Exhibit 10.11

 

PURCHASE AGREEMENT

 

THIS PURCHASE AGREEMENT (“Agreement”) is made as of the 23rd day of April, 2004
by and among UNIFY CORPORATION, a Delaware corporation (the “Company”), and the
Investors set forth on the signature pages affixed hereto (each an “Investor”
and collectively the “Investors”).

 

Recitals

 

A.            The Company and the Investors are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the provisions of Regulation D (“Regulation D”), as promulgated by the U.S.
Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933,
as amended; and

 

B.            The Investors wish to purchase from the Company, and the Company
wishes to sell and issue to the Investors, upon the terms and conditions stated
in this Agreement, (i) an aggregate of 5,633,900 shares of the Company’s Common
Stock, par value $0.001 per share (the “Common Stock”), and (ii) warrants to
purchase an aggregate of 2,253,560 shares of Common Stock in the form attached
hereto as Exhibit A (the “Warrants”); and

 

C.            Contemporaneous with the sale of the Common Stock and Warrants,
the parties hereto will execute and deliver a Registration Rights Agreement, in
the form attached hereto as Exhibit B (the “Registration Rights Agreement”),
pursuant to which the Company will agree to provide certain registration rights
under the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder, and applicable state securities laws.

 

In consideration of the mutual promises made herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

 

1.             Definitions.  In addition to those terms defined above and
elsewhere in this Agreement, for the purposes of this Agreement, the following
terms shall have the meanings set forth below:

 

“Affiliate” means, with respect to any Person, any other Person which directly
or indirectly through one or more intermediaries Controls, is controlled by, or
is under common control with, such Person.

 

“Business Day” means a day, other than a Saturday or Sunday, on which banks in
New York City are open for the general transaction of business.

 

“Common Stock” means the common stock, par value $0.001 per share, of the
Company, and any securities into which the Common Stock may be reclassified.

 

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“Company’s Knowledge” means the actual knowledge of the executive officers (as
defined in Rule 405 under the 1933 Act) of the Company, after due inquiry.

 

“Confidential Information” means trade secrets, confidential information and
know-how (including but not limited to ideas, formulae, compositions, processes,
procedures and techniques, research and development information, computer
program code, performance specifications, support documentation, drawings,
specifications, designs, business and marketing plans, and customer and supplier
lists and related information).

 

“Control” (including the terms “controlling”, “controlled by” or “under common
control with”) means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.

 

“Intellectual Property” means all of the following: (i) patents, patent
applications, patent disclosures and inventions (whether or not patentable and
whether or not reduced to practice); (ii) trademarks, service marks, trade
dress, trade names, corporate names, logos, slogans and Internet domain names,
together with all goodwill associated with each of the foregoing; (iii)
copyrights and copyrightable works; (iv) registrations, applications and
renewals for any of the foregoing; and (v) proprietary computer software
(including but not limited to data, data bases and documentation).

 

“Material Adverse Effect” means a material adverse effect on (i) the assets,
liabilities, results of operations, condition (financial or otherwise),
business, or prospects of the Company and its Subsidiaries taken as a whole, or
(ii) the ability of the Company to perform its obligations under the Transaction
Documents.

 

“Person” means an individual, corporation, partnership, limited liability
company, trust, business trust, association, joint stock company, joint venture,
sole proprietorship, unincorporated organization, governmental authority or any
other form of entity not specifically listed herein.

 

“Purchase Price” means an aggregate of Four Million Sixty-Nine Dollars
($4,000,069), and with respect to each Investor, means the Purchase Price set
forth opposite such Investor’s name on the signature pages hereto.

 

“SEC Filings” has the meaning set forth in Section 4.6.

 

“Securities” means the Shares, the Warrants and the Warrant Shares.

 

“Shares” means the shares of Common Stock being purchased by the Investors
hereunder.

 

“Subsidiary” has the meaning set forth in Section 4.1.

 

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“Transaction Documents” means this Agreement, the Warrants and the Registration
Rights Agreement.

 

“Warrant Shares” means the shares of Common Stock issuable upon the exercise of
the Warrants.

 

“1933 Act” means the Securities Act of 1933, as amended, or any successor
statute, and the rules and regulations promulgated thereunder.

 

“1934 Act” means the Securities Exchange Act of 1934, as amended, or any
successor statute, and the rules and regulations promulgated thereunder.

 

2.             Purchase and Sale of the Shares and Warrants.  Subject to the
terms and conditions of this Agreement, on the Closing Date (as defined below),
each of the Investors shall severally, and not jointly, purchase, and the
Company shall sell and issue to the Investors, the Shares and Warrants in the
respective amounts set forth opposite the Investors’ names on the signature
pages attached hereto in exchange for the Purchase Price as specified in Section
3 below.

 

3.             Closing.  Upon confirmation that the other conditions to closing
specified herein have been satisfied or duly waived by the Investors, the
Company shall deliver to Lowenstein Sandler PC, in trust, a certificate or
certificates, registered in such name or names as the Investors may designate,
representing the Shares and Warrants, with instructions that such certificates
are to be held for release to the Investors only upon payment in full of the
Purchase Price to the Company by all the Investors.  Upon such receipt by
Lowenstein Sandler PC of the certificates, each Investor shall promptly, but no
more than one Business Day thereafter, cause a wire transfer in same day funds
to be sent to the account of the Company as instructed in writing by the
Company, in an amount representing such Investor’s pro rata portion of the
Purchase Price as set forth on the signature pages to this Agreement.  On the
date (the “Closing Date”) the Company receives the Purchase Price, the
certificates evidencing the Shares and Warrants shall be released to the
Investors (the “Closing”).  The Closing of the purchase and sale of the Shares
and Warrants shall take place at the offices of Lowenstein Sandler PC, 1330
Avenue of the Americas, 21st Floor, New York, New York, or at such other
location and on such other date as the Company and the Investors shall mutually
agree.

 

4.             Representations and Warranties of the Company.  The Company
hereby represents and warrants to the Investors that, except as set forth in the
schedules delivered herewith (collectively, the “Disclosure Schedules”):

 

4. 1          Organization, Good Standing and Qualification.  Each of the
Company and its Subsidiaries (as defined below) is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to carry on
its business as now conducted and to own its properties.  Each of the Company
and its Subsidiaries is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction in which the conduct of its
business or its ownership or leasing of property makes such qualification or
leasing necessary

 

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unless the failure to so qualify has not and could not reasonably be expected to
have a Material Adverse Effect.  The Company’s subsidiaries are reflected on
Schedule 4.1 hereto (the “Subsidiaries”).

 

4.2           Authorization.  The Company has full power and authority and has
taken all requisite action on the part of the Company, its officers, directors
and stockholders necessary for (i) the authorization, execution and delivery of
the Transaction Documents, (ii) authorization of the performance of all
obligations of the Company hereunder or thereunder, and (iii) the authorization,
issuance (or reservation for issuance) and delivery of the Securities.  The
Transaction Documents constitute the legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability, relating to or affecting creditors’
rights generally.

