EXHIBIT 10.1

 

IN MAKING AN INVESTMENT DECISION PURCHASERS MUST RELY ON THEIR OWN EXAMINATION
OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS
INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE
SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS
DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

 

THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. PURCHASERS SHOULD BE AWARE THAT THEY WILL
BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE
PERIOD OF TIME.

 

EPICOR SOFTWARE CORPORATION

 

SERIES D PREFERRED STOCK PURCHASE AGREEMENT

 

February 11, 2003

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TABLE OF CONTENTS

 

 

         

PAGE

SECTION 1.

  

AUTHORIZATION OF SALE OF THE SECURITIES

  

1

SECTION 2.

  

AGREEMENT TO SELL AND PURCHASE THE SHARES

  

1

2.1  

  

Sale of Shares

  

1

SECTION 3.

  

CLOSING AND DELIVERY

  

1

3.1  

  

Closing

  

1

3.2  

  

Delivery of the Shares at the Closing

  

1

SECTION 4.

  

REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY

  

2

4.1  

  

Organization and Qualification

  

2

4.2  

  

Capitalization

  

2

4.3  

  

Authorization of Securities

  

3

4.4  

  

Governmental Consents

  

3

4.5  

  

Due Authorization, Execution and Delivery of Agreement

  

4

4.6  

  

No Conflicts

  

4

4.7  

  

Title to Assets

  

4

4.8  

  

Permits

  

4

4.9  

  

Legal Actions

  

5

4.10

  

Labor

  

5

4.11

  

No Violations

  

5

4.12

  

Insurance

  

5

4.13

  

Company Contracts

  

5

4.14

  

SEC Documents

  

6

4.15

  

Related Party Transactions

  

6

4.16

  

Financial Statements

  

6

4.17

  

Receivables

  

7

4.18

  

Intellectual Property

  

7

4.19

  

Nasdaq Compliance

  

8

4.20

  

Taxes

  

8

4.21

  

No Integration or General Solicitation

  

8

4.22

  

No Registration

  

8

 

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TABLE OF CONTENTS

(CONTINUED)

 

         

PAGE

4.23

  

No Material Changes

  

8

4.24

  

Accounting Controls

  

9

4.25

  

Form S-3 Qualification

  

9

4.26

  

No Anti-Dilution Event

  

9

4.27

  

Registration Rights

  

9

4.28

  

Investment Company Act

  

9

4.29

  

Sarbanes-Oxley Act

  

10

4.30

  

Audit Committee

  

10

4.31

  

Foreign Corrupt Practices Act

  

10

4.32

  

Loans to Officers and Directors

  

10

4.33

  

Employee Benefits

  

10

4.34

  

Nasdaq Listing

  

10

4.35

  

Rights Plan

  

11

SECTION 5.

  

REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS

  

11

SECTION 6.

  

SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS

  

12

SECTION 7.

  

CONDITIONS TO COMPANY’S OBLIGATIONS AT THE CLOSING

  

12

7.1  

  

Receipt of Payment

  

12

7.2  

  

Representations and Warranties Correct

  

12

7.3  

  

Covenants Performed

  

12

7.4  

  

Absence of Strategic Transaction

  

12

SECTION 8.

  

CONDITIONS TO PURCHASERS’ OBLIGATIONS AT THE CLOSING

  

13

8.1  

  

Representations and Warranties Correct

  

13

8.2  

  

Covenants Performed

  

13

8.3  

  

Reservation of Conversion Shares

  

13

8.4  

  

Legal Opinion

  

13

8.5  

  

Officer’s Certificate

  

13

8.6  

  

Secretary’s Certificate

  

13

 

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TABLE OF CONTENTS

(CONTINUED)

 

         

PAGE

8.7  

  

Transfer Agent Instructions

  

13

8.8  

  

Certificate of Designation

  

13

8.9  

  

Nasdaq Listing

  

13

8.10

  

No Material Adverse Effect

  

13

8.11

  

Proceedings and Documents

  

14

8.12

  

Absence of Strategic Transaction

  

14

SECTION 9.

  

REGISTRATION OF THE SHARES; COMPLIANCE WITH THE SECURITIES ACT

  

14

9.1  

  

Registration Procedures

  

14

9.2  

  

Transfer of Shares After Registration; Suspension; Damages

  

16

9.3  

  

Expenses of Registration

  

19

9.4  

  

Delay of Registration; Furnishing Information

  

19

9.5  

  

Indemnification

  

19

9.6  

  

Agreement to Furnish Information

  

22

9.7  

  

Assignment of Registration Rights

  

22

9.8  

  

Rule 144 Reporting

  

23

9.9  

  

S-3 Eligibility

  

23

9.10

  

Termination of Registration Rights

  

23

9.11

  

Amendment of Registration Rights

  

24

9.12

  

Legends

  

24

SECTION 10.

  

BROKER’S FEE

  

24

SECTION 11.

  

NOTICES

  

24

SECTION 12.

  

MISCELLANEOUS

  

25

12.1

  

Waivers and Amendments

  

25

12.2

  

Headings

  

25

12.3

  

Severability

  

25

12.4

  

Governing Law

  

25

12.5

  

Counterparts

  

25

12.6

  

Successors and Assigns

  

26

12.7

  

Entire Agreement

  

26

 

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TABLE OF CONTENTS

(CONTINUED)

 

        

PAGE

12.8

 

Payment of Fees and Expenses

  

26

12.9

 

Acquisition Transaction Repurchase Right

  

26

12.10

 

Waiver of Conflicts

  

27

12.11

 

Reasonable Efforts

  

27

12.12

 

Termination of Agreement

  

27

 

ATTACHMENTS:

 

Exhibit A

    

-

    

Schedule of Purchasers

Exhibit B

    

-

    

Certificate of Designations of Series D Convertible Preferred Stock

Exhibit C

    

-

    

Form of Transfer Agent Instructions

Appendix I

    

-

    

Stock Certificate Questionnaire

Appendix II

    

-

    

Registration Statement Questionnaire

Appendix III

    

-

    

Seller’s Certificate of Sale

 

iv

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SERIES D PREFERRED STOCK PURCHASE AGREEMENT

 

THIS AGREEMENT (“Agreement”) is made as of the 11th day of February, 2003 (the
“Effective Date”), by and among EPICOR SOFTWARE CORPORATION, a Delaware
corporation with its principal place of business at 195 Technology Drive,
Irvine, California 92718, (the “Company”) and each of those persons and
entities, severally and not jointly, listed as a Purchaser on the Schedule of
Purchasers attached as Exhibit A hereto (each, a “Purchaser” and collectively,
the “Purchasers”).

 

AGREEMENT

 

In consideration of the mutual covenants contained in this Agreement, and for
other good and valuable consideration, the receipt of which is hereby
acknowledged, the Company and each Purchaser (severally and not jointly) hereby
agree as follows:

 

SECTION 1. AUTHORIZATION OF SALE OF THE SECURITIES. Subject to the terms and
conditions of this Agreement, the Company has or before the Closing Date (as
defined in Section 3) will have authorized (a) the sale and issuance of three
hundred thousand (300,000) shares of its Series D Convertible Preferred Stock
(the “Preferred Stock”) having rights, preferences and privileges as set forth
in the Company’s Certificate of Designations of Series D Preferred Stock (the
“Certificate of Designations”) attached hereto as Exhibit B, and (b) the
issuance of the shares of its Common Stock (the “Common Stock”) to be issued
upon conversion of the Preferred Stock (the “Conversion Shares”). The shares of
Preferred Stock sold hereunder shall be referred to herein as the “Shares.” The
Shares and the Conversion Shares shall be referred to herein as the
“Securities.”

 

SECTION 2. AGREEMENT TO SELL AND PURCHASE THE SHARES.

 

2.1 Sale of Shares. At the Closing (as defined in Section 3), the Company will
sell to each Purchaser, and each Purchaser will purchase from the Company, at a
purchase price per Share equal to $19.10, the number of Shares set forth next to
such Purchaser’s name on the Schedule of Purchasers attached hereto as Exhibit A
(the “Schedule of Purchasers”).

 

SECTION 3. CLOSING AND DELIVERY.

 

3.1 Closing. The closing of the purchase and sale of the Shares to be sold
pursuant to this Agreement shall be held immediately following the satisfaction
of the closing conditions contained herein, at the offices of Wilson Sonsini
Goodrich & Rosati, Professional Corporation, 650 Page Mill Road, Palo Alto,
California, or on such other date and place as may be agreed to by the Company
and the Purchasers. The date of the closing of the purchase and sale of the
Shares is referred to herein as the “Closing Date”, and such closing is referred
to as the “Closing.”

 

3.2 Delivery of the Shares at the Closing. At the Closing, the Company shall
deliver to each Purchaser stock certificates registered in the name of such
Purchaser, or in such

 

1

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nominee name(s) as designated by such Purchaser, representing the number of
shares of Preferred Stock to be purchased by such Purchaser at the Closing as
set forth in the Schedule of Purchasers. The name(s) in which the stock
certificates are to be issued to each Purchaser are set forth in the Stock
Certificate Questionnaire in the form attached hereto as Appendix I, as
completed by each Purchaser.

 

SECTION 4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.

