-----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, EVX5K34SeyUnj9NbJyvcXUAkK73bYFEgaHrMrlk8rdpDlF/r7Uxvke3mCR8A3LN/ VwjmEdA3Kgu0RxSH38NeaA== 0000950135-97-003568.txt : 19970820 0000950135-97-003568.hdr.sgml : 19970820 ACCESSION NUMBER: 0000950135-97-003568 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 19970819 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAYENNE SOFTWARE INC CENTRAL INDEX KEY: 0000880229 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 042784044 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-33917 FILM NUMBER: 97666277 BUSINESS ADDRESS: STREET 1: 8 NEW ENGLAND EXECUTIVE PARK CITY: BURLINGTON STATE: MA ZIP: 01803 BUSINESS PHONE: 6172739003 MAIL ADDRESS: STREET 1: 8 NEW ENGLAND EXECUTIVE PARK CITY: BURLINGTON STATE: MA ZIP: 01803 FORMER COMPANY: FORMER CONFORMED NAME: BACHMAN INFORMATION SYSTEMS INC /MA/ DATE OF NAME CHANGE: 19921111 S-3 1 CAYENNE SOFTWARE, INC. 1 As filed with the Securities and Exchange Commission on August __, 1997 REGISTRATION NO. 333- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------- FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ----------------- CAYENNE SOFTWARE, INC. (Exact Name of Registrant as Specified in Its Charter) MASSACHUSETTS (State or Other Jurisdiction of Incorporation or Organization) 7399 (Primary Standard Industrial Classification Code Number) 04-2784044 (I.R.S. Employer Identification Number) 8 NEW ENGLAND EXECUTIVE PARK BURLINGTON, MASSACHUSETTS 01803 (617) 273-9003 (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices) ----------------- PETER J. BONI PRESIDENT AND CHIEF EXECUTIVE OFFICER CAYENNE SOFTWARE, INC. 8 NEW ENGLAND EXECUTIVE PARK BURLINGTON, MASSACHUSETTS 01803 (617) 273-9003 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) ----------------- COPIES TO: JOHN D. PATTERSON, JR., ESQ. FOLEY, HOAG & ELIOT LLP ONE POST OFFICE SQUARE BOSTON, MASSACHUSETTS 02109 ----------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after this Registration Statement becomes effective. If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462 (b) under the Securities Act, please check the following box and list the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: [ ] If this Form is a post-effective amendment filed pursuant to Rule 462 (c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement number of the earlier effective registration statement for the same offering: [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box: [ ] 2
CALCULATION OF REGISTRATION FEE ========================================================================================================================= PROPOSED PROPOSED AMOUNT MAXIMUM MAXIMUM TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF SECURITIES TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE - ------------------------------------------------------------------------------------------------------------------------- Common Stock, par value $0.01 1,873,332 $2.5625 $4,800,413 $1,454.67 ============================================= ================= ================= ================== ================= (1) Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(c) under the Securities Act of 1933 based upon the average of the high and low prices of the Common Stock on August 13, 1997, as reported by NASDAQ.
----------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. ============================================================================== 3 CAYENNE SOFTWARE, INC. FORM S-3 REGISTRATION STATEMENT CROSS-REFERENCE SHEET
Form S-3 Item Number and Caption Location in Prospectus - -------------------------------- ---------------------- 1. Forepart of the Registration Statement and Outside Front Cover Page of Prospectus............................................ Outside Front Cover Page of Prospectus 2. Inside Front and Outside Back Cover Pages of Prospectus............................. Available Information; Information Incorporated by Reference; Outside Back Cover Page of Prospectus 3. Summary Information, Risk Factors and Ratio of Earnings to Fixed Charges................ The Company; Risk Factors 4. Use of Proceeds....................................... Use of Proceeds 5. Determination of Offering Price....................... * 6. Dilution.............................................. * 7. Selling Security-Holders.............................. Selling Stockholders 8. Plan of Distribution.................................. Plan of Distribution 9. Description of Securities to be Registered............ * 10. Interests of Named Experts and Counsel................ Experts; Legal Matters 11. Material Changes...................................... * 12. Incorporation of Certain Information by Reference............................................. Information Incorporated by Reference 13. Disclosure of Commission Position on Indemnification for Securities Act Liabilities........................................... *
- ----------------------------------------- * Omitted since the answer is negative or the item is inapplicable. 4 CAYENNE SOFTWARE, INC. 1,873,332 SHARES OF COMMON STOCK -------------------- The 1,873,332 shares (the "Shares") of common stock, par value $0.01 per share (the "Common Stock"), of Cayenne Software, Inc. ("Cayenne" or the "Company") covered by this Prospectus may be offered on a delayed or continuous basis by certain stockholders of the Company or by pledgees, donees, transferees or other successors in interest (the "Selling Stockholders") See "Selling Stockholders." The Company will not receive any proceeds from the offering. The Company will bear the costs relating to the registration of the Shares offered hereby (other than selling commissions). The Selling Stockholders may offer the Shares, from time to time during the effectiveness of this registration, for sale through the NASDAQ Stock Market, in the over-the-counter market, in one or more negotiated transactions, or through a combination of methods of sale, at prices and on terms then prevailing or at negotiated prices. Sales may be effected to or through broker-dealers, who may receive compensation in the form of discounts, concessions or commissions in connection therewith. See "Plan of Distribution." The Common Stock is traded on the NASDAQ Stock Market under the symbol "CAYN". On August 11, 1997, the closing price for the Common Stock, as reported on the NASDAQ Stock Market, was $2.50 per share. -------------------- THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS." -------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. -------------------- ALL SECURITIES TO BE REGISTERED HEREBY ARE TO BE OFFERED BY CERTAIN OF THE COMPANY'S STOCKHOLDERS. THE DATE OF THIS PROSPECTUS IS AUGUST __, 1997. 5 THE COMPANY The Company was incorporated in Massachusetts in 1983 under the name Bachman Information Systems, Inc. Its name was changed to Cayenne Software, Inc. in July 1996. The Company supplies software analysis and design solutions for commercial and technical applications and database development. The Company's executive offices are located at 8 New England Executive Park, Burlington, Massachusetts 01803. Its telephone number is (617) 273-9003. AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Reports, proxy statements and other information filed by the Company can be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C. 20549; and at its regional offices located at Citicorp Center, 500 W. Madison Street, Suite 1400, Chicago, Illinois 60661- 2511, and 7 World Trade Center, Suite 1300, New York, New York 10048. Copies of such material can be obtained from the public reference section of the Commission at 450 Fifth Street, N.W., Washington D.C. 20549, at prescribed rates. Electronic filings made by the Company through the Commission's Electronic Data Gathering, Analysis and Retrieval System are publicly available through the Commission's world wide web site (http://www.sec.gov). The Company's Common Stock is traded on the NASDAQ Stock Market under the symbol CAYN. Reports and other information concerning the Company may be inspected at the National Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006. This Prospectus constitutes a part of a Registration Statement on Form S-3 (the "Registration Statement") filed by the Company with the Commission under the Securities Act of 1933, as amended (the "Securities Act"). This Prospectus omits certain of the information contained in the Registration Statement and the exhibits and schedules thereto, as certain items are omitted in accordance with the rules and regulations of the Commission. For further information concerning the Company and the Common Stock offered hereby, reference is hereby made to the Registration Statement and the exhibits and schedules filed therewith, which may be inspected without charge at the office of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and copies of which may be obtained from the Commission at prescribed rates. Any statements contained herein concerning the provisions of any document are not necessarily complete, and, in each instance, reference is made to the copy of such documents filed as an exhibit to the Registration Statement or otherwise filed with the Commission. Each such statement is qualified in its entirety by such reference. INFORMATION INCORPORATED BY REFERENCE The following documents of the Company which have been filed with the Commission are hereby incorporated by reference in this Prospectus. (a) Annual Report on Form 10-K, as amended, for the transition period ended December 31, 1996, Commission File No. 0-19682. (b) Quarterly Report on Form 10-Q for the quarter ended March 31, 1997, Commission File No. 0-19682. (c) Quarterly Report on Form 10-Q for the quarter ended June 30, 1997, Commission File No. 0-19682. -2- 6 (d) The description of the Company's Common Stock contained in the Registration Statement on Form 8-A dated November 26, 1991, Commission File No. 0-19682. All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of the offering of the Common Stock offered hereby shall be deemed to be incorporated by reference in this Prospectus and to be a part hereof from the respective dates of filing such documents. Any statement or information contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed modified or superseded for the purposes of this Prospectus to the extent that a statement contained herein or in any subsequently filed document which also is or is deemed to be incorporated by reference modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. The Company will provide without charge to any person to whom a Prospectus is delivered, on written or oral request of such person, a copy of any or all of the documents incorporated herein by reference (other than exhibits and schedules to such documents). Requests should be directed to: Treasurer, Cayenne Software, Inc., 8 New England Executive Park, Burlington, Massachusetts 01803, (617) 273-9003. FORWARD-LOOKING STATEMENTS - - From time to time, information provided by the Company or statements made by its employees may contain "forward-looking" information, as that term is defined in the Private Securities Litigation Reform Act of 1995 (the "Act"). The Company cautions investors that there can be no assurance that actual results or business conditions will not differ materially from those projected or suggested in such forward-looking statements as a result of various factors, including but not limited to the matters discussed under "Risk Factors" below. -3- 7 RISK FACTORS In addition to the other information in this Prospectus, the following should be considered carefully in evaluating the Company and its business before purchasing the Common Stock offered by this Prospectus. FINANCIAL CONDITION OF THE COMPANY On November 6, 1996, the Company amended and restated its revolving credit agreement with a bank to borrow up to $5 million, to extend its term through October 4, 1997 and to amend certain of the financial and operating covenants and other provisions thereunder. In connection with the amendment, the Company issued to the Bank a three-year warrant to purchase 25,000 shares of the Company's Common Stock at an exercise price of $4.25 per share. The loan is contingent upon meeting certain financial and operating covenants at the time of any borrowing and over the life of the loan. The loan is secured by all of the assets of the Company and any borrowing amounts are tied to a percentage of qualified accounts receivable outstanding at the time of any borrowing. The financial covenants, which were further amended in April 1997, include attainment of specified levels of consolidated net income (loss) at the end of each quarter, including net income of $250,000 for the quarter ended June 30, 1997 and each quarter thereafter, and specified levels of liquidity at the end of each month. The Company was in compliance with all covenants as amended at June 30, 1997 or has received a waiver from the bank as to any non-compliance. At June 30, 1997, the borrowing base under the revolving credit agreement was approximately $2.5 million. The Company had approximately $2.8 million outstanding against the line of credit at that date and is currently working to perfect certain international trade receivables in order to resolve the shortfall. In July 1997, the Company raised $2 million in equity capital through a private placement of Series C Convertible Preferred Stock and Warrants to purchase Common Stock to one of the Selling Stockholders described in this Prospectus. The Company expects to renew or renegotiate its revolving credit agreement that expires on October 4, 1997. The Company is currently seeking additional equity investment on similar terms. The Company expects that its existing cash balances, funds generated through operations, and the additional equity investment will provide sufficient cash resources to finance current operations and projected capital requirements through the end of 1997. Thereafter, the company's cash requirements will depend on the results of future operations, which cannot be foreseen. The Company has been notified by The Nasdaq Stock Market, Inc. that it is not in compliance with the net tangible asset requirement for continued listing on the Nasdaq National Market. The Company has been given terms which include raising additional equity, with which it must comply. If the Company is not successful, its stock will be listed under the Nasdaq SmallCap Market. The Company intends to meet this requirement by raising additional equity. RESULTS OF RECENT OPERATIONS The Company's operating results for the three years ended June 30, 1996 the six-month transitional period ended December 31, 1996 and the six months ended June 30, 1997 were significantly adversely affected by several factors. In July 1996, the Company completed its merger with Cadre Technologies, Inc., which resulted in a $6.3 million charge to operations for the quarter ended September 30, 1996 to reflect costs associated with the combining of the two companies, transaction fees, and other costs. In addition, the Company has continued to invest heavily in its object-oriented and client/server-based products. The Company's operating results continue to be affected by the market trends of the Company's customers moving from mainframe development to client/server and object-oriented solutions. The increased revenue growth of the Company's client/server and object-oriented products has not been rapid enough to offset the revenue decline of the Company's mainframe- based products. As the Company continues to make the transition from providing tools focused solely on mainframe application development to supporting customers' needs for a more open and flexible set of solutions aimed at the growing client/server market, it faces many challenges. The Company plans to enhance its product offerings through development efforts, strategic alliances and acquisitions to improve its competitive position. -4- 8 On July 18, 1996, the Company completed its acquisition of Cadre Technologies Inc. ("Cadre") under an Agreement and Plan of Merger dated March 25, 1996, by and among the Company, Cadre and B.C. Acquisition Corp., whereby the Company agreed to acquire all of the outstanding capital stock of Cadre in exchange for 4,716,442 shares of Cayenne common stock (the "merger"). The merger was accounted for as a pooling-of-interests during the transition period ended December 31, 1996. Effective upon the merger, the Company changed its name to Cayenne Software, Inc. The Company acquired Cadre to expand its product offerings to include structured analysis and design and object-oriented technology and to expand its customer base. During the transition period ended December 31, 1996, the Company incurred a charge of $6.3 million in conjunction with the merger and to reflect costs associated with combining the operations of the two companies, transaction fees, and other costs. Included in the charge were $1.6 million of employee-related termination expenses for approximately 45 employees; $1.3 million of legal, accounting, investment banking, and other professional fees; $1.4 million of facilities closure and consolidation expenses; and $2 million of other expenses associated with the consolidation of the two companies and the name change. SIGNIFICANT RECENT LOSSES; SHORT PRIOR HISTORY OF PROFITABILITY Cayenne received its first venture financing in the third quarter of fiscal 1986, shipped its first software products in the fourth quarter of fiscal 1988, and did not reach profitability until the first quarter of fiscal 1991. Cayenne incurred net losses of $13.2 million, $24.9 million, and $11.3 million in Fiscal 1994, Fiscal 1995, and Fiscal 1996, respectively, and a net loss of $6.4 million for the six months ended December 31, 1996, which included a $6.3 million charge for restructuring and other costs in September 1996. For the six months ended June 30, 1997 the Company recorded a net loss of $1.8 million. A reorganization of the Company's sales force during June 1997 resulted in a longer sales cycle for software licenses and adversely effected profitability. In September 1994, the first quarter of fiscal 1995, the Company recorded a restructuring charge of approximately $2 million resulting from reductions in staff and related facilities expenses and the termination of certain contracts. During the quarter ended June 30, 1995, the Company also incurred approximately $1.8 million in restructuring costs, which included a $0.9 million write-off of redundant capitalized software, $0.8 million of employee related costs, and $0.1 million of other costs related to the restructuring. In the quarter ended December 31, 1995, the Company incurred an additional $1.7 million in restructuring charges. Future operating results will depend on many factors, including demand for Cayenne's products, Cayenne's ability to obtain major orders, the level of competition, Cayenne's ability to develop and market new products, and the ability of its officers and key employees to manage Cayenne's business and control costs. There can be no assurance that revenue growth or profitable operations on a quarterly or annual basis will be achieved during 1997 or in any subsequent fiscal year. CHANGING MARKETS The Company develops software tools that help software developers create applications and integrate diverse information sources for large and small software development projects. The products include modeling, database design and development tools for object-oriented, data-driven and structured application development approaches for use by large corporations, independent software vendors and technical organizations. The products are targeted to the object and relational application development needs of software development teams in a scalable, workgroup-to-enterprise environment. The Company's products are used to create real-time and embedded applications, three-tier client/server applications, data warehouses, and internet/intranet solutions on a wide range of platforms. The market in which Cayenne participates is characterized by frequent and rapid changes in hardware and software technology and in customer preferences; the Company has responded to these changes and will continue to do so in the future. For information-intensive applications the computing environment has migrated from centralized mainframe computers to personal computer networks and related "client/server" technology, and it is now incorporating internet/intranet environments. The Company has devoted much effort to change its product mix in response to these market changes by: 1) transitioning its -5- 9 mainframe products to a client/server environment, 2) leading the software industry in the structured to object- oriented design methodologies migration, 3) adding UML object modeling methodology to its OMT methodology, and 4) internet enabling the Company's products. Cayenne's future success will depend on its ability to enhance its current products and to develop and introduce new products that accommodate advances in software and hardware technology and changing customer requirements. In July 1996, the Company acquired Cadre Technologies, Inc. and entered into an additional industry segment focused on the creation and maintenance of complex software systems, the problem addressed by Computer Aided Software Engineering ("CASE") products. During the 1970s, a number of "structured" techniques and methods were invented to replace earlier ad-hoc approaches to software development. The analysis and design (as opposed to implementation) techniques emphasize the building of abstract models to assist in the understanding, planning, and implementation of a system. The rationale for modeling is the same in software as it is in any engineering discipline; money and effort are saved if problems are identified and dealt with early in the engineering process. Structured analysis and structured design. In the early eighties, networks of computer workstations made it feasible to partially automate the capture, traversal, and analysis of engineering models by work groups. This technology was rapidly adopted in the civil, mechanical, and electrical engineering domains. The CASE market expanded quickly in the mid-to late-eighties, as did the number of companies formed to service it. The high end of the market, with its multi-user networked UNIX engineering workstation solution, found a home in technically-oriented organizations, such as those in telecommunications, aerospace and defense. The other end of the market focused on single-user, personal computer ("PC") based products. These found early success in corporate IS organizations, where PCs were widely used. The IS CASE market declined in the early nineties for a number of reasons. While the IS software development market is large, commitment to structured methods (and the attendant engineering discipline) was weak. Some CASE companies made claims which the products were unable to deliver and soured the market. Others were slow to respond to technology changes such as the shift to client-server application development and object orientation (discussed further below). The decline resulted in a number of market leaders closing or being acquired. The technical market, where Cadre derived the majority of its business, was affected by the contraction and consolidation in the defense industry. Consequently, Cadre diversified its product line into the software development process, including debugging, measurement and verification tools. Object oriented technology. In the meantime, the software development community began to experiment with "object-oriented" technology, and in particular, OO analysis, design and implementation techniques. The structured techniques mentioned previously generally partition a system purely along functional lines, i.e. in terms of what the system does. The OO approach partitions a system into "objects", where each object encapsulates information and those functions that operate on that information. The benefit of the OO approach is that systems partitioned this way are more robust, more amenable to change, and the objects are easier to reuse in other systems. Cadre started selling its first OO analysis and design products (based on the method of developing software created by Shlaer-Mellor) in 1989. When market momentum began to build around a related method called the Object Modeling Technique ("OMT"), Cadre initially entered the market by reselling an OMT product in 1993. This was replaced by the OMT tool developed by Westmount Technology B.V., acquired by Cadre in 1995. In 1997, Cayenne introduced an object oriented product line that uses the Unified Modeling Language ("UML") methodology. -6- 10 FLUCTUATIONS IN QUARTERLY PERFORMANCE Throughout its history, Cayenne's revenue has varied from quarter to quarter, with the largest portion of revenue recognized in the fourth quarter of each fiscal year. In the normal course of events, Cayenne may realize lower revenue in the first quarter than in the preceding fourth quarter and also may realize lower revenue in the third quarter than in the preceding second quarter. Cayenne has also frequently recognized more revenue in the last month of each quarter than in either of the preceding two months. Cayenne believes that these quarterly and monthly patterns are partly attributable to Cayenne's sales commission policies, which compensate sales personnel for meeting or exceeding quarterly quotas, and to the budgeting and purchasing cycles of customers. In addition, Cayenne's revenue and earnings have fluctuated historically, and may fluctuate in the future, due to the timing of large individual orders. There were no large orders ($1,000,000 or more) during the six months ended June 30, 1997. Cayenne usually has no significant backlog, and substantially all of its product revenue in any quarter results from sales made in that quarter. If sales do not close in a quarter as expected, Cayenne's results of operations for that quarter would be adversely affected. Net income may be disproportionately affected by a reduction in revenues because only a small portion of Cayenne's expenses vary with revenues. HIGHLY COMPETITIVE INDUSTRY; INCREASING COMPETITION; DEPENDENCE ON KEY PERSONNEL The market for Cayenne's software products is highly competitive, and Cayenne expects competition to increase. Companies competing in related markets, including hardware manufacturers, could seek to enter this market with software products which offer functionality similar to that offered by Cayenne's products. The computer aided software engineering ("CASE") market generally has been adversely affected by competition from other programming support environments. In addition, Cayenne expects to encounter additional competitors as it expands its product line beyond the mainframe and structured analysis and design markets into the client/server and object-oriented markets. Many of Cayenne's existing and potential competitors have greater financial, technical and other resources than Cayenne. In addition, mergers or other business combinations among competitors could strengthen them and create larger companies with broader product offerings, more extensive market influence and greater resources. Maintaining and improving Cayenne's competitive position will require continued investment by Cayenne in research and development, sales, and marketing, particularly as Cayenne expands its product line beyond the mainframe and structured analysis and design markets. There can be no assurance that Cayenne will have sufficient resources to make that investment. Competitive pressures could result in loss of market share, price reductions and increases in expenses that could adversely affect Cayenne's business. Cayenne has experienced turnover in its personnel in the past including certain executives and key management, technical, and sales employees. Cayenne's future success will depend in large part upon its ability to attract and retain skilled executives and management and technical personnel. Competition for such personnel in the software industry continues to be intense. There can be no assurance that Cayenne will be successful in attracting and retaining the personnel it requires for its operations. VOLATILITY OF SHARE PRICE Since the completion of Cayenne's initial public offering in November 1991, the closing price of Cayenne Common Stock, as reported by the Nasdaq Stock Market, has ranged from $1 3/4 to $37 3/4. The highest closing price of the Common Stock as reported on the NASDAQ Stock Market during the Company's last two completed fiscal years was $11.875 per share. See "Price Range of Common Stock and Dividends." Announcements of technological innovations or new products by Cayenne or its competitors, quarterly variations in Cayenne's operating results, general factors affecting the computer software industry, and other -7- 11 factors may cause the market price of Cayenne Common Stock to fluctuate significantly in the future. In addition, in recent years the stock market has experienced large price and volume fluctuations, which often have been unrelated to the operating performance of specific companies or market sectors. RISKS OF INTERNATIONAL OPERATIONS; RELIANCE ON DISTRIBUTORS Approximately 48%, 50%, 52%, 51% and 53% of Cayenne's revenues in fiscal 1994, 1995, and 1996, the six months ended December 31, 1996, and the six months ended June 30, 1997, respectively, were attributable to international sales. The future contribution of sales from Cayenne's international subsidiaries to its results of operations depends on Cayenne's success in maintaining cost-effective direct marketing operations through Cayenne's wholly owned subsidiaries in Australia, Germany, Italy, the Netherlands, Singapore, Spain, and the United Kingdom. Sales in countries in which Cayenne continues to use independent distributors will remain subject to the distributors' financial condition and success, which cannot be controlled by Cayenne. Other risks inherent in Cayenne's international business generally include exposure to currency fluctuations, longer payment cycles, greater difficulties in accounts receivable collection and the requirement of complying with a wide variety of foreign laws. DEPENDENCE ON PROPRIETARY TECHNOLOGY Cayenne's success is heavily dependent upon its proprietary software technology. Cayenne relies principally on a combination of copyrights, trade secrets and contractual rights to protect its proprietary technology. In addition, Cayenne holds ten United States patents and currently has various patent applications pending abroad. There can be no assurance that any patents will be issued in respect of those applications, or that the steps taken by Cayenne to protect its proprietary rights will be adequate to prevent misappropriation of its technology or independent development by others of similar technology. Although Cayenne believes that its products and technology do not infringe on any existing proprietary rights of others, the use of patents to protect software has increased, and there can be no assurance that third parties will not assert infringement claims in the future. If any such claim were to be asserted, it might involve costly and protracted litigation. No assurance can be given that Cayenne would be successful in any such litigation or that, if it were not successful, it would be able to license the disputed proprietary rights on commercially reasonable terms. ANTI-TAKEOVER EFFECT OF CERTAIN PROVISIONS OF CHARTER AND BY-LAWS, MASSACHUSETTS LAW AND EMPLOYMENT AGREEMENTS The Cayenne Board has the authority to issue up to 1,600,000 shares of preferred stock (including the 100,000 shares of Series C Convertible Preferred Stock issued in July 1997) and to determine the price, rights, preferences, privileges and restrictions, including voting rights, of those shares without any further vote or action by the stockholders. The rights of the holders of Cayenne Common Stock will be subject to, and may be adversely affected by, the rights of the holders of any Cayenne preferred stock that may be issued in the future. The issuance of Cayenne preferred stock, while providing desirable flexibility in connection with possible acquisitions and other corporate purposes, could have the effect of making it more difficult for a third party to acquire a majority of the outstanding voting stock of Cayenne. In addition, the classification of the Cayenne Board and certain other provisions of Cayenne's Restated Articles of Organization (the "Cayenne Articles"), its Amended and Restated By-Laws (the "Cayenne By-Laws") and Massachusetts law could delay or frustrate the removal of incumbent directors and could make more difficult a merger, tender offer or proxy contest involving Cayenne. Further, Cayenne and certain of its current executive officers have entered into employment agreements that become effective only upon the occurrence of certain "changes in control." Other officers of the Company also have -8- 12 arrangements providing them with severance payments and other benefits if their employment is terminated without cause or, in some cases, in connection with a change in control of the Company. While these agreements were intended by Cayenne to limit further departures by executive officers, the agreements also could have the effect of making a merger, tender offer or proxy contest more difficult. SHARES OF COMMON STOCK ELIGIBLE FOR FUTURE SALE Sales of a substantial number of shares of Cayenne Common Stock in the public market could adversely affect the market price for the Cayenne Common Stock. Sales of substantial amounts of Cayenne Common Stock by existing holders may impair Cayenne's ability to raise capital in the future through the sale of Cayenne Common Stock or other equity securities. Cayenne has registered 11,799,945 shares of Cayenne Common Stock issuable under its stock option and stock purchase plans, of which 3,071,509 shares were subject to outstanding options at August 7, 1997. Shares issued upon the exercise of options and shares issued under Cayenne's stock purchase plan generally will be eligible for sale in the public market. LITIGATION Cayenne has received correspondence from Esprit Systems Consulting, Inc. claiming that Cayenne's subsidiary, Cadre Technologies, Inc., is liable to Esprit for approximately $1,650,000 under an extension to a contract for services to be rendered to Cadre. Cayenne believes that the claim is without merit, because, among other things, the contract in question terminated without extension. The claim has not been asserted formally in arbitration or litigation, and no assurance can be given as to its future course or likely result. USE OF PROCEEDS The Company will not receive any proceeds from the sale of Common Stock offered hereby by the Selling Stockholders. PRICE RANGE OF COMMON STOCK AND DIVIDENDS The following table sets forth, for the periods indicated, the range of high and low sales prices for the Company's common stock, as reported by the NASDAQ Stock Market. The Company's Common Stock is traded under the NASDAQ symbol "CAYN" (formerly "BACH") since the Company's initial public offering on November 26, 1991. These prices reflect interdealer prices, without retail mark-ups, mark-downs or commissions, and do not necessarily represent actual transactions.