 

4.3           Capitalization.  Schedule 4.3 sets forth (a) the authorized
capital stock of the Company on the date hereof; (b) the number of shares of
capital stock issued and outstanding; (c) the number of shares of capital stock
issuable pursuant to the Company’s stock plans; and (d) the number of shares of
capital stock issuable and reserved for issuance pursuant to securities (other
than the Shares and the Warrants) exercisable for, or convertible into or
exchangeable for any shares of capital stock of the Company.  All of the issued
and outstanding shares of the Company’s capital stock have been duly authorized
and validly issued and are fully paid, nonassessable and free of pre-emptive
rights and were issued in full compliance with applicable state and federal
securities law and any rights of third parties.  Except as described on Schedule
4.3, all of the issued and outstanding shares of capital stock of each
Subsidiary have been duly authorized and validly issued and are fully paid,
nonassessable and free of pre-emptive rights, were issued in full compliance
with applicable state and federal securities law and any rights of third parties
and are owned by the Company, beneficially and of record, subject to no lien,
encumbrance or other adverse claim.  Except as described on Schedule 4.3, no
Person is entitled to pre-emptive or similar statutory or contractual rights
with respect to any securities of the Company.  Except as described on Schedule
4.3, there are no outstanding warrants, options, convertible securities or other
rights, agreements or arrangements of any character under which the Company or
any of its Subsidiaries is or may be obligated to issue any equity securities of
any kind and except as contemplated by this Agreement, neither the Company nor
any of its Subsidiaries is currently in negotiations for the issuance of any
equity securities of any kind.  Except as described on Schedule 4.3 and except
for the Registration Rights Agreement, there are no voting agreements, buy-sell
agreements, option or right of first purchase agreements or other agreements of
any kind among the Company and any of the securityholders of the Company
relating to the securities of the Company held by them.  Except as described on
Schedule 4.3, no Person has the right to require the Company to register any
securities of the Company under the 1933 Act, whether on a demand basis or in
connection with the registration of securities of the Company for its own
account or for the account of any other Person.

 

Except as described on Schedule 4.3, the issuance and sale of the Securities
hereunder will not obligate the Company to issue shares of Common Stock or other
securities to any other Person (other than the Investors) and will not result in
the adjustment of the exercise, conversion, exchange or reset price of any
outstanding security.

 

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Except as described on Schedule 4.3, the Company does not have outstanding
stockholder purchase rights or “poison pill” or any similar arrangement in
effect giving any Person the right to purchase any equity interest in the
Company upon the occurrence of certain events.

 

4.4           Valid Issuance.  The Shares have been duly and validly authorized
and, when issued and paid for pursuant to this Agreement, will be validly
issued, fully paid and nonassessable, and shall be free and clear of all
encumbrances and restrictions (other than those created by the Investors),
except for restrictions on transfer set forth in the Transaction Documents or
imposed by applicable securities laws.  The Warrants have been duly and validly
authorized.  Upon the due exercise of the Warrants, the Warrant Shares will be
validly issued, fully paid and non-assessable free and clear of all encumbrances
and restrictions, except for restrictions on transfer set forth in the
Transaction Documents or imposed by applicable securities laws and except for
those created by the Investors.  The Company has reserved a sufficient number of
shares of Common Stock for issuance upon the exercise of the Warrants, free and
clear of all encumbrances and restrictions, except for restrictions on transfer
set forth in the Transaction Documents or imposed by applicable securities laws
and except for those created by the Investors.

 

4.5           Consents.  The execution, delivery and performance by the Company
of the Transaction Documents and the offer, issuance and sale of the Securities
require no consent of, action by or in respect of, or filing with, any Person,
governmental body, agency, or official other than filings that have been made
pursuant to applicable state securities laws and post-sale filings pursuant to
applicable state and federal securities laws which the Company undertakes to
file within the applicable time periods.  Subject to the accuracy of the
representations and warranties of each Investor set forth in Section 5 hereof,
the Company has taken all action necessary to exempt (i) the issuance and sale
of the Securities, (ii) the issuance of the Warrant Shares upon due exercise of
the Warrants, and (iii) the other transactions contemplated by the Transaction
Documents from the provisions of any shareholder rights plan or other “poison
pill” arrangement, any anti-takeover, business combination or control share law
or statute binding on the Company or to which the Company or any of its assets
and properties may be subject and any provision of the Company’s Certificate of
Incorporation or By-laws that is or could reasonably be expected to become
applicable to the Investors as a result of the transactions contemplated hereby,
including without limitation, the issuance of the Securities and the ownership,
disposition or voting of the Securities by the Investors or the exercise of any
right granted to the Investors pursuant to this Agreement or the other
Transaction Documents.

 

4.6           Delivery of SEC Filings; Business.  The Company has made available
to the Investors through the EDGAR system, true and complete copies of the
Company’s most recent Annual Report on Form 10-K for the fiscal year ended April
30, 2003 (the “10-K”), and all other reports filed by the Company pursuant to
the 1934 Act since the filing of the 10-K and prior to the date hereof
(collectively, the “SEC Filings”).  The SEC Filings are the only filings
required of the Company pursuant to the 1934 Act for such period.  The Company
and its Subsidiaries are engaged in all material respects only in the business
described in the SEC

 

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Filings and the SEC Filings contain a complete and accurate description in all
material respects of the business of the Company and its Subsidiaries, taken as
a whole.

 

4.7           Use of Proceeds.  The net proceeds of the sale of the Shares and
the Warrants hereunder shall be used by the Company for working capital and
general corporate purposes.

 

4.8           No Material Adverse Change.  Since January 31, 2004, except as
identified and described in the SEC Filings or as described on Schedule 4.8,
there has not been:

 

(i)            any change in the consolidated assets, liabilities, financial
condition or operating results of the Company from that reflected in the
financial statements included in the Company’s Quarterly Report on Form 10-Q for
the quarter ended January 31, 2004, except for changes in the ordinary course of
business which have not and could not reasonably be expected to have a Material
Adverse Effect, individually or in the aggregate;

 

(ii)           any declaration or payment of any dividend, or any authorization
or payment of any distribution, on any of the capital stock of the Company, or
any redemption or repurchase of any securities of the Company;

 

(iii)          any material damage, destruction or loss, whether or not covered
by insurance to any assets or properties of the Company or its Subsidiaries;

 

(iv)          any waiver, not in the ordinary course of business, by the Company
or any Subsidiary of a material right or of a material debt owed to it;

 

(v)           any satisfaction or discharge of any lien, claim or encumbrance or
payment of any obligation by the Company or a Subsidiary, except in the ordinary
course of business and which is not material to the assets, properties,
financial condition, operating results or business of the Company and its
Subsidiaries taken as a whole (as such business is presently conducted and as it
is proposed to be conducted);

 

(vi)          any change or amendment to the Company’s Certificate of
Incorporation or by-laws, or material change to any material contract or
arrangement by which the Company or any Subsidiary is bound or to which any of
their respective assets or properties is subject;

 

(vii)         any material labor difficulties or labor union organizing
activities with respect to employees of the Company or any Subsidiary;

 

(viii)        any material transaction entered into by the Company or a
Subsidiary other than in the ordinary course of business;

 

(ix)           the loss of the services of any key employee, or material change
in the composition or duties of the senior management of the Company or any
Subsidiary;

 

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(x)            the loss or threatened loss of any customer which has had or
could reasonably be expected to have a Material Adverse Effect; or

 

(xi)           any other event or condition of any character that has had or
could reasonably be expected to have a Material Adverse Effect.