 

Except as set forth in the Schedule of Exceptions dated as of even date herewith
and provided to the Purchasers separately from this Agreement, the Company
hereby represents and warrants to, and covenants with, the Purchasers as
follows:

 

4.1 Organization and Qualification. Each of the Company and each Significant
Subsidiary (as defined below) has been duly incorporated and is a validly
existing corporation in good standing under the laws of the jurisdiction of its
incorporation, with requisite corporate power and authority to own its
properties and conduct its business as presently conducted. The Company and each
Significant Subsidiary are duly qualified to do business as foreign corporations
in good standing in each jurisdiction in which their ownership or lease of
property or the conduct of their businesses require such qualification, except
where the failure to be so qualified would not have a material adverse effect on
transactions contemplated by this Agreement or the financial condition, business
(current or reasonably foreseeable future), properties or results of operations
of the Company (hereinafter, a “Material Adverse Effect”). The Company has
furnished representatives of the Purchasers with correct and complete copies of
the charter and by-laws of the Company, both as amended and currently in effect.
Except as set forth in the Schedule of Exceptions, the Company does not
presently own, directly or indirectly, any of the stock or other equity
interests in any entity which constitutes a Significant Subsidiary. “Subsidiary”
shall mean any corporation or other entity of which a majority of the capital
stock or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
are at the time directly or indirectly owned by the Company. “Significant
Subsidiary” shall mean any Subsidiary which qualified as “significant
subsidiary” as defined in Item 1-02 of Regulation S-X promulgated under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

4.2 Capitalization. (a) The authorized capital stock of the Company consists of:
(i) 60 million (60,000,000) shares of common stock, par value $0.001 per share
(“Common Stock”) and (ii) five million (5,000,000) shares of preferred stock of
which 500,000 shares are designated as Series A Junior Participating Preferred
Stock, 231,915 shares are designated as Series C Preferred Stock and 300,000
shares shall have been designated as Series D Preferred Stock prior to the
Closing. As of February 10, 2003, 42,675,587 shares of Common Stock, no shares
of Series A Junior Participating Preferred Stock and 61,735 shares of Series C
Preferred Stock were issued and outstanding. There are no other outstanding
shares of capital stock or voting securities of the Company other than shares of
Common Stock issued after February 10, 2003 under the Company’s 2002 Employee
Stock Purchase Plan (the “ESPPs”) or upon the exercise of options issued under
the Company’s 1993 Nonqualified Stock Option Plan, 1994 Incentive Stock Option,
Nonqualified Stock Option and Restricted Stock Purchase Plan, 1996 Nonqualified
Stock Option Plan, 1997 Nonqualified Stock Option Plan, 1998 Nonqualified Stock
Option Plan, 1999 Nonstatutory Stock Option Plan, and 1999 Merger Transition
Nonstatutory Stock Option Plan

 

2

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and the Clientele Stock Incentive Plan (collectively, the “Plans”). All
outstanding shares of the Company have been duly authorized, validly issued,
fully paid and are non-assessable and free of any liens or encumbrances created
by the Company and are not subject to preemptive rights. As of the close of
business on January 31, 2003, the Company had reserved an aggregate of 3,550,654
shares of Common Stock for issuance to employees, directors and independent
contractors upon exercise of outstanding options to acquire shares of Common
Stock issued under the Company’s Plans, 3,009,987 shares of Common Stock were
then available for future grants of options under the Company’s Plans, an
aggregate of 617,350 shares of Common Stock for issuance upon conversion of the
outstanding Series C Preferred Stock and no shares of Common Stock for issuance
upon exercise of outstanding warrants. The Company has reserved an aggregate of
3,000,000 shares of Common Stock for issuance upon conversion of the Shares.
Other than as contemplated by this Agreement or under the Plans or under the
Amended and Restated Preferred Stock Rights Agreement, dated as of November 13,
2001, between the Company and Mellon Investor Services LLC (the “Rights Plan”)
and except as described in this Section 2.2, there are no other options,
warrants, calls, rights, commitments, preemptive rights, rights of first refusal
or other rights or agreements to which the Company is a party or by which it is
bound obligating the Company to issue, deliver, sell, repurchase or redeem, or
cause to be issued, delivered, sold, repurchased or redeemed, any shares of the
capital stock of the Company or obligating the Company to grant, extend or enter
into any such option, warrant, call, right, commitment or agreement.

 

(b) All of the issued and outstanding capital stock of each Significant
Subsidiary has been duly authorized and validly issued and is fully paid and
nonassessable and is owned of record by the Company, free and clear of any lien,
charge, security interest, encumbrance or claim.

 

(c) The Preferred Stock has the rights, preferences and privileges set forth in
the Certificate of Designations (as may be amended from time to time). The
rights, preferences and privileges of the Preferred Stock do not conflict with
or result in a breach or violation of any of the terms and provisions of the
Company’s certificate of incorporation (including any certificate of designation
adopted by the board of directors of the Company).

 

4.3 Authorization of Securities. The Shares, and all outstanding shares of
capital stock of the Company have been duly authorized; all outstanding shares
of capital stock of the Company are, and, when the Shares have been delivered
and paid for in accordance with this Agreement on the Closing Date, will have
been validly issued, fully paid and non-assessable. None of the Shares are or
will be subject to any preemptive right or any right of refusal.

 

4.4 Governmental Consents. Based on the accuracy of the Purchasers’
representations with respect to matters affecting securities law compliance, no
consent, approval, authorization, or order of, or filing with, any governmental
agency or body or any court is required for the consummation of the transactions
contemplated by this Agreement in connection with the issuance and sale of the
Shares by the Company, except for the filing of a Form D with the Securities and
Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended
(the “Securities Act”), and such similar filings as may be required following
the Closing under state securities laws.

 

3

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4.5 Due Authorization, Execution and Delivery of Agreement. This Agreement has
been duly authorized, executed and delivered by the Company. All corporate
action on the part of the Company and its directors and officers necessary for
the authorization, execution and delivery of this Agreement, the performance of
all the Company’s obligations hereunder and for the authorization, issuance or
reservation for issuance, sale and delivery of the Securities has been taken,
except only that the Certificate of Designations, the form of which is attached
hereto as Exhibit B, which has been duly approved by the board of directors of
the Company, has not yet been filed with the Secretary of State of Delaware and
will be so filed prior to the Closing. This Agreement and the transactions
hereunder have also been approved by a majority of the disinterested directors
of the Company, within the meaning of Section 144 of the Delaware General
Corporation Law. No approval by the stockholders of the Company is required for
the authorization, execution and delivery of this Agreement, the performance of
all the Company’s obligations hereunder and the authorization, issuance or
reservation for issuance, sale and delivery of the Securities. This Agreement
constitutes the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, subject to (i) laws of general
application relating to bankruptcy, insolvency and the relief of debtors, (ii)
rules of law governing specific performance, injunctive relief and other
equitable remedies, and (iii) the limitations imposed by applicable federal or
state securities laws on the indemnification provisions contained in this
Agreement.

 

4.6 No Conflicts. The execution, delivery and performance of this Agreement, and
the issuance and sale of the Securities, will not conflict with, or result in a
breach or violation of (i) any of the terms and provisions of the charter or
bylaws of the Company or any Subsidiary, (ii) any statute, rule, regulation or
order of any governmental agency or body, any court, domestic or foreign, or any
self-regulatory organization having jurisdiction over the Company or any
Subsidiary or any of their respective properties, or (iii) any of the terms and
provisions of, or constitute a material default (with or without notice or lapse
of time) under, or give to any third party a right of termination, amendment,
acceleration or cancellation (with or without notice or lapse of time) of, any
agreement or instrument (A) to which the Company or any Subsidiary is a party or
by which the Company or any Subsidiary is bound or to which any of the
properties of the Company or any Subsidiary is subject and (B) the existence of
which would be required to be disclosed by the Company as a “material contract”
as such contracts are defined in Reg. § 601(a)(10) of Regulation S-K under the
Securities Act (each such agreement or instrument, a “Company Contract”). The
Company has full power and authority to authorize, issue and sell the Securities
as contemplated by this Agreement.

 

4.7 Title to Assets. The Company and each Subsidiary have good and marketable
title to all real properties and all other properties and assets owned by it
that are material to the operation of the business of the Company or each
Subsidiary, in each case free from liens and defects that would materially
affect the value thereof or materially interfere with the use made or to be made
thereof by them; and the Company and each Subsidiary hold all leased real and
personal property that are material to the operation of their respective
businesses under valid and enforceable leases with no exceptions that would
materially interfere with the use made or to be made thereof by them.

 

4.8 Permits. The Company and each Subsidiary possess all certificates,
authorizations and permits issued by appropriate governmental agencies or bodies
necessary to

 

4

--------------------------------------------------------------------------------

 

conduct the business now operated by them and to own, lease, license and use
their respective properties in the manner so owned, leased, licensed and used,
except to the extent that the failure to so possess would not have a Material
Adverse Effect. Neither the Company nor any Subsidiary has received any written
notice of proceedings relating to the revocation or modification of any such
certificate, authorization or permit that, if determined adversely to the
Company or the Subsidiary, as the case may be, would individually or in the
aggregate have a Material Adverse Effect.

 

4.9 Legal Actions. There are no pending legal, governmental or administrative
actions, suits or proceedings against or affecting the Company or any Subsidiary
or any of their respective properties or any director, officer or employee
(related to any such person’s services as a director, officer or employee of the
Company or any Subsidiary) that, if determined adversely to the Company or the
Subsidiary would individually or in the aggregate have a Material Adverse
Effect, or could reasonably be expected to materially and adversely affect the
ability of the Company to perform its obligations under this Agreement and, to
the actual knowledge of the Company’s executive officers, no such actions, suits
or proceedings are threatened in writing. Neither the Company nor any Subsidiary
has initiated and neither has any plan to initiate any action, suit or
proceeding that, if decided adversely to the Company or the Subsidiary, would,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.