6 Months Fiscal Year Fiscal Year Fiscal Year Ended 6/30/97 1996b 1996 1995 ---------------- --------------- -------------- ------------------ High Low High Low High Low High Low First Quarter $5.88 $3.938 $7.13 $4.00 $7.875 $5.75 $2.750 $1.75 Second Quarter 4.188 3.25 5.69 3.813 10.25 4.625 4.188 2.00 Third Quarter n/a n/a n/a n/a 11.875 8.25 5.375 3.50 Fourth Quarter n/a n/a n/a n/a 10.00 6.50 7.875 4.50
-9- 13 The Company has not declared or paid cash dividends on its common stock and does not plan to pay cash dividends to its stockholders in the near future. The Company presently intends to retain any earnings to finance further growth of its business. At August 7, 1997, there were 617 stockholders of record of the Company's Common Stock. NOTE: In October 1996, the Company changed its fiscal year-end from June 30 to December 31, and accordingly experienced a short fiscal year from July 1 through December 31, 1996. That short year is referred to as "Fiscal Year 1996b" in the table above. -10- 14 BUSINESS CAYENNE SOFTWARE, INC., organized as a Massachusetts corporation in 1983 under the name BACHMAN Information Systems, Inc., develops, markets and supports a comprehensive suite of software products and services. Fortune 1000 companies and government agencies around the world use Cayenne products as they develop, implement, and maintain enterprise-wide, business-critical information systems. Cayenne's products are designed around an innovative open architecture that enables organizations to create applications that integrate diverse information sources into new high-performance computing environments, to modify applications as business and technology change, and to run those applications on a variety of platforms. Cayenne's approach to reusability and its open architecture directly support mainframe and client/server initiatives and partnerships with other leading software vendors. Cayenne targets its products to Fortune 1000 companies, government agencies, and organizations of similar size throughout the world that use personal computers, workstations, mid-range and mainframe computers and relational database management systems for data-intensive applications. The Company develops software tools that help software developers create applications and integrate diverse information sources for large and small software development projects. The products include modeling, database design and development tools for object-oriented, data-driven and structured application development approaches for use by large corporations, independent software vendors and technical organizations. The products are targeted to the object and relational application development needs of software development teams in a scaleable, workgroup-to-enterprise environment. The Company's products are used to create real-time and embedded applications, three-tier client/server applications, data warehouses, and Internet/intranet solutions on a wide range of platforms. The market in which Cayenne participates is characterized by frequent and rapid changes in hardware and software technology and in customer preferences, and therefore, the Company has devoted much effort to enhance its product offerings and to improve its competitive position through: development efforts, strategic alliances and acquisitions. These actions have had an adverse effect on the Company's operating results during fiscal 1994, 1995 and 1996 the six-month transition period ended December 31, 1996 and the six months ended June 30, 1997. Cayenne's executive offices, principal research and development facilities, and principal marketing, customer service and support and production facilities are located in approximately 62,000 square feet of space in an executive office park in Burlington, Massachusetts. Cayenne occupies that space under a lease expiring October 31, 1997. Cayenne is currently negotiating for renewal of its lease. There is currently substantial demand for general office space in the Greater Boston area; and Cayenne may experience an increase in rental expense for periods after October 1997, as well as expenses for moving if Cayenne ultimately arranges to lease other space. Cayenne maintains its primary sales and support offices in nine locations in the United States, and its distribution subsidiaries have offices in Toronto, Canada; Bracknell, England; Wiesbaden and Munich, Germany; Singapore; Madrid, Spain; Delft, Netherlands; Canberra, Australia; and Florence, Milan, Rome, and Turin, Italy. SELLING STOCKHOLDERS The following table sets forth the number of shares of Common Stock owned by each of the Selling Stockholders as of August 12, 1997. Except as indicated, none of the Selling Stockholders has had a material relationship with the Company within the past three years other than as a result of the ownership of the Shares -11- 15 or other securities of the Company. Because the Selling Stockholders may offer all or some of the Shares which they hold pursuant to the offering contemplated by this Prospectus, and because there are currently no agreements, arrangements or understandings with respect to the sale of any of the Shares, no estimate can be given as to the amount of Shares that will be held by the Selling Stockholders after completion of this offering. The Shares offered by this Prospectus may be offered from time to time by the Selling Stockholders named below:
Shares Beneficially Owned Before Shares Registered the Offering for Sale Hereby1 ---------------- ------------------- Southbrook International 1,033,332 1,033,332 Investments, Ltd.2 Total 1,033,332 1,033,332 ================ ===================
(1) This Registration Statement shall also cover any additional shares of Common Stock which become issuable in connection with the shares registered for sale hereby by reason of any stock dividend, stock split, recapitalization or other similar transaction effected without the receipt of consideration which results in an increase in the number of the Registrant's outstanding shares of Common Stock. (2) Southbrook International Investments, Ltd. holds 100,000 shares of the company's Series C Convertible Preferred Stock, which may be converted to shares of Common Stock from time to time at a rate determined by the lower of the average quoted market price of the Common Stock for either (i) the ten trading days preceding the date of issuance or (ii) any five trading days during the period of thirty days before the conversion. The amount of Common Stock shown in the table reflects the amount into which the full 100,000 shares of Preferred Stock might have been converted on August 12, 1997 in accordance with the market-price formula. Because the number of shares of Common Stock that will be ultimately issued to Southbrook upon conversion of the preferred stock is dependent upon the conversion formula described above, that amount (and therefore the amount of Common Stock offered hereby) cannot be determined at this time. Southbrook also holds warrants to purchase an aggregate of 233,332 shares of Common Stock. The amount of Common Stock shown in the table reflects the amount that the Southbrook would be entitled to purchase upon exercise of the warrants in full. PLAN OF DISTRIBUTION The Common Stock may be sold from time to time by the Selling Stockholders, or by pledgees, donees, transferees or other successors in interest thereof. They may sell from time to time on one or more exchanges, in the over-the-counter market, or otherwise, at prices and at terms then prevailing or at prices related to the then current market price or in negotiated transactions. The shares may be sold by one or more of the following methods, without limitation: (a) a block trade in which the broker or dealer so engaged will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction, (b) purchases by a broker or dealer as principal and resale by such broker or dealer for its account pursuant to the Prospectus, as supplemented, (c) an exchange distribution in accordance with the rules of such exchange, (d) ordinary brokerage transactions and transactions in which the broker solicits purchasers, (e) privately negotiated transactions; if short sales; and (g) a combination of any such methods of sale. In addition, any securities covered by the Prospectus which qualify for sale pursuant to Rule 144 may be sold under Rule 144 rather than pursuant to the Prospectus, as supplemented. From time to time the Selling Stockholders may engage in short sales, short sales against the box, puts and calls and other transactions in securities of the Company or derivatives thereof, and may sell and deliver the shares in connection therewith. From time to time Selling Stockholders may pledge their shares pursuant to the margin provisions of their respective customer agreements with their respective brokers. Upon a default by a Selling Stockholder, the broker may offer and sell the pledged shares of Common Stock from time to time. -12- 16 To the extent required by applicable law, the specific Shares to be sold, the names of the Selling Shareholders, the respective purchase prices and public offering prices, the names of any such agent, broker-dealer or underwriter, and any applicable commissions or discounts with respect to a particular offer will be set forth in an accompanying Prospectus Supplement. Resales or reoffers of the Shares by the Selling Shareholders must be accompanied by a copy of this Prospectus. The Selling Shareholders and any agents, broker-dealers or underwriters that participate in the distribution of the Shares may be deemed to be underwriters, and any profit on the sale of the Shares by them, and any discounts, commissions or concessions received by them, may be deemed to be underwriting commissions or discounts under the Securities Act. LEGAL MATTERS The validity of the Common Stock offered hereby will be passed upon for the Company by Foley, Hoag & Eliot LLP, Boston, Massachusetts. EXPERTS The consolidated balance sheets as of December 31 and June 30, 1996 and 1995 and the consolidated statements of operations, stockholders' equity (deficit), and cash flows for the six month period ended December 31, 1996 and for each of the three years in the period ended June 30, 1996 of the Company incorporated by reference in this Registration Statement, have been incorporated by reference herein in reliance on the report of Coopers & Lybrand L.L.P., independent accountants, given on the authority of that firm as experts in accounting and auditing. The consolidated financial statements of Cadre Technologies, Inc. and its subsidiaries as of December 31, 1995 and for each of the two years in the period then ended, incorporated in this prospectus by reference from the Cayenne Software, Inc. Annual Report on Form 10-K for the year ended December 31, 1996 have been audited by Deloitte & Touche, LLP, independent auditors, as stated in their report which is incorporated herein by reference (which report expresses in unqualified opinion and includes an explanatory paragraph relating to substantial doubt about Cadre Technologies, Inc.'s ability to continue as a going concern), and have been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. -13- 17 No person has been authorized to give any information or to make any representations other than those contained in this Prospectus and, if given or made, such information or representations must not be relied upon as having been authorized by the Company or any Selling Shareholder. This Prospectus does not constitute an offer to sell or the solicitation of an offer to buy any securities other than the securities to which it relates or an offer to sell or the solicitation of an offer to buy such securities in any circumstances in which such offer or solicitation is unlawful. Neither the delivery of this Prospectus nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since the date hereof or the information contained herein is correct as of any time subsequent to its date. TABLE OF CONTENTS
Page The Company............................... 2 Available Information..................... 2 Information Incorporated by Reference.............................2 Forward-looking Statements.................3 Risk Factors............................. 4 Use of Proceeds............................9 Price Range of Common Stock and Dividends...........................10 Business..................................11 Selling Stockholders......................11 Plan of Distribution......................12 Legal Matters.............................13 Experts...................................13
1,873,332 Shares CAYENNE SOFTWARE, INC. Common Stock (par value $.01 per share) ----------------------- PROSPECTUS ----------------------- August __, 1997 18 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The Selling Stockholder(s) will bear all brokerage fees and commissions and similar charges relating to their sales of any of the registered shares. The following expenses of this registration (all estimated) will be borne by the Registrant:
SEC registration fee....................... $ 1,455 Printing and EDGAR filing.................. 5,000 Legal and accounting fees.................. 7,500 ------- ........................................... 13,955 =======
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Paragraph D of Article 6 of the Company's Articles provides that, to the maximum extent permitted by Massachusetts law (as the same exists or is subsequently amended), no director shall be personally liable to the Company or any of its stockholders for monetary damages arising out of the director's breach of fiduciary duty as a director of the Company. Section 13(b)(l 1/2) of the Massachusetts BCL provides that a Massachusetts corporation's articles of organization may state a provision eliminating or limiting the personal liability of a director to a corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, provided that such provision may not eliminate or limit the liability of a director (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under specified sections of the Massachusetts BCL establishing the liability of directors for certain unauthorized distributions and loans to insiders or (iv) for any transaction from which the director derived an improper personal benefit. Section 6 of Article VII of the the Company's By-Laws provides that the Company shall, to the extent legally permissible, indemnify each of its directors and officers (including persons who serve at its request as directors, officers or trustees of any organization in which the Company has an interest as a stockholder, creditor or otherwise), against all liabilities and expenses reasonably incurred by such persons in connection with the defense or disposition of any action, suit or proceeding in which they may be involved or with which they may be threatened by reason of being or having been such a director or officer, except with respect to any matter as to which they shall have been adjudicated not to have acted in good faith in the reasonable belief that their action was in the best interests of the Company. Section 67 of the Massachusetts BCL authorizes a Massachusetts corporation to indemnify its directors, officers, employees and other agents unless such person shall have been adjudicated in any proceeding not to have acted in good faith in the reasonable belief that such action was in the best interests of the corporation. The effect of these provisions would be to permit indemnification by the Company for, among other liabilities, (a) liabilities arising out of the Securities Act in connection with this Registration Statement (see Item 9 below). Section 67 of the Massachusetts BCL also affords a Massachusetts corporation the power to obtain insurance on behalf of its directors, officers, employees and agents against liabilities incurred by them in those capacities or out of their status as such, whether or not the corporation would have the power to indemnify them against those liabilities. The Company has procured a directors' and officers' liability and company II-1 19 reimbursement liability insurance policy that (a) insures directors and officers of the Company against losses (in excess of a deductible amount) arising from certain claims made against them by reason of certain acts done or attempted by such directors or officers and (b) insures the Company against losses (in excess of a deductible amount) arising from any such claims, but only if the Company is required or permitted to indemnify such directors or officers for such losses under statutory or common law or under provisions of the Company's articles of organization or by-laws. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a)...............................Exhibits: 3.1 Statement of Rights and Preferences of Series C Convertible Preferred Stock 4.1 Specimen Certificate representing Common Stock of the Company (filed as Exhibit 4.1 to the Company's Registration Statement on Form S-1, File No. 33-43401, and incorporated herein by reference) 4.2 Convertible Preferred Stock Purchase Agreement dated as of July 18, 1997 between the Company and Southbrook International Investments, Ltd. 4.3 Registration Rights Agreement dated as of July 18, 1997 4.4 Form of Warrant Agreement dated as of July 18, 1997 5.1 Opinion of Foley, Hoag & Eliot LLP 23.1 Consent of Coopers & Lybrand L.L.P. 23.2 Consent of Deloitte & Touche LLP 23.3 Consent of Foley, Hoag & Eliot LLP (included on Exhibit 5.1) 24.1 Power of Attorney (contained on the signature page) ITEM 17. UNDERTAKINGS. The undersigned Registrant hereby undertakes: (a) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement; II-2 20 (iii) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement; provided, however, that paragraphs 2 (a)(1)(i) and 2 (a)(1)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference herein. (b) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. 3. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-3 21 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the Town of Burlington, Massachusetts, on August 15, 1997. CAYENNE SOFTWARE, INC. By: /s/ Frederick H. Phillips ------------------------------------------ Frederick H. Phillips Vice President, Finance and Administration KNOW ALL MEN BY THESE PRESENTS that each individual whose signature appears below constitutes and appoints Peter J. Boni and Frederick H. Phillips, and each of them, his true and lawful attorneys-in-fact and agents with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing he may deem necessary or advisable to be done in connection with this Registration Statement, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ Peter J. Boni President and August 18, 1997 -------------------------- Chief Executive Officer, Peter J. Boni Director /s/ Frederick H. Phillips Vice President, Finance and Administration, August 15, 1997 -------------------------- Treasurer and Chief Financial Officer Frederick H. Phillips (Principal Financial and Accounting Officer) /s/ Charles W. Bachman Chairman of the Board August 8, 1997 -------------------------- of Directors Charles W. Bachman /s/ John J. Alexander Director August 11, 1997 -------------------------- John J. Alexander /s/ R. John Fletcher Director August 8, 1997 -------------------------- R. John Fletcher /s/ William H. D. Goddard Director August 14, 1997 -------------------------- William H. D. Goddard /s/ Roland Pampel Director August 11, 1997 -------------------------- Roland Pampel /s/ Allyn C. Woodward, Jr. Director August 11, 1997 -------------------------- Allyn C. Woodward, Jr.