 

4.9           SEC Filings.

 

(a)           At the time of filing thereof, the SEC Filings complied as to form
in all material respects with the requirements of the 1934 Act and did not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.

 

(b)           Except as set forth on Schedule 4.9, each registration statement
and any amendment thereto filed by the Company since January 1, 2001 pursuant to
the 1933 Act and the rules and regulations thereunder, as of the date such
statement or amendment became effective, complied as to form in all material
respects with the 1933 Act and did not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein not misleading; and
each prospectus filed pursuant to Rule 424(b) under the 1933 Act, as of its
issue date and as of the closing of any sale of securities pursuant thereto did
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading.

 

4.10         No Conflict, Breach, Violation or Default.  The execution, delivery
and performance of the Transaction Documents by the Company and the issuance and
sale of the Securities will not conflict with or result in a breach or violation
of any of the terms and provisions of, or constitute a default under (i) the
Company’s Certificate of Incorporation or the Company’s Bylaws, both as in
effect on the date hereof (true and complete copies of which have been made
available to the Investors through the EDGAR system), or (ii)(a) any statute,
rule, regulation or order of any governmental agency or body or any court,
domestic or foreign, having jurisdiction over the Company, any Subsidiary or any
of their respective assets or properties, or (b) any agreement or instrument to
which the Company or any Subsidiary is a party or by which the Company or a
Subsidiary is bound or to which any of their respective assets or properties is
subject.

 

4.11         Tax Matters.  The Company and each Subsidiary has timely prepared
and filed all tax returns required to have been filed by the Company or such
Subsidiary with all appropriate governmental agencies and timely paid all taxes
shown thereon or otherwise owed by it.  The charges, accruals and reserves on
the books of the Company in respect of taxes for all fiscal periods are adequate
in all material respects, and there are no material unpaid assessments against
the Company or any Subsidiary nor, to the Company’s Knowledge, any basis for the
assessment of any additional taxes, penalties or interest for any fiscal period
or audits by any federal, state or local taxing authority except for any
assessment which is not material to the

 

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Company and its Subsidiaries, taken as a whole.  All taxes and other assessments
and levies that the Company or any Subsidiary is required to withhold or to
collect for payment have been duly withheld and collected and paid to the proper
governmental entity or third party when due.  There are no tax liens or claims
pending or, to the Company’s Knowledge, threatened against the Company or any
Subsidiary or any of their respective assets or property.  Except as described
on Schedule 4.11, there are no outstanding tax sharing agreements or other such
arrangements between the Company or any Subsidiary, on the one hand, and any
other corporation or entity, on the other hand.

 

4.12         Title to Properties.  Except as disclosed in the SEC Filings, the
Company and each Subsidiary has good and marketable title to all real properties
and all other properties and assets owned by it, in each case free from liens,
encumbrances and defects that would materially affect the value thereof or
materially interfere with the use made or currently planned to be made thereof
by them; and except as disclosed in the SEC Filings, the Company and each
Subsidiary holds any leased real or personal property under valid and
enforceable leases with no exceptions that would materially interfere with the
use made or currently planned to be made thereof by them.

 

4.13         Certificates, Authorities and Permits.  The Company and each
Subsidiary possess adequate certificates, authorities or permits issued by
appropriate governmental agencies or bodies necessary to conduct the business
now operated by it, and neither the Company nor any Subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
certificate, authority or permit that, if determined adversely to the Company or
such Subsidiary, could reasonably be expected to have a Material Adverse Effect,
individually or in the aggregate.

 

4.14         No Labor Disputes.  No material labor dispute with the employees of
the Company or any Subsidiary exists or, to the Company’s Knowledge, is
imminent.

 

4.15         Intellectual Property.

 

(a)           All Intellectual Property of the Company and its Subsidiaries is
currently in compliance with all legal requirements (including timely filings,
proofs and payments of fees) and to the Company’s Knowledge is valid and
enforceable.  No Intellectual Property of the Company or its Subsidiaries which
is necessary for the conduct of Company’s and each of its Subsidiaries’
respective businesses as currently conducted or as currently proposed to be
conducted has been or is now involved in any cancellation, dispute or
litigation, and, to the Company’s Knowledge, no such action is threatened.  No
patent of the Company or its Subsidiaries has been or is now involved in any
interference, reissue, re-examination or opposition proceeding.

 

(b)           All of the licenses and sublicenses and consent, royalty or other
agreements concerning Intellectual Property which are necessary for the conduct
of the Company’s and each of its Subsidiaries’ respective businesses as
currently conducted or as currently proposed to be conducted to which the
Company or any Subsidiary is a party or by which any of their assets are bound
(other than generally commercially available, non-custom,

 

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off-the-shelf software application programs having a retail acquisition price of
less than $10,000 per license) (collectively, “License Agreements”) are valid
and binding obligations of the Company or its Subsidiaries that are parties
thereto and, to the Company’s Knowledge, the other parties thereto, enforceable
in accordance with their terms, except to the extent that enforcement thereof
may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws affecting the enforcement of creditors’ rights
generally, and to the Company’s Knowledge there exists no event or condition
which will result in a material violation or breach of or constitute (with or
without due notice or lapse of time or both) a default by the Company or any of
its Subsidiaries under any such License Agreement.

 

(c)           The Company and its Subsidiaries own or to the Company’s Knowledge
have the valid right to use all of the Intellectual Property that is necessary
for the conduct of the Company’s and each of its Subsidiaries’ respective
businesses as currently conducted or as currently proposed to be conducted and
for the ownership, maintenance and operation of the Company’s and its
Subsidiaries’ properties and assets, free and clear of all liens, encumbrances,
adverse claims or obligations to license all such owned Intellectual Property
and Confidential Information, other than licenses entered into in the ordinary
course of the Company’s and its Subsidiaries’ businesses.  To the Company’s
Knowledge, the Company and its Subsidiaries have a valid and enforceable right
to use all third party Intellectual Property and Confidential Information used
or held for use in the respective businesses of the Company and its
Subsidiaries.

 

(d)           To the Company’s Knowledge, the conduct of the Company’s and its
Subsidiaries’ businesses as currently conducted does not infringe or otherwise
impair or conflict with (collectively, “Infringe”) any Intellectual Property
rights of any third party or any confidentiality obligation owed to a third
party, and, to the Company’s Knowledge, the Intellectual Property and
Confidential Information of the Company and its Subsidiaries which are necessary
for the conduct of Company’s and each of its Subsidiaries’ respective businesses
as currently conducted or as currently proposed to be conducted are not being
Infringed by any third party.  There is no litigation or order pending or
outstanding or, to the Company’s Knowledge, threatened or imminent, that seeks
to limit or challenge or that concerns the ownership, use, validity or
enforceability of any Intellectual Property or Confidential Information of the
Company and its Subsidiaries and the Company’s and its Subsidiaries’ use of any
Intellectual Property or Confidential Information owned by a third party, and,
to the Company’s Knowledge, there is no valid basis for the same.