 

4.10 Labor. No material labor dispute exists or, to the actual knowledge of the
Company’s executive officers, is imminent with respect to any of the employees
of the Company or any Subsidiary.

 

4.11 No Violations. Neither the Company nor any Subsidiary is (i) in default
under or in violation of (and no event has occurred that has not been waived
that, with notice or lapse of time could reasonably be expected to result in a
default by the Company or the Subsidiary under), nor has the Company or any
Subsidiary received written notice of a claim that it is in default under or
that it is in violation of, any Company Contract, (ii) in violation of any order
of any court, arbitrator, governmental body or self-regulatory organization, or
(iii) in violation of any statute, rule or regulation of any governmental
authority or self-regulatory organization, including without limitation any
foreign, federal, state and local laws relating to taxes, environmental
protection, occupational health and safety, product quality and safety and
employment and labor matters, except in each case as would not, individually or
in the aggregate, reasonably be expected to have or result in a Material Adverse
Effect.

 

4.12 Insurance. The Company maintains insurance and in such coverage amounts as
is customary in the business in which the Company is engaged. The Company
maintains a directors’ and officers’ liability insurance policy with coverage in
the amount of $15,000,000 and in scope as is customary for a publicly-traded
company in the business in which the Company is engaged, and the insurer under
such policy has not canceled or disclaimed liability under such policy or
notified the Company in writing of its intent to do so or to not renew such
policy.

 

4.13 Company Contracts. Except as filed under the SEC Documents (defined below),
neither the Company nor any Subsidiary is a party to any Company Contract. To
the

 

5

--------------------------------------------------------------------------------

 

actual knowledge of the executive officers of the Company, each Company Contract
is valid, binding and in full force and effect and is enforceable by the Company
or the Subsidiary, as the case may be, in accordance with its terms subject to
applicable bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws affecting creditors’ rights generally and to general
equitable principles and except to the extent that the failure of a Company
Contract to be valid, binding and in full force and effect would not be
reasonably likely to have a Material Adverse Effect. As of the date hereof, no
other party to any such Company Contract has notified the Company or any
Subsidiary in writing that it intends to terminate such Company Contract. The
Company and each Subsidiary have performed, in all respects, all obligations
required to be performed by it to date under the Company Contracts, as amended,
and neither the Company nor any Subsidiary is (with or without the lapse of time
or the giving of notice, or both) in breach or default in any respect thereunder
and, to the actual knowledge of the executive officers of the Company, no other
party to any of the Company Contracts, as of the date hereof, is (with or
without the lapse of time or the giving of notice, or both) in breach or default
in any respect thereunder, except in each case to the extent that such
nonperformance, breach or default would not be reasonably likely to have a
Material Adverse Effect.

 

4.14 SEC Documents. The Company has made available to representatives of the
Purchasers all registration statements, proxy statements and other statements,
reports, schedules, forms and other documents filed by the Company with the SEC
since January 1, 2000, including copies of all the exhibits referenced therein
(the “SEC Documents”). All statements, reports, schedules, forms and other
documents required to have been filed by the Company or any affiliate of the
Company with the SEC since January 1, 2000 have been so timely filed. As of
their respective dates (or, if amended or superseded by a filing prior to the
date of this Agreement, then on the date of such amendment or superseding
filing): (i) each of the SEC Documents complied in all material respects with
the applicable requirements of the Securities Act or the Exchange Act, as the
case may be, and the rules and regulations thereunder; and (ii) none of the SEC
Documents 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 the light of the circumstances under which they were
made, not misleading.

 

4.15 Related Party Transactions. Except as set forth in the SEC Documents, there
have been no transactions, agreements, arrangements or understandings between
the Company or any of its Subsidiaries, on the one hand, and their respective
directors, officers or affiliates, including without limitation their directors
and officers, on the other hand, that would be required to be disclosed under
Item 404 of Regulation S-K under the Securities Act (except for amounts due as
normal salaries and bonuses and in reimbursement of expenses).

 

4.16 Financial Statements. The financial statements included in the SEC
Documents present fairly the financial position of the Company as of the dates
shown and its results of operations and cash flows for the periods shown, and
such financial statements have been prepared in conformity with the generally
accepted accounting principles in the United States applied on a consistent
basis (except as may be indicated in the audit report or notes to such financial
statements or, in the case of unaudited statements, as permitted by Form 10-Q of
the SEC, and except that the unaudited financial statements may not have
contained footnotes and were subject to normal and recurring year-end
adjustments), and complied as to form in all

 

6

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material respects with the published rules and regulations of the SEC applicable
thereto at the time of filing. Except as and to the extent disclosed or reserved
against in the financial statements of the Company and the notes thereto
included in the SEC Documents, neither the Company nor any Subsidiary has any
liability, debt or obligation, whether accrued, absolute, contingent or
otherwise, and whether due or to become due which, individually or in the
aggregate, are material to the Company and the Subsidiaries, taken as a whole.
Subsequent to September 30, 2002, neither the Company nor any Subsidiary has
incurred any liabilities, debts or obligations of any nature whatsoever which
are, individually or in the aggregate, material to the Company and the
Subsidiaries, taken as a whole, other than those incurred in the ordinary course
of its business, other than as disclosed in the SEC Documents. The financial
results of the Company for the quarter ended December 31, 2002 shall be
materially consistent with the anticipated financial results announced in the
Company’s press release dated January 16, 2003.

 

4.17 Receivables. The accounts receivable reflected on the balance sheet of the
Company as of September 30, 2002 represent valid obligations of customers of the
Company arising from bona fide transactions entered into in the ordinary course
of business and to the knowledge of the Company have been properly reserved
against on the balance sheet in accordance with the generally accepted
accounting principles in the United States, and the Company has no reason to
believe such reserves are inadequate.

 

4.18 Intellectual Property. Except as would not have a Material Adverse Effect,
the Company and each Subsidiary own or possess, or can acquire on reasonable
terms, sufficient legal rights to all patents, patent rights, licenses,
inventions, copyrights, know-how (including trade secrets and other unpatented
and/or unpatentable propriety or confidential information, systems or
procedures), trademarks, service marks and trade names (collectively,
“Intellectual Property Rights”) necessary to conduct its business as now
operated by it and as currently proposed to be operated by it. To the actual
knowledge of the executive officers of the Company, the methods, products,
services, works, technologies, systems and processes employed by the Company to
conduct its business do not infringe upon or misappropriate any Intellectual
Property Rights of any person or entity anywhere in the world, except for
Intellectual Property Rights which the Company can acquire on reasonable terms
and except as would not, individually or in the aggregate, have a Material
Adverse Effect. To the actual knowledge of the executive officers of the
Company, no claims have been filed with a governmental agency or body or any
court, domestic or foreign, and the Company has not received any written notice
threatening any such claim: (i) challenging the validity, effectiveness or
ownership by the Company or the Subsidiary of any of the Intellectual Property
Rights of the Company or the Subsidiary, or (ii) to the effect that the use,
distribution, licensing, sublicensing, sale or any other exercise of rights in
any product, service, work, technology or process as now used or offered or
proposed for use, licensing, sublicensing, sale or other manner of commercial
exploitation by the Company or the Subsidiary infringes or will infringe on any
Intellectual Property Rights of any person or entity. There has been no default
with respect to any license granting Intellectual Property Rights to the Company
or any Subsidiary that could reasonably be expected to have a Material Adverse
Effect. To the actual knowledge of the executive officers of the Company, no
employee or third party is or has been infringing or using without authorization
any Intellectual Property Rights of the Company or any Subsidiary. The Company
and each Subsidiary use and have used commercially reasonable efforts to
maintain the confidentiality of their trade secrets.

 

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4.19 Nasdaq Compliance. As of the Closing (after taking into account the
investment by the Purchasers), the Company will be in compliance with the
continued listing and maintenance requirements of The Nasdaq National Market
(“Nasdaq”). The issuance and sale of the securities hereunder does not
contravene the rules and regulations of Nasdaq.

 

4.20 Taxes. The Company and each Subsidiary have timely made or filed all
federal, state and foreign income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and the Subsidiary have set aside on their
books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and have timely paid all taxes and other governmental
assessments and charges that are material in amount, shown or determined to be
due on such returns, reports and declarations, except those being contested in
good faith, and have set aside on their books provisions reasonably adequate for
the payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. To the actual knowledge of the executive
officers of the Company, there are no unpaid taxes in any material amount
claimed to be due by the taxing authority of any jurisdiction. The Company has
not executed a waiver with respect to the statute of limitations relating to the
assessment or collection of any foreign, federal, state or local tax. None of
the Company’s or any Subsidiary’s tax returns is presently being audited by any
taxing authority.

 

4.21 No Integration or General Solicitation. Neither the Company nor, to the
actual knowledge of the executive officers of the Company, any affiliate (as
defined in Rule 501(b) of Regulation D under the Securities Act) (an
“Affiliate”) of the Company has, directly, or through any agent, (a) sold,
offered for sale, solicited any offers to buy or otherwise negotiated in respect
of, any security (as defined in the Securities Act) which is or will be
integrated with the sales of the Securities in a manner that would require the
registration under the Securities Act of the Securities; or (b) offered,
solicited offers to buy or sold the Securities in any form of general
solicitation or general advertising (as those terms are used in Regulation D
under the Securities Act) or in any manner involving a public offering within
the meaning of Section 4(2) of the Securities Act; and the Company will not
engage in any of the actions described in subsections (a) and (b) of this
paragraph.