II-4 22 INDEX OF EXHIBITS 3.1 Statement of Rights and Preferences of Series C Convertible Preferred Stock 4.1 Specimen Certificate representing Common Stock of the Company (filed as Exhibit 4.1 to the Company's Registration Statement on Form S-1, File No. 33-43401, and incorporated herein by reference) 4.2 Convertible Preferred Stock Purchase Agreement dated as of July 18, 1997 between the Company and Southbrook International Investments, Ltd. 4.3 Registration Rights Agreement dated as of July 18, 1997 4.4 Form of Warrant Agreement dated as of July 18, 1997 5.1 Opinion of Foley, Hoag & Eliot LLP 23.1 Consent of Coopers & Lybrand L.L.P. 23.2 Consent of Deloitte & Touche LLP 23.3 Consent of Foley, Hoag & Eliot LLP (included on Exhibit 5.1) 24.1 Power of Attorney (contained on the signature page) EX-3.1 2 RIGHTS AND PREFERENCES OF SERIES C CONVERTIBLE 1 EXHIBIT 3.1 STATEMENT OF THE RIGHTS AND PREFERENCES OF SERIES C CONVERTIBLE PREFERRED STOCK OF CAYENNE SOFTWARE, INC. Section 1. DESIGNATION, AMOUNT AND PAR VALUE. The series of preferred stock shall be designated as the Series C Convertible Preferred Stock (the "Preferred Stock"), and the number of shares so designated shall be 150,000 (which shall not be subject to increase without the written consent of the holders thereof). Each share of Preferred Stock shall have a par value of $1.00 per share and a stated value of $20.00 per share (the "Stated Value"). Section 2. DIVIDENDS. a. Holders of Preferred Stock (the "Holders") shall be entitled to receive, when and as declared by the Board of Directors of the Company (the "Board of Directors") out of funds legally available therefor, and the Company shall pay, cumulative dividends at the rate per share (as a percentage of the Stated Value per share) equal to 5% per annum, payable, at the Company's option, in cash or shares of Common Stock, in arrears at such time as the Company shall determine, but in no event later than the Conversion Date (as hereinafter defined). Dividends on the Preferred Stock shall accrue daily commencing the Original Issue Date (as defined in Section 7), and shall be deemed to accrue on such date whether or not earned or declared and whether or not there are profits, surplus or other funds of the Company legally available for the payment of dividends. The party that holds the Preferred Stock on an applicable record date for any dividend payment will be entitled to receive such dividend payment and any other accrued and unpaid dividends which accrued prior to such dividend payment date, without regard to any sale or disposition of such Preferred Stock subsequent to the applicable record date but prior to the applicable dividend payment date. Except as otherwise provided herein, if at any time the Company pays less than the total amount of dividends then accrued on account of the Preferred Stock, such payment shall be distributed ratably among the holders of the Preferred Stock based upon the number of shares held by each holder. Payment of dividends on the Preferred Stock is further subject to the provisions of Section 5(c)(iv). b. Notwithstanding anything to the contrary contained herein, the Company may not issue shares of Common Stock in payment of dividends on the Preferred Stock if: i. the number of shares of Common Stock at the time authorized, unissued and unreserved for all purposes, or held as treasury stock, is insufficient to issue such dividends in shares of Common Stock; ii. the shares of Common Stock to be issued in respect of such dividends are not registered for resale pursuant to an effective registration statement that names the recipient of such dividend as a selling stockholder thereunder; or 2 iii. the shares of Common Stock to be issued in respect of such dividends are not listed on the Nasdaq National Market, and any other exchange on which the Common Stock is then listed for trading. c. So long as any Preferred Stock shall remain outstanding, neither the Company nor any subsidiary thereof shall redeem, purchase or otherwise acquire directly or indirectly any Junior Securities (as defined in Section 7), nor shall the Company directly or indirectly pay or declare any dividend or make any distribution (other than a dividend or distribution described in Section 5) upon, nor shall any distribution be made in respect of, any Junior Securities, nor shall any monies be set aside for or applied to the purchase or redemption (through a sinking fund or otherwise) of any Junior Securities unless all dividends on the Preferred Stock for all past dividend periods shall have been paid. Section 3. VOTING RIGHTS. Except as otherwise provided herein and as otherwise required by law, each holder of Preferred Stock shall be entitled to vote on all matters submitted to the shareholders of the Corporation for their consideration and shall be entitled to cast that number of votes equal to the largest number of whole shares of Common Stock into which such holder's shares of Preferred Stock could be converted, pursuant to the provisions of Section 5 hereof, at the record date for the determination of shareholders entitled to vote on such matter. Except as otherwise required by law or expressly provided herein, the holders of shares of Preferred Stock, Series A Preferred Stock, Series B Preferred Stock and Common Stock shall vote together as a single class on all matters submitted to the shareholders of the Corporation for their consideration. So long as any shares of Preferred Stock are outstanding, the Company shall not, without the affirmative vote of the holders of a majority of the shares of the Preferred Stock then outstanding, alter or change adversely the powers, preferences or rights given to the Preferred Stock or authorize or create any class of stock ranking as to dividends or distribution of assets upon a Liquidation (as defined in Section 4) senior to, prior to or pari passu with the Preferred Stock. Section 4. LIQUIDATION. Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary (a "Liquidation"), the holders of Preferred Stock shall be entitled to receive out of the assets of the Company, whether such assets are capital or surplus, for each share of Preferred Stock an amount equal to the Stated Value plus all accrued but unpaid dividends per share, whether declared or not, before any distribution or payment shall be made to the holders of any Junior Securities, and if the assets of the Company shall be insufficient to pay in full such amounts, then the entire assets to be distributed shall be distributed among the holders of Preferred Stock ratably in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full. A sale, conveyance or disposition of all or substantially all of the assets of the Company or the effectuation by the Company of a transaction or series of related transactions in which more than 50% of the voting power of the Company is disposed of, or a consolidation or merger of the Company with or into any other company or companies shall not be treated as a Liquidation, but instead shall be subject to the provisions of Section 5. The Company shall mail written notice of any such Liquidation, not less than 45 days prior to the payment date stated therein, to each record holder of Preferred Stock. Section 5. CONVERSION. 3 a.(i) Each share of Preferred Stock shall be convertible into shares of Common Stock (subject to reduction pursuant to Sections 5(a)(iii) and 5(a)(iv) at the Conversion Ratio (as defined in Section 7) at the option of the holder in whole or in part at any time after the Original Issue Date. The holder shall effect conversions by surrendering the certificate or certificates representing the shares of Preferred Stock to be converted to the Company, together with the form of conversion notice attached hereto as Exhibit A (the "Holder Conversion Notice"). Each Holder Conversion Notice shall specify the number of shares of Preferred Stock to be converted and the date on which such conversion is to be effected, which date may not be prior to the date the holder delivers such Holder Conversion Notice by facsimile (the "Holder Conversion Date"). If no Holder Conversion Date is specified in a Holder Conversion Notice, the Holder Conversion Date shall be the date that the Holder Conversion Notice is deemed delivered pursuant to Section 5(h). Subject to Sections 5(b), 5(a)(iii) and 5(a)(iv), each Holder Conversion Notice, once given, shall be irrevocable. If the holder is converting less than all shares of Preferred Stock represented by the certificate or certificates tendered by the holder with the Holder Conversion Notice, the Company shall promptly deliver to such holder a certificate for such number of shares as have not been converted. (ii) Subject to the conditions set forth in this Section 5(a)(ii), all outstanding and unconverted shares of Preferred Stock may be converted, at the option of the Company, into shares of Common Stock (subject to reduction pursuant to Sections 5(a)(iii) and 5(a)(iv)) at the Conversion Ratio on or after the second anniversary of the date on which the Underlying Securities Registration Statement (as defined in Section 7) has been declared effective by the Securities and Exchange Commission (the "Commission"), provided, that such Underlying Securities Registration Statement is effective on the Company Conversion Date (as defined below) and that the Underlying Shares (as defined in Section 7) are then listed on the Nasdaq National Market or Nasdaq SmallCap Market and each other securities exchange or market on which the Common Stock is then listed. The conversion date for any conversion pursuant to this Section 5(a)(ii) (the "Company Conversion Date") shall be not earlier than 20 days nor later than 5 days prior to the date on which the Company shall deliver to the holders of such outstanding and unconverted shares of Preferred Stock a notice of such conversion in the form attached hereto as Exhibit B (the "Company Conversion Notice"). A Holder Conversion Date and a Company Conversion Date are sometimes collectively referred to herein as the "Conversion Date" and a Holder Conversion Notice and a Company Conversion Notice are sometimes collectively referred to as a "Conversion Notice." Any conversion pursuant to this Section 5(a)(ii) shall be subject to Section 5(b) with respect to consequences of the Company's failure to deliver shares of Common Stock in respect of a conversion under this Section and to Sections 5(a)(iii) and 5(a)(iv). (iii) Certain Regulatory Approval. If on the Conversion Date applicable to any conversion under this Section 5(a), (A) the Common Stock is then listed for trading on the Nasdaq National Market or the American Stock Exchange or if the rules of the Nasdaq Stock Market are hereafter amended to extend Rule 4460(i) promulgated thereby (or any successor or replacement provision thereof) to the Nasdaq SmallCap Market and the Common Stock is then listed for trading on such market and (B) the Conversion Price then in effect is such that the aggregate number of shares of Common Stock that would then be issuable upon conversion of all outstanding shares of Preferred Stock, together with any shares of Common Stock previously issued upon conversion of 4 Preferred Stock, would equal or exceed 20% of the number of shares of Common Stock outstanding on the Original Issue Date (the "Issuable Maximum"), and the Company has not previously obtained "Shareholder Approval" (as defined below), then the Company shall issue to the converting holder of the Preferred Stock an amount of shares of Common Stock equal to the Issuable Maximum, such amount to be calculated based on each holder's percentage of total number of Preferred Shares outstanding on the Original Issue Date, and, with respect to any shares of Common Stock that would be issuable to such holder in respect of the Conversion Notice at issue in excess of the Issuable Maximum, (I) if the Conversion Price is equal to or less than $1.00 per share, the Company shall have the option or (II) if the Conversion Price is greater than $1.00 per share, the converting holder shall have the option to require the Company, to either (1) as promptly as possible, but in no event later than 60 days after such Conversion Date, convene a meeting of the holders of the Common Stock and obtain the Shareholder Approval or (2) redeem, from funds legally available therefor at the time of such redemption, the balance of the Preferred Stock subject to such Conversion Notice at a price per share equal to the product of (i) the average Per Share Market Value for the ten (10) Trading Days immediately preceding (1) the Conversion Date or (2) the date of payment in full by the Company of such redemption price, whichever is greater, and (ii) the Conversion Ratio calculated on (1) the Conversion Date or (2) calculated as if the Conversion Date (for purposes of determining the Conversion Price) were the date of payment by the Company of such redemption price, whichever date yields a lower Conversion Price denominator for the determination of the Conversion Ratio; provided, however, that if the Company shall elect to obtain Shareholder Approval under paragraph (1) above and the Company fails for any reason to obtain such Shareholder Approval within the time period set forth in (1) above, the Company shall be obligated to redeem the Preferred Stock not converted as a result of the provisions of this Section in accordance with the provisions of paragraph (2) above, and in such case the interest contemplated by the immediately succeeding sentence shall be deemed to accrue from the Conversion Date. If the Company shall elect to redeem shares of Preferred Stock pursuant to this Section and fails for any reason to pay the redemption price under (2) above within seven days after the Conversion Date, the Company will pay interest on such redemption price at a rate of 15% per annum to the converting holder of Preferred Stock, accruing from the Conversion Date until the redemption price plus any accrued interest thereon is paid in full. The entire redemption price, including interest thereon, shall be paid in cash. "Shareholder Approval" means the approval by a majority of the total votes cast on the proposal, in person or by proxy, at a meeting of the shareholders of the Company held in accordance with the Company's Articles of Organization and by-laws, of the issuance by the Company of shares of Common Stock exceeding the Issuable Maximum as a consequence of the conversion of Preferred Stock into Common Stock at a price less than the greater of the book or market value on the Original Issue Date as and to the extent required pursuant to Rule 4460(i) of the Nasdaq Stock Market or Rule 713 of the American Stock Exchange (or any successor or replacement provision thereof), as applicable. (iv) If on any Conversion Date applicable to a conversion under Section 5(a) or a redemption pursuant to Section 6, the average Per Share Market Value for the five Trading Days immediately preceding such Conversion Date exceeds the Initial Conversion Price (defined in Section 5(c)(i)) by more than 50%, the Conversion Price otherwise applicable to such conversion or repayment shall be increased by an amount equal to 50% of the difference between (A) the average Per Share Market Value for the five Trading Days immediately preceding such Conversion Date, and (B) 150% of the Initial Conversion Price. 5 b. Not later than three Trading Days after the Conversion Date, the Company will deliver to the holder (i) a certificate or certificates which shall be free of restrictive legends and trading restrictions (other than those then required by law and as set forth in the Purchase Agreement) representing the number of shares of Common Stock being acquired upon the conversion of shares of Preferred Stock (subject to reduction pursuant to Section 5(a)(iii)) and (ii) one or more certificates representing the number of shares of Preferred Stock not converted; provided, however, that the Company shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon conversion of any shares of Preferred Stock until certificates evidencing such shares of Preferred Stock are either delivered for conversion to the Company or any transfer agent for the Preferred Stock or Common Stock, or the holder of such Preferred Stock notifies the Company that such certificates have been lost, stolen or destroyed and provides a bond (or other adequate security reasonably acceptable to the Company) reasonably satisfactory to the Company to indemnify the Company from any loss incurred by it in connection therewith. The Company shall, upon request of the holder of the Preferred Stock, use its best efforts to deliver any certificate or certificates required to be delivered by the Company under this Section. If such certificate or certificates are not delivered by the date required under this Section 5(b), the holder shall be entitled by written notice to the Company at any time on or before its receipt of such certificate or certificates thereafter, to rescind such conversion, in which event the Company shall immediately return the certificates representing the shares of Preferred Stock tendered for conversion. If the Company fails to deliver to the holder such certificate or certificates pursuant to this Section, including for purposes hereof, any shares of Common Stock to be issued on the Conversion Date on account of accrued but unpaid dividends hereunder, by the seventh Trading Day after the Conversion Date, the Company shall pay to such holder, in cash, as liquidated damages and not as a penalty, $1,500 for each such Subsequent Trading Day after the Conversion Date until such certificates are delivered. If the Company fails to deliver to the holder such certificate or certificates pursuant to this Section prior to the 30th day after the Conversion Date, the Company shall, at the holder's option (i) redeem, from funds legally available therefor at the time of such redemption, such number of shares of Preferred Stock then held by such holder, as requested by such holder, and (ii) pay all accrued but unpaid dividends on account of the Preferred Stock for which the Company shall have failed to issue Common Stock certificates hereunder, in cash. The redemption price per share shall be equal to the product of (A) the average Per Share Market Value for the ten (10) Trading Days immediately preceding (1) the Conversion Date or (2) the date of payment in full by the Company of such redemption price, whichever is greater, and (ii) the Conversion Ratio calculated on (1) the Conversion Date or (2) calculated as if the Conversion Date (for purposes of determining the Conversion Price) were the date of payment by the Company of such redemption price, whichever date yields a lower Conversion Price denominator for the determination of the Conversion Ratio. If the holder has requested that the Company redeem shares of Preferred Stock pursuant to this Section and the Company fails for any reason to pay the redemption price under (2) above within seven days after such notice, the Company will pay interest on the redemption price at a rate of 15% per annum, in cash to such holder, accruing from such seventh day until the redemption price and any accrued interest thereon is paid in full. c. i. The conversion price for each share of Preferred Stock (the "Conversion Price") in effect on any Conversion Date shall be the lesser of (a) the lower of (1) the average Per Share Market Value for the ten (10) Trading Days immediately preceding the Original Issue Date and (2) 6 the average Per Share Market Value for the ten (10) Trading Days immediately preceding any issuance of Common Stock by the Company under Section 4(2) of the Securities Act within 60 days of the Original Issue Date which is approved by or on behalf of the original holder of Preferred Stock (the "Initial Conversion Price"), and (b) the average of the lowest Per Share Market Values for the five (5) Trading Days during the thirty (30) consecutive Trading Days immediately preceding such Conversion Date. ii. If the Company, at any time while any shares of Preferred Stock are outstanding, (a) shall pay a stock dividend or otherwise make a distribution or distributions on shares of its Junior Securities payable in shares of Common Stock, (b) subdivide outstanding shares of Common Stock into a larger number of shares, (c) combine outstanding shares of Common Stock into a smaller number of shares, or (d) issue by reclassification of shares of Common Stock any shares of capital stock of the Company, the Initial Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event and of which the denominator shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section 5(c)(ii) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification. iii. If the Company, at any time while any shares of Preferred Stock are outstanding, shall issue rights or warrants to all holders of Common Stock entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the Per Share Market Value of Common Stock at the record date mentioned below, the Initial Conversion Price shall be multiplied by a fraction, of which the denominator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding on the date of issuance of such rights or warrants plus the number of additional shares of Common Stock offered for subscription or purchase, and of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding on the date of issuance of such rights or warrants plus the number of shares which the aggregate offering price of the total number of shares so offered would purchase at such Per Share Market Value. Such adjustment shall be made whenever such rights or warrants are issued, and shall become effective immediately after the record date for the determination of stockholders entitled to receive such rights or warrants. However, upon the expiration of any right or warrant to purchase Common Stock the issuance of which resulted in an adjustment in the Initial Conversion Price pursuant to this Section 5(c)(iii), if any such right or warrant shall expire and shall not have been exercised, the Initial Conversion Price shall immediately upon such expiration be recomputed and effective immediately upon such expiration be increased to the price which it would have been (but reflecting any other adjustments in the Initial Conversion Price made pursuant to the provisions of this Section 5 after the issuance of such rights or warrants) had the adjustment of the Initial Conversion Price made upon the issuance of such rights or warrants been made on the basis of offering for subscription or purchase only that number of shares of Common Stock actually purchased upon the exercise of such rights or warrants actually exercised. iv. If the Company, at any time while shares of Preferred Stock are outstanding, shall distribute to all holders of Common Stock (and not to holders of Preferred Stock) evidences of its 7 indebtedness or assets or rights or warrants to subscribe for or purchase any security (excluding those referred to in Sections 5(c)(ii) and (iii) above), then in each such case the Initial Conversion Price at which each share of Preferred Stock shall thereafter be convertible shall be determined by multiplying the Initial Conversion Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the Per Share Market Value of Common Stock determined as of the record date mentioned above, and of which the numerator shall be such Per Share Market Value of the Common Stock on such record date less the then fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of Common Stock as determined by the Board of Directors in good faith; provided, however, that in the event of a distribution exceeding ten percent (10%) of the net assets of the Company, such fair market value shall be determined by a nationally recognized or major regional investment banking firm or firm of independent certified public accountants of recognized standing (which may be the firm that regularly examines the financial statements of the Company) (an "Appraiser") selected in good faith by the holders of a majority in interest of the shares of Preferred Stock then outstanding; and provided, further, that the Company, after receipt of the determination by such Appraiser shall have the right to select an additional Appraiser, in good faith, in which case the fair market value shall be equal to the average of the determinations by each such Appraiser. In either case the adjustments shall be described in a statement provided to the holders of Preferred Stock of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above. v. All calculations under this Section 5 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. vi. Whenever the Initial Conversion Price is adjusted pursuant to Section 5(c)(ii),(iii) or (iv), the Company shall promptly mail to each holder of Preferred Stock, a notice setting forth the Initial Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment. vii. In case of any reclassification of the Common Stock, any consolidation or merger of the Company with or into another person pursuant to which the Company will not be the surviving entity, the sale or transfer of all or substantially all of the assets of the Company or any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property, the holders of the Preferred Stock then outstanding shall have the right thereafter to, at their option, convert such shares only into the shares of stock and other securities, cash and property receivable upon or deemed to be held by holders of Common Stock following such reclassification, consolidation, merger, sale, transfer or share exchange, and the holders of the Preferred Stock shall be entitled upon such event to receive such amount of securities, cash or property as the shares of the Common Stock of the Company into which such shares of Preferred Stock could have been converted immediately prior to such reclassification, consolidation, merger, sale, transfer or share exchange would have been entitled. The terms of any such consolidation, merger, sale, transfer or share exchange shall include such terms so as to continue to give to the holder of Preferred Stock the right to receive the securities, cash or property set forth in this Section 8 5(c)(vii) upon any conversion following such consolidation, merger, sale, transfer or share exchange. This provision shall similarly apply to successive reclassifications, consolidations, mergers, sales, transfers or share exchanges. viii. If: A. the Company shall declare a dividend (or any other distribution) on its Common Stock; or B. the Company shall declare a special nonrecurring cash dividend on or a redemption of its Common Stock; or C. the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; or D. the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock of the Company, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, of any compulsory share of exchange whereby the Common Stock is converted into other securities, cash or property; or E. the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company; then the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of Preferred Stock, and shall cause to be mailed to the holders of Preferred Stock at their last addresses as they shall appear upon the stock books of the Company, at least 30 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided, however, that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. Holders are entitled to convert shares of Preferred Stock during the 30-day period commencing the date of such notice to the effective date of the event triggering such notice. d. The Company covenants that it will at all times reserve and keep available out of its authorized and unissued Common Stock solely for the purpose of issuance upon conversion of Preferred Stock and payment of dividends on Preferred Stock, each as herein provided, free from 9 preemptive rights or any other actual contingent purchase rights of persons other than the holders of Preferred Stock, such number of shares of Common Stock as shall be issuable (taking into account the adjustments and restrictions of Section 5(c)) upon the conversion of all outstanding shares of Preferred Stock and payment of dividends hereunder. The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly and validly authorized, issued and fully paid, nonassessable and freely tradeable. e. Upon a conversion hereunder the Company shall not be required to issue stock certificates representing fractions of shares of Common Stock, but may if otherwise permitted, make a cash payment in respect of any final fraction of a share based on the Per Share Market Value at such time. If the Company elects not, or is unable, to make such a cash payment, the holder of a share of Preferred Stock shall be entitled to receive, in lieu of the final fraction of a share, one whole share of Common Stock. f. The issuance of certificates for shares of Common Stock on conversion of Preferred Stock shall be made without charge to the holders thereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificate, provided that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the holder of such shares of Preferred Stock so converted and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. g. Shares of Preferred Stock converted into Common Stock shall be canceled and shall have the status of authorized but unissued shares of undesignated stock. h. Any and all notices or other communications or deliveries to be provided by the holders of the Preferred Stock hereunder, including, without limitation, any Conversion Notice, shall be in writing and delivered personally, by facsimile, sent by a nationally recognized overnight courier service or sent by certified or registered mail, postage prepaid, addressed to the attention of the Chief Financial Officer of the Company at the facsimile telephone number or address of the principal place of business of the Company as set forth in the Purchase Agreement. Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile, sent by a nationally recognized overnight courier service or sent by certified or registered mail, postage prepaid, addressed to each holder of Preferred Stock at the facsimile telephone number or address of such holder appearing on the books of the Company, or if no such facsimile telephone number or address appears, at the principal place of business of the holder. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 4:30 p.m. (Eastern Time), (ii) the date after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section later than 4:30 p.m. (Eastern Time) on any date and earlier than 11:59 p.m. (Eastern Time) on such date, (iii) four days after deposit in the United States mails, (iv) the Business Day following the date of mailing, if sent by 10 nationally recognized overnight courier service, or (v) upon actual receipt by the party to whom such notice is required to be given. i. Any right or power of the Holders may be waived with respect to any transaction by an instrument in writing signed by the Holders of not less than two-thirds (2/3) of the then-outstanding shares of Preferred Stock (excluding any shares then held by the Company or any subsidiary of the Company). Section 6. REDEMPTIONS. a. The Company shall have the right, exercisable at any time upon 30 Trading Days notice to the holders of the Preferred Stock given at any time on or after the third anniversary after the Original Issue Date, to redeem, from funds legally available therefor at the time of such redemption, all or any portion of the shares of Preferred Stock which have not previously been converted or redeemed, at a price per share equal to the product of (i) the average Per Share Market Value for the ten (10) Trading Days immediately preceding (1) the date of the redemption notice referenced above or (2) the date of payment in full by the Company of the redemption price hereunder, whichever is greater, and (ii) the Conversion Ratio calculated as if the Conversion Date (for purposes of determining the Conversion Price) were (1) the date of such redemption notice or (2) the date of payment by the Company of such redemption price, whichever date yields a lower Conversion Price denominator for the determination of the Conversion Ratio. The entire redemption price shall be paid in cash. Holders of Preferred Stock may convert any shares of Preferred Stock, including shares subject to a redemption notice given under this Section, during the period from the date of such redemption notice through the 30th Trading Day thereafter. b. The Company shall have the right, exercisable at any time upon 30 Trading Days notice to the Purchaser, given at any time after the Company has announced publicly a merger or consolidation in which the Company will not be the surviving entity, to redeem, from funds legally available therefor at the time of such redemption, all (but not less than all) of the then outstanding and unconverted shares of Preferred Stock. The redemption price for shares of Preferred Stock to be redeemed pursuant to this Section will be determined in accordance with Section 6(a) above and the payment of such redemption price shall be subject to the provisions of Section 6(c) below. Holders of Preferred Stock may convert any shares of Preferred Stock, including shares subject to a redemption notice given under this Section, during the period from the date of such redemption notice through the 30th Trading Day thereafter. c. If any portion of the redemption price under Section 6(a) or (b) shall not be paid by the Company within seven calendar days after the date due under such Sections, such redemption price shall be increased by 15% per annum until paid (which amount shall be paid as liquidated damages and not as a penalty). In addition, if any portion of such redemption price remains unpaid for more than seven calendar days after the date due, the holder of the Preferred Stock subject to such redemption may elect, by written notice to the Company given within 45 days after the date due, to either (i) demand conversion in accordance with the formula and the time frame therefor set forth in Section 5 of all of the shares of Preferred Stock for which such redemption price, plus accrued liquidated damages thereof, has not been paid in full (the "Unpaid Redemption Shares"), in which 11 event the Per Share Market Value for such shares shall be the lower of the Per Share Market Value calculated on the date such redemption price was originally due and the Per Share Market Value as of the holder's written demand for conversion, or (ii) invalidate ab initio such redemption, notwithstanding anything herein contained to the contrary. If the holder elects option (i) above, the Company shall within five Trading Days of its receipt of such election deliver to the holder the shares of Common Stock issuable upon conversion of the Unpaid Redemption Shares subject to such holder conversion demand and otherwise perform its obligations hereunder with respect thereto; or, if the Holder elects option (ii) above, the Company shall promptly, and in any event not later than five Trading Days from receipt of holder's notice of such election, return to the holder all of the Unpaid Redemption Shares. If, upon a holder election under option (i) above, the Company fails to deliver the shares of Common Stock issuable upon conversion of the Unpaid Redemption Shares within the time period set forth in this Section, the Company shall pay to the holder in cash, as liquidated damages and not as a penalty, $1,500 per day until the Company delivers such Common Stock to the holder. Section 7. DEFINITIONS. For the purposes hereof, the following terms shall have the following meanings: "Business Day" means any day of the year on which commercial banks are not required or authorized to be closed in New York, New York. "Common Stock" means shares now or hereafter authorized of the class of Common Stock, par value $0.01 per share, of the Company and stock of any other class into which such shares may hereafter have been reclassified or changed. "Conversion Ratio" means, at any time, a fraction, of which the numerator is Stated Value plus accrued but unpaid dividends (including any accrued but unpaid interest thereon), and of which the denominator is the Conversion Price at such time. "Junior Securities" means the Common Stock and all other equity securities of the Company, except the Series A Convertible Preferred Stock and Series B Convertible Preferred Stock. "Original Issue Date" shall mean the date of the first issuance of any shares of the Preferred Stock regardless of the number of transfers of any particular shares of Preferred Stock and regardless of the number of certificates which may be issued to evidence such Preferred Stock. "Per Share Market Value" means on any particular date (a) the closing bid price per share of the Common Stock on such date on the Nasdaq National Market or other stock exchange on which the Common Stock has been listed or if there is no such price on such date, then the closing bid price on such exchange on the date nearest preceding such date, or (b) if the Common Stock is not listed on the Nasdaq National Market or any stock exchange, the closing bid price for a share of Common Stock in the over-the-counter market, as reported by the Nasdaq Stock Market at the close of business on such date, or (c) if the Common Stock is not quoted on the Nasdaq Stock Market, the closing bid price for a share of Common Stock in the over-the-counter market as reported by the National Quotation Bureau Incorporated (or similar organization or agency succeeding to its 12 functions of reporting prices), or (d) if the Common Stock is not reported by the National Quotation Bureau Incorporated (or similar organization or agency succeeding to its functions of reporting prices), then the average of the "Pink Sheet" quotes for the relevant conversion period, as determined in good faith by the holder, or (e) if the Common Stock is not publicly traded the fair market value of a share of Common Stock as determined by an Appraiser selected in good faith by the holders of a majority in interest of the shares of the Preferred Stock; provided, however, that the Company, after receipt of the determination by such Appraiser, shall have the right to select an additional Appraiser, in which case, the fair market value shall be equal to the average of the determinations by each such Appraiser. "Person" means a corporation, an association, a partnership, organization, a business, an individual, a government or political subdivision thereof or a governmental agency. "Purchase Agreement" means the Convertible Preferred Stock Purchase Agreement, dated as of the Original Issue Date, between the Company and the original holder of the Preferred Stock. "Registration Rights Agreement" means the Registration Rights Agreement, dated the Original Issue Date, by and between the Company and the original holder of Preferred Stock. "Trading Day" means (a) a day on which the Common Stock is traded on the Nasdaq National Market or principal national securities exchange or market on which the Common Stock has been listed, or (b) if the Common Stock is not listed on the Nasdaq National Market or any stock exchange or market, a day on which the Common Stock is traded in the over-the-counter market, as reported by the OTC Bulletin Board, or (c) if the Common Stock is not quoted on the OTC Bulletin Board, a day on which the Common Stock is quoted in the over-the-counter market as reported by the National Quotation Bureau Incorporated (or any similar organization or agency succeeding its functions of reporting prices). "Underlying Shares" means the number of shares of Common Stock into which the Shares are convertible in accordance with the terms hereof and the Purchase Agreement. "Underlying Securities Registration Statement" means the registration statement filed by the Company, pursuant to the Registration Rights Agreement, covering the Underlying Shares and the Warrant Shares. "Warrant Shares" means the number of shares of Common Stock issuable upon the exercise in full of the Warrants. "Warrants" means the Common Stock purchase warrants issued by the Company to and as directed by the original holder of the Preferred Stock simultaneously with the closing of the purchase of Preferred Stock under the Purchase Agreement, pursuant to which the holders of the Warrants shall, collectively, have the right to acquire an aggregate of 700,000 shares of Common Stock (subject to adjustment as provided therein) at the exercise price per share set forth therein. 13 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 14 EXHIBIT A NOTICE OF CONVERSION AT THE ELECTION OF HOLDER (To be Executed by the Registered Holder in order to Convert shares of Preferred Stock) The undersigned hereby irrevocably elects to convert the number of shares of Series C Convertible Preferred Stock indicated below, into shares of Common Stock, par value $.01 per share (the "Common Stock"), of Cayenne Software, Inc. (the "Company") according to the conditions hereof, as of the date written below. If shares are to be issued in the name of a person other than undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith. No fee will be charged to the holder for any conversion, except for such transfer taxes, if any. Conversion calculations: Date to Effect Conversion Number of shares of Preferred Stock to be Converted Number of shares of Common Stock to be Issued Applicable Conversion Price Signature Name: Address: 15 EXHIBIT B NOTICE OF CONVERSION AT THE ELECTION OF THE COMPANY The undersigned in the name and on behalf of Cayenne Software, Inc. (the "Company") hereby notifies the addressee hereof that the Company hereby elects to exercise its right to convert [ ] shares of its Series C Convertible Preferred Stock (the "Preferred Stock") held by the Holder into shares of Common Stock, par value $.01 per share (the "Common Stock") of the Company according to the terms hereof, as of the date written below. No fee will be charged to the Holder for any conversion hereunder, except for such transfer taxes, if any which may be incurred by the Company if shares are to be issued in the name of a person other than the person to whom this notice is addressed. Conversion calculations: Date to effect Conversion Number of shares of Preferred Stock to be Converted Number of shares of Common Stock to be Issued Applicable Conversion Price Name of Holder: Address of Holder: EX-4.2 3 PURCHASE AGREEMENT WITH SOUTHBROOK INTERNATIONAL 1 EXHIBIT 4.2 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT Between CAYENNE SOFTWARE, INC. and SOUTHBROOK INTERNATIONAL INVESTMENTS, LTD. ------------------------------ July 18, 1997 ------------------------------ - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 2 CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT, dated as of July 18, 1997 (this "Agreement"), by and among Cayenne Software, Inc., a Massachusetts corporation (the "Company"), and Southbrook International Investments, Ltd., a corporation organized and existing under the laws of the British Virgin Islands (the "Purchaser"). WHEREAS, subject to the terms and conditions set forth in this Agreement, the Company desires to issue and sell to the Purchaser and the Purchaser desires to acquire shares of the Company's Series C Convertible Preferred Stock, par value $1.00 per share (the "Series C Preferred"), the Company's Series D Convertible Preferred Stock, par value $1.00 per share (the "Series D Preferred"), and the Company's Series E Convertible Preferred Stock, par value $1.00 per share (the "Series E Preferred") (the Series C Preferred, Series D Preferred and Series E Preferred are collectively referred to herein as the "Preferred Stock". IN CONSIDERATION of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt of which is hereby acknowledged, the parties agree as follows: ARTICLE VIII CERTAIN DEFINITIONS Section 1.1. Certain Definitions. As used in this Agreement and unless the context requires a different meaning, the following terms have the meanings indicated: "Affiliate" means, with respect to any Person, any Person that, directly or indirectly, controls, is controlled by or is under common control with such Person. For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlled by" and "under common control with") shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or by contract or otherwise. "Business Day" means any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of New York are authorized or required by law or other government actions to close. "Closing Date" means, individually, the Initial Series C Closing Date, Subsequent Series C Closing Date, Series D Closing Date or Series E Closing Date, as applicable. 3 "Code" means the Internal Revenue Code of 1986, as amended, and the rules and regulations thereunder as in effect on the date hereof. "Commission" means the Securities and Exchange Commission. "Common Stock" means the Company's common stock, par value $0.01 per share. "Disclosure Materials" means, collectively, the SEC Documents, the disclosure package delivered to the Purchaser in connection with the offering by the Company of the Shares and the Warrants and the Schedules to this Agreement furnished by or on behalf of the Company pursuant to Section 3.1. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Lien" means, with respect to any asset, any mortgage, lien, pledge, encumbrance, right of first refusal, charge or security interest of any kind in or on such asset or the revenues or income thereon or therefrom. "Material Adverse Effect" shall have the meaning set forth in Section 3.1(a). "Original Issue Date" shall have the respective meanings (as applicable) set forth in the Statements of Rights and Preferences. "Person" means an individual or a corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind. "Preferred Stock" shall have the meaning set forth in the recitals hereto. "Purchase Price" shall have the meaning set forth in Section 2.2. "Registration Rights Agreement" means the registration rights agreement, dated as of the date hereof, by and between the Company and the Purchaser, in the form of Exhibit B, as the same may be amended, supplemented or otherwise modified in accordance with its terms. "Required Approvals" shall have the meaning set forth in Section 3.1(f). 4 "Robinson Silverman" shall mean Robinson Silverman Pearce Aronsohn & Berman LLP, 1290 Avenue of the Americas, New York, New York 10104. "SEC Documents" shall have the meaning set forth in Section 3.1(l). "Securities Act" means the Securities Act of 1933, as amended. "Shares" means the shares of Preferred Stock purchased by the Purchaser pursuant to this Agreement. "Statements of Rights and Preferences" shall have the meaning set forth in Section 2.1(b). "Subsequent Financing Notice" shall have the meaning set forth in Sections 2.2(b)(i). "Subsequent Sale" shall have the meaning set forth in Section 4.12(a). "Subsequent Sale Notice" shall have the meaning set forth in Section 4.12(a). "Subsidiaries" shall have the meaning set forth in Section 3.1(a). "Trading Day" shall have the meaning set forth in the Series C Terms. "Underlying Securities Registration Statement" shall have the meaning set forth in Section 3.1(f). "Underlying Shares" means the shares of Common Stock into which the Shares are convertible in accordance with the terms hereof and the Statements of Rights and Preferences. "Warrants" shall have the meaning set forth in Section 4.21. 5 ARTICLE IX PURCHASE AND SALE OF SHARES Section 2.1. Purchase and Sale of Shares. (a) Subject to the terms and conditions set forth herein, at the closings referred to below, the Company shall issue and sell to the Purchaser and the Purchaser shall purchase (i) up to 150,000 shares of Series C Preferred, (ii) up to 50,000 shares of Series D Preferred and (iii) up to 50,000 shares of Series E Preferred. (b) The Series C Preferred shall have the respective rights, preferences and privileges set forth in Exhibit A attached hereto (the "Series C Terms"), which shall be incorporated into a Statement of Rights and Preferences to be filed on or prior to the Initial Series C Closing Date (as defined below) by the Company with the Commonwealth of Massachusetts (the "Series C Statement of Rights and Preferences"). The Series D Preferred and Series E Preferred, if and when issued, shall have respective rights, preferences and privileges identical to the Series C Terms, mutatis mutandis, except that the Conversion Price (as defined below) for conversion of said Shares shall reset as of the Original Issue Date (as defined below) therefor. The Series D Preferred and Series E Preferred shall be authorized pursuant to statements of rights and preferences to be prepared by the Company, subject to the approval of the Purchaser, and filed on or prior to the Series D Closing Date (as defined below) and Series E Closing Date (as defined below), as applicable, by the Company with the Commonwealth of Massachusetts (such statements of rights and preferences, together with the Series C Statement of Rights and Preferences, are collectively referred to herein as the "Statements of Rights and Preferences"). For purposes of this Agreement, "Conversion Price," "Original Issue Date," "Conversion Date" "Trading Day" and "Per Share Market Value" shall have the meanings set forth in the Series C Terms. Section 2.2. Purchase Price. The purchase price per Share shall be $20.00. Section 2.3. The Closings. (a) The Series C Closings. (i) (A) The closing (the "Initial Series C Closing") of the purchase and sale of 100,000 shares of Series C Preferred (the "Initial Series C Shares") 6 shall take place at the offices of Robinson Silverman immediately following the execution hereof or such later date as the parties shall agree. The date of the Initial Series C Closing is hereinafter referred to as the "Initial Series C Closing Date." (B) At the Initial Series C Closing, (1) the Company shall deliver to the Purchaser one or more stock certificates representing the Initial Series C Shares and the Series C Warrants (as defined in Section 4.21), each registered in the name of the Purchaser, the legal opinion of Foley, Hoag & Eliot, counsel to the Company, substantially in the form of Exhibit C, and all other documents, instruments and writings required to have been delivered at or prior to the Initial Series C Closing by the Company pursuant to this Agreement, and (2) the Purchaser shall deliver to the Company $2,000,000, in United States dollars in immediately available funds by wire transfer to an account designated in writing by the Company for such purpose prior to the Initial Series C Closing Date, and all other documents, instruments and writings required to have been delivered at or prior to the Initial Series C Closing by the Purchaser pursuant to this Agreement. (ii) (A) The closing (the "Subsequent Series C Closing") of the purchase and sale of up to 50,000 shares of Series C Preferred (the "Subsequent Series C Shares") shall take place at the offices of Robinson Silverman on such date (the "Subsequent Series C Closing Date") as the Company may designate in a written notice to the Purchaser (a "Subsequent Financing Notice"), which the Company may deliver (x) no earlier than the date that the Company notifies, and presents evidence reasonably satisfactory to, the Purchaser in writing that the Company has raised at least $1,000,000 in financing on terms substantially similar in all economic respects to the terms hereof and the Series C Terms from sources approved by the Purchaser and (y) no later than the 60th day after the Initial Series C Closing Date (the "Subsequent Series C Closing Expiration Date"); provided, that in no case shall the Subsequent Series C Closing take place unless and until the conditions set forth in Section 5.1 have been satisfied or waived in accordance with the terms hereof. The Subsequent Financing Notice relating to the Subsequent Series C Shares shall specify the number of Subsequent Series C Shares to be issued and sold thereat. Notwithstanding anything to the contrary specified in the Subsequent Financing Notice relating to the Subsequent Series C Shares, the Subsequent Series C Closing may not occur prior to the 15th Trading Day after receipt by the Purchaser of such notice. (B) At the Subsequent Series C Closing, (1) the Company shall deliver to the Purchaser one or more stock certificates representing the Subsequent Series C Shares to be issued and sold thereat, registered in the name of the Purchaser and all other documents, instruments and writings required to 7 have been delivered at or prior to the Subsequent Series C Closing by the Company pursuant to this Agreement, and (2) the Purchaser shall deliver to the Company the purchase price for such Subsequent Series C Shares (calculated in accordance with Section 2.2), in United States dollars in immediately available funds by wire transfer to an account designated in writing by the Company for such purpose prior to the Subsequent Series C Closing Date, and all other documents, instruments and writings required to have been delivered at or prior to the Subsequent Series C Closing by the Purchaser pursuant to this Agreement. (b) The Series D Closing. (i) The closing (the "Series D Closing") of the purchase and sale of up to 50,000 shares of Series D Preferred (the "Series D Shares") to be issued and sold thereat in accordance with the terms and conditions set forth herein, shall take place at the offices of Robinson Silverman on such date (the "Series D Closing Date") as the Company may designate in a Subsequent Financing Notice relating to the Series D Shares, which the Company may deliver (x) no earlier than the 120th day after the earlier to occur of the Subsequent Series C Closing Date or the Subsequent Series C Closing Expiration Date and (y) no later than 200 days after the date hereof (the "Series D Closing Expiration Date"); provided, that in no case shall the Series D Closing take place unless and until the conditions set forth in Section 5.1 have been satisfied or waived in accordance with the terms hereof. Such Subsequent Financing Notice shall specify the number of Series D Shares that the Company intends to sell to the Purchaser at the Series D Closing. (ii) At the Series D Closing, (a) the Company shall deliver to the Purchaser one or more stock certificates representing the Series D Shares to be issued and sold thereat and the Series D Warrants (as defined in Section 4.21), each registered in the name of the Purchaser, and all other documents, instruments and writings required to have been delivered at or prior to the Series D Closing by the Company pursuant to this Agreement and (b) the Purchaser shall deliver to the Company (1) the purchase price for such Series D Shares (calculated in accordance with Section 2.2), in United States dollars in immediately available funds by wire transfer to an account designated in writing by the Company for such purpose and delivered to the Purchaser prior to the Series D Closing Date and (2) all other documents, instruments and writings required to have been delivered at or prior to the Series D Closing by the Purchaser pursuant to this Agreement. (c) The Series E Closing. (i) The closing (the "Series E Closing") of the purchase and sale of up to 50,000 shares of Series E Preferred (the "Series E Shares") to be issued and sold thereat in accordance with the terms and conditions set forth herein shall take place at the offices of Robinson 8 Silverman on such date (the "Series E Closing Date") as the Company may designate in a Subsequent Financing Notice relating to the Series E Shares, which the Company may deliver (x) no earlier than the 120th day after the earlier to occur of the Series D Closing Date or the Series D Closing Expiration Date and (y) no later than 320 days after the date hereof; provided, that in no case shall the Series E Closing take place unless and until the conditions set forth in Section 5.1 have been satisfied or waived in accordance with the terms hereof. Such Subsequent Financing Notice shall specify the number of Series E Shares that the Company intends to sell to the Purchaser at the Series E Closing. (ii) At the Series E Closing, (a) the Company shall deliver to the Purchaser one or more stock certificates representing the Series E Shares to be issued and sold thereat and the Series E Warrants (as defined in Section 4.21), each registered in the name of the Purchaser, and all other documents, instruments and writings required to have been delivered at or prior to the Series E Closing by the Company pursuant to this Agreement and (b) the Purchaser shall deliver to the Company (1) the purchase price for such Series E Shares (calculated in accordance with Section 2.2), in United States dollars in immediately available funds by wire transfer to an account designated in writing by the Company for such purpose and delivered to the Purchaser prior to the Series E Closing Date and (2) all other documents, instruments and writings required to have been delivered at or prior to the Series D Closing by the Purchaser pursuant to this Agreement. ARTICLE X REPRESENTATIONS AND WARRANTIES Section 3.1. Representations and Warranties of the Company. The Company hereby represents and warrants to the Purchaser as follows: (a) Organization and Qualification. The Company is a corporation, duly incorporated, validly existing and in good standing under the laws of The Commonwealth of Massachusetts, with the requisite corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted. The Company has no subsidiaries other than as set forth in the SEC Documents or in Schedule 3.1(a) (collectively, the "Subsidiaries"). Each of the Subsidiaries is a corporation, duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation, with the full corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted. Each of the Company and the Subsidiaries is duly qualified to do business and is in good standing as a foreign 9 corporation in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not, individually or in the aggregate, have a material adverse effect on the results of operations, assets, prospects, or financial condition of the Company and the Subsidiaries, taken as a whole (a "Material Adverse Effect"). (b) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated hereby, by the Warrants, by the Statements of Rights and Preferences and by the Registration Rights Agreement, and otherwise to carry out its obligations hereunder and thereunder. This Agreement, the Registration Rights Agreement, the Statements of Rights and Preferences and the Warrants are collectively referred to as the "Transaction Documents." The execution and delivery of the Transaction Documents by the Company and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Company. Each of the Transaction Documents has been duly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application. Neither the Company nor any Subsidiary is in violation of any of the provisions of its respective articles of organization, bylaws or other charter documents. (c) Capitalization. The authorized, issued and outstanding capital stock of the Company and each of the Subsidiaries is set forth in Schedule 3.1(c). No shares of Common Stock are entitled to preemptive or similar rights. Except as specifically disclosed in Schedule 3.1(c), there are no outstanding options, warrants, script rights to subscribe to, calls or commitments of any character whatsoever relating to, or, except as a result of the purchase and sale of the Shares and Warrants hereunder, securities, rights or obligations convertible into or exchangeable for, or giving any person any right to subscribe for or acquire any shares of Common Stock, or contracts, commitments, understandings, or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock, or securities or rights convertible or exchangeable into shares of Common Stock. (d) Issuance of Shares, Warrants, Warrant Shares and Underlying Shares. The Shares and the Warrants are duly authorized and, when paid for in accordance with the terms 10 hereof, shall be validly issued, fully paid and nonassessable, free and clear of any Liens. The Company, as at the Series C Closing Date, Series D Closing Date and Series E Closing Date, as the case may be, will have and at all times while the Shares and any Warrants are outstanding will maintain an adequate reserve of shares of Common Stock to enable it to perform its conversion and other obligations under this Agreement, the Warrants and the Statements of Rights and Preferences with respect to the number of Shares and Warrants issued and outstanding at such Closing Date, which reserve shall be no less than the sum of (i) twice the number of shares of Common Stock issuable hereunder and pursuant to the terms of the Statements of Rights and Preferences, assuming a conversion in full of all of the Shares on the Original Issue Date thereof and (ii) the number of shares of Common Stock issuable upon the exercise in full of the Warrants (the "Warrant Shares") to be issued at such Closing Date. When issued in accordance with the terms hereof and the Statements of Rights and Preferences, and the Warrants, the Underlying Shares and the Warrant Shares will be duly authorized, validly issued, fully paid and nonassessable, free and clear of all Liens. (e) No Conflicts. The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated thereby do not and will not (i) conflict with or violate any provision of its articles of organization or bylaws (each as amended through the date hereof) or (ii) subject to obtaining the consents specified in Section 3.1(f), conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company is a party, or (iii) to the knowledge of the Company result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or govern mental authority to which the Company is subject (including Federal and State securities laws and regulations), or by which any property or asset of the Company is bound or affected, except in the case of each of clauses (ii) and (iii), such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as could not, individually or in the aggregate, (x) adversely affect the legality, validity or enforceability of the Transaction Documents, (y) have a Material Adverse Effect or (z) adversely impair the Company's ability to perform fully on a timely basis its obligations under the Transaction Documents. The business of the Company is not being conducted in violation of any law, ordinance or regulation of any governmental authority, the violation of which would have a Material Adverse Effect. 