 

(e)           The consummation of the transactions contemplated hereby and by
the other Transaction Documents will not result in the alteration, loss,
impairment of or restriction on the Company’s or any of its Subsidiaries’
ownership or right to use any of the Intellectual Property or Confidential
Information which is necessary for the conduct of Company’s and each of its
Subsidiaries’ respective businesses as currently conducted or as currently
proposed to be conducted.

 

(f)            All software owned by the Company or any of its Subsidiaries,
and, to the Company’s Knowledge, all software licensed from third parties by the
Company or any of its Subsidiaries, (i) is free from any material defect, bug,
virus, or programming, design or

 

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documentation error; (ii) operates and runs in a reasonable and efficient
business manner; and (iii) conforms in all material respects to the
specifications and purposes thereof.

 

(g)           The Company and its Subsidiaries have taken reasonable steps to
protect the Company’s and its Subsidiaries’ rights in their Intellectual
Property and Confidential Information.  Each employee, consultant and contractor
who has had access to Confidential Information which is necessary for the
conduct of Company’s and each of its Subsidiaries’ respective businesses as
currently conducted or as currently proposed to be conducted has executed an
agreement to maintain the confidentiality of such Confidential Information and
has executed appropriate agreements that are substantially consistent with the
Company’s standard forms thereof.  Except under confidentiality obligations,
there has been no material disclosure of any of the Company’s or its
Subsidiaries’ Confidential Information to any third party.

 

4.16         Environmental Matters.  Neither the Company nor any Subsidiary is
in violation of any statute, rule, regulation, decision or order of any
governmental agency or body or any court, domestic or foreign, relating to the
use, disposal or release of hazardous or toxic substances or relating to the
protection or restoration of the environment or human exposure to hazardous or
toxic substances (collectively, “Environmental Laws”), owns or operates any real
property contaminated with any substance that is subject to any Environmental
Laws, is liable for any off-site disposal or contamination pursuant to any
Environmental Laws, or is subject to any claim relating to any Environmental
Laws, which violation, contamination, liability or claim has had or could
reasonably be expected to have a Material Adverse Effect, individually or in the
aggregate; and there is no pending or, to the Company’s Knowledge, threatened
investigation that might lead to such a claim.

 

4.17         Litigation.  Except as described in the SEC Filings or on Schedule
4.17, there are no pending actions, suits or proceedings against or affecting
the Company, its Subsidiaries or any of its or their properties; and to the
Company’s Knowledge, no such actions, suits or proceedings are threatened or
contemplated.

 

4.18         Financial Statements.  The financial statements included in each
SEC Filing present fairly, in all material respects, the consolidated financial
position of the Company as of the dates shown and its consolidated results of
operations and cash flows for the periods shown, and such financial statements
have been prepared in conformity with United States generally accepted
accounting principles applied on a consistent basis (except as may be disclosed
therein or in the notes thereto, and, in the case of quarterly financial
statements, as permitted by Form 10-Q under the 1934 Act).  Except as set forth
in the financial statements of the Company included in the SEC Filings filed
prior to the date hereof or as described on Schedule 4.18, neither the Company
nor any of its Subsidiaries has incurred any liabilities, contingent or
otherwise, except those incurred in the ordinary course of business, consistent
(as to amount and nature) with past practices since the date of such financial
statements, none of which, individually or in the aggregate, have had or could
reasonably be expected to have a Material Adverse Effect.

 

4.19         Insurance Coverage.  The Company and each Subsidiary maintains in
full force and effect insurance coverage that is, to the Company’s Knowledge,
customary for

 

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comparably situated companies for the business being conducted and properties
owned or leased by the Company and each Subsidiary, and the Company reasonably
believes such insurance coverage to be adequate against all liabilities, claims
and risks against which it is customary for comparably situated companies to
insure.

 

4.20         Brokers and Finders.  No Person will have, as a result of the
transactions contemplated by the Transaction Documents, any valid right,
interest or claim against or upon the Company, any Subsidiary or an Investor for
any commission, fee or other compensation pursuant to any agreement, arrangement
or understanding entered into by or on behalf of the Company, other than as
described in Schedule 4.20.

 

4.21         No Directed Selling Efforts or General Solicitation.  Neither the
Company nor any Person acting on its behalf has conducted any general
solicitation or general advertising (as those terms are used in Regulation D) in
connection with the offer or sale of any of the Securities.

 

4.22         No Integrated Offering.  Neither the Company nor any of its
Affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any Company security or solicited any
offers to buy any security, under circumstances that would adversely affect
reliance by the Company on Section 4(2) for the exemption from registration for
the transactions contemplated hereby or would require registration of the
Securities under the 1933 Act.

 

4.23         Private Placement.  Assuming the accuracy of the representations
and warranties of the Investors in Section 5 of this Agreement, the offer and
sale of the Securities to the Investors as contemplated hereby is exempt from
the registration requirements of the 1933 Act.

 

4.24         Questionable Payments.  Except as described in Schedule 4.24,
neither the Company nor any of its Subsidiaries nor, to the Company’s Knowledge,
any of their respective current or former stockholders, directors, officers,
employees, agents or other Persons acting on behalf of the Company or any
Subsidiary, has on behalf of the Company or any Subsidiary or in connection with
their respective businesses: (a) used any corporate funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity; (b) made any direct or indirect unlawful payments to any
governmental officials or employees from corporate funds; (c) established or
maintained any unlawful or unrecorded fund of corporate monies or other assets;
(d) made any false or fictitious entries on the books and records of the Company
or any Subsidiary; or (e) made any unlawful bribe, rebate, payoff, influence
payment, kickback or other unlawful payment of any nature.

 

4.25         Transactions with Affiliates.  Except as disclosed in the SEC
Filings or as disclosed on Schedule 4.25, none of the officers or directors of
the Company and, to the Company’s Knowledge, none of the employees of the
Company is presently a party to any transaction with the Company or any
Subsidiary (other than as holders of stock options and/or warrants, and for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for

 

11

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rental of real or personal property to or from, or otherwise requiring payments
to or from any officer, director or such employee or, to the Company’s
Knowledge, any entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner.