 

4.22 No Registration. Subject to the accuracy of each of the Purchaser’s
representations herein, it is not necessary in connection with the offer, sale
and delivery of the Securities to the several Purchasers in the manner
contemplated by this Agreement to register the Securities under the Securities
Act or to qualify the Company’s issuance of the Securities under applicable
state securities laws.

 

4.23 No Material Changes. Except as disclosed in the SEC Documents, since
December 31, 2001, (i) there has been no event, occurrence or development that
has had or that could reasonably be expected to result in a Material Adverse
Effect, (ii) the Company has not incurred any liabilities (contingent or
otherwise) other than (A) trade payables and accrued expenses incurred in the
ordinary course of business consistent with past practice and (B) liabilities
not required to be reflected in the Company’s financial statements pursuant to
GAAP or required to be disclosed in filings made with the SEC, (iii) the Company
has not altered its method of accounting or the identity of its auditors, (iv)
the Company has not declared or made any dividend or distribution of cash or
other property to its stockholders or purchased, redeemed

 

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or made any agreements to purchase or redeem any shares of its capital stock,
and (v) the Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company stock option and
stock purchase plans. Except as disclosed in the SEC Documents, since December
31, 2001 no material off-balance sheet liabilities not required to be reflected
in the Company’s financial statements pursuant to GAAP or required to be
disclosed in filings made with the SEC which would individually or in the
aggregate have a Material Adverse Effect have been incurred. No material default
exists with respect to or under any obligations of the Company or any Subsidiary
to repay money borrowed (including, without limitation, all notes payable and
drafts accepted representing extensions of credit, all obligations under letters
of credit, all obligations evidenced by bonds, debentures, notes or other
similar instruments and all obligations upon which interest charges are
customarily paid) and all contractual obligations (whether absolute or
contingent) of such entity to repurchase goods sold and distributed or any
instrument or agreement relating thereto and no event or circumstance exists
with respect thereto that (with notice or the lapse of time or both) could
reasonably be expected to give rise to such a default.

 

4.24 Accounting Controls. The Company maintains 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
material discrepancies.

 

4.25 Form S-3 Qualification. The Company satisfies the requirements for use of
Form S-3 for registration of the resale of the Securities as contemplated
herein. To the actual knowledge of the executive officers of the Company, there
exist no facts or circumstances that could reasonably be expected to prohibit or
delay the preparation or initial filing of the Registration Statement.

 

4.26 No Anti-Dilution Event. The issuance of the Securities does not constitute
an anti-dilution event for any existing security holders of the Company,
pursuant to which such security holders would be entitled to additional
securities or a reduction in the applicable conversion price or exercise price
of any securities due to any issuance proposed to be conducted hereunder.

 

4.27 Registration Rights. The Company has not granted or agreed to grant any
person or entity any rights (including “piggy–back” registration rights) to
require the Company to file a registration statement under the Securities Act
with respect to any securities, or to include such securities with the
Securities in any registration statement, except for such as have been satisfied
or waived.

 

4.28 Investment Company Act. The Company is not, and upon the issuance and sale
of the Shares as herein contemplated and the application of the net proceeds
therefrom will not be an “investment company” as such term is defined in the
Investment Company Act of 1940, as amended (the “1940 Act”). Furthermore, in the
event that the SEC shall inform the Company

 

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that the SEC believes that the Company is an “investment company” as such term
is defined in the 1940 Act, the Company shall manage its investments and
promptly take such other actions as is reasonably necessary in order that the
SEC shall no longer consider the Company to be an “investment company” as such
term is defined in the 1940 Act.

 

4.29 Sarbanes-Oxley Act. The parties acknowledge that there are uncertainties
regarding the requirements of the Sarbanes-Oxley Act of 2002 (the
“Sarbanes-Oxley Act”), and to the best of the Company’s knowledge, the Company
is not in violation of the Sarbanes-Oxley Act.

 

4.30 Audit Committee. The audit committee of the Company’s board of directors
meets the applicable standards and requirements of the Sarbanes-Oxley Act and
Nasdaq, each as in effect as of the date of this Agreement.

 

4.31 Foreign Corrupt Practices Act. To the actual knowledge of the Company’s
executive officers, neither the Company nor any of its Subsidiaries has violated
the Foreign Corrupt Practices Act. Without limiting the foregoing, to the actual
knowledge of the Company’s executive officers, neither the Company nor any of
its Subsidiaries has, to obtain or retain business, directly or indirectly
offered, paid or promised to pay, or authorized the payment of, any money or
other thing of value to: (a) any person or entitiy who is an official, officer,
agent, employee or representative of any governmental body or of any existing or
prospective customer (whether government owned or non-government owned); (b) any
political party or official thereof; (c) any candidate for political or
political party office; or (d) any other person or entity while knowing or
having reason to believe that all or any portion of such money or thing of value
would be offered, given or promised, directly or indirectly, to any such
official, officer, agent, employee, representative, political party, political
party official, candidate or person or entity affiliated with such customer,
political party or official or political office.

 

4.32 Loans to Officers and Directors. Except as disclosed in the SEC Documents,
no officer or director of the Company or any of its Subsidiaries is indebted to
the Company or any of its Subsidiaries in any material amount.

 

4.33 Employee Benefits. Except as disclosed in the SEC Documents, a Change of
Control (as defined in Section 7.4) will not (either alone or upon the
occurrence of any additional or subsequent events) constitute an event that will
or may result (either alone or in connection with any other circumstance or
event) in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any executive officer of the Company
or any of its Subsidiaries.

 

4.34 Nasdaq Listing. Prior to the Closing Date, the Company shall file with
Nasdaq an application or other document to the extent required by Nasdaq for the
listing of the Conversion Shares with Nasdaq and shall provide evidence of such
filing to the Purchasers. The Company shall use its commercially reasonable
efforts to obtain the listing, subject to official notice of issuance, of the
Conversion Shares on Nasdaq prior to the Closing Date. So long as the Purchasers
beneficially own any Preferred Stock or Common Stock, the Company shall use all
commercially reasonable efforts to maintain the listing of the Common Stock on
Nasdaq or a registered national securities exchange.

 

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4.35 Rights Plan. The Company acknowledges that, pursuant to Section 6.(F) of
the

 

Certificate of Designation, upon issuance of the Shares each holder of the
Shares shall, in respect of the Shares, be entitled to preferred stock purchase
rights pursuant to the Rights Plan as currently in effect and as amended from
time to time as though holder of that number of shares of Common Stock into
which the Shares held by such holder may be converted, and shall be entitled to
the benefit of such stock purchase rights immediately upon and after issuance of
the Shares to the extent such stock purchase rights are outstanding with respect
to the Common Stock of the Company. The Company agrees to take all actions
required of it to perform its obligations under said Section 6.(F) of the
Certificate of Designation as promptly as practical following the Closing.

 

SECTION 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS.

 

Each Purchaser, severally and not jointly, represents and warrants to and
covenants with the Company that:

 

(a) Purchaser either alone or together with the advice of such Purchaser’s
purchaser representative, is knowledgeable, sophisticated and experienced in
making, and is qualified to make, decisions with respect to investments in
shares presenting an investment decision like that involved in the purchase of
the Securities, including investments in securities issued by the Company, and
has requested, received, reviewed and considered, either alone or with such
Purchaser’s purchaser representative, all information Purchaser deems relevant
in making an informed decision to purchase the Securities.

 

(b) Purchaser is acquiring the Securities being acquired by Purchaser pursuant
to this Agreement in the ordinary course of its business and for its own account
for investment only and with no present intention of distributing any of such
Securities or any arrangement or understanding with any other persons regarding
the distribution of such Securities, except in compliance with Section 5(c).

 

(c) Purchaser will not, directly or indirectly, offer, sell, pledge, transfer or
otherwise dispose of (or solicit any offers to buy, purchase or otherwise
acquire or take a pledge of) any of the Securities purchased hereunder except in
compliance with the Securities Act of 1933, as amended (the “Securities Act”),
applicable blue sky laws, and the rules and regulations promulgated thereunder.

 

(d) Purchaser is an “accredited investor” within the meaning of Rule 501 of
Regulation D promulgated under the Securities Act.

 

(e) Purchaser has full right, power, authority and capacity to enter into this
Agreement and to consummate the transactions contemplated hereby and has taken
all necessary action on the part of Purchaser and its directors and officers to
authorize the execution, delivery and performance of all of Purchaser’s
obligations under this Agreement. This Agreement constitutes the legal, valid
and binding obligation of Purchaser, enforceable against Purchaser in accordance
with its terms, subject to (i) laws of general application relating to
bankruptcy, insolvency and the relief of debtors, (ii) rules of law governing
specific performance, injunctive

 

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relief and other equitable remedies, and (iii) the limitations imposed by
applicable federal or state securities laws on the indemnification provisions
contained in this Agreement.

 

(f) Purchaser is domiciled in the State of California.

 

SECTION 6. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
Notwithstanding any investigation made by any party to this Agreement, all
covenants, agreements, representations and warranties made by the Company and
each Purchaser herein and in the certificates for the Shares delivered pursuant
hereto shall survive the execution of this Agreement for a period of eighteen
(18) months, the delivery to the Purchasers of the Shares being purchased and
the payment therefor; provided, however, that the representations and warranties
made by the Company in Section 4.2(c), Section 4.5, clause (i) of Section 4.6
and Section 4.35 shall survive the execution of this Agreement indefinitely.