11 (f) Consents and Approvals. Except as specifically set forth in Schedule 3.1(f), neither the Company nor any Subsidiary is required to obtain any consent, waiver, authorization or order of, or make any filing or registration with, any court or other federal, state, local or other govern mental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, except for (i) the filings of the Statements of Rights and Preferences with respect to the Shares with the Secretary of State of The Commonwealth of Massachusetts, which filings shall be effected prior to the applicable Closing Date, (ii) the filing of the registration statements covering the Underlying Shares and the Warrant Shares (the "Underlying Securities Registration Statement") with the Commission and the making of the applicable blue-sky filings under state securities laws, each as contemplated by the Registration Rights Agreement and (iii) other than, in all other cases, where the failure to obtain such consent, waiver, authorization or order, or to give or make such notice or filing, could not, individually or in the aggregate, (x) adversely affect the legality, validity or enforceability of the Transaction Documents, (y) have a Material Adverse Effect or (z) adversely impair the Company's ability to perform fully on a timely basis its obligations under the Transaction Documents (together with the consents, waivers, authorizations, orders, notices and filings referred to in Schedule 3.1(f), the "Required Approvals"). (g) Litigation; Proceedings. There is no action, suit, notice of violation, proceeding or investigation pending or, to the best knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries or any of their respective properties before or by any court, governmental or administrative agency or regulatory authority (Federal, state, county, local or foreign) which (i) relates to or challenges the legality, validity or enforceability of the Transaction Documents or the Shares (ii) could, individually or in the aggregate, have a Material Adverse Effect or (iii) could, individually or in the aggregate, adversely impair the ability of the Company to perform fully on a timely basis its obligations under the Transaction Documents. (h) No Default or Violation. Neither the Company nor any Subsidiary (i) is in default under or in violation of any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound, except such conflicts or defaults as do not have a Material Adverse Effect, (ii) is in violation of any order of any court, arbitrator or governmental body, except for such violations as do not have a Material Adverse Effect, or (iii) is in violation of any statute, rule or regulation of any governmental authority which could (individually or in the aggregate) (x) adversely affect the legality, validity or enforceability of 12 the Transaction Documents, (y) have a Material Adverse Effect or (z) adversely impair the Company's ability or obligation to perform fully on a timely basis its obligations under the Transaction Documents. (i) Certain Fees. No fees or commission will be payable by the Company to any broker, finder, investment banker or bank with respect to the consummation of the transactions contemplated hereby. (j) Disclosure Materials. The Disclosure Materials do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. (k) Private Offering. Neither the Company nor any Person acting on its behalf has taken or will take any action (including, without limitation, any offering of any securities of the Company under circumstances which would require the integration of such offering with the offering of the Shares, the Warrants the Underlying Shares or the Warrant Shares under the Securities Act) which might subject the offering, issuance or sale of the Shares, the Warrants the Underlying Shares or the Warrant Shares to the registration requirements of Section 5 of the Securities Act. (l) SEC Documents. The Company has filed all reports required to be filed by it under the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the three years preceding the date hereof (or such shorter period as the Company was required by law to file such material) (the foregoing materials being collectively referred to herein as the "SEC Documents") on a timely basis, or has received a valid extension of such time of filing. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the Commission promulgated thereunder, and none of the SEC Documents, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Documents comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the Commission with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved, except as may be otherwise indicated in such financial statements or the notes thereto, and fairly present in all material respects the financial position of the Company and its consolidated 13 subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal year-end audit adjustments. Since the date of the financial statements included in the Company's last filed Quarterly Report on Form 10-Q, there has been no event, occurrence or development that has had a Material Adverse Effect which is not specifically disclosed in any of the Disclosure Materials. (m) Seniority. No class of equity securities of the Company is senior to the Shares in right of payment, whether upon liquidation, dissolution or otherwise. (n) Exclusivity. The Company shall not issue and sell the Preferred Stock to any Person other than the Purchaser. (o) Form S-3 Eligibility. The Company is, and at each Closing Date will be, eligible to register securities for resale with the Commission under Form S-3 promulgated under the Securities Act. (p) Investment Company. The Company is not and is not an Affiliate of an "investment company" within the meaning of the Investment Company Act of 1940, as amended. Section 3.2. Representations and Warranties of the Purchaser. The Purchaser hereby represents and warrants to the Company as follows: (a) Organization; Authority. The Purchaser is a corporation duly and validly existing and in good standing under the laws of the jurisdiction of its incorporation. The Purchaser has the requisite power and authority to enter into and to consummate the transactions contemplated hereby and by the other Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The purchase of the Shares and the Warrants by the Purchaser hereunder has been duly authorized by all necessary action on the part of the Purchaser. Each of the Transaction Documents has been duly executed and delivered by the Purchaser or on its behalf and constitutes the valid and legally binding obligation of the Purchaser, enforceable against the Purchaser in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights generally and to general principles of equity. (b) Investment Intent. The Purchaser is acquiring the Shares, the Warrants, the Warrant Shares and the Underlying Shares for its own account for investment purposes only and not with a view to or for distributing or reselling such Shares, Warrants, Warrant Shares or Underlying Shares or any part thereof or interest therein, without prejudice, however, to the 14 Purchaser's right, subject to the provisions of the Transaction Documents, at all times to sell or otherwise dispose of all or any part of such Shares, Warrants, Warrant Shares or Underlying Shares under an effective registration statement under the Securities Act and in compliance with applicable state securities laws or under an exemption from such registration. (c) Purchaser Status. The Purchaser was not formed for the purpose of acquiring the Shares and the Warrants. At the time the Purchaser was offered the Shares and the Warrants, it was, and at the date hereof, it is, and at each Closing Date, it will be, an "accredited investor" as defined in Rule 501(a) under the Securities Act. (d) Experience of Purchaser. The Purchaser has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Shares, the Warrants, the Underlying Shares and the Warrant Shares, and has so evaluated the merits and risks of such investment. (e) Ability of Purchaser to Bear Risk of Investment. The Purchaser is able to bear the economic risk of an investment in the Shares, the Warrants, the Underlying Shares and the Warrant Shares and is able to afford a complete loss of such investment. (f) Prohibited Transactions. The Shares and the Warrants are not being acquired, directly or indirectly, with the assets of any "employee benefit plan", within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended. (g) Access to Information. The Purchaser acknowledges receipt of the Disclosure Materials and further acknowledges that it has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Shares and the Warrants and the merits and risks of investing in the Shares and the Warrants; (ii) access to information about the Company and the Company's financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment in the Company; and (iii) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense and that is necessary to make an informed investment decision with respect to the Shares and the Warrants and to verify the accuracy and completeness of the information contained in the Disclosure Materials. 15 (h) Reliance. The Purchaser understands and acknowledges that (i) the Shares and the Warrants are being offered and sold, and the Underlying Shares and the Warrant Shares are being offered, to it without registration under the Securities Act in a private placement that is exempt from the registration provisions of the Securities Act and (ii) the availability of such exemption depends in part on, and that the Company will rely upon the accuracy and truthfulness of, the foregoing representations and the Purchaser hereby consents to such reliance. The Company acknowledges and agrees that the Purchaser makes no representation or warranty with respect to the transactions contemplated hereby other than those specifically set forth in this Section 3.2. ARTICLE XI OTHER AGREEMENTS OF THE PARTIES Section 4.1. Transfer Restrictions. If the Purchaser should decide to dispose of any of the Shares or any portion of the Warrants (and upon conversion or exercise thereof, any Underlying Shares or Warrant Shares), the Purchaser understands and agrees that it may do so only (i) pursuant to an effective the registration statement under the Securities Act, (ii) pursuant to an available exemption from the registration requirements of the Securities Act or (iii) to the Company. In connection with any transfer of any Shares, Warrants, Underlying Shares or Warrant Shares other than pursuant to an effective registration statement or to the Company, the Company may require that the transferor provide to the Company an opinion of counsel experienced in the area of United States securities laws selected by the transferor, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such Shares, Warrants, Underlying Shares or Warrant Shares under the Securities Act or any state securities laws. The Purchaser agrees to the imprinting, so long as is required by this Section, of the following legend on certificates representing the Shares, Warrants, Underlying Shares or Warrant Shares: NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION 16 STATEMENT UNDER THE SECURITIES ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAW. The legend set forth above shall be removed upon the conversion of Shares or exercise of Warrants represented by such certificates at any time while an Underlying Securities Registration Statement is effective under the Securities Act or sooner if, in the opinion of counsel to the Company experienced in the area of United States securities laws such legend is no longer required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission). The Company agrees that it will provide the Purchaser, upon request, with a substitute stock certificate or certificates or warrant certificates, free from such legend at such time as such legend is no longer applicable. Section 4.2. Stop Transfer Instruction. The Company may not make any notation on its records or give instructions to any transfer agent of the Company which enlarge the restrictions on transfer set forth in Section 4.1 above. Section 4.3. Furnishing of Information. For so long as the Purchaser owns Shares, Warrants, Underlying Shares or Warrant Shares, the Company covenants to timely file (or obtain valid extensions in respect thereof) all reports required to be filed by the Company after the date hereof pursuant to Section 13(a) or 15(d) of the Exchange Act and to promptly furnish the Purchaser with true and complete copies of all such filings. If the Company is not at the time required to file reports pursuant to such sections, it will prepare and furnish to the Purchaser annual and quarterly financial statements, together with a discussion and analysis of such financial statements in form and substance substantially similar to those that would otherwise be required to be included in reports required by Section 13(a) or 15(d) of the Exchange Act in the time period that such filings would have been required to have been made under the Exchange Act. Section 4.4. Notice of Certain Events. The Company shall (i) advise the Purchaser promptly after obtaining knowledge thereof, and, if requested by the Purchaser, confirm such advice in writing, of (A) the issuance by any state securities commission of any stop order suspending the qualification or exemption from qualification of the Shares, Warrant Shares or Underlying Shares or the Common Stock for offering or sale in any jurisdiction, or the initiation of any proceeding for such purpose by any state securities commission or other regulatory authority, or (B) any event that makes any statement of a material fact made in the Disclosure Materials untrue or that requires the making of any additions to or changes in the 17 Disclosure Materials in order to make the statements therein, in the light of the circumstances under which they are made, not misleading, (ii) use its best efforts to prevent the issuance of any stop order or order suspending the qualification or exemption from qualification of the Shares, Warrant Shares or Underlying Shares or the Common Stock under any state securities or Blue Sky laws, and (iii) if at any time any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Shares, Warrant Shares or Underlying Shares or the Common Stock under any such laws, use its best efforts to obtain the withdrawal or lifting of such order at the earliest possible time. Section 4.5. Copies and Use of Disclosure Materials. The Company shall furnish the Purchaser, without charge, as many copies of the Disclosure Materials, and any amendments or supplements thereto, as the Purchaser may reasonably request. The Company consents to the use of the Disclosure Materials, and any amendments and supplements thereto, by the Purchaser in connection with resales of the Shares, the Warrant Shares or the Underlying Shares other than pursuant to an effective registration statement. Section 4.6. Modification to Disclosure Materials. If any event shall occur as a result of which, in the reasonable judgment of the Company, it becomes necessary or advisable to amend or supplement the Disclosure Materials in order to make the statements therein, in the light of the circumstances at the time the Disclosure Materials were delivered to the Purchaser, not misleading, or if it is necessary to amend or supplement the Disclosure Materials to comply with applicable law, the Company shall promptly prepare an appropriate amendment or supplement to the Disclosure Materials so that (i) as so amended or supplemented the Disclosure Materials will not include an untrue statement of material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time it is delivered to Purchaser, not misleading and (ii) the Disclosure Materials will comply in all material respects with applicable law. Section 4.7. Blue Sky Laws. In accordance with the Registration Rights Agreement, the Company shall qualify the Shares, the Warrants, the Warrant Shares and the Underlying Shares under the securities or Blue Sky laws of such jurisdictions as the Purchaser may reasonably request and to continue such qualification at all times through the third anniversary of the Closing Date; provided, however, that neither the Company nor its Subsidiaries shall be required in connection therewith to qualify as a foreign corporation where they are not now so qualified. 18 Section 4.8. Integration. The Company shall not and shall use its best efforts to ensure that no Affiliate shall sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Shares, the Warrant Shares or the Underlying Shares in a manner that would require the registration under the Securities Act of the sale of the Shares, the Warrant Shares or Underlying Shares to the Purchaser. Section 4.9. Furnishing of Rule 144A Materials. The Company shall, for so long as any of the Shares, Warrants, Warrant Shares or Underlying Shares remain outstanding and during any period in which it is not subject to Section 13 or 15(d) of the Exchange Act, make available to any registered holder of Shares or Underlying Shares in connection with any sale thereof and any prospective purchaser of such Shares, Warrants, Warrant Shares or Underlying Shares from such Person, the following information in accordance with Rule 144A(d)(4) under the Securities Act: a brief statement of the nature of the business of the Company and the products and services it offers and the Company's most recent audited balance sheet and profit and loss and retained earnings statements, and similar audited financial statements for such part of the two preceding fiscal years as the Company has been in operation. Section 4.10. Solicitation Materials. The Company shall not (i) distribute any offering materials in connection with the offering and sale of the Shares, Warrants, Warrant Shares or Underlying Shares other than the Disclosure Materials and any amendments and supplements thereto prepared in compliance herewith or (ii) solicit any offer to buy or sell the Shares, Warrants, Warrant Shares or Underlying Shares by means of any form of general solicitation or advertising. Section 4.11. Subsequent Financial Statements. The Company shall furnish to the Purchaser, promptly after they are filed with the Commission, a copy of all financial statements for any period subsequent to the period covered by the financial statements included in the Disclosure Materials. Section 4.12. Right of First Refusal; Certain Corporate Actions. (a) The Company shall not, directly or indirectly, without the prior written consent of the Purchaser, offer, sell, grant any option to purchase or otherwise dispose (or announce any offer, sale, grant or any option to purchase or other disposition) of any of its or its Affiliates equity or equity equivalent securities (a "Subsequent Sale") for a period of 180 days after the Closing Date, except (i) upon conversion of any of the Preferred Stock or exercise of any of the Warrants and upon conversion of securities issued in respect of the financings permitted pursuant to Section 2.3, (ii) as a stock dividend or 19 upon any subdivision of shares of Common Stock, provided that the securities issued pursuant to such stock dividend or subdivision are limited to additional shares of Common Stock, (iii) pursuant to subscriptions, warrants, options, convertible securities or other rights which are outstanding on the Closing Date, (iv) solely in consideration for the acquisition (whether by merger or otherwise) by the Company or any of its Subsidiaries of all or substantially all of the stock or assets of any other entity, (v) pursuant to a primary registered public offering under the Securities Act, (vi) pursuant to the exercise of options or purchase rights to purchase Common Stock granted to employees, consultants and directors of the Company pursuant to any stock purchase, stock option or employee stock bonus plan approved by the Board of Directors, (vii) securities issued to equipment lessors or institutional lenders in connection with lease of corporate equipment or borrowings by the Company as approved by the Company's Board of Directors, and (viii) upon the exercise of any right other than a right to purchase securities which was not itself in violation of the terms of this paragraph, unless (A) the Company delivers to the Purchaser a written notice (the "Subsequent Sale Notice") of its intention to effect such Subsequent Sale, which Subsequent Sale Notice shall describe in reasonable detail the proposed terms of such Subsequent Sale, the identity of the Persons who proposes to provide such Subsequent Sale and the amount of proceeds intended to be raised thereunder and (B) the Purchaser shall not have notified the Company by 5:00 p.m. (Eastern Time) on the tenth Business Day after its receipt of the Subsequent Sale Notice of its willingness to enter into good faith negotiations to provide (or to cause its sole designee to provide) financing to the Company on substantially the terms set forth in the Subsequent Sale Notice. If the Purchaser shall fail to notify the Company of its intention to enter into such negotiations within such time period, the Company may effect the Subsequent Sale substantially upon the terms and to the Persons (or Affiliates of such Persons) set forth in the Subsequent Sale Notice; provided, that the Company shall provide the Purchaser with a second Subsequent Sale Notice, and the Purchaser shall again have the right of first refusal set forth above in this paragraph (a), subject to the exceptions set forth above in this paragraph (a), if the Subsequent Sale subject to the initial Subsequent Sale Notice shall not have been consummated for any reason on the terms set forth in such Subsequent Sale Notice within 90 days after the date of the initial Subsequent Sale Notice with the Person (or an Affiliate of such Person) identified in the Subsequent Sale Notice. (b) For as long as Preferred Stock or Warrants outstanding, the Company shall not and shall cause the Subsidiaries not to, without the consent of the Purchaser, (i) amend its Restated Articles of Organization, bylaws or other charter documents so as to adversely affect any rights provided in the Transaction Documents to the Preferred Stock and the 20 Warrants; (ii) split, combine or reclassify its outstanding capital stock; (iii) redeem, repurchase or offer to repurchase or otherwise acquire shares of its Junior Securities (as defined in the Statements of Rights and Preferences); or (iv) enter into any agreement with respect to any of the foregoing. Section 4.13. Intentionally Omitted. Section 4.14. Availability of Common Stock. The Company has duly reserved a sum of 2,700,000 shares of authorized and unissued Common Stock for issuance upon the conversion of Series C Shares and the exercise all of the Series C Warrants. If at any time the Company does not have reserved sufficient shares of Common Stock to enable it to perform its conversion and exercise obligations hereunder it shall, at the option of the holders of Preferred Stock, shall redeem all Shares and Underlying Shares then held by such holders, pursuant to Section 4.16 hereto. Section 4.15. Listing of Underlying Shares and Warrant Shares. Prior to the Closing, the Company shall have filed an additional listing application with the Nasdaq National Market (and each other national securities exchange on which the Common Stock is then listed) for the listing of the Underlying Shares and the Warrant Shares. The Company shall, as promptly as possible, take all steps necessary to cause the Underlying Shares and Warrant Shares to be approved for listing in the Nasdaq National Market (and each other national securities exchange or market on which the Common Stock is then listed), and shall provide to the Purchaser evidence of such listing when approved and shall maintain the listing of its Common Stock on such exchange. Section 4.16. Purchaser's Rights if Trading in Common Stock is Suspended or Delisted. In the event that at any time within the three-year period after the Closing Date trading in the shares of the Common Stock is suspended, or if the Common Stock shall not listed for trading, on the Nasdaq National Market (other than as a result of the suspension of trading in securities on such market or exchange generally or temporary suspensions pending the release of material information and other than a suspension of trading on the Nasdaq National Market if the Common Stock is listed for trading, and not suspended, on the Nasdaq SmallCap Market within one Business Day after such suspension) for more than ten days, at the Purchaser's option exercisable by written notice to the Company, the Company shall redeem all Shares and all Underlying Shares then held by such Purchaser, at an aggregate purchase price equal to (A) the product of the average Per Share Market Value for the five Trading Days immediately preceding the day of such notice multiplied by the number of shares of Common Stock into which the Shares to be purchased are then convertible and exercisable (or 21 in the case of Underlying Shares, the number of Underlying Shares to be purchased), plus (B) interest on such amount accruing from the 7th day after such notice at the rate of 15% per annum. Section 4.17. No Violation of Applicable Law. Notwithstanding any provision of this Agreement to the contrary, if any redemption of Shares or Underlying Shares otherwise required under the Transaction Documents or the Statements of Rights and Preferences would be prohibited by the relevant provisions of the Massachusetts Business Corporation Law, such redemption shall be effected as soon as it is permitted under such law; provided, however, that, interest payable by the Company with respect to any such redemption shall continue to accrue in accordance with Section 4.16 during any such period. Section 4.18. Redemption Restrictions. Notwithstanding any provision of this Agreement to the contrary, if any redemption of Shares or Underlying Shares otherwise required under this Agreement would be prohibited in the absence of consent from any lender of the Company or of any Subsidiary, or by the holders of any class of securities of the Company, the Company shall use its best efforts to obtain such consent as promptly as practicable after the redemption is required. Interest payable by the Company with respect to any such redemption shall continue to accrue in accordance with Section 4.16 until such consent is obtained. Nothing contained in this Section shall be construed as a waiver by the Purchaser of any rights it may have by virtue of any breach of any representation or warranty of the Company herein as to the absence of any requirement to obtain any such consent. Section 4.19. Notice of Breaches. Each of the Company and the Purchaser shall give prompt written notice to the other of any breach of any representation, warranty or other agreement contained in the Transaction Documents, as well as any events or occurrences arising after the date hereof and prior to, with respect to the Series C Closing Date, the Series C Closing, with respect to the Series D Closing, the Series D Closing Date, or with respect to the Series E Closing, the Series E Closing Date, which could reasonably be likely to cause any representation or warranty or other agreement of such party, as the case may be, contained herein or therein to be incorrect or breached as of such Closing Date. However, no disclosure by either party pursuant to this Section shall be deemed to cure any breach of any representation, warranty or other agreement contained herein or in the other Transaction Documents. Neither the Company, any Subsidiary nor the Purchaser will take, or agree to commit to take, any action that is intended to make any representation or warranty of the Company or the Purchaser, as the case may be, contained herein or in the other Transaction Documents or in the Statements of Rights and Preferences inaccurate in any respect at such Closing Date. 22 Notwithstanding the generality of the foregoing, the Company shall promptly notify the Purchaser of any notice or claim (written or oral) that it receives from any lender of the Company to the effect that the consummation of the transactions contemplated by the Transaction Documents violates or would violate any written agreement or understanding between such lender and the Company, and the Company shall promptly furnish by facsimile to the holders of the Shares and Warrants a copy of any written statement in support of or relating to such claim or notice. Section 4.20. Conversion Procedures. Exhibit D attached hereto sets forth the procedures with respect to the conversion of the Shares, including the forms of conversion notice to be provided upon conversion, instructions as to the procedures for conversion, the form of legal opinion, if necessary, that shall be rendered to the Company's transfer agent and such other information and instructions as may be reasonably necessary to enable the Purchaser to exercise its right of conversion smoothly and expeditiously. Section 4.21. The Warrants. (a) The Series C Warrants. At the Initial Series C Closing, the Company shall issue to the Purchaser three Common Stock purchase warrants (the "Series C Warrants"), in accordance with the following terms: (i) one Series C Warrant shall entitle the Purchaser to acquire 66,666 shares of Common Stock at a price per share equal to 125% of the Per Share Market Value on the Initial Series C Closing Date in accordance with the terms thereof, (ii) one Series C Warrant shall entitle the Purchaser to acquire 66,666 shares of Common Stock at a price per share equal to 135% of the Per Share Market Value on the Initial Series C Closing Date in accordance with the terms thereof and (iii) one Series C Warrant shall entitle the Purchaser to acquire 100,000 shares of Common Stock at a price per share equal to 150% of the Per Share Market Value on the Initial Series C Closing Date in accordance with the terms thereof. (b) The Subsequent Warrants. At each of the Series D Closing and Series E Closing the Company shall issue to the Purchaser three Common Stock purchase warrants in accordance with the following terms: (i) one such warrant shall entitle the Purchaser to acquire a number of shares of Common Stock equal to the product of 66,666 and the Applicable Percentage (as defined below), at a price per share equal to 125% of the Per Share Market Value on the Series D Closing Date or Series E Closing Date (as applicable) in accordance with the terms thereof, (ii) one such warrant shall entitle the Purchaser to acquire a number of shares of Common Stock equal to the product of 66,666 and the Applicable Percentage, at a price per share equal to 135% of the Per Share Market Value on the Series D Closing Date or Series E 23 Closing Date (as applicable) in accordance with the terms thereof and (iii) one such warrant shall entitle the Purchaser to acquire a number of shares of Common Stock equal to the product of 100,000 and the Applicable Percentage, at a price per share equal to 150% of the Per Share Market Value