 

4.26         Internal Controls.  The Company and the Subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management’s
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management’s general or
specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. The Company has established disclosure
controls and procedures (as defined in 1934 Act Rules 13a-14 and 15d-14) for the
Company and designed such disclosure controls and procedures to ensure that
material information relating to the Company, including the Subsidiaries, is
made known to the certifying officers by others within those entities,
particularly during the period in which the Company’s most recently filed period
report under the 1934 Act, as the case may be, is being prepared.  The Company’s
certifying officers have evaluated the effectiveness of the Company’s controls
and procedures as of a date within 90 days prior to the filing date of the most
recently filed periodic report under the 1934 Act (such date, the “Evaluation
Date”).  The Company presented in its most recently filed periodic report under
the 1934 Act the conclusions of the certifying officers about the effectiveness
of the disclosure controls and procedures based on their evaluations as of the
Evaluation Date.  Since the Evaluation Date, there have been no significant
changes in the Company’s internal controls (as such term is defined in Item
307(b) of Regulation S-K) or, to the Company’s Knowledge, in other factors that
could significantly affect the Company’s internal controls.  The Company
maintains and will continue to maintain a standard system of accounting
established and administered in accordance with GAAP and the applicable
requirements of the 1934 Act.

 

4.27         Disclosures.  Neither the Company nor any Person acting on its
behalf has provided the Investors or their agents or counsel with any
information that constitutes or might constitute material, non-public
information.  The written materials delivered to the Investors in connection
with the transactions contemplated by the Transaction Documents do not contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.

 

5.             Representations and Warranties of the Investors.  Each of the
Investors hereby severally, and not jointly, represents and warrants to the
Company that:

 

5.1           Organization and Existence.  The Investor is a validly existing
corporation, limited partnership or limited liability company and has all
requisite corporate, partnership or limited liability company power and
authority to invest in the Securities pursuant to this Agreement.  Each of the
Investors is organized under the laws of the State of Delaware and has its
principal place of business in the State of New York.

 

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5.2           Authorization.  The execution, delivery and performance by the
Investor of the Transaction Documents to which such Investor is a party have
been duly authorized and will each constitute the valid and legally binding
obligation of the Investor, enforceable against the Investor in accordance with
their respective terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability, relating
to or affecting creditors’ rights generally.

 

5.3           Purchase Entirely for Own Account.  The Securities to be received
by the Investor hereunder will be acquired for the Investor’s own account, not
as nominee or agent, and not with a view to the resale or distribution of any
part thereof in violation of the 1933 Act, and the Investor has no present
intention of selling, granting any participation in, or otherwise distributing
the same in violation of the 1933 Act.  The Investor is not a broker dealer
registered with the SEC under the 1934 Act or an entity engaged in a business
that would require it to be so registered.

 

5.4           Investment Experience.  The Investor acknowledges that it can bear
the economic risk and complete loss of its investment in the Securities and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment contemplated
hereby.

 

5.5           Disclosure of Information.  The Investor has had an opportunity to
receive all additional information related to the Company requested by it and to
ask questions of and receive answers from the Company regarding the Company, its
business and the terms and conditions of the offering of the Securities.  The
Investor acknowledges receipt of copies of the SEC Filings.  Neither such
inquiries nor any other due diligence investigation conducted by the Investor
shall modify, amend or affect the Investor’s right to rely on the Company’s
representations and warranties contained in this Agreement.

 

5.6           Restricted Securities.  The Investor understands that the
Securities are characterized as “restricted securities” under the U.S. federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the 1933 Act only in certain limited circumstances.

 

5.7           Legends.  It is understood that, except as provided below,
certificates evidencing the Securities may bear the following or any similar
legend:

 

(a)           “The securities represented hereby may not be transferred unless
(i) such securities have been registered for sale pursuant to the Securities Act
of 1933, as amended, (ii) such securities may be sold pursuant to Rule 144(k),
or (iii) the Company has received an opinion of counsel reasonably satisfactory
to it that such transfer may lawfully be made without registration under the
Securities Act of 1933 or qualification under applicable state securities laws.”

 

13

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(b)           If required by the authorities of any state in connection with the
issuance of sale of the Securities, the legend required by such state authority.

 

5.8           Accredited Investor.  The Investor is an accredited investor as
defined in Rule 501(a) of Regulation D, as amended, under the 1933 Act.

 

5.9           No General Solicitation.  The Investor did not learn of the
investment in the Securities as a result of any public advertising or general
solicitation.

 

5.10         Brokers and Finders.  No Person will have, as a result of the
transactions contemplated by the Transaction Documents, any valid right,
interest or claim against or upon the Company, any Subsidiary or an Investor for
any commission, fee or other compensation pursuant to any agreement, arrangement
or understanding entered into by or on behalf of the Investor.

 

5.11         Prohibited Transactions.  During the last thirty (30) days prior to
the date hereof, no Investor has, directly or indirectly, effected or agreed to
effect any short sale, whether or not against the box, established any “put
equivalent position” (as defined in Rule 16a-1(h) under the 1934 Act) with
respect to the Common Stock, granted any other right (including, without
limitation, any put or call option) with respect to the Common Stock or with
respect to any security that includes, relates to or derived any significant
part of its value from the Common Stock or otherwise sought to hedge its
position in the Securities (each, a “Prohibited Transaction”).  Prior to the
earlier of (i) the termination of this Agreement, or (ii) the Effectiveness
Deadline (as defined in the Registration Rights Agreement), no Investor shall
engage, directly or indirectly, in a Prohibited Transaction.  Each Investor
acknowledges that the representations and warranties contained in this Section
5.11 are being made for the benefit of the Investors as well as the Company and
that each of the other Investors shall have an independent the right to assert
any claims against any Investor arising out of any breach or violation of the
provisions of this Section 5.11.

 

6.             Conditions to Closing.

 

6.1           Conditions to the Investors’ Obligations. The obligation of the
Investors to purchase the Shares and the Warrants at the Closing is subject to
the fulfillment to the Investors’ satisfaction, on or prior to the Closing Date,
of the following conditions, any of which may be waived by an Investor (as to
itself only):

 

(a)           The representations and warranties made by the Company in Section
4 hereof qualified as to materiality shall be true and correct at all times
prior to and on the Closing Date, except to the extent any such representation
or warranty expressly speaks as of an earlier date, in which case such
representation or warranty shall be true and correct as of such earlier date,
and, the representations and warranties made by the Company in Section 4 hereof
not qualified as to materiality shall be true and correct in all material
respects at all times prior to and on the Closing Date, except to the extent any
such representation or warranty expressly speaks as of an earlier date, in which
case such representation or warranty shall be true and correct in all material
respects as of such earlier date.  The Company shall have performed in all

 

14

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material respects all obligations and conditions herein required to be performed
or observed by it on or prior to the Closing Date.

 

(b)           The Company shall have obtained any and all consents, permits,
approvals, registrations and waivers necessary or appropriate for consummation
of the purchase and sale of the Securities and the consummation of the other
transactions contemplated by the Transaction Documents, all of which shall be in
full force and effect.

 

(c)           The Company shall have executed and delivered the Registration
Rights Agreement.

 

(d)           No judgment, writ, order, injunction, award or decree of or by any
court, or judge, justice or magistrate, including any bankruptcy court or judge,
or any order of or by any governmental authority, shall have been issued, and no
action or proceeding shall have been instituted by any governmental authority,
enjoining or preventing the consummation of the transactions contemplated hereby
or in the other Transaction Documents.