 

SECTION 7. CONDITIONS TO COMPANY’S OBLIGATIONS AT THE CLOSING. The Company’s
obligation to complete the sale and issuance of the Shares and deliver the
Shares to each Purchaser, individually, as set forth in the Schedule of
Purchasers, at the Closing shall be subject to the following conditions to the
extent not waived by the Company:

 

7.1 Receipt of Payment. The Company shall have received payment, by certified
check or wire transfer of immediately available funds, in the full amount of the
purchase price for the number of Shares being purchased by such Purchaser at the
Closing as set forth in the Schedule of Purchasers.

 

7.2 Representations and Warranties Correct. The representations and warranties
made by such Purchaser in Section 5 hereof shall be true and correct when made,
and shall be true and correct in all material respects on the date of the
Closing.

 

7.3 Covenants Performed. All covenants, agreements and conditions contained
herein to be performed by such Purchaser on or prior to the Closing shall have
been performed or complied with in all material respects.

 

7.4 Absence of Strategic Transaction. Prior to the Closing, the Company shall
not have entered into (a) a binding agreement providing for a Change of Control
or (b) an alternative financing transaction in which the Company raises at least
$8,000,000 through the sale of new equity securities of the Company (excluding
any securities that constitute debt for balance sheet purposes) (an “Alternative
Financing”). For purposes hereof, a “Change of Control” shall mean (i) any
acquisition of the Company by means of merger or other form of corporate
reorganization in which outstanding shares of capital stock of the Company are
exchanged for securities or other consideration issued, or caused to be issued,
by the acquiring corporation or its subsidiary (other than a mere
reincorporation transaction) in which in excess of 50% of the Company’s voting
power is transferred, (ii) a sale of all or substantially all of the assets of
the Company, or (iii) any other transaction or series of related transactions in
which a person or a “group” (as such term is used in Section 13(d) of the
Exchange Act) acquire in excess of 50% of the voting power of the Company is
transferred.

 

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SECTION 8. CONDITIONS TO PURCHASERS’ OBLIGATIONS AT THE CLOSING. Each
Purchaser’s obligation to accept delivery of the Shares and to pay for the
Shares at the Closing shall be subject to the following conditions to the extent
not waived by such Purchaser:

 

8.1 Representations and Warranties Correct. The representations and warranties
made by the Company in Section 4 hereof shall be true and correct when made and
shall be true and correct in all material respects on the Closing Date.

 

8.2 Covenants Performed. All covenants, agreements and conditions contained
herein to be performed by the Company shall have been performed or complied with
in all material respects.

 

8.3 Reservation of Conversion Shares. The Conversion Shares shall have been duly
authorized and reserved for issuance upon the conversion of the Shares.

 

8.4 Legal Opinion. Each Purchaser shall have received an opinion, dated the
Closing Date, from Wilson Sonsini Goodrich & Rosati, counsel for the Company, in
the form agreed to by the Company and the Purchasers.

 

8.5 Officer’s Certificate. Each Purchaser shall have received a certificate,
dated the Closing Date, of an officer of the Company in which such officer shall
state that, as of such date, the conditions set forth in Sections 8.1, 8.2, 8.10
and 8.12 shall have been satisfied.

 

8.6 Secretary’s Certificate. Each Purchaser shall have received a certificate,
dated the Closing Date, of the Secretary of the Company in customary form
certifying as to (i) the bylaws of the Company, (ii) the certificate of
incorporation of the Company, (iii) the resolutions of the Board of Directors of
the Company and any committee of the Board of Directors approving the
transactions contemplated by this Agreement.

 

8.7 Transfer Agent Instructions. Prior to the Closing, the Company will (i)
execute and deliver to the Company’s Transfer Agent the Transfer Agent
Instruction in substantially the form of Exhibit C to this Agreement and
pursuant thereto irrevocably instruct the Transfer Agent to issue certificates
for the Conversion Shares from time to time upon conversion of the Shares in
such amounts as specified from time to time to the Transfer Agent in the
conversion notices surrendered in connection with such conversions, (ii) appoint
the Transfer Agent the conversion agent for the Shares.

 

8.8 Certificate of Designation. The Certificate of Designations shall have been
filed with the Secretary State of the State of Delaware.

 

8.9 Nasdaq Listing. The Common Stock shall be listed on Nasdaq.

 

8.10 No Material Adverse Effect. No event or events that would individually or
in the aggregate constitute a Material Adverse Effect to the Company shall have
occurred subsequent to the date of the filing of the Company’s last Quarterly
Report on Form 10-Q, unless curable and such event or events shall have been
cured to the Purchasers’ reasonable satisfaction. The financial results of the
Company for the quarter ended December 31, 2002 shall not be

 

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materially inconsistent with the anticipated financial results announced in the
Company’s press release dated January 16, 2003.

 

8.11 Proceedings and Documents. All corporate proceedings in connection with the
transactions contemplated at the Closing and all documents incident thereto
shall be reasonably satisfactory in all material respects in form and substance
to Cooley Godward LLP.

 

8.12 Absence of Strategic Transaction. Prior to the Closing, the Company shall
not have entered into (a) a binding agreement providing for a Change of Control
or (b) an Alternative Financing.

 

SECTION 9. REGISTRATION OF THE SHARES; COMPLIANCE WITH THE SECURITIES ACT.

 

9.1 Registration Procedures. The Company is obligated to do the following:

 

(a) As soon as is reasonably practicable after the Closing Date, but in no event
later than 30 calendar days after the Closing Date (the “Filing Deadline”), the
Company shall prepare and file with the SEC one or more registration statements
(collectively, the “Registration Statement”) on Form S-3 (unless the Company is
not then eligible to register for resale on Form S-3, in which case on another
appropriate form) in order to register with the SEC the resale by the
Purchasers, from time to time, of the Conversion Shares and shares of Common
Stock issuable upon conversion of the Series C Preferred Stock (collectively,
the “Registrable Securities”) through Nasdaq or the facilities of any national
securities exchange on which the Companys Common Stock is then traded, or in
privately negotiated transactions. The Company shall use its commercially
reasonable efforts to cause the Registration Statement to be declared effective
as soon thereafter as possible, but in any event prior to 120 days after the
Closing Date (the “Effectiveness Deadline”).

 

(b) Not less than four (4) trading days prior to the filing of a Registration
Statement or any prospectus contained in a Registration Statement (a
“Prospectus”) or any amendment or supplement thereto, the Company shall, (i)
furnish to the Purchasers for their review copies of all such documents proposed
to be filed (including documents incorporated or deemed incorporated by
reference), and (ii) notify each Purchaser in writing of the information the
Company requires from each such Purchaser to be included in such Registration
Statement.

 

(c) The Company shall (i) prepare and file with the SEC (x) such amendments and
supplements to each Registration Statement and the Prospectus used in connection
therewith, and (y) such other filings required by the SEC, and (ii) take such
other actions, in each case as may be necessary to keep the Registration
Statement continuously effective and so that such Registration Statement will
not contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and so that such Prospectus will not contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, until the earlier of
(A) the date that the Purchasers have completed the distribution related to the
Registrable Securities, (B) such time that all Registrable Securities then held
by the Purchasers

 

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and their affiliates can be sold without compliance with the registration
requirements of the Securities Act pursuant to Rule 144(k) under the Securities
Act and the Purchasers have received an opinion from counsel to the Company that
all Registrable Securities then held by the Purchasers and their affiliates may
be sold pursuant to Rule 144(k) and the Company has caused the legend referred
to in Section 9.12 to be removed from the certificates representing the
Registrable Securities, or (C) such time as all Purchasers shall hold in the
aggregate less than one percent of the Common Stock then outstanding as set
forth under Rule 144(e)(1) under the Securities Act (the “Effectiveness
Period”).

 

(d) (i) Furnish to the Purchasers with respect to the Registrable Securities
registered under the Registration Statement such number of copies of the
Registration Statement (including pre-effective and post-effecive amendments),
Prospectuses (including supplemental prospectuses) and preliminary versions of
the Prospectus filed with the SEC (“Preliminary Prospectuses”) in conformity
with the requirements of the Securities Act and such other documents as the
Purchasers may reasonably request, in order to facilitate the public sale or
other disposition of all or any of the Registrable Securities by the Purchasers;
and (ii) upon request, inform each Purchaser who so requests that the Company
has complied with its obligations in Section 9.1(d)(i) (or that, if the Company
has filed a post-effective amendment to the Registration Statement which has not
yet been declared effective, the Company will notify the Purchaser to that
effect, will use its commercially reasonable efforts to secure the effectiveness
of such post-effective amendment as promptly as reasonably possible and will
promptly notify the Purchaser pursuant to Section 9.1(d)(i) hereof when the
amendment has become effective).

 

(e) Notify the Purchasers as promptly as reasonably possible and (if requested
by any such Person) confirm such notice in writing (i) (A) when the SEC notifies
the Company whether there will be a review of a Registration Statement and
whenever the SEC comments in writing on such Registration Statement (the Company
shall provide true and complete copies thereof and all written responses thereto
to each of the Purchasers); and (B) with respect to a Registration Statement or
any posteffective amendment, when the same has become effective; (ii) of any
request by the SEC for amendments or supplements to a Registration Statement or
Prospectus or for additional information; (iii) of the issuance by the SEC of
any stop order suspending the effectiveness of a Registration Statement covering
any or all of the Registrable Securities or the initiation of any proceedings
for that purpose; (iv) 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 (v) of the
occurrence of any event or passage of time that makes the financial statements
included in a Registration Statement ineligible for inclusion therein or any
statement made in such 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 such Registration Statement,
Prospectus or other documents so that, in the case of a Registration Statement,
such Registration Statement will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading, and so that such Prospectus will
not contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.