on the Series D Closing Date or Series E Closing Date (as applicable) in accordance with the terms thereof. The "Applicable Percentage" shall equal the quotient (expressed as a percentage) of the purchase price paid for the Series D Shares or the Series E Shares (as applicable) over the aggregate of the purchase price paid for the Series C Shares at the Series C Closings. (c) The Warrants shall be substantially in the form of Exhibit E. ARTICLE XII CONDITIONS PRECEDENT TO CLOSING Section 5.1. Conditions Precedent to Obligation of the Purchaser to Purchase the Subsequent Series C Shares, Series D Shares and the Series E Shares. The obligation of the Purchaser to purchase the Series D Shares and the Series E Shares is subject to the satisfaction or waiver by the Purchaser, at or prior to the Series D Closing and the Series E Closing, as applicable, of each of the following conditions: (a) Prior Closings. The Initial Series C Closing and, in the case of the Series E Closing, the Series D Closing, shall have occurred; (b) Accuracy of the Company's Representations and Warranties. The representations and warranties of the Company contained herein shall be true and correct in all material respects as of the date when made and as of the Series D Closing Date and the Series E Closing Date, as applicable, as though made on such date; (c) Performance by the Company. The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by the Company at or prior to the Series D Closing or the Series E Closing, as applicable; (d) Underlying Securities Registration Statements. With respect to the Series D Closing, the Underlying Securities Registration Statement with respect to the Underlying Shares issuable on conversion of all outstanding Series C Shares and with respect to the Warrant Shares issuable upon exercise of the Series C Warrants shall have been declared effective under the Securities Act by the Commission at least 90 Trading Days prior 24 to the Series D Closing Date (provided that any Trading Days that the Purchaser is prohibited by, on behalf of, or at the direction of, the Company from trading under such registration statement shall be added to such 90 Trading Day period); and with respect to the Series E Closing, the Underlying Securities Registration Statement with respect to the Underlying Shares issuable on conversion of all outstanding Series D Shares and with respect to the Warrant Shares issuable upon exercise of the Series D Warrants shall have been declared effective under the Securities Act by the Commission for at least 90 Trading Days prior to the Series E Closing Date (provided that any Trading Days that the Purchaser is prohibited by, on behalf of, or at the direction of, the Company from trading under such registration statement shall be added to such 90 Trading Day period); and in each such case such Underlying Securities Registration Statement shall have remained effective and shall not be subject to any stop order; (e) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court of governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by the Transaction Documents; (f) No Material Adverse Effect. Since the date of the financial statements included in the Company's last filed Quarterly Report on Form 10-Q, no event which could have a Material Adverse Effect and no material adverse change in the financial condition or business of the Company shall have occurred which is not disclosed in the Disclosure Materials; (g) No Prohibitions. The purchase of and payment for the Shares (and upon conversion thereof, the Underlying Shares) shall not (i) be prohibited or enjoined (temporarily or permanently) by any applicable law or governmental regulation not in effect in such form at the date of this Agreement or (ii) subject the Purchaser to any penalty or other onerous condition under or pursuant to any applicable law or governmental regulation not in effect in such form at the date of this Agreement that would materially reduce the benefits to the Purchaser of the purchase of the Shares at issue (or, upon conversion thereof, the Underlying Shares); (h) No Suspensions of Trading in Common Stock. Trading in the Common Stock shall not have been suspended by the Commission or on the Nasdaq National Market or any other national securities exchange or market on which the Common Stock is listed or quoted (except for any suspension of trading of limited duration at the direction of the Company solely to permit dissemination of material information regarding the Company); 25 (i) Listing of Common Stock. The Common Stock shall have been at all times between the Series C Closing Date, the Series D Closing Date and the Series E Closing Date, as applicable, and on the applicable Closing Date be, listed for trading on the Nasdaq National Market, the New York Stock Exchange or the American Stock Exchange; (j) Change of Control. No Change of Control in the Company shall have occurred. "Change of Control" means the occurrence of any of (i) an acquisition after the date hereof by an individual or legal entity of in excess of 50% of the voting securities of the Company, (ii) a replacement of more than one-half of the members of the Company's board of directors which is not approved by those individuals who are members of the board of directors on the applicable Closing Date in one or a series of related transactions, (iii) the merger of the Company with or into another entity, consolidation or sale of all or substantially all of the assets of the Company in one or a series of related transactions or (iv) the execution by the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth above in (i), (ii) or (iii); (k) Market Price of Common Stock. The average of the Per Share Market Value for the Common Stock for the twenty (20) Trading Days prior to the applicable Closing Date shall not have been less than $2.00; (l) Legal Opinion. The Company shall have delivered to the Purchaser an opinion of outside legal counsel to the Company (and reasonably acceptable to the Purchaser) in substantially the form attached hereto as Exhibit D and dated the applicable Closing Date; (m) Required Approvals. All Required Approvals shall have been obtained; (n) Delivery of Stock Certificates and Warrants. The Company shall have delivered to Robinson Silverman, to hold in escrow pending the applicable Closing, stock certificate(s) representing the Shares and the Warrants being purchased at such Closing, registered in the name of the Purchaser, each in form satisfactory to the Purchaser; (o) Shares of Common Stock. On each applicable Closing Date the Company shall have duly reserved for issuance to the Purchaser the sum of (i) two times the number of Underlying Shares which would be issuable upon conversion in full of the Shares being issued and sold at such Closing, assuming such conversion occurred on the Original Issue Date for such Shares and (ii) the number of Warrant Shares issuable upon exercise in full of the Warrants to be issued at such Closing; and 26 (p) Performance of Conversion/Exercise Obligations. The Company shall have timely performed its conversion and exercise obligations in respect of the conversion or exercise (as the case may be) of previously issued Shares and Warrants. ARTICLE XIII MISCELLANEOUS Section 6.1. Fees and Expenses. Each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement, except as provided in the Registration Rights Agreement. The Company shall pay all stamp and other taxes and duties levied in connection with the issuance of the Shares (and upon conversion thereof, the Underlying Shares) and the Warrants (and upon exercise thereof, the Warrant Shares) pursuant hereto. The Purchaser shall be responsible for its own tax liability that may arise as a result of the investment hereunder or the transactions contemplated by this Agreement. Whether or not the transactions contemplated by this Agreement are consummated or this Agreement is terminated, the Company shall pay (i) all costs, expenses, fees and all taxes incident to and in connection with: (A) the preparation, printing and distribution of the Disclosure Materials and all amendments and supplements thereto (including, without limitation, financial statements and exhibits), and all preliminary and final Blue Sky memoranda and all other agreements, memoranda, correspondence and other documents prepared and delivered in connection herewith (B) the issuance and delivery of the Shares and the Warrants and, upon conversion of the Shares, the Underlying Shares and upon exercise of the Warrants, the Warrant Shares, (C) the qualification of the Shares and the Warrants and, upon conversion of the Shares, the Underlying Shares and upon exercise of the Warrants, the Warrant Shares for offer and sale under the securities or Blue Sky laws of the several states (including, without limitation, the fees and disbursements of the Purchasers' counsel relating to such registration or qualification), (D) furnishing such copies of the Disclosure Materials and all amendments and supplements thereto, as may reasonably be requested for use in connection with resales of the Shares and the Warrants and, upon conversion of the Shares, the Underlying Shares and upon exercise of the Warrants, the Warrant Shares, and (E) the preparation of certificates for the Shares and the Warrants and, upon conversion of the Shares, the Underlying Shares and upon exercise of the Warrants, the Warrant Shares (including, without limitation, printing and engraving thereof), (ii) all fees and expenses of the counsel and accountants of the Company and (iii) all expenses and listing fees in connection with the application for quotation of the Underlying Shares and the Warrant Shares in the Nasdaq National Market. 27 Section 6.2. Entire Agreement; Amendments. This Agreement, together with the Exhibits, and Schedules hereto, and the Registration Rights Agreement, the Statement of Rights and Preferences and the Warrants contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters. Section 6.3. Notices. Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be deemed to have been received (a) upon hand delivery (receipt acknowledged) or delivery by telex (with correct answer back received), telecopy or facsimile (with transmission confirmation report) at the address or number designated below (if delivered on a Business Day during normal business hours where such notice is to be received), or the first Business Day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second Business Day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be: If to the Company: Cayenne Software, Inc. 8 New England Executive Park Burlington, MA 01803 Facsimile No.: Attention: Frederick H. Phillips With copies to: Foley, Hoag & Eliot One Post Office Square Boston, MA 02109 Facsimile No.: (617) 832-7000 Attention: David W. Walker If to the Purchaser: Southbrook International Investments, Ltd. c/o Trippoak Advisors, Inc. 630 Fifth Avenue Suite 2000 New York, New York 10111 Facsimile: (212) 332-3256 Attention: Robert L. Miller 28 With copies to: Robinson Silverman Pearce Aronsohn & Berman LLP 1290 Avenue of the Americas New York, NY 10104 Facsimile No.: (212) 541-4630 Attn: Eric L. Cohen or such other address as may be designated in writing hereafter, in the same manner, by such person. Section 6.4. Amendments; Waivers. No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an amendment, by both the Company and the Purchaser, or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. Section 6.5. Headings. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. Section 6.6. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchaser. The Purchaser may not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Company, except that the Purchaser may assign its rights hereunder and under the Transaction Documents without the consent of the Company as long as the assignee demonstrates to the reasonable satisfaction of the Company its satisfaction of the representations and warranties set forth in Section 3.2. This provision shall not limit the Purchaser's right to transfer securities or transfer or assign rights hereunder or under the Registration Rights Agreement. Section 6.7. No Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns and, other than with respect to permitted assignees under Section 6.6, is not for the benefit of, nor may any provision hereof be enforced by, any other Person. Section 6.8. Governing Law; Arbitration. (a) This Agreement shall be governed by and construed and enforced in 29 accordance with the internal laws of the State of New York without regard to the principles of conflicts of law thereof. (b) All disputes between the parties hereto arising under the terms of this Agreement and the other Transaction Documents shall be arbitrated in New York City under the rules of the American Arbitration Association then in effect in the City of New York. Judgment on any award made by the arbitrators hereunder may be rendered in any court having jurisdiction. The parties consent to the nonexclusive jurisdiction of the State and Federal Courts sitting in New York County, New York, in connection with the enforcement of such award. The parties agree to keep confidential any materials, documents and other information that is disclosed in connection with any arbitration proceeding. Section 6.9. Survival. The representations and warranties of the Company and the Purchaser contained in Article III and the agreements and covenants of the parties contained in Article IV and this Article VI shall survive the Closing (or any earlier termination of this Agreement) and any conversion of Shares and exercise of Warrants hereunder. Section 6.10. Counterpart Signatures. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof. Section 6.11. Publicity. The Company and the Purchaser shall consult with each other in issuing any press releases or otherwise making public statements with respect to the transactions contemplated hereby and neither party shall issue any such press release or otherwise make any such public statement without the prior written consent of the other, which consent shall not be unreasonably withheld or delayed, except that no prior consent shall be required if such disclosure is required by law, in which such case the disclosing party shall provide the other party with prior notice of such public statement. Section 6.12. Severability. In case any one or more of the provisions of this Agreement shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will 30 attempt to agree upon a valid and enforceable provision which shall be a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement. Section 6.13. Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, the Purchaser will be entitled to specific performance of the obligations of the Company under this Agreement and the Company will be entitled to specific performance of the obligations of the Purchaser hereunder with respect to the subsequent transfer of Shares, Warrants, Warrant Shares and Underlying Shares. Each of the Company and the Purchaser agrees that monetary damages would not be adequate compensation for any loss incurred by reason of any breach of its obligations described in the foregoing sentence and hereby agrees to waive in any action for specific performance of any such obligation the defense that a remedy at law would be adequate. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK [SIGNATURE PAGE FOLLOWS] 31 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first indicated above. Company: CAYENNE SOFTWARE, INC. By:_____________________________________ Name: Title: Purchaser: SOUTHBROOK INTERNATIONAL INVESTMENTS, LTD. By:_____________________________________ Name: Title: EX-4.3 4 REGISTRATION RIGHTS AGREEMENT 1 EXHIBIT 4.3 REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (this "Agreement") is made and entered into as of July 18, 1997, by and among Cayenne Software, Inc., a Massachusetts corporation (the "Company"), and Southbrook International Investments, Ltd. a corporation organized and existing under the laws of the British Virgin Islands (the "Purchaser"). This Agreement is made pursuant to the Convertible Preferred Stock Purchase Agreement, dated as of the date hereof, by and among the Company and the Purchaser (the "Purchase Agreement"). The execution of this Agreement is a condition to the closing of the transactions contemplated by the Purchase Agreement. The Company and the Purchaser hereby agree as follows: 14. Definitions Capitalized terms used and not otherwise defined herein shall have the meanings given such terms in the Purchase Agreement. As used in this Agreement, the following terms shall have the following meanings: "Advice" shall have meaning set forth in Section 3(o). "Affiliate" means, with respect to any Person, any other Person that directly or indirectly controls or is controlled by or under common control with such Person. For the purposes of this definition, "control," when used with respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms of "affiliated," "controlling" and "controlled" have meanings correlative to the foregoing. "Business Day" means any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the state of New York generally are authorized or required by law or other government actions to close. "Certificate of Vote" shall have the meaning set forth in Section 4. "Commission" means the Securities and Exchange Commission. "Common Stock" means the Company's Common Stock, par value $0.01 per share. "Effectiveness Date" means (i) with respect to the Registration Statement to be filed with respect to the Series C Shares, the 100th day following the Initial Series C Closing Date, (ii) with respect to the Registration Statement to be filed with respect to the Series D Shares, the 100th day following the Series D Closing Date, and (iii) with respect to the -1- 2 Registration Statement to be filed with respect to the Series E Shares, the 100th day following the Series D Closing Date. "Effectiveness Period" shall have the meaning set forth in Section 2(a). "Event" shall have the meaning set forth in Section 4. "Event Date" shall have the meaning set forth in Section 4. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Filing Date" means (i) with respect to the shares of Common Stock issuable upon conversion of the Series C Shares and exercise of the Series C Warrants, the 30th day following the Initial Series C Closing Date, (ii) with respect to the shares of Common Stock issuable upon conversion of the Series D Shares and the Series D Warrants, the 30th day following the Series D Closing Date, and (iii) with respect to the shares of Common Stock issuable upon conversion of the Series E Shares and exercise of the Series E Warrants, the 30th day following the Series E Closing Date. "Holder" or "Holders" means the holder or holders, as the case may be, from time to time of Registrable Securities. "Indemnified Party" shall have the meaning set forth in Section 6(c). "Indemnifying Party" shall have the meaning set forth in Section 6(c). "Initial Series C Closing Date" means the date of the issuance and sale of the Initial Series C Shares pursuant to the Purchase Agreement. "Initial Series C Shares" means the shares of Preferred Stock issued and sold on the Initial Series C Closing Date pursuant to the Purchase Agreement. "Losses" shall have the meaning set forth in Section 6(a). "Managing Underwriter" means any managing underwriter retained by a Holder in connection with the offer and sale of Registrable Securities. "Person" means an individual or a corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind. "Preferred Stock" means the shares of Series C, Series D and Series E Convertible Preferred Stock, par value $1.00 per share, of the Company issued to the Purchaser pursuant to the Purchase Agreement. "Proceeding" means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened. -2- 3 "Prospectus" means the prospectus included in the Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by the Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus. "Registrable Securities" means (a) with respect to the Registration Statement to be filed after the Initial Series C Closing, the shares of Common Stock issuable upon conversion of the Series C Shares, shares of Common Stock issuable upon exercise of the Series C Warrants, and shares of Common Stock issuable as payment of dividends on the Series C Shares, (b) with respect to the Registration Statement to be filed after the Series D Closing, the shares of Common Stock issuable upon conversion of the Series D Shares, the shares of Common Stock issuable upon exercise of the Series D Warrants and the shares of Common Stock issuable as payment of dividends on the Series D Shares, and (c) with respect to the Registration Statement to be filed after the Series E Closing, the shares of Common Stock issuable upon conversion of the Series E Shares, shares of Common Stock issuable upon exercise of the Series E Warrants and the shares of Common Stock issuable as payment of dividends on the Series E Shares; provided, however that in order to account for the fact that the number of shares of Common Stock that are issuable upon conversion of shares of Preferred Stock is determined in part upon the market price of the Common Stock at the time of conversion, in the case of each (a), (b) and (c), Registrable Securities shall include a number of shares of Common Stock equal to no less than the sum of (1) two times the number of shares of Common Stock issuable upon conversion in full of the Preferred Stock, assuming such conversion occurred on the particular Closing Date for such shares of Preferred Stock, (2) the number of shares of Common Stock issuable upon exercise in full of the Warrants, assuming such exercise occurred on the particular issuance date for such Warrants, and (3) the number of Shares of Common Stock issuable on payment of dividends on such shares of Preferred Stock for the one year period after the applicable Closing Date, or such other number of shares of Common Stock as agreed to by the parties to the Purchase Agreement. Notwithstanding anything herein contained to the contrary, if the actual number of shares of Common Stock into which the Preferred Stock is convertible exceeds twice the number of shares of Common Stock into which particular shares of Preferred Stock are convertible based upon a computation as at a particular Closing Date, the term "Registrable Securities" shall be deemed to include such additional shares of Common Stock. If an additional Registration Statement is required to be filed because the actual number of shares of Common Stock into which the Preferred Stock are convertible, plus shares issuable upon payment of dividends as described above and shares issuable upon exercise of the Warrants exceeds the number of shares of Common Stock initially registered in respect of any particular series of Preferred Stock based upon the computation on a particular Closing Date, the Company shall have 10 Business Days after it makes such a determination or receives notice from the Holders of Registrable Securities as to such a determination to file such additional Registration Statement in accordance with the terms hereof. "Registration Statement" means the registration statement, contemplated by Section 2(a) (and any additional Registration Statements contemplated in the definition of Registrable Securities), including (in each case) the Prospectus, amendments and supplements -3- 4 to such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement. "Rule 144" means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. "Rule 158" means Rule 158 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. "Rule 415" means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. "Securities Act" means the Securities Act of 1933, as amended. "Series C Shares" means, collectively, the Initial Series C Shares and the Subsequent Series C Shares pursuant to the Purchase Agreement. "Series D Shares" means the shares of Preferred Stock issued and sold on the Subsequent Series D Closing Date pursuant to the Purchase Agreement. "Series D Closing Date" means the date of the issuance and sale of the Series D Shares pursuant to the Purchase Agreement. "Series E Shares" means the shares of Preferred Stock issued and sold on the Subsequent Series E Closing Date pursuant to the Purchase Agreement. "Series E Closing Date" means the date of the issuance and sale of the Series E Shares pursuant to the Purchase Agreement. "Subsequent Series C Shares" means the shares of Preferred Stock issued and sold on the Subsequent Series C Closing Date pursuant to the Purchase Agreement. "Initial Series C Closing Date" means the date of the issuance and sale of the Initial Series C Shares pursuant to the Purchase Agreement. "Tranche 2 Closing Date" means the date of the issuance and sale of the Tranche 2 Debentures pursuant to the Purchase Agreement. "Tranche 2 Debentures" means the Debentures issued and sold to the Purchaser on the Tranche 2 Closing Date. -4- 5 "Tranche 3 Closing Date" means the date of the issuance and sale of the Tranche 3 Debentures pursuant to the Purchase Agreement. "Tranche 3 Debentures" means the Debentures issued and sold to the Purchaser on the Tranche 3 Closing Date. "Special Counsel" means any special counsel to the Holders, for which the Holders will be reimbursed by the Company pursuant to Section 4. "Underwriter" means any underwriter retained by a Holder in connection with the offer and sale of Registrable Securities. "Underwritten Registration or Underwritten Offering" means a registration in connection with which securities of the Company are sold to an underwriter for reoffering to the public pursuant to an effective registration statement. "Warrants" means the Common Stock purchase warrants issued to or as directed by the Purchaser on each Closing Date. XV Shelf Registration 1. On or prior to each applicable Filing Date the Company shall prepare and file with the Commission a "Shelf" Registration Statement covering all Registrable Securi ties for an offering to be made on a continuous basis pursuant to Rule 415. The Registration Statement shall be on Form S-3 (or another appropriate form approved by the Holders of a majority of the Registrable Securities that permit registration of Registrable Securities for resale by the Holders in the manner or manners designated by them (including, without limitation, public or private sales and one or more Underwritten Offerings)). The Company shall (i) not permit any securities other than the Registrable Securities and those securities specifically listed on Schedule 8 attached hereto, to be included in the Registration Statement and (ii) use its best efforts to cause the Registration Statement to be declared effective under the Securities Act as promptly as possible after the filing thereof, but in any event prior to the Effectiveness Date, and to keep such Registration Statement continuously effective under the Securities Act until the date which is two years after the date that such Registration Statement is declared effective by the Commission or such earlier date when all Registrable Securities covered by such Registration Statement have been sold or may be sold pursuant to Rule 144 without volume restrictions as determined by the counsel to the Company pursuant to a written opinion letter, addressed to the Holders, to such effect (the "Effectiveness Period"); provided, however, that the Company shall not be deemed to have used its best efforts to keep the Registration Statement effective during the Effectiveness Period if it voluntarily takes any action that would result in the Holders not being able to sell the Registrable Securities covered by such Registration Statement during the Effectiveness Period, unless such action is required under applicable law or the Company has filed a post-effective amendment to the Registration Statement and the Commission has not declared it effective. 2. If the Holders of a majority of the Registrable Securities so elect, an offering of Registrable Securities pursuant to the Registration Statement may be effected in the form of an Underwritten Offering. In such event, and if the Managing Underwriters advise the Company and such Holders in writing that in their opinion the amount of Registrable -5- 6 Securities proposed to be sold in such Underwritten Offering exceeds the amount of Registrable Securities which can be sold in such Underwritten Offering, there shall be included in such Underwritten Offering the amount of such Registrable Securities which in the opinion of such Managing Underwriters can be sold, and such amount shall be allocated pro rata among the Holders proposing to sell Registrable Securities in such Underwritten Offering. 3. If any of the Registrable Securities are to be sold in an Underwritten Offering, the investment banker or investment bankers and manager or managers that will administer the offering will be selected by the Holders of a majority of the Registrable Securities included in such offering. No Holder may participate in any Underwritten Offering hereunder unless such Person (i) agrees to sell its Registrable Securities on the basis provided in any underwriting agreements approved by the Persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such arrangements. XVI Registration Procedures In connection with the Company's registration obligations hereunder, the Company shall: 1. Prepare and file with the Commission on or prior to each applicable Filing Date a Registration Statement on Form S-3 in accordance with the method or methods of distribution thereof as specified by the Holders, and cause the Registration Statement to become effective and remain effective as provided herein; provided, however, that not less than five (5) Business Days prior to the filing of the Registration Statement or any related Prospectus or any amendment or supplement thereto (including any document that would be incorporated or deemed to be incorporated therein by reference), the Company shall (i) furnish to the Holders, their Special Counsel and any Managing Underwriters, copies of all such documents proposed to be filed, which documents (other than those incorporated or deemed to be incorporated by reference) will be subject to the review of such Holders, their Special Counsel and such Managing Underwriters, and (ii) cause its officers and directors, counsel and independent certified public accountants to respond to such inquiries as shall be necessary, in the reasonable opinion of respective counsel to such Holders and such Underwriters, to conduct a reasonable investigation within the meaning of the Securities Act. The Company shall not file the Registration Statement or any such Prospectus or any amendments or supplements thereto to which the Holders of a majority of the Registrable Securities, their Special Counsel, or any Managing Underwriters, shall object. 