 

(e)           The Company shall have delivered a Certificate, executed on behalf
of the Company by its Chief Executive Officer or its Chief Financial Officer,
dated as of the Closing Date, certifying to the fulfillment of the conditions
specified in subsections (a), (b), (d) and (h) of this Section 6.1.

 

(f)            The Company shall have delivered a Certificate, executed on
behalf of the Company by its Secretary, dated as of the Closing Date, certifying
the resolutions adopted by the Board of Directors of the Company approving the
transactions contemplated by this Agreement and the other Transaction Documents
and the issuance of the Securities, certifying the current versions of the
Certificate of Incorporation and Bylaws of the Company and certifying as to the
signatures and authority of persons signing the Transaction Documents and
related documents on behalf of the Company.

 

(g)           The Investors shall have received an opinion from Gray Cary Ware &
Freidenrich LLP, the Company’s counsel, dated as of the Closing Date, in form
and substance reasonably acceptable to the Investors and addressing such legal
matters as the Investors may reasonably request.

 

(h)           No stop order or suspension of trading shall have been imposed by
the SEC or any other governmental or regulatory body with respect to public
trading in the Common Stock.

 

6.2           Conditions to Obligations of the Company. The Company’s obligation
to sell and issue the Shares and the Warrants at the Closing is subject to the
fulfillment to the satisfaction of the Company on or prior to the Closing Date
of the following conditions, any of which may be waived by the Company:

 

(a)           The representations and warranties made by the Investors in
Section 5 hereof, other than the representations and warranties contained in
Sections 5.3, 5.4,

 

15

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5.5, 5.6, 5.7, 5.8 and 5.9 (the “Investment Representations”), shall be true and
correct in all material respects when made, and shall be true and correct in all
material respects on the Closing Date with the same force and effect as if they
had been made on and as of said date.  The Investment Representations shall be
true and correct in all respects when made, and shall be true and correct in all
respects on the Closing Date with the same force and effect as if they had been
made on and as of said date.  The Investors shall have performed in all material
respects all obligations and conditions herein required to be performed or
observed by them on or prior to the Closing Date.

 

(b)           The Investors shall have executed and delivered the Registration
Rights Agreement.

 

(c)           The Investors shall have delivered the Purchase Price to the
Company.

 

6.3           Termination of Obligations to Effect Closing; Effects.

 

(a)           The obligations of the Company, on the one hand, and the
Investors, on the other hand, to effect the Closing shall terminate as follows:

 

(i)            Upon the mutual written consent of the Company and the Investors;

 

(ii)           By the Company if any of the conditions set forth in Section 6.2
shall have become incapable of fulfillment, and shall not have been waived by
the Company;

 

(iii)          By an Investor (with respect to itself only) if any of the
conditions set forth in Section 6.1 shall have become incapable of fulfillment,
and shall not have been waived by the Investor; or

 

(iv)          By either the Company or any Investor (with respect to itself
only) if the Closing has not occurred on or prior to April 30, 2004;

 

provided, however, that, except in the case of clause (i) above, the party
seeking to terminate its obligation to effect the Closing shall not then be in
breach of any of its representations, warranties, covenants or agreements
contained in this Agreement or the other Transaction Documents if such breach
has resulted in the circumstances giving rise to such party’s seeking to
terminate its obligation to effect the Closing.

 

(b)           In the event of termination by the Company or any Investor of its
obligations to effect the Closing pursuant to this Section 6.3, written notice
thereof shall forthwith be given to the other Investors and the other Investors
shall have the right to terminate their obligations to effect the Closing upon
written notice to the Company and the other Investors.  Nothing in this Section
6.3 shall be deemed to release any party from any liability for any breach by
such party of the terms and provisions of this Agreement or the other
Transaction

 

16

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Documents or to impair the right of any party to compel specific performance by
any other party of its obligations under this Agreement or the other Transaction
Documents.

 

7.             Covenants and Agreements of the Company.

 

7.1           Reservation of Common Stock.  The Company shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of providing for the exercise of the Warrants,
such number of shares of Common Stock as shall from time to time equal the
number of shares sufficient to permit the exercise of the Warrants issued
pursuant to this Agreement in accordance with their respective terms.

 

7.2           Reports.  The Company will furnish to such Investors and/or their
assignees such information relating to the Company and its Subsidiaries as from
time to time may reasonably be requested by such Investors and/or their
assignees; provided, however, that the Company shall not disclose material
nonpublic information to the Investors, or to advisors to or representatives of
the Investors, unless prior to disclosure of such information the Company
identifies such information as being material nonpublic information and provides
the Investors, such advisors and representatives with the opportunity to accept
or refuse to accept such material nonpublic information for review and any
Investor wishing to obtain such information enters into an appropriate
confidentiality agreement with the Company with respect thereto.

 

7.3           No Conflicting Agreements.  The Company will not take any action,
enter into any agreement or make any commitment that would conflict or interfere
in any material respect with the Company’s obligations to the Investors under
the Transaction Documents.

 

7.4           Insurance.  The Company shall not materially reduce the insurance
coverages described in Section 4.19 unless the Company’s insurable risks are
commensurately reduced.

 

7.5           Compliance with Laws.  The Company will comply in all material
respects with all applicable laws, rules, regulations, orders and decrees of all
governmental authorities.

 

7.6           Listing of Underlying Shares and Related Matters.  For so long as
the Common Stock or other securities of the Company are traded on the Over the
Counter Bulletin Board (the “OTCBB”), the Shares and the Warrant Shares will
also be tradeable on the OTCBB.  If the Company applies to have its Common Stock
or other securities traded on any principal stock exchange or market, it shall
include in such application the Shares and the Warrant Shares and will take such
other action as is necessary to cause such Common Stock to be so listed.

 

7.7           Termination of Covenants.  The provisions of Sections 7.2 through
7.5 shall terminate and be of no further force and effect upon the earlier of
(i) the mutual consent of the Company and the Investors or (ii) the date on
which the Company’s obligations under the Registration Rights Agreement to
register or maintain the effectiveness of any registration covering the
Registrable Securities (as such term is defined in the Registration Rights
Agreement) shall terminate.

 

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7.8           Removal of Legends.  Upon the earlier of (i) registration for
resale pursuant to the Registration Rights Agreement and receipt by the Company
of the Investor’s written confirmation that such Securities will not be disposed
of except in compliance with the prospectus delivery requirements of the 1933
Act or (ii) Rule 144(k) becoming available the Company shall, upon an Investor’s
written request, promptly cause certificates evidencing the Investor’s
Securities to be replaced with certificates which do not bear such restrictive
legends, and Warrant Shares subsequently issued upon due exercise of the
Warrants shall not bear such restrictive legends provided the provisions of
either clause (i) or clause (ii) above, as applicable, are satisfied with
respect to such Warrant Shares.  When the Company is required to cause
unlegended certificates to replace previously issued legended certificates, if
unlegended certificates are not delivered to an Investor within five (5)
Business Days of submission by that Investor of legended certificate(s) to the
Company’s transfer agent together with a representation letter in customary
form, the Company shall be liable to the Investor for liquidated damages in an
amount equal to 1% of the aggregate purchase price of the Securities evidenced
by such certificate(s) for each thirty (30) day period (or portion thereof)
beyond such five (5) Business Day that the unlegended certificates have not been
so delivered.