 

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(f) File documents required of the Company for normal blue sky clearance in
states reasonably specified in writing by the Purchasers prior to the
effectiveness of the Registration Statement; provided, however, that the Company
shall not be required to qualify to do business or consent to service of process
in any jurisdiction in which it is not now so qualified or has not so consented.

 

(g) Use its commercially reasonable efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of (i) any order suspending the effectiveness of a
Registration Statement, or (ii) any suspension of the qualification (or
exemption therefrom) of any of the Registrable Securities for sale in any
jurisdiction, as soon as practicable.

 

(h) Cooperate with the Purchasers to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be delivered to
any transferee pursuant to any Registration Statement free of any restrictive
legends and in such denominations and registered in such names as the Purchasers
may reasonably request.

 

(i) In the event of any underwritten public offering, enter into and perform its
obligations under an underwriting agreement, in usual and customary form, with
the managing underwriter(s) of such offering. Each Purchaser participating in
such underwriting shall also enter into and perform its obligations under such
an agreement.

 

(j) In the event of any underwritten public offering, use its commercially
reasonable efforts to furnish, on the date that such Registrable Securities are
delivered to the underwriters for sale, if such securities are being sold
through underwriters, (i) an opinion, dated as of such date, of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and (ii) a letter, dated as of
such date, from the independent certified public accountants of the Company, in
form and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering addressed to the
underwriters.

 

(k) Use all commercially reasonable efforts to cause all such Registrable
Securities registered pursuant hereto to be listed on Nasdaq, if the Common
Stock is then listed on Nasdaq, and each other securities exchange on which
similar securities issued by the Company are then listed.

 

(l) The Company understands that each of the Purchasers disclaims being an
underwriter, but any Purchasers being deemed an underwriter by the SEC shall not
relieve the Company of any obligations it has hereunder.

 

9.2 Transfer of Shares After Registration; Suspension; Damages.

 

(a) Each Purchaser, severally and not jointly, agrees (i) that it will not sell,
offer to sell, solicit offers to buy, dispose of, loan, pledge or grant any
right with respect to the Registrable Securities or otherwise take an action
that would constitute a sale within the meaning of the Securities Act, other
than transactions exempt from the registration requirements of the Securities
Act, except as contemplated in the Registration Statement referred to in Section
9.1 and as described below, (ii) that it shall be a condition precedent to the
obligations of the

 

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Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Purchaser that such Purchaser shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be required to effect the registration of such
Registrable Securities and shall be requested by the Company, (iii) that it
shall execute such documents in connection with such registration, that are
customary for resale registration statements, as the Company may reasonably
request, (iv) to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of any Registration
Statement hereunder, unless such Purchaser has notified the Company in writing
of such Purchaser’s election to exclude all of such Purchasers Registrable
Securities from such Registration Statement and (v) that it will promptly notify
the Company of any changes in the information set forth in the Registration
Statement regarding the Purchaser or its plan of distribution. Any delay of a
Purchaser in taking the actions set forth in clauses (ii), (iii), (iv) and (v)
of this Section 9.2(a), shall be deemed a “Purchaser Delay” for purposes of this
Agreement.

 

(b) Subject to paragraph (c) below, in the event: (i) of any request by the SEC
or any other federal or state governmental authority during the period of
effectiveness of the Registration Statement for amendments or supplements to a
Registration Statement or related Prospectus or for additional information; (ii)
of the issuance by the SEC or any other federal or state governmental authority
of any stop order suspending the effectiveness of a Registration Statement or
the initiation of any proceedings for that purpose; (iii) 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 of any proceeding for such purpose; or (iv)
of any event or circumstance which necessitates the making of any changes in the
Registration Statement or Prospectus, or any document incorporated or deemed to
be incorporated therein by reference, so that, in the case of the Registration
Statement, it will not contain any untrue statement of a material fact or any
omission to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and that in the case of the
Prospectus, it will not contain any untrue statement of a material fact or any
omission to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; then the Company shall promptly deliver a certificate
in writing to each Purchaser (a “Suspension Notice”) to the effect of the
foregoing and, upon receipt of such Suspension Notice, the Purchaser will
refrain from selling any Registrable Securities pursuant to the Registration
Statement (a “Suspension”) until the Purchasers receipt of copies of a
supplemented or amended Prospectus prepared and filed by the Company, or until
it is advised in writing by the Company that the current Prospectus may be used,
and has received copies of any additional or supplemental filings that are
incorporated or deemed incorporated by reference in any such Prospectus.

 

(c) In the event of any Suspension, the Company will use all commercially
reasonable efforts to cause the use of the Prospectus so suspended to be resumed
as soon as reasonably practicable but in any event within forty-five (45) days
after delivery of the Suspension Notice to Purchasers; provided, however, that
Purchasers shall not be prohibited from selling Registrable Securities under the
Registration Statement as a result of Suspensions on more than three occasions
of not more than forty-five (45) days each and not more than ninety (90) days in
the aggregate in any twelve month period. Notwithstanding the foregoing, if the

 

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Company ceases to be eligible to register the Registrable Securities on Form S-3
and resolution of any Suspension requires the Company to file a post-effective
amendment on Form S-1, (i) the Company will use its commercially reasonable
efforts to cause the use of the Prospectus so suspended to be resumed as soon as
reasonably practicable but in any event within ninety (90) days after delivery
of a Suspension Notice to Purchasers, and (ii) the Purchasers shall not be
prohibited from selling Registrable Securities under the Registration Statement
as a result of Suspensions on or after the date that the Company ceases to be
eligible to register the Registrable Securities on Form S-3 on more than two
occasions of not more than sixty (60) days each in any twelve month period. In
addition to and without limiting any other remedies (including, without
limitation, at law or at equity) available to the Purchaser, the Purchaser shall
be entitled to specific performance in the event that the Company fails to
comply with the provisions of this Section 9.2(c).

 

(d) Provided that a Suspension in accordance with paragraphs (b) and (c) of this
Section 9.2 is not then in effect a Purchaser may sell Registrable Securities
under the Registration Statement, provided that it arranges for delivery of a
current Prospectus to the transferee of such Registrable Securities. Upon
receipt of a request therefor, the Company will provide an adequate number of
current Prospectuses to the Purchaser and to any other parties requiring such
Prospectuses.

 

(e) In the event of a sale of Registrable Securities by a Purchaser, unless such
requirement is waived by the Company in writing, such Purchaser shall deliver to
the Company’s transfer agent, with a copy to the Company, of a Seller’s
Certificate of Sale substantially in the form attached hereto as Appendix III.

 

(f) If (i) a Registration Statement covering all of the Registrable Securities
has not been declared effective by the SEC on or prior to the Effectiveness
Deadline, or (ii) a Registration Statement ceases to be effective as to, or
ceases to be available to the Purchasers with respect to, all Registrable
Securities to which it is required to relate at any time after the Effectiveness
Deadline and prior to the expiration of the Effectiveness Period other than
during the continuance and for the enumerated time periods of any Suspension in
accordance with paragraphs (c) and (d) of this Section 9.2, or (iii) at any time
after the Effectiveness Deadline the Company shall cease to have available and
reserved for issuance upon conversion of the Series C Preferred Stock and Series
D Preferred Stock a sufficient number of shares as shall then be required upon
conversion of all outstanding Series C Preferred Stock and Series D Preferred
Stock (any such event, a “Liquidity Default”), then the Company shall pay each
Purchaser at the end of each calendar month in which such Liquidity Default
occurred or continued, liquidated damages in an amount equal to eight and
one-third percent (8.33%) of the highest closing sales price for the Company’s
common stock since the commencement of the Liquidity Default, multiplied by the
weighted average number of shares of Registrable Securities held by such
Purchaser during the portion of the month in which the Liquidity Default
continued (the “Liquidated Damages”); provided, however, that no Purchaser shall
be entitled to Liquidated Damages with respect to any Registrable Securities
previously sold or then eligible to be sold within a three (3) month period
without compliance with the registration requirements of the Securities Act
under Rule 144 of the Securities Act. The Company shall not in any event be
required to pay Liquidated Damages for more than one Liquidity Default at any
given time, and upon cure of a Liquidity Default (by the filing or the
declaration of effectiveness of the

 

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Registration Statement, as applicable) such Liquidated Damages shall cease to
accrue with respect to such Liquidity Default. All accrued Liquidated Damages
shall be paid in cash to the Purchasers entitled thereto not more than 15 days
following the end of any month for which such damages are payable, and if not
promptly paid shall bear interest at a rate of 1% per month, compounded monthly
until paid. Notwithstanding anything in the foregoing to the contrary, all
periods in clauses (i) and (ii) shall be tolled to the extent of any delays
caused solely by any Purchaser Delay.

 

9.3 Expenses of Registration. Except as specifically provided herein, all
expenses incurred by the Company in complying with Section 9 hereof, including,
all registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses, fees and the expense of any
special audits incident to or required by any such registration (but excluding
the compensation of regular employees of the Company which shall be paid in any
event by the Company) (collectively, the “Registration Expenses”) shall be borne
by the Company. Except as provided in Section 12.8, each Purchaser shall bear
its own legal fees in connection with any registration hereunder; provided,
however, that if the Company does not file the Registration Statement with the
SEC within five (5) business days after the Closing Date, the term Registration
Expenses shall also include reasonable fees and expenses of one counsel to the
Purchasers (which shall be in addition to any fees pursuant to Section 12.9 but
which shall not exceed $10,000). All underwriting discounts and selling
commissions applicable to a sale incurred in connection with any registrations
hereunder shall be borne by the holders of the securities so registered pro rata
on the basis of the number of shares so sold.