2. (i) Prepare and file with the Commission such amendments, including post-effective amendments, to the Registration Statement as may be necessary to keep the Registration Statement continuously effective for the Effectiveness Period and prepare and file with the Commission such additional Registration Statements in order to register for resale under the Securities Act all of the Registrable Securities; (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement, and as so supplemented or amended to be filed pursuant to Rule 424 (or any similar provisions then in force) promulgated under the Securities Act; (iii) respond as promptly as practicable to any comments received from the Commission with respect to the Registration Statement or any amendment thereto and -6- 7 promptly provide the Holders true and complete copies of all correspondence from and to the Commission relating to the Registration Statement; and (iv) comply with the provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by the Registration Statement during the applicable period in accordance with the intended methods of disposition by the Holders thereof set forth in the Registration Statement as so amended or in such Prospectus as so supplemented. 3. Notify the Holders of Registrable Securities to be sold, their Special Counsel and any Managing Underwriters immediately (and, in the case of (i)(A) below, not less than five (5) days prior to such filing) and (if requested by any such Person) confirm such notice in writing no later than 3 Business Days following the day (i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to the Registration Statement is proposed to be filed; (B) when the Commission notifies the Company whether there will be a "review" of such Registration Statement and whenever the Commission comments on such Registration Statement; and (C) with respect to the Registration Statement or any post-effective amendment, when the same has become effective; (ii) of any request by the Commission or any other Federal or state governmental authority for amendments or supplements to the Registration Statement or Prospectus or for additional information; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose; (iv) if at any time any of the representations and warranties of the Company contained in any agreement (including any underwriting agreement) contemplated hereby ceases to be true and correct in all material respects; (v) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose; and (vi) of the occurrence of any event that makes any statement made in the Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to the Registration Statement, Prospectus or other documents so that, in the case of the Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 4. Use its best efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order suspending the effectiveness of the Registration Statement or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, at the earliest practicable moment. 5. If requested by any Managing Underwriter or the Holders of a majority of the Registrable Securities to be sold in connection with an Underwritten Offering, (i) promptly incorporate in a Prospectus supplement or post-effective amendment to the Registration Statement such information as such Managing Underwriters and such Holders reasonably agree should be included therein and (ii) make all required filings of such Prospectus supplement or such post-effective amendment as soon as practicable after the Company has received notification of the matters to be incorporated in such Prospectus supplement or post-effective amendment; provided, however, that the Company shall not be required to take any action pursuant to this Section 3(e) that would, in the opinion of counsel for the Company, violate applicable law. -7- 8 6. Furnish to each Holder, their Special Counsel and any Managing Underwriters, without charge, at least one conformed copy of each Registration Statement and each amendment thereto, including financial statements and schedules, all documents incorporated or deemed to be incorporated therein by reference, and all exhibits to the extent requested by such Person (including those previously furnished or incorporated by reference) promptly after the filing of such documents with the Commission. 7. Promptly deliver to each Holder, their Special Counsel, and any Underwriters, without charge, as many copies of the Prospectus or Prospectuses (including each form of prospectus) and each amendment or supplement thereto as such Persons may reasonably request; and the Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders and any Underwriters in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto. 8. Prior to any public offering of Registrable Securities, use its best efforts to register or qualify or cooperate with the selling Holders, any Underwriters and their respective counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as any Holder or Underwriter requests in writing, to keep each such registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Registrable Securities covered by a Registration Statement; provided, however, that the Company shall not be required to qualify to do business or to file a general consent to service of process in any jurisdiction. 9. Cooperate with the Holders and any Managing Underwriters to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold, which certificates shall be free of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as any such Managing Underwriters or Holders may request at least two Business Days prior to any sale of Registrable Securities. 10. Upon the occurrence of any event contemplated by Section 3(c)(vi), as promptly as practicable, prepare a supplement or amendment, including a post-effective amendment, to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, neither the Registration Statement nor such Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 11. Use its best efforts to cause all Registrable Securities relating to such Registration Statement to be listed on the Nasdaq National Market and any other securities exchange, market or over-the-counter bulletin board, if any, on which similar securities issued by the Company are then listed. -8- 9 12. Enter into such agreements (including an underwriting agreement in form, scope and substance as is customary in Underwritten Offerings) and take all such other actions in connection therewith (including those reasonably requested by any Managing Underwriters and the Holders of a majority of the Registrable Securities being sold) in order to expedite or facilitate the disposition of such Registrable Securities, and whether or not an underwriting agreement is entered into, (i) make such representations and warranties to such Holders and such Underwriters as are customarily made by issuers to underwriters in underwritten public offerings, and confirm the same if and when requested; (ii) obtain and deliver copies thereof to each Holder and the Managing Underwriters, if any, of opinions of counsel to the Company and updates thereof addressed to each selling Holder and each such Underwriter, in form, scope and substance reasonably satisfactory to any such Managing Underwriters and Special Counsel to the selling Holders covering the matters customarily covered in opinions requested in Underwritten Offerings and such other matters as may be reasonably requested by such Special Counsel and Underwriters; (iii) immediately prior to the effectiveness of the Registration Statement, and, in the case of an Underwritten Offering, at the time of delivery of any Registrable Securities sold pursuant thereto, obtain and deliver copies to the Holders and the Managing Underwriters, if any, of "cold comfort" letters and updates thereof from the independent certified public accountants of the Company (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements and financial data is, or is required to be, included in the Registration Statement), addressed to each selling Holder and each of the Underwriters, if any, in form and substance as are customary in connection with Underwritten Offerings; (iv) if an underwriting agreement is entered into, the same shall contain indemnification provisions and procedures no less favorable to the selling Holders and the Underwriters, if any, than those set forth in Section 7 (or such other provisions and procedures acceptable to the Managing Underwriters, if any, and holders of a majority of Registrable Securities participating in such Underwritten Offering); and (v) deliver such documents and certificates as may be reasonably requested by the Holders of a majority of the Registrable Securities being sold, their Special Counsel and any Managing Underwriters to evidence the continued validity of the representations and warranties made pursuant to clause 3(l)(i) above and to evidence compliance with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company. 13. Make available for inspection by the selling Holders, any representative of such Holders, any Underwriter participating in any disposition of Registrable Securities, and any attorney or accountant retained by such selling Holders or Underwriters, at the offices where normally kept, during reasonable business hours, all financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries, and cause the officers, directors, agents and employees of the Company and its subsidiaries to supply all information in each case requested by any such Holder, representative, Underwriter, attorney or accountant in connection with the Registration Statement; provided, however, that any information that is determined in good faith by the Company in writing to be of a confidential nature at the time of delivery of such information shall be kept confidential by such Persons, unless (i) disclosure of such information is required by court or administrative order or is necessary to respond to inquiries of regulatory authorities; (ii) disclosure of such information, in the opinion of counsel to such Person, is required by law; (iii) such information becomes generally available to the public other than as a result of a disclosure or failure to safeguard by such Person; or (iv) such information becomes available to such Person from a source other -9- 10 than the Company and such source is not known by such Person to be bound by a confidentiality agreement with the Company. 14. Comply with all applicable rules and regulations of the Commission and make generally available to its security holders earning statements satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 not later than 45 days after the end of any 12-month period (or 90 days after the end of any 12-month period if such period is a fiscal year) (i) commencing at the end of any fiscal quarter in which Registrable Securities are sold to Underwriters in a firm commitment or best efforts Underwritten Offering and (ii) if not sold to Underwriters in such an offering, commencing on the first day of the first fiscal quarter of the Company after the effective date of the Registration Statement, which statement shall cover said 12-month period, or end shorter periods as is consistent with the requirements of Rule 158. 15. Provide a CUSIP number for all Registrable Securities, not later than the effective date of the Registration Statement. The Company may require each selling Holder to furnish to the Company such information regarding the distribution of such Registrable Securities as is required by law to be disclosed in the Registration Statement and the Company may exclude from such registration the Registrable Securities of any such Holder who unreasonably fails to furnish such information within a reasonable time after receiving such request. If the Registration Statement refers to any Holder by name or otherwise as the holder of any securities of the Company, then such Holder shall have the right to require (i) the inclusion therein of language, in form and substance reasonably satisfactory to such Holder, to the effect that the ownership by such Holder of such securities is not to be construed as a recommendation by such Holder of the investment quality of the Company's securities covered thereby and that such ownership does not imply that such Holder will assist in meeting any future financial requirements of the Company, or (ii) if such reference to such Holder by name or otherwise is not required by the Securities Act or any similar Federal statute then in force, the deletion of the reference to such Holder in any amendment or supplement to the Registration Statement filed or prepared subsequent to the time that such reference ceases to be required. The Purchaser covenants and agrees that (i) it will not offer or sell any Registrable Securities under the Registration Statement until it has received copies of the Prospectus as then amended or supplemented as contemplated in Section 3(g) and notice from the Company that such Registration Statement and any post-effective amendments thereto have become effective as contemplated by Section 3(c) and (ii) the Purchaser and its officers, directors or Affiliates, if any, will comply with the prospectus delivery requirements of the Securities Act as applicable to them in connection with sales of Registrable Securities pursuant to the Registration Statement. Each Holder agrees by its acquisition of such Registrable Securities that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or 3(c)(vi), such Holder will forthwith discontinue disposition of such Registrable Securities until such Holder's receipt of the copies of the supplemented Prospectus and/or amended Registration Statement contemplated by Section 3(j), -10- 11 or until it is advised in writing (the "Advice") by the Company that the use of the applicable Prospectus may be resumed, and, in either case, has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such Prospectus or Registration Statement. XVII Liquidated Damages. The Company acknowledges and agrees that the Holders will suffer damages, and that it would not be feasible to ascertain the extent of such damages with precision, if (a) a Registration Statement shall not have been filed with the Commission on or prior to the applicable Filing Date, or (b) the Company fails to file with the Commission a request for acceleration in accordance with Rule 12d1-2 promulgated under the Securities Exchange Act of 1934, as amended, within five (5) days of the date that the Company is notified (orally or in writing, whichever is earlier) by the Commission that an Underlying Securities Registration Statement will not be "reviewed" or is not subject to further review or comment, or (c) a Registration Statement is not declared effective by the Commission on or prior to the applicable Effectiveness Date, or (d) a Registration Statement is filed with and declared effective by the Commission but thereafter ceases to be effective at any time prior to the expiration of the Effectiveness Period without being succeeded within 10 Business Days by a subsequent Registration Statement filed with and declared effective by the Commission, or (e) trading in the Common Stock shall be suspended for any reason for more than three Trading Days (as such term is defined under the Certificate of Vote of Directors Establishing A Series Of A Class Of Stock filed with the State of Massachusetts in respect of the Preferred Stock (the "Certificate of Vote")) or (f) if the conversion rights of the holders of the Preferred Stock as set forth in the Certificate of Vote are suspended for any reason (any such failure being referred to as an "Event," and for purposes of clauses (a), (c) and (f) the date on which such Event occurs, or, for purposes of clause (b) the date on which such five (5) day period is exceeded, or for purposes of clause (d) the date which such 10 Business Day-period is exceeded, or for purposes of clause (e) the date on which such three Trading Day period is exceeded, being referred to as "Event Date"), then the Company shall pay the Purchaser in cash, as liquidated damages and not as a penalty, 1.5% of the Purchase Price per month, payment thereof due on the day after such Event Date and thereafter on each monthly anniversary date of such Event Date, until such time as a subsequent Registration Statement is declared effective by the Commission, or until any Event contemplated by clause (e) or (f), as the case may be, is cured. The Company shall notify each Holder within five days of each Event and Event Date. The Company shall pay the liquidated damages due with respect to the Registrable Securities to each Holder of record as at the Event Date on a monthly basis, beginning with the date upon which such liquidated damages first accrue. XVIII Registration Expenses 1. All fees and expenses incident to the performance of or compliance with this Agreement by the Company shall be borne by the Company whether or not the Registration Statement is filed or becomes effective and whether or not any Registrable Securities are sold pursuant to the Registration Statement. The fees and expenses referred to in the foregoing sentence shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses (A) with respect to filings required to be made with the National Association of Securities Dealers, Inc. and (B) in compliance with state securities or Blue Sky laws (including, without limitation, fees and disbursements of -11- 12 counsel for the Underwriters or Holders in connection with Blue Sky qualifications of the Registrable Securities and determination of the eligibility of the Registrable Securities for investment under the laws of such jurisdictions as the Managing Underwriters, if any, or Holders of a majority of Registrable Securities may designate)), (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities and of printing prospectuses if the printing of prospectuses is requested by the Managing Underwriters, if any, or by the holders of a majority of the Registrable Securities included in the Registration Statement), (iii) messenger, telephone and delivery expenses, (iv) reasonable fees and disbursements of counsel for the Company and Special Counsel for the Holders, (v) fees and disbursements of all independent certified public accountants referred to in Section 3(l)(iii) (including, without limitation, the expenses of any special audit and "cold comfort" letters required by or incident to such performance), (vi) Securities Act liability insurance, if the Company so desires such insurance, and (vii) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement. In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit, the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange on which similar securities issued by the Company are then listed. 2. In connection with the Registration Statement, the Company shall reimburse the Holders for the fees and disbursements of one firm of attorneys chosen by the Holders of a majority of the Registrable Securities. XIX Indemnification 1. Indemnification by the Company. The Company shall, notwithstanding termination of this Agreement and without limitation as to time, indemnify and hold harmless each Holder, the officers, directors, agents (including any Underwriters retained by such Holder in connection with the offer and sale of Registrable Securities), brokers (including brokers who offer and sell Registrable Securities as principal as a result of a pledge or any failure to perform under a margin call of Common Stock), investment advisors and employees of each of them, each Person who controls any such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, agents and employees of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, costs of preparation and reasonable attorneys' fees) and expenses (collectively, "Losses"), as incurred, arising out of or relating to any untrue or alleged untrue statement of a material fact contained in the Registration Statement, any Prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or form of prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading, except to the extent, but only to the extent, that such untrue statements or omissions are based solely upon information regarding such Holder furnished in writing to the Company by or on behalf of such Holder expressly for use therein, which information was reasonably relied on by the Company for use therein or to the extent that such information relates to such Holder or such Holder's proposed method of distribution of Registrable -12- 13 Securities and was reviewed and expressly approved in writing by such Holder expressly for use in the Registration Statement, such Prospectus or such form of Prospectus or in any amendment or supplement thereto. The Company shall notify the Holders promptly of the institution, threat or assertion of any Proceeding of which the Company is aware in connection with the transactions contemplated by this Agreement. 2. Indemnification by Holders. In connection with the Registration Statement, each Holder shall furnish to the Company in writing such information as the Company reasonably requests for use in connection with the Registration Statement or any Prospectus and agrees, severally and not jointly, to indemnify and hold harmless the Company, their directors, officers, agents and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, to the fullest extent permitted by applicable law, from and against all Losses (as determined by a court of competent jurisdiction in a final judgment not subject to appeal or review) arising solely out of or based solely upon any untrue statement of a material fact contained in the Registration Statement, any Prospectus, or any form of prospectus, or arising solely out of or based solely upon any omission of a material fact required to be stated therein or necessary to make the statements therein not misleading to the extent, but only to the extent, that such untrue statement or omission is contained in any information so furnished in writing by such Holder to the Company specifically for inclusion in the Registration Statement or such Prospectus and that such information was reasonably relied upon by the Company for use in the Registration Statement, such Prospectus or such form of prospectus or to the extent that such information relates to such Holder or such Holder's proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in the Registration Statement, such Prospectus or such form of Prospectus. In no event shall the liability of any selling Holder hereunder be greater in amount than the dollar amount of the net proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation. 3. Conduct of Indemnification Proceedings. If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an "Indemnified Party"), such Indemnified Party promptly shall notify the Person from whom indemnity is sought (the "Indemnifying Party") in writing, and the Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof; provided, that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have proximately and materially adversely prejudiced the Indemnifying Party. An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed to pay such fees and expenses; or (2) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3) the named parties to any such Proceeding (including any impleaded parties) include both such -13- 14 Indemnified Party and the Indemnifying Party, and such Indemnified Party shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and such counsel shall be at the expense of the Indemnifying Party). The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding. All fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within 10 Business Days of written notice thereof to the Indemnifying Party (regardless of whether it is ultimately determined that an Indemnified Party is not entitled to indemnification hereunder; provided, that the Indemnifying Party may require such Indemnified Party to undertake to reimburse all such fees and expenses to the extent it is finally judicially determined that such Indemnified Party is not entitled to indemnification hereunder). 4. Contribution. If a claim for indemnification under Section 6(a) or 6(b) is unavailable to an Indemnified Party or is insufficient to hold such Indemnified Party harmless for any Losses in respect of which this Section would apply by its terms (other than by reason of exceptions provided in this Section), then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in Section 6(c), any attorneys' or other fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section was available to such party. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 6(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 6(d), the Purchaser shall not be required to contribute, in the aggregate, any amount in excess of the amount by which the proceeds actually received by the Purchaser from the sale of the -14- 15 Registrable Securities subject to the Proceeding exceeds the amount of any damages that the Purchaser 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. The indemnity and contribution agreements contained in this Section are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties. XX Rule 144 The Company shall file the reports required to be filed by it under the Securities Act and the Exchange Act in a timely manner and, if at any time the Company is not required to file such reports, they will, upon the request of any Holder, make publicly available other information so long as necessary to permit sales of its securities pursuant to Rule 144. The Company further covenants that it will take such further action as any Holder may reasonably request, all to the extent required from time to time to enable such Holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144. Upon the request of any Holder, the Company shall deliver to such Holder a written certification of a duly authorized officer as to whether it has complied with such requirements. XXI Miscellaneous 1. Remedies. In the event of a breach by the Company or by a Holder, of any of their obligations under this Agreement, each Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. The Company and each Holder agree that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate. 2. No Inconsistent Agreements. Except as set forth in Schedule 8 hereto, neither the Company nor any of its subsidiaries has, as of the date hereof, nor shall the Company or any of its subsidiaries, on or after the date of this Agreement, enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. Neither the Company nor any of its subsidiaries has previously entered into any agreement granting any registration rights with respect to any of its securities to any Person. Without limiting the generality of the foregoing, without the written consent of the Holders of a majority of the then outstanding Registrable Securities, the Company shall not grant to any Person the right to request the Company to register any securities of the Company under the Securities Act unless the rights so granted are subject in all respects to the prior rights in full of the Holders set forth herein, and are not otherwise in conflict or inconsistent with the provisions of this Agreement. 3. No Piggyback on Registrations. Except as set forth in Schedule 8 hereto, neither of the Company nor any of its security holders (other than the Holders in such -15- 16 capacity pursuant hereto) may include securities of the Company in the Registration Statement other than the Common Stock to be issued under the Purchase Agreement, and the Company shall not enter into any agreement providing any such right to any of its securityholders. 4. Piggy-Back Registrations. If at any time the Company shall determine to prepare and file with the Commission a registration statement relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with stock option or other employee benefit plans, the Company shall send to each holder of Registrable Securities written notice of such determination and, if within twenty (20) days after receipt of such notice, any such holder shall so request in writing, the Company shall include in such registration statement all or any part of the Registrable Securities such holder requests to be registered, except that if, in connection with any Underwritten Offering for the account of the Company the managing underwriter(s) thereof shall impose a limitation on the number of shares of Common Stock which may be included in the registration statement because, in such underwriter(s)' judgment, such limitation is necessary to effect an orderly public distribution of securities covered thereby, then the Company shall be obligated to include in such registration statement only such limited portion of the Registrable Securities for to which such holder has requested inclusion hereunder. Any exclusion of Registrable Securities shall be made pro rata among the holders seeking to include Registrable Securities, in proportion to the number of Registrable Securities sought to be included by such holders; provided, however, that the Company shall not exclude any Registrable Securities unless the Company has first excluded all outstanding securities the holders of which are not entitled by right to inclusion of securities in such registration statement; and provided, further, however, that, after giving effect to the immediately preceding proviso, any exclusion of Registrable Securities shall be made pro rata with holders of other securities having the right to include such securities in such registration statement. No right to registration of Registrable Securities under this Section shall be construed to limit any registration otherwise required hereunder. This Section 8(d) shall apply only at such times when all of the Registrable Securities issued and outstanding cannot be sold pursuant to an effective Registration Statement on Form S-3 and for a period not to exceed two years after the date of this Agreement. 5. Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the Company and the Holders of at least a majority of the then outstanding Registrable Securities; provided, however, that, for the purposes of this sentence, Registrable Securities that are owned, directly or indirectly, by the Company, or an Affiliate of the Company are not deemed outstanding. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders and that does not directly or indirectly affect the rights of other Holders may be given by Holders of at least a majority of the Registrable Securities to which such waiver or consent relates; provided, however, that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the immediately preceding sentence. -16- 17 6. Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 4:30 p.m. (Eastern Time) on a Business Day, (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in the Purchase Agreement later than 4:30 p.m. (Eastern Time) on any date and earlier than 11:59 p.m. (Eastern Time) on such date, (iii) the Business Day following the date of mailing, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The address for such communications shall be: If to the Company: Cayenne Software, Inc. 8 New England Executive Park Burlington, MA 01803 Facsimile No.: (617) 229-8124 Attention: Eugene J. DiDonato With copies to: Foley, Hoag & Eliot One Post Office Square Boston, MA 02109 Facsimile No.: (617) 832-7000 Attention: David W. Walker If to the Purchaser: Southbrook International Investments, Ltd. c/o Trippoak Advisors, Inc. 630 Fifth Avenue Suite 2000 New York, New York 10111 Facsimile No.: (212) 332-3256 Attention: Robert L. Miller with copies to: Brown Simpson, L.L.C. Carnegie Hall Tower 152 West 57th Street, 40th Floor New York, New York 10019 Facsimile No.: (212) 247-1329 Attn: James R. Simpson - and - Robinson Silverman Pearce Aronsohn & Berman LLP 1290 Avenue of the Americas New York, NY 10104 Facsimile No.: (212) 541-4630 -17- 18 Attn: Eric L. Cohen If to any other Person who is then the registered Holder: To the address of such Holder as it appears in the stock transfer books of the Company or such other address as may be designated in writing hereafter, in the same manner, by such Person. 7. Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties and shall inure to the benefit of each Holder. The Company may not assign its rights or obligations hereunder without the prior written consent of each Holder. A Holder may assign its rights hereunder in the manner and to the Persons as permitted under the Purchase Agreement. 8. Assignment of Registration Rights. The rights of the Purchaser hereunder, including the right to have the Company register for resale Registrable Securities in accordance with the terms of this Agreement, shall be automatically assignable by the Purchaser to any assignee or transferee of all or a portion of the shares of Preferred Stock, the Warrants or the Registrable Securities if: (i) the Purchaser agrees in writing with the transferee or assignee to assign such rights, and a copy of such agreement is furnished to the Company within a reasonable time after such assignment, (ii) the Company is, within a reasonable time after such transfer or assignment, furnished with written notice of (a) the name and address of such transferee or assignee, and (b) the securities with respect to such registration rights are being transferred or assigned, (iii) following such transfer or assignment the further disposition of such securities by the transferee or assignees restricted under the Securities Act and applicable state securities laws, (iv) at or before the time the Company receives the written notice contemplated by clause (ii) of this Section, the transferee or assignee agrees in writing with the Company to be bound by all of the provisions of this Agreement, and (v) such transfer shall have been made in accordance with the applicable requirements of the Purchase Agreement. The rights to assignment shall apply to the Purchaser's (and to subsequent) successors and assigns. 9. Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and, all of which taken together shall constitute one and the same Agreement. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature were the original thereof. 10. Governing Law; Arbitration;. (A) This Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to principles of conflicts of law thereof. (B) All disputes between the parties hereto arising under the terms of this Agreement shall be arbitrated in New York City under the rules of the American Arbitration Association then in effect in the City of New York. Judgment on any award made by the arbitrators hereunder may be rendered in any court having jurisdiction. The parties consent to -18- 19 the nonexclusive jurisdiction of the Federal and State Courts sitting in New York County, New York, in connection with the enforcement of such award. The parties agree to keep confidential any materials, documents or other information that is disclosed in connection with any arbitration proceeding. 11. Cumulative Remedies. The remedies provided herein are cumulative and not exclusive of any remedies provided by law. 12. Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. 13. Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 14. Shares Held by The Company and its Affiliates. Whenever the consent or approval of Holders of a specified percentage of Registrable Securities is required hereunder, Registrable Securities held by the Company or its Affiliates (other than the Purchaser or transferees or successors or assigns thereof if such Persons are deemed to be Affiliates solely by reason of their holdings of such Registrable Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] [SIGNATURE PAGE FOLLOWS] -19- 20 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. CAYENNE SOFTWARE, INC. By:______________________ Name: Title: SOUTHBROOK INTERNATIONAL INVESTMENTS, LTD. By:______________________ Name: Title: -20- EX-4.4 5 FORM OF WARRANT AGREEMENT DATED AS OF 7/18/1997 1 EXHIBIT 4.4 EXHIBIT E NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS. CAYENNE SOFTWARE, INC. WARRANT July 18, 1997 Cayenne Software, Inc., a Massachusetts corporation (the "Company"), hereby certifies that, for value received, Southbrook International Investments, Ltd., or its registered assigns ("Holder"), is entitled, subject to the terms set forth below, to purchase from the Company up to a total of [ ](1) shares of Common Stock, $.01 par value per share (the "Common Stock"), of the Company (each such share, a "Warrant Share" and all such shares, the "Warrant Shares") at an exercise price equal to [ ](2) per share (as adjusted from time to time as provided in Section 8, the "Exercise Price"), at any time and from time to time commencing on the earlier of (i) the date that is one year from the date hereof and (ii) six months from the date a registration statement covering the Warrant Shares is declared effective, and through and including - -------- (1) The number of shares per Warrant shall equal 66,666, 66,666 and 100,000, respectively. (2) Such exercise price shall equal 125%, 135% and 150% for each Warrant issued, respectively, of the average Per Share Market Value (as such term is defined in the Series C Statement of Rights and Preferences, Exhibit A to the Convertible Preferred Stock Purchase Agreement, dated as of the date hereof between the Holder and the Company (the "Series C Statement of Rights and Preferences")) for the ten (10) Trading Days (as such term is defined in the Statement of Rights and Preferences) immediately preceding the Original Issue Date (and in no event less than the par value of the Common Stock). -1- 2 [ ](1) (the "Expiration Date"), and subject to the following terms and conditions: (a) Registration of Warrant. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the "Warrant Register"), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, and the Company shall not be affected by notice to the contrary. (b) Registration of Transfers and Exchanges. (a) The Company shall register the transfer of any portion of this Warrant in the Warrant Register, upon surrender of this Warrant, with the Form of Assignment attached hereto duly completed and signed, to the Company at the office specified in or pursuant to Section 3(b). Upon any such registration or transfer, a new warrant to purchase Common Stock, in substantially the form of this Warrant (any such new warrant, a "New Warrant"), evidencing the portion of this Warrant so transferred shall be issued to the transferee and a New Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be issued to the transferring Holder. The acceptance of the New Warrant by the transferee thereof shall be deemed the acceptance of such transferee of all of the rights and obligations of a holder of a Warrant. (b) This Warrant is exchangeable, upon the surrender hereof by the Holder to the office of the Company specified in or pursuant to Section 3(b) for one or more New Warrants, evidencing in the aggregate the right to purchase the number of Warrant Shares which may then be purchased hereunder. Any such New Warrant will be dated the date of such exchange. (c) Duration and Exercise of Warrants. (a) This Warrant shall be exercisable by the registered Holder on any business day before 5:30 P.M., New York time, at any time and from time to time on or after the date hereof to and including the Expiration Date. At 5:30 P.M., New York time on the Expiration Date, the portion of this Warrant not exercised prior thereto shall be and become void and of no value. Prior to the Expiration Date, the Company may not call or otherwise redeem this Warrant without the prior written consent of the Holder. - -------- 1 2000, 2001 and 2002 in each Warrant issued, respectively. -2- 3 (b) Subject to Sections 2(b), 6 and 10, upon surrender of this Warrant, with the Form of Election to Purchase attached hereto duly completed and signed, to the Company at its office at 8 New England Executive Park, Burlington, MA 01803, Attention: Chief Financial Officer, or at such other address as the Company may specify in writing to the then registered Holder, and upon payment of the Exercise Price multiplied by the number of Warrant Shares that the Holder intends to purchase hereunder, in lawful money of the United States of America, in cash or by certified or official bank check or checks, all as specified by the Holder in the Form of Election to Purchase, the Company shall promptly (but in no event later than 3 business days after the Date of Exercise) issue or cause to be issued and cause to be delivered to or upon the written order of the Holder and in such name or names as the Holder may designate, a certificate for the Warrant Shares issuable upon such exercise, free of restrictive legends other than as required by applicable law. Any person so designated by the Holder to receive Warrant Shares shall be deemed to have become holder of record of such Warrant Shares as of the Date of Exercise of this Warrant. A "Date of Exercise" means the date on which the Company shall have received (i) this Warrant (or any New Warrant, as applicable), with the Form of Election to Purchase attached hereto (or attached to such New Warrant) appropriately completed and duly signed, and (ii) payment of the Exercise Price for the number of Warrant Shares so indicated by the holder hereof to be purchased. (c) This Warrant shall be exercisable, either in its entirety or, from time to time, for a portion of the number of Warrant Shares. If less than all of the Warrant Shares which may be purchased under this Warrant are exercised at any time, the Company shall issue or cause to be issued, at its expense, a New Warrant evidencing the right to purchase the remaining number of Warrant Shares for which no exercise has been evidenced by this Warrant. (d) Piggyback Registration Rights. During the term of this Warrant the Company may not file any registration statement with the Securities and Exchange Commission (other than registration statements of the Company filed on Form S-8 or Form S-4 including supplements thereto, but not additionally filed registration statements in respect of such securities, each as promulgated under the Securities Act of 1933, as amended, pursuant to which the Company is registering securities pursuant to a Company employee benefit plan or pursuant to a merger, acquisition or similar transaction) unless the Company provides the Holder with not less than five business days notice to each of the Holder and -3- 4 Robinson Silverman Peace Aronsohn & Berman LLP, attention Eric L. Cohen, notice of its intention to file such registration statement and provides the Purchaser the option to include any or all of the applicable Warrant Shares therein. The piggyback registration rights granted to the Holder pursuant to this Section shall continue until all of the Holder's Warrant Shares have been sold in accordance with an effective registration statement or upon the expiration of this Warrant. The Company will pay all registration expenses in connection therewith. (e) Demand Registration Rights. At any time during the term of this Warrant when the Warrant Shares are not registered pursuant to an effective registration statement, the Holder may make a written request for the registration under the Securities Act of 1933, as amended (a "Demand Registration"), of all or any portion of the Warrant Shares (the "Registrable Securities"), and the Company shall use its best efforts to effect such Demand Registration as promptly as possible, but in any case within 90 days thereafter. Any request for a Demand Registration shall specify the aggregate number of Registrable Securities proposed to be sold and shall also specify the intended method of disposition thereof. The right to cause a registration of the Registrable Securities under this Section 5 shall be limited to two such registrations. In any registration initiated as a Demand Registration, the Company will pay all registration expenses in connection therewith. A Demand Registration shall not be counted as a Demand Registration hereunder until such Demand Registration has been declared effective by the Securities and Exchange Commission and maintained continuously effective for a period of at least 360 days or such shorter period when all Registrable Securities included therein have been sold in accordance with such Demand Registration, provided, however that any days on which such registration statement is not effective or on which the Holder is not permitted by the Company or any governmental authority to sell Warrant Shares under such registration statement shall not count towards such 360 day period. (f) Payment of Taxes. The Company will pay all documentary stamp taxes attributable to the issuance of Warrant Shares upon the exercise of this Warrant; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the registration of any certificates for Warrant Shares or Warrants in a name other than that of the Holder, and the Company shall not be required to issue or cause to be issued or deliver or cause to be delivered the certificates for Warrant Shares unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. The -4- 5 Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving Warrant Shares upon exercise hereof. (g) Replacement of Warrant. If this Warrant is mutilated, lost, stolen or destroyed, the Company may in its discretion issue or cause to be issued in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant, a New Warrant, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and indemnity, if requested, satisfactory to it. Applicants for a New Warrant under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable charges as the Company may prescribe. (h) Reservation of Warrant Shares. The Company covenants that it will at all times reserve and keep available out of the aggregate of its authorized but unissued Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon exercise of this Warrant as herein provided, the number of Warrant Shares which are then issuable and deliverable upon the exercise of this entire Warrant, free from preemptive rights or any other actual contingent purchase rights of persons other than the Holders (taking into account the adjustments and restrictions of Section 9). The Company covenants that all Warrant Shares that shall be so issuable and deliverable shall, upon issuance and the payment of the applicable Exercise Price in accordance with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable. (i) Certain Adjustments. The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from time to time as set forth in this Section 9. Upon each such adjustment of the Exercise Price pursuant to this Section 9, the Holder shall thereafter prior to the Expiration Date be entitled to purchase, at the Exercise Price resulting from such adjustment, the number of Warrant Shares obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of Warrant Shares issuable upon exercise of this Warrant immediately prior to such adjustment and dividing the product thereof by the Exercise Price resulting from such adjustment. (a) If the Company, at any time while this Warrant is outstanding, (i) shall pay a stock dividend (except scheduled dividends paid on outstanding preferred stock as of the date hereof which contain a stated divided rate) or otherwise make a distribution or distributions on shares of its Common Stock (as defined below) or on any other class of capital stock and not the -5- 6 Common Stock) payable in shares of Common Stock, (ii) subdivide outstanding shares of Common Stock into a larger number of shares, or (iii) combine outstanding shares of Common Stock into a smaller number of shares, the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event and of which the denominator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding after such event. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision or combination, and shall apply to successive subdivisions and combinations. (b) In case of any reclassification of the Common Stock, any consolidation or merger of the Company with or into another person, the sale or transfer of all or substantially all of the assets of the Company or any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property, then the Holder shall have the right thereafter to exercise this Warrant only into the shares of stock and other securities and property receivable upon or deemed to be held by holders of Common Stock following such reclassification, consolidation, merger, sale, transfer or share exchange, and the Holder shall be entitled upon such event to receive such amount of securities or property equal to the amount of Warrant Shares such Holder would have been entitled to had such Holder exercised this Warrant immediately prior to such reclassification, consolidation, merger, sale, transfer or share exchange. The terms of any such consolidation, merger, sale, transfer or share exchange shall include such terms so as to continue to give to the Holder the right to receive the securities or property set forth in this Section 9(b) upon any exercise following any such reclassification, consolidation, merger, sale, transfer or share exchange. (c) If the Company, at any time while this Warrant is outstanding, shall distribute to all holders of Common Stock (and not to holders of this Warrant) evidences of its indebtedness or assets or rights or warrants to subscribe for or purchase any security (excluding those referred to in Sections 9(a), (b) and (d)), then in each such case the Exercise Price shall be determined by multiplying the Exercise Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the Exercise Price determined as of the record date mentioned above, and of which the numerator shall be such Exercise Price on such record date less the then fair market value at such -6- 7 record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of Common Stock as determined by the Company's independent certified public accountants that regularly examines the financial statements of the Company (an "Appraiser"). (d) If, at any time while this Warrant is outstanding, the Company shall issue or cause to be issued rights or warrants to acquire or otherwise sell or distribute shares of Common Stock to all holders of Common Stock for a consideration per share less than the Exercise Price then in effect, then, forthwith upon such issue or sale, the Exercise Price shall be reduced to the price (calculated to the nearest cent) determined by dividing (i) an amount equal to the sum of (A) the number of shares of Common Stock outstanding immediately prior to such issue or sale multiplied by the Exercise Price, and (B) the consideration, if any, received or receivable by the Company upon such issue or sale by (ii) the total number of shares of Common Stock outstanding immediately after such issue or sale. (e) For the purposes of this Section 9, the following clauses shall also be applicable: (i) Record Date. In case the Company shall take a record of the holders of its Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock or in Convertible Securities, or (B) to subscribe for or purchase Common Stock or Convertible Securities, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be. (ii) Treasury Shares. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock. (f) All calculations under this Section 8 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. (g) Whenever the Exercise Price is adjusted pursuant to Section 9(c) above, the Holder, after receipt of the determination by the Appraiser, shall have the right to select an additional appraiser (which shall be a nationally recognized accounting firm), in which case the adjustment shall be equal to -7- 8 the average of the adjustments recommended by each of the Appraiser and such appraiser. The Holder shall promptly mail or cause to be mailed to the Company, a notice setting forth the Exercise Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment. Such adjustment shall become effective immediately after the record date mentioned above. (h) If: (i) the Company shall declare a dividend (or any other distribution) on its Common Stock; or (ii) the Company shall declare a special nonrecurring cash dividend on or a redemption of its Common Stock; or (iii) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; or (iv) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock of the Company, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; or (v) the Company shall authorize the voluntary dissolution, liquidation or winding up of the affairs of the Company, then the Company shall cause to be mailed to each Holder at their last addresses as they shall appear upon the Warrant Register, at least 30 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of Common Stock of -8- 9 record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding up; provided, however, that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. (j) Fractional Shares. The Company shall not be required to issue or cause to be issued fractional Warrant Shares on the exercise of this Warrant. The number of full Warrant Shares which shall be issuable upon the exercise of this Warrant shall be computed on the basis of the aggregate number of Warrant Shares purchasable on exercise of this Warrant so presented. If any fraction of a Warrant Share would, except for the provisions of this Section 9, be issuable on the exercise of this Warrant, the Company shall pay an amount in cash equal to the Exercise Price multiplied by such fraction. (k) Notices. Any and all notices or other communications or deliveries hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 4:30 p.m. (New York time) on a business day, (ii) the business day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section later than 4:30 p.m. (New York time) on any date and earlier than 11:59 p.m. (New York time) on such date, (iii) the business day following the date of mailing, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The addresses for such communications shall be: (i) if to the Company, to CAYENNE SOFTWARE, INC., 8 New England Executive Park, Burlington, MA 01803, Attention: Chief Financial Officer, or to facsimile no. (617) 229-8124, or (ii) if to the Holder, to the Holder at the address or facsimile number appearing on the Warrant Register or such other address or facsimile number as the Holder may provide to the Company in accordance with this Section 11. (l) Warrant Agent. -9- 10 (a) The Company shall serve as warrant agent under this Warrant. Upon thirty (30) days' notice to the Holder, the Company may appoint a new warrant agent. (b) Any corporation into which the Company or any new warrant agent may be merged or any corporation resulting from any consolidation to which the Company or any new warrant agent shall be a party or any corporation to which the Company or any new warrant agent transfers substantially all of its corporate trust or shareholders services business shall be a successor warrant agent under this Warrant without any further act. Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder's last address as shown on the Warrant Register. (m) Miscellaneous. (a) This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and permitted assigns. This Warrant may be amended only in writing signed by the Company and the Holder. (b) Subject to Section 13(a), above, nothing in this Warrant shall be construed to give to any person or corporation other than the Company and the Holder any legal or equitable right, remedy or cause under this Warrant; this Warrant shall be for the sole and exclusive benefit of the Company and the Holder. (c) This Warrant shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware without regard to the principles of conflicts of law thereof. (d) The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any of the provisions hereof. (e) In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Warrant. -10- 11 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK, SIGNATURE PAGE FOLLOWS] -11- 12 IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its authorized officer as of the date first indicated above. CAYENNE SOFTWARE, INC. By:_________________________________________ Name:_______________________________________ Title:______________________________________ -12- 13 FORM OF ELECTION TO PURCHASE (To be executed by the Holder to exercise the right to purchase shares of Common Stock under the foregoing Warrant) To Cayenne Software, Inc.: In accordance with the Warrant enclosed with this Form of Election to Purchase, the undersigned hereby irrevocably elects to purchase _____________ shares of Common Stock ("Common Stock"), $.01 par value per share, of Cayenne Software, Inc. and encloses herewith $________ in cash, certified or official bank check or checks, which sum represents the aggregate Exercise Price (as defined in the Warrant) for the number of shares of Common Stock to which this Form of Election to Purchase relates, together with any applicable taxes payable by the undersigned pursuant to the Warrant. The undersigned requests that certificates for the shares of Common Stock issuable upon this exercise be issued in the name of PLEASE INSERT SOCIAL SECURITY OR TAX IDENTIFICATION NUMBER ______________________________________ ________________________________________________________________________________ (Please print name and address) ________________________________________________________________________________ ________________________________________________________________________________ If the number of shares of Common Stock issuable upon this exercise shall not be all of the shares of Common Stock which the undersigned is entitled to purchase in accordance with the enclosed Warrant, the undersigned requests that a New Warrant (as defined in the Warrant) evidencing the right to purchase the shares of Common Stock not issuable pursuant to the exercise evidenced hereby be issued in the name of and delivered to: ________________________________________________________________________________ (Please print name and address) ________________________________________________________________________________ ________________________________________________________________________________ Dated: ____________, _____ Name of Holder: (Print)_______________________________ (By:)_________________________________ (Name:) (Title:) (Signature must conform in all respects to name of holder as specified on the face of the Warrant) 14 [To be completed and signed only upon transfer of Warrant] FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto ________________________________ the right represented by the within Warrant to purchase ____________ shares of Common Stock of Cayenne Software, Inc. which the within Warrant relates and appoints ________________ attorney to transfer said right on the books of Cayenne Software, Inc. with full power of substitution in the premises. Dated: _______________, ____ ________________________________________ (Signature must conform in all respects to name of holder as specified on the face of the Warrant) ________________________________________ Address of Transferee ________________________________________ ________________________________________ In the presence of: _________________________________ EX-5.1 6 OPINION OF FOLEY, HOAG & ELIOT LLP 1 EXHIBIT 5.1 FOLEY, HOAG & ELIOT LLP One Post Office Square Boston, Massachusetts 02109 August 15, 1997 Cayenne Software, Inc. 8 New England Executive Park Burlington, MA 01803 Ladies and Gentlemen: We are familiar with the Registration Statement on Form S-3 transmitted for filing by the Company today (the "S-8 Registration Statement") relating to 1,873,332 shares (the "Shares") of the Company's Common Stock to be offered and sold by certain holders of Series C Convertible Preferred Stock (the "Preferred Stock") and Warrants of the Company (the "Selling Stockholders"). We are familiar with the Company's Articles of Organization and all amendments thereto, its By-Laws and all amendments thereto, the records of all meetings and consents of its Board of Directors and of its stockholders, and its stock records. We have examined such other records and documents as we deemed necessary or appropriate for purposes of rendering this opinion. Based upon the foregoing, we are of the opinion that (a) the Company has corporate power adequate for the issuance of the Shares in the manner set forth in the S-3 Registration Statement; (b) the Company has taken all necessary corporate action required to authorize the issuance and sale of the Shares to the Selling Stockholders upon conversion of Preferred Stock or exercise of Warrants; and (c) upon issuance in accordance with the applicable provisions of the Preferred Stock or the Warrants, the Shares will be legally issued, fully paid and non-assessable. We consent to the filing of this opinion as an exhibit to the S-3 Registration Statement. Very truly yours, FOLEY, HOAG & ELIOT LLP By: /s/ David W. Walker ------------------- a Partner EX-23.1 7 CONSENT OF COOPERS & LYBRAND L.L.P. 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS Board of Directors and Stockholders of Cayenne Software, Inc. We consent to the incorporation by reference in this Registration Statement of Cayenne Software, Inc. (formerly Bachman Information Systems, Inc.) on Form S-3 of our report, which included an explanatory paragraph about the merger of Cayenne Software, Inc. and Cadre Technologies Inc. which has been accounted for as a pooling of interests, dated February 25, 1997, on our audits of the consolidated financial statements of Cayenne Software, Inc. as of December 31, 1996 and June 30, 1996, and for the six month period ended December 31, 1996 and the year ended June 30, 1996, which report is included in the Annual Report on Form 10-K of Cayenne Software, Inc. for the transition period ended December 31, 1996. We also consent to the reference to our firm under the caption "Experts". COOPERS & LYBRAND L.L.P. Boston, Massachusetts August 18, 1997 EX-23.2 8 CONSENT OF DELOITTE & TOUCHE LLP 1 EXHIBIT 23.2 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in this Registration Statement of Cayenne Software, Inc. on Form S-3 of our report dated February 2, 1996 (relating to the consolidated financial statements of Cadre Technologies Inc. and its subsidiaries, which expresses an unqualified opinion and includes an explanatory paragraph relating to substantial doubt about Cadre Technologies Inc.'s ability to continue as a going concern) appearing in the Annual Report on Form 10-K of Cayenne Software, Inc. for the transition period ended December 31, 1996 and to the reference to us under the heading "Experts" in the Prospectus, which is part of this Registration Statement. Deloitte & Touche LLP Boston, MA August 15, 1997 -----END PRIVACY-ENHANCED MESSAGE-----