 

7.9           Director Designee.

 

(a)           So long as Special Situations Fund III, L.P. (“SSF”) and/or one or
more of its Affiliates collectively are the beneficial owners of at least 25% of
the Shares originally purchased by SSF and its Affiliates hereunder (as
appropriately adjusted for any stock split, combinations, recapitalization or
similar event), SSF shall have the right to designate one person for election to
the board of directors of the Company (the “SSF Designee”).  The Company shall
use its commercially reasonable efforts to cause the SSF Designee to be elected
to the Company’s board of directors.  SSF shall have the right to remove or
replace any SSF Designee by giving notice to such SSF Designee and the Company. 
The Company shall use its commercially reasonable efforts to effect the removal
or replacement of any such SSF Designee.

 

(b)           Subject to any limitations imposed by applicable law, the SSF
Designee shall be entitled to the same perquisites, including stock options,
reimbursement of expenses and other similar rights in connection with such
person’s membership on the Board of Directors of the Company, as every other
non-employee member of the Board of Directors of the Company.

 

8.             Survival and Indemnification.

 

8.1           Survival.  The representations, warranties, covenants and
agreements contained in this Agreement shall survive the Closing of the
transactions contemplated by this Agreement.

 

8.2           Indemnification.  The Company agrees to indemnify and hold
harmless each Investor and its Affiliates and their respective directors,
officers, employees and agents from and against any and all losses, claims,
damages, liabilities and expenses (including

 

18

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without limitation reasonable attorney fees and disbursements and other expenses
incurred in connection with investigating, preparing or defending any action,
claim or proceeding, pending or threatened and the costs of enforcement thereof)
(collectively, “Losses”) to which such Person may become subject as a result of
any breach of representation, warranty, covenant or agreement made by or to be
performed on the part of the Company under the Transaction Documents, and will
reimburse any such Person for all such amounts as they are incurred by such
Person.

 

8.3           Conduct of Indemnification Proceedings.  Promptly after receipt by
any Person (the “Indemnified Person”) of notice of any demand, claim or
circumstances which would or might give rise to a claim or the commencement of
any action, proceeding or investigation in respect of which indemnity may be
sought pursuant to Section 8.2, such Indemnified Person shall promptly notify
the Company in writing and the Company shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to such Indemnified
Person, and shall assume the payment of all fees and expenses; provided,
however, that the failure of any Indemnified Person so to notify the Company
shall not relieve the Company of its obligations hereunder except to the extent
that the Company is materially prejudiced by such failure to notify.  In any
such proceeding, any Indemnified Person shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Person unless: (i) the Company and the Indemnified Person shall
have mutually agreed to the retention of such counsel; or (ii) in the reasonable
judgment of counsel to such Indemnified Person representation of both parties by
the same counsel would be inappropriate due to actual or potential differing
interests between them.  The Company shall not be liable for any settlement of
any proceeding effected without its written consent, which consent shall not be
unreasonably withheld, but if settled with such consent, or if there be a final
judgment for the plaintiff, the Company shall indemnify and hold harmless such
Indemnified Person from and against any loss or liability (to the extent stated
above) by reason of such settlement or judgment.  Without the prior written
consent of the Indemnified Person, which consent shall not be unreasonably
withheld, the Company shall not effect any settlement of any pending or
threatened proceeding in respect of which any Indemnified Person is or could
have been a party and indemnity could have been sought hereunder by such
Indemnified Party, unless such settlement includes an unconditional release of
such Indemnified Person from all liability arising out of such proceeding.

 

9.             Miscellaneous.

 

9.1           Successors and Assigns.  This Agreement may not be assigned by a
party hereto without the prior written consent of the Company or the Investors,
as applicable, provided, however, that an Investor may assign its rights and
delegate its duties hereunder in whole or in part to an Affiliate or to a third
party acquiring some or all of its Securities in a private transaction without
the prior written consent of the Company or the other Investors, after notice
duly given by such Investor to the Company and the other Investors, provided,
that no such assignment or obligation shall affect the obligations of such
Investor hereunder and, provided further, that the right to designate a director
set forth in Section 7.9 may not be delegated or assigned by SSF without the
prior written consent of the Company.  The provisions of this Agreement shall
inure to the benefit of and be binding upon the respective permitted successors
and assigns of the parties.  Nothing in this Agreement, express or implied, is
intended

 

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to confer upon any party other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations, or liabilities under
or by reason of this Agreement, except as expressly provided in this Agreement.

 

9.2           Counterparts; Faxes.  This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.  This Agreement may also
be executed via facsimile, which shall be deemed an original.

 

9.3           Titles and Subtitles.  The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

 

9.4           Notices.  Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given as hereinafter described (i) if given by personal delivery,
then such notice shall be deemed given upon such delivery, (ii) if given by
telex or telecopier, then such notice shall be deemed given upon receipt of
confirmation of complete transmittal, (iii) if given by mail, then such notice
shall be deemed given upon the earlier of (A) receipt of such notice by the
recipient or (B) three days after such notice is deposited in first class mail,
postage prepaid, and (iv) if given by an internationally recognized overnight
air courier, then such notice shall be deemed given one business day after
delivery to such carrier.  All notices shall be addressed to the party to be
notified at the address as follows, or at such other address as such party may
designate by ten days’ advance written notice to the other party:

 

If to the Company:

 

Unify Corporation

2101 Arena Blvd., Suite 100

Sacramento, CA  95834

Attention:  :  Pete DiCorti

Fax:  916-928-6408

 

With a copy to:

 

Gray Cary Ware & Freidenrich  LLP

400 Capitol Mall, Suite 2400

Sacramento, CA 95814

Attention:   Kevin A. Coyle, Esq.

Fax:  916-930-3201

 

If to the Investors:

 

to the addresses set forth on the signature pages hereto.

 

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9.5           Expenses.  The parties hereto shall pay their own costs and
expenses in connection herewith, except that the Company shall pay the
reasonable fees and expenses incurred by the Investors (including, but not
limited to, legal fees and expenses), not to exceed $25,000.  Such expenses
shall be paid not later than the Closing.  The Company shall reimburse the
Investors upon demand for all reasonable out-of-pocket expenses incurred by the
Investors, including without limitation reimbursement of attorneys’ fees and
disbursements, in connection with any amendment, modification or waiver of this
Agreement or the other Transaction Documents as may be requested by the
Company.  In the event that legal proceedings are commenced by any party to this
Agreement against another party to this Agreement in connection with this
Agreement or the other Transaction Documents, the party or parties which do not
prevail in such proceedings shall severally, but not jointly, pay their pro rata
share of the reasonable attorneys’ fees and other reasonable out-of-pocket costs
and expenses incurred by the prevailing party in such proceedings.

 

9.6           Amendments and Waivers.  Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and the Investors.  Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any Securities purchased under this Agreement at the time outstanding,
each future holder of all such Securities, and the Company.

