thereafter outstanding shall be bound by any amendment or waiver effected pursuant to this Section 11(j), whether or not any notice, writing or marking indicating such amendment or waiver appears on such Registrable Shares or is delivered to such holder. (k) Inspection. For so long as this Agreement shall be in effect, this Agreement and a complete list of the names and addresses of all the holders of Registrable Shares and the addresses of the Purchasers shall be made available for inspection and copying on any business day to the Purchasers or any holder of Registrable Shares for proper purposes only (which shall include any purpose related to the rights of the holders of Registrable Shares under the Securities and this Agreement) at the offices of the Company at the address thereof set forth in Section 11(c) above. (l) Counterparts. This agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument. Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all, of the parties hereto. (m) Effective Date. This Agreement shall become effective as between the Company, the Founders and the Investors upon the execution of the Agreement as of such date (the "Effective Date") on which the Agreement (which has already been executed by the Company) shall have been executed by Investors who hold at least 70% of the Investors' Shares and Founders who hold at least a majority of the Founders' Shares, whereupon this Agreement shall be binding upon all Investors and Founders, whether or not they have executed this Agreement. Notwithstanding anything to the contrary, regardless of whether or when the Effective Date shall occur, this Agreement shall be a valid and binding agreement of the Company and the Purchasers (and any subsequent of holder Registrable Shares which are not Founders' Shares or Investors' Shares), and until the Effective Date shall occur, this Agreement shall be deemed to exclude all rights and obligations of the holders of Founders' Shares and Investors' Shares. As of the Effective Date, with respect to Frontenac VI Limited Partnership and JMI Equity Fund L.P. (the "Funds"), that certain Letter Agreement, dated as of February 8, 2000, by and among the Company, the Funds and the Purchasers shall terminate. (n) Future Registration Rights. Except for the registration rights granted hereunder, the Company will not grant registration rights as to any equity securities of the Company, or any securities convertible or exchangeable into or exercisable for such securities, without the written consent of the holders of at least (A) a majority in number of Purchasers' Shares and (B) 70% of the Investors' Shares unless (i) any such registration rights that may be initiated at the demand of the holders of such rights (each such holder a "New Investor") shall include in such demand Registrable Shares requested to be included by holders of Purchasers' Shares and Investors' Shares pro rata in accordance with the number of shares requested to be included therein by each of the holders of Purchasers' Shares and Investors' Shares and each of the New Investors, so long as the holders of a majority of the Purchasers' Shares and 70% of the Investors' Shares agree to include on a pro rata basis any shares requested to be included by such New Investor in any Demand Registration of Registrable Shares initiated by either holders of Purchasers' Shares or Investors' Shares under Section 2(a) herein (other than a Demand Registration as to which the holders of Purchasers' Shares or Investors' Shares, as the case may be, have made the election contemplated by clause (x) or clause (y) of the second proviso to the first sentence of Section 2(e) not to have any Investors' Shares or Purchasers' Shares, respectively, included therein on a pro-rata basis), (ii) in the case of any such registration rights relating to the registration of Common Stock for the account of the Company, the holders of Registrable Shares hereunder shall have priority over the holders of any such registration rights and (iii) any such registration rights granted shall not be any more favorable to the holders of such registration rights as compared to, or otherwise be inconsistent with, the rights granted to the holders of Purchasers' Shares and Investors' Shares hereunder. Agreed to and accepted as of the date first above written. OPTIKA INC. By: /s/ Steven M. Johnson --------------------------------- Name: Steven M. Johnson Title: CFO [Company's Signature Page - Registration Rights Agreement] PURCHASERS - ---------- THOMAS WEISEL CAPITAL PARTNERS, L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, its managing member By: /s/ Deborah Bernstein ----------------------------------------------------- Name: Deborah Bernstein Title: Authorized Signatory TWP CEO FOUNDERS' CIRCLE (AI), L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, its managing member By: /s/ Deborah Bernstein ----------------------------------------------------- Name: Deborah Bernstein Title: Authorized Signatory TWP CEO FOUNDERS' CIRCLE (QP), L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, its managing member By: /s/ Deborah Bernstein ----------------------------------------------------- Name: Deborah Bernstein Title: Authorized Signatory THOMAS WEISEL CAPITAL PARTNERS EMPLOYEE FUND, L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, its managing member By: /s/ Deborah Bernstein ----------------------------------------------------- Name: Deborah Bernstein Title: Authorized Signatory TWP 2000 C0-INVESTMENT FUND, L.P. By: Thomas Weisel Capital Partners LLC, its general partner By: Thomas Weisel Partners Group LLC, its managing member By: /s/ Deborah Bernstein ----------------------------------------------------- Name: Deborah Bernstein Title: Authorized Signatory [Purchasers' Signature Page - Registration Rights Agreement] PURCHASERS - ---------- RKB CAPITAL, L.P. By: /s/ Peter Schleider ---------------------------------- Name: Peter Schleider Title: General Partner [Purchasers Signature Page - Registration Rights Agreement] INVESTORS - --------- Frontenac VI Limited Partnership By: Frontenac Company Its: General Partner By: ------------------------------- Name: Title: JMI Equity Fund, L.P. By: JMI Partners, L.P. Its: General Partner By: /s/ Harry Gruner ------------------------------- Name: Harry Gruner Title: FOUNDERS: - --------- SCHEDULE A SCHEDULE OF FOUNDERS Paul Carter Harvey Jeane Malcolm Thomson Steven Johnson Mark Ruport Linda E. Boguslav Lisa M. Hardiman Russell A. Johnson James T. Schuster David Holzman Richard Holzman Kevin Ilsen Eric Brown IPRS Asia (s) Pte Ltd Intuit Development Limited Gillespie Limited SCHEDULE B SCHEDULE OF INVESTORS Frontenac VI Limited Partnership JMI Equity Fund, L.P. -----END PRIVACY-ENHANCED MESSAGE-----