9.4 Delay of Registration; Furnishing Information. The Purchasers shall furnish
to the Company such information regarding themselves, the Registrable Securities
held by them and the intended method of disposition of such securities as shall
be required to effect the registration of their Registrable Securities.
Furthermore, each Purchaser, severally and not jointly, agrees to promptly
notify the Company of any changes in the information set forth in a registration
statement regarding such Purchaser or its plan of distribution set forth in such
registration statement.

 

9.5 Indemnification. In the event any Registrable Securities are included in a
registration statement under this Section 9.

 

(a) To the extent permitted by law, the Company will indemnify and hold harmless
each Purchaser, the partners, officers and directors of each Purchaser, any
underwriter (as defined in the Securities Act) for such Purchaser and each
person, if any, who controls such Purchaser or underwriter within the meaning of
the Securities Act or the Exchange Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations (collectively a
“Violation”): (i) any untrue statement or alleged untrue statement of a material
fact contained in a Registration Statement, including any preliminary prospectus
or final prospectus contained therein or any amendments or supplements thereto,
(ii) the omission or alleged omission to state therein a material fact required
to be stated therein, or necessary to make the statements therein not
misleading, or (iii) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any state securities

 

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law or any rule or regulation promulgated under the Securities Act, the Exchange
Act or any state securities law in connection with the offering covered by such
Registration Statement; and the Company will pay as incurred to each such
Purchaser, partner, officer, director, underwriter or controlling person for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this Section 9.5
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company, which consent shall not be unreasonably withheld, unless such
settlement (x) includes an unconditional release of the Company from all
liability on any claims that are the subject matter of such action, and (y) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of the Company; provided, further, that the Company shall
not be liable in any such case for any such loss, claim, damage, liability or
action to the extent that it arises out of or is based upon a Violation which
(i) occurs in reliance upon and in conformity with written information furnished
expressly for inclusion in such Registration Statement, prospectus, amendment or
supplement by such Purchaser, partner, officer, director, underwriter or
controlling person of such Purchaser or (ii) based upon a claim that a
Preliminary Prospectus contained an untrue statement or alleged untrue statement
of a material fact or omission or alleged omission to state therein a material
fact required to be stated therein, or necessary to make the statements therein
not misleading, if such person was not sent or given a copy of the Prospectus
(or the Prospectus as amended or supplemented) at or prior to the written
confirmation of the sale of such Registrable Securities to such person and the
untrue statement contained in or omission from such Preliminary Prospectus was
corrected in the final Prospectus (or the Prospectus as amended or supplemented)
unless such failure is the result of noncompliance by the Company of Section
9.1(b) or (d) hereof; provided, further, that this indemnification agreement
will be in addition to any liability which the Company may otherwise have to the
Purchasers.

 

(b) To the extent permitted by law, each Purchaser will, if Registrable
Securities held by such Purchaser are included in the securities as to which
such Registration Statement, prospectus, amendment or supplement is being filed,
severally and not jointly, indemnify and hold harmless the Company, each of its
directors, its officers and each person, if any, who controls the Company within
the meaning of the Securities Act or Exchange Act, any underwriter and any
person who controls such underwriter and any other Purchaser selling securities
under such registration statement or any of such other Purchaser’s partners,
directors or officers or any person who controls such Purchaser, against any
losses, claims, damages or liabilities (joint or several) to which the Company
or any such director, officer, controlling person, underwriter or controlling
person of such underwriter or other such Purchaser, or partner, director,
officer or controlling person of such other Purchaser may become subject under
the Securities Act, the Exchange Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereto) arise out of or
are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Purchaser specifically for use in
connection with such Registration Statement, prospectus, amendment or
supplement; and each such Purchaser will pay as incurred any legal or other
expenses reasonably incurred by the Company or any such director, officer,
controlling person, underwriter or controlling person of such underwriter or
other person registering shares under such registration, or partner, officer,
director or controlling person of such other person registering shares under
such Registration

 

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Statement in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the indemnity agreement
contained in this Section 9.5 shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Purchaser, which consent shall not be unreasonably
withheld, unless such settlement (x) includes an unconditional release of such
Purchaser from all liability on any claims that are the subject matter of such
action, and (y) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of such Purchaser; provided,
further, that in no event shall any indemnity under this Section 9.5 exceed the
dollar amount of the net proceeds to be received by such Purchaser from the sale
of such Purchaser’s Registrable Securities pursuant to the Registration
Statement.

 

(c) Promptly after receipt by an indemnified party under this Section 9.5 of
notice of the commencement of any action (including any governmental action),
such indemnified party will, if a claim in respect thereof is to be made against
any indemnifying party under this Section 9.5, deliver to the indemnifying party
a written notice of the commencement thereof and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel reasonably satisfactory to the parties;
provided, however, each indemnified party (together with all indemnfied parties
which may be represented by one counsel without conflict) shall have the right
to retain one separate counsel, with the fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to actual or
potential differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action shall not relieve such indemnifying party of any liability to
the indemnified party under this Section 9.5, unless and to the extent that such
failure is materially prejudicial to the indemnifying party’s ability to defend
such action, but the omission so to deliver written notice to the indemnifying
party will not relieve it of any liability that it may have to any indemnified
party otherwise than under this Section 9.5.

 

(d) If the indemnification provided for in this Section 9.5 is held by a court
of competent jurisdiction to be unavailable to an indemnified party with respect
to any losses, claims, damages or liabilities referred to herein, the
indemnifying party, in lieu of indemnifying such indemnified party thereunder,
shall to the extent permitted by applicable law contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim, damage or
liability (i) in such proportion as is appropriate to reflect the relative
benefits received by the indemnifying party or parties on the one hand and the
indemnified party on the other from the sale of the Registrable Securities
pursuant to the Registration Statement, or (ii) if such allocation is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits but also the relative fault of the indemnifying party
or parties on the one hand and the indemnified party on the other in connection
with the Violation(s) that resulted in such loss, claim, damage or liability, as
well as any other relevant equitable considerations. The relative fault of the
indemnifying party and of the indemnified party shall be determined by a court
of law by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party and
the parties relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission; provided, that in

 

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no event shall any contribution by a Purchaser hereunder exceed the dollar
amount of the net proceeds to be received by such Purchaser from the sale of
such Purchasers Registrable Securities pursuant to the Registration Statement.

 

(e) Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in any underwriting agreement entered
into in connection with an underwritten public offering are in conflict with the
provisions of this Section 9.5, the provisions in the underwriting agreement
shall control.

 

(f) The obligations of the Company and the Purchasers under this Section 9.5
shall survive completion of any offering of Registrable Securities in a
Registration Statement and the termination of this Agreement.

 

9.6 Agreement to Furnish Information.

 

(a) Purchaser shall complete or caused to be completed the Stock Certificate
Questionnaire and the Registration Questionnaire, attached hereto as Appendix I
and Appendix II, respectively, for use in preparation of the Registration
Statements to be filed by the Company.

 

(b) In connection with an underwritten registration in which such Purchaser is
participating, each Purchaser agrees to execute and deliver such other
agreements as may be reasonably requested by the Company or the underwriter. In
addition, if requested by the Company or the representative of the underwriters
of Common Stock (or other securities) of the Company, each Purchaser shall
provide such information related to such Purchaser as may be required by the
Company or such representative in connection with the completion of any public
offering of the Companys securities pursuant to a registration statement filed
under the Securities Act.

 

9.7 Assignment of Registration Rights. The rights to cause the Company to
register Registrable Securities pursuant to this Section 9 may be assigned (but
only with the related obligations) by a Purchaser, provided (i) each transfer to
each transferee or designee involves either (X) all Registrable Securities held
by such Purchaser, (Y) not less than twenty-five thousand (25,000) shares of
Preferred Stock, or (Z) an affiliate or a current or former partner or member of
such Purchaser or any affiliate, (ii) the Company is, within a reasonable time
after such transfer, furnished with written notice of the name and address of
such transferee or assignee, (iii) such transferee or assignee agrees in writing
to assume the obligations of this Section 9 and (iv) such assignment shall be
effective only if immediately following such transfer the further disposition of
such shares by the transferee or assignee is restricted under the Securities Act
(for purposes of this statement, if the transferee, together with all affiliated
persons (x) is able to sell all of the Restricted Securities held by such
transferee and its affiliates pursuant to Rule 144(k) and and the transferee has
received an opinion from counsel to the Company that all Registrable Securities
then held by the transferee and its affiliates may be sold pursuant to Rule
144(k) and the Company has caused the legend referred to in Section 9.12 to be
removed from the certificates representing the Registrable Securities or (y)
holds less than 1% of the Company’s Common Stock following such transfer and has
the ability to sell all of such Common Stock under Rule 144 within a three month
period, then further disposition will not be deemed to be restricted under the
Securities Act).

 

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9.8 Rule 144 Reporting. With a view to making available to the Purchasers the
benefits of certain rules and regulations of the SEC which may permit the sale
of the Registrable Securities to the public without registration, the Company
agrees to use its commercially reasonable efforts to:

 

(a) Make and keep public information available, as those terms are understood
and defined in SEC Rule 144 or any similar or analogous rule promulgated under
the Securities Act;

 

(b) Keep the Registration Statement effective at all times except as permitted
without penalty under Sections 9.2(b) and 9.2(c);

 

(c) File with the SEC, in a timely manner, all reports and other documents
required of the Company under the Exchange Act; and

 

(d) So long as a Purchaser owns any Registrable Securities, furnish to such
Purchaser forthwith upon request: a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 of the Securities
Act, and of the Exchange Act; a copy of the most recent annual or quarterly
report of the Company; and such other reports and documents as a Purchaser may
reasonably request in availing itself of any rule or regulation of the SEC
allowing it to sell any such securities without registration.