 

9.7           Publicity.  Except as set forth below, no public release or
announcement concerning the transactions contemplated hereby shall be issued by
the Company or the Investors without the prior consent of the Company (in the
case of a release or announcement by the Investors) or the Investors (in the
case of a release or announcement by the Company) (which consents shall not be
unreasonably withheld), except as such release or announcement may be required
by law or the applicable rules or regulations of any securities exchange or
securities market, in which case the Company or the Investors, as the case may
be, shall allow the Investors or the Company, as applicable, to the extent
reasonably practicable in the circumstances, reasonable time to comment on such
release or announcement in advance of such issuance.  By 8:30 a.m. (New York
City time) on the trading day immediately following the Closing Date, the
Company shall issue a press release disclosing the consummation of the
transactions contemplated by this Agreement.  No later than the third trading
day following the Closing Date, the Company will file a Current Report on Form
8-K attaching the press release described in the foregoing sentence as well as
copies of the Transaction Documents.  In addition, the Company will make such
other filings and notices in the manner and time required by the SEC. 
Notwithstanding the foregoing, the Company shall not publicly disclose the name
of any Investor, or include the name of any Investor in any filing with the SEC
(other than the Registration Statement and any exhibits to filings made in
respect of this transaction in accordance with periodic filing requirements
under the 1934 Act) or any regulatory agency or administrative body, without the
prior written consent of such Investor, except to the extent such disclosure is
required by law or trading market regulations, in which case the Company shall
provide the Investors with prior notice of such disclosure.

 

9.8           Severability.  Any provision of this Agreement that is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such

 

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prohibition or unenforceability without invalidating the remaining provisions
hereof but shall be interpreted as if it were written so as to be enforceable to
the maximum extent permitted by applicable law, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.  To the extent permitted
by applicable law, the parties hereby waive any provision of law which renders
any provision hereof prohibited or unenforceable in any respect.

 

9.9           Entire Agreement.  This Agreement, including the Exhibits and the
Disclosure Schedules, and the other Transaction Documents constitute the entire
agreement among the parties hereof with respect to the subject matter hereof and
thereof and supersede all prior agreements and understandings, both oral and
written, between the parties with respect to the subject matter hereof and
thereof.

 

9.10         Further Assurances.  The parties shall execute and deliver all such
further instruments and documents and take all such other actions as may
reasonably be required to carry out the transactions contemplated hereby and to
evidence the fulfillment of the agreements herein contained.

 

9.11         Governing Law; Consent to Jurisdiction; Waiver of Jury Trial.  This
Agreement shall be governed by, and construed in accordance with, the internal
laws of the State of New York without regard to the choice of law principles
thereof.  Each of the parties hereto irrevocably submits to the exclusive
jurisdiction of the courts of the State of New York located in New York County
and the United States District Court for the Southern District of New York for
the purpose of any suit, action, proceeding or judgment relating to or arising
out of this Agreement and the transactions contemplated hereby.  Service of
process in connection with any such suit, action or proceeding may be served on
each party hereto anywhere in the world by the same methods as are specified for
the giving of notices under this Agreement.  Each of the parties hereto
irrevocably consents to the jurisdiction of any such court in any such suit,
action or proceeding and to the laying of venue in such court.  Each party
hereto irrevocably waives any objection to the laying of venue of any such suit,
action or proceeding brought in such courts and irrevocably waives any claim
that any such suit, action or proceeding brought in any such court has been
brought in an inconvenient forum.  EACH OF THE PARTIES HERETO WAIVES ANY RIGHT
TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND
REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.

 

[signature page follows]

 

22

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IN WITNESS WHEREOF, the parties have executed this Agreement or caused their
duly authorized officers to execute this Agreement as of the date first above
written.

 

The Company:

UNIFY CORPORATION

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

23

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The Investors:

SPECIAL SITUATIONS FUND III, L.P.

 

 

 

 

 

By:

 

 

 

Name: Austin W. Marxe

 

 

Title: General Partner

 

 

Aggregate Purchase Price:  $1,649,969

Number of Shares:  2,323,900

Number of Warrants:  929,560

 

 

Address for Notice:

 

153 E. 53rd Street

55th Floor

New York, NY  10022

 

with a copy to:

 

Lowenstein Sandler PC

65 Livingston Avenue

Roseland, NJ  07068

Attn:  John D. Hogoboom, Esq.

Telephone:     973.597.2500

Facsimile:      973.597.2400

 

 

 

SPECIAL SITUATIONS CAYMAN FUND, L.P.

 

 

 

 

 

By:

 

 

 

Name: Austin W. Marxe

 

 

Title: General Partner

 

 

Aggregate Purchase Price:  $550,037

Number of Shares:  774,700

Number of Warrants:  309,880

 

Address for Notice:

 

153 E. 53rd Street

55th Floor

New York, NY  10022

 

24

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with a copy to:

 

Lowenstein Sandler PC

65 Livingston Avenue

Roseland, NJ  07068

Attn:  John D. Hogoboom, Esq.

Telephone:     973.597.2500

Facsimile:      973.597.2400

 

 

 

SPECIAL SITUATIONS PRIVATE EQUITY FUND, L.P.

 

 

 

 

 

By:

 

 

 

Name: Austin W. Marxe

 

 

Title: General Partner

 

 

Aggregate Purchase Price:  $900,067

Number of Shares:  1,267,700

Number of Warrants:  507,080

 

153 E. 53rd Street

55th Floor

New York, NY  10022

 

with a copy to:

 

Lowenstein Sandler PC

65 Livingston Avenue

Roseland, NJ  07068

Attn:  John D. Hogoboom, Esq.

Telephone:     973.597.2500

Facsimile:      973.597.2400

 

 

 

SPECIAL SITUATIONS TECHNOLOGY FUND, L.P.

 

 

 

 

 

By:

 

 

 

Name: Austin W. Marxe

 

 

Title: General Partner

 

 

Aggregate Purchase Price:  $150,023

Number of Shares:  211,300

 

25

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Number of Warrants:  84,520

 

Address for Notice:

 

153 E. 53rd Street

55th Floor

New York, NY  10022

 

with a copy to:

 

Lowenstein Sandler PC

65 Livingston Avenue

Roseland, NJ  07068

Attn:  John D. Hogoboom, Esq.

Telephone:     973.597.2500

Facsimile:      973.597.2400

 

 

 

SPECIAL SITUATIONS TECHNOLOGY FUND II, L.P.

 

 

 

 

 

By:

 

 

 

Name: Austin W. Marxe

 

 

Title: General Partner

 

 

Aggregate Purchase Price:  $749,973

Number of Shares:  1,056,300

Number of Warrants:  422,520

 

Address for Notice:

 

153 E. 53rd Street

55th Floor

New York, NY  10022

 

with a copy to:

 

Lowenstein Sandler PC

65 Livingston Avenue

Roseland, NJ  07068

Attn:  John D. Hogoboom, Esq.

Telephone:     973.597.2500

Facsimile:      973.597.2400

 

26

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