 

9.9 S-3 Eligibility. The Company will use its commercially reasonable efforts to
meet the requirements for the use of Form S-3 for registration of the resale by
the Purchasers of the Registrable Securities. The Company will use its
commercially reasonable efforts to file all reports required to be filed by the
Company with the SEC in a timely manner and take all other necessary action so
as to maintain such eligibility for the use of Form S-3. Nothing in this Section
9.9 shall be deemed to affect the Company’s right to effect a Suspension
pursuant to Section 9.2(b).

 

9.10 Termination of Registration Rights. Subject to the rights of transferees
under Section 9.7 hereof, the Company’s obligations pursuant to this Section 9
shall terminate with respect to each Purchaser severally upon the earlier of (A)
the date that such Purchaser has completed the distribution related to such
Purchaser’s Registrable Securities, (B) such time that all Registrable
Securities then held by such Purchaser and its affiliates can be sold without
compliance with the registration requirements of the Securities Act pursuant to
Rule 144(k) under the Securities Act and and the Purchasers have received an
opinion from counsel to the Company that all Registrable Securities then held by
the Purchasers and their affiliates may be sold pursuant to Rule 144(k) and the
Company has caused the legend referred to in Section 9.12 to be removed from the
certificates representing the Registrable Securities, or (C) such time as such
Purchaser shall hold less than one percent of the Common Stock then outstanding
as set forth under Rule 144(e)(1) under the Securities Act and has the ability
to sell all of such Purchaser’s (and all affiliates’) Registrable Securities
under Rule 144 within a three month period. Following a termination of the
Company’s obligations pursuant to the preceding sentence with respect to a
Purchaser, any Securities held by such Purchaser shall not be deemed to be
Registrable Securities thereafter, and the obligations of such Purchaser
pursuant to this Section 9 shall also terminate.

 

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9.11 Amendment of Registration Rights. Provisions of this Section 9 may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and Purchasers who then hold not less than 75% of
the Registrable Securities. Any amendment or waiver effected in accordance with
this Section 9.11 shall be binding upon each Purchaser and the Company. No such
amendment shall be effective to the extent that it applies to less than all of
the holders of the Registrable Securities.

 

9.12 Legends. Each certificate representing Shares shall (unless such Shares are
then eligible for transfer pursuant to Rule 144(k) under the Securities Act or
as otherwise permitted under applicable law or the provisions of the Agreement)
be stamped or otherwise imprinted with a legend substantially similar to the
following (in addition to any legend required under applicable state securities
laws or as provided elsewhere in this Agreement):

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE “ACT”) AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT
OR, IN THE OPINION OF COUNSEL OR BASED ON OTHER WRITTEN EVIDENCE IN THE FORM AND
SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR
TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.

 

Nothing in this Section 9.12 or elsewhere in this Agreement shall be deemed to
restrict the ability of the holder of any Securities to transfer any such
Securities to an affiliate, partner or former partner of such holder in
compliance with the Securities Act, provided that as a condition to such
transfer, the Company may require an opinion of counsel in form and substance
satisfactory to the Company if the circumstances reasonably merit such an
opinion.

 

SECTION 10. BROKER’S FEE. The Company and each Purchaser (severally and not
jointly) hereby represent that there are no brokers or finders entitled to
compensation in connection with the sale of the Shares, and shall indemnify each
other for any such fees for which they are responsible.

 

SECTION 11. NOTICES. All notices, requests, consents and other communications
hereunder shall be in writing, shall be sent by email, confirmed facsimile or
mailed by first-class registered or certified airmail, or nationally recognized
overnight express courier, postage prepaid, and shall be deemed given when so
sent in the case of email or facsimile transmission, or when so received in the
case of mail or courier, and addressed as follows:

 

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(a) if to the Company, to:

 

Epicor Software Corporation

195 Technology Drive

Irvine, CA 92718

Attention: General Counsel

Facsimile: (949) 585-4447

Email: jireland@epicor.com

 

with a copy so mailed to:

 

Wilson Sonsini Goodrich & Rosati, Professional Corporation

650 Page Mill Road

Palo Alto, California 94306

Attention: Katharine A. Martin

Facsimile: (650) 493-6811

 

or to such other person at such other place as the Company shall designate to
the Purchasers in writing; and

 

(b) if to the Purchasers, at the address as set forth below each Purchaser’s
name on the Schedule of Purchasers, or at such other address or addresses as may
have been furnished to the Company in writing.

 

SECTION 12. MISCELLANEOUS.

 

12.1 Waivers and Amendments. Neither this Agreement nor any provision hereof may
be changed, waived, discharged, terminated, modified or amended except upon the
written consent of the Company and holders of at least 75% of the Shares (not
taking into account any Shares that have been sold and no longer bear the
restrictive legend referred to in Section 9.12).

 

12.2 Headings. The headings of the various sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed to be part of
this Agreement.

 

12.3 Severability. In case any provision contained in this Agreement should be
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.

 

12.4 Governing Law. This Agreement shall be governed by and construed in
accordance with the corporate laws of the State of Delaware and, with respect to
matters of law other than corporate law, the laws of the State of California as
applied to contracts entered into and performed entirely in California by
California residents, without regard to conflicts of law principles.

 

12.5 Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall constitute an original, but all of which, when taken
together, shall constitute but one instrument, and shall become effective when
one or more counterparts have been signed by each party hereto and delivered to
the other parties.

 

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12.6 Successors and Assigns. Except as otherwise expressly provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.

 

12.7 Entire Agreement. This Agreement, that certain letter agreement between the
Purchasers and the Company dated January 22, 2003 entitled “Series D Preferred
Stock Financing” (the “Commitment Letter”) and the other documents delivered
pursuant hereto, including the exhibits, constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof.

 

12.8 Payment of Fees and Expenses.

 

(a) Each of the Company and the Purchasers shall bear its own expenses and legal
fees incurred on its behalf with respect to the Commitment Letter, this
Agreement and the transactions contemplated hereby, except that, in accordance
with the terms of the Commitment Letter, the Company shall promptly pay on
behalf of the Purchasers the reasonable fees and expenses of Cooley Godward LLP,
special counsel for the Purchasers, not to exceed $75,000.

 

(b) If any action at law or in equity is necessary to enforce or interpret the
terms of this Agreement, the prevailing party shall be entitled to reasonable
attorney’s fees, costs and necessary disbursements in addition to any other
relief to which such party may be entitled.

 

12.9 Acquisition Transaction Repurchase Right. In the event of: (a) any
acquisition of the Company by means of merger or other form of corporate
reorganization in which outstanding shares of the Company are exchanged for
securities or other consideration issued, or caused to be issued, by the
acquiring corporation or its subsidiary (other than a mere reincorporation
transaction) in which in excess of 50% of the Company’s voting power is
transferred; (b) a sale of all or substantially all of the assets of the
Company; or (c) any other transaction or series of related transactions (by the
Company, by third party tender offer or otherwise) in which in excess of 50% of
the Company’s voting power is transferred (the events described in clauses (a)
through (c) above shall collectively be referred to as an “Acquisition
Transaction”), then each Purchaser shall have the right to sell its Shares to
the Company (or any successor to the Company) at an aggregate price equal to the
same amount and type of consideration as such Purchaser would have received if
the aggregate consideration paid in such Acquisition Transaction had been
distributed as liquidation proceeds pursuant to the Certificate of Designations.
Each Purchaser shall exercise its rights under this Section 12.9 by providing
the Company (or its successor) with written notice of its election to sell its
Shares within 60 days following the Acquisition Transaction. If the Company does
not have sufficient funds legally available pursuant to Section 160 of the
Delaware General Corporation Law (the “DGCL”) to effect the repurchase of the
Shares sought to be sold by Purchasers pursuant to this Section 12.9, then the
Company shall repurchase such Shares pro rata (based on the portion of the
aggregate repurchase price payable to each Purchaser) to the extent possible,
and shall repurchase the remaining Shares as soon as sufficient funds are
legally available. If the Company (or its successor) fails to repurchase any
Purchaser’s Shares within five (5) business days of such Purchaser’s written
election, whether due to the Company’s default or because the Company does not
have sufficient legal funds, such Purchaser shall be entitled to interest at the
annual rate of twelve percent (12%) on all unpaid amounts until such Purchaser
has received the full

 

26

--------------------------------------------------------------------------------

 

purchase price specified in this Section 12.9, which shall be paid only when
permissible pursuant to Section 160 of the DGCL.

 

12.10 Waiver of Conflicts.

 

(a) Each party to this Agreement acknowledges that Wilson Sonsini Goodrich &
Rosati, Professional Corporation (“Wilson Sonsini”), outside general counsel to
the Company, has in the past performed and is or may now or in the future
represent one or more Purchasers or their affiliates in matters unrelated to the
transactions contemplated by this Agreement (the “Investment”), including
representation of such Purchasers or their affiliates in matters of a similar
nature to the Investment. The applicable rules of professional conduct require
that Wilson Sonsini inform the parties hereunder of this representation and
obtain their consent. Wilson Sonsini has served as outside general counsel to
the Company and has negotiated the terms of the Investment solely on behalf of
the Company. The Company and each Purchaser hereby (a) acknowledge that they
have had an opportunity to ask for and have obtained information relevant to
such representation, including disclosure of the reasonably foreseeable adverse
consequences of such representation; (b) acknowledge that with respect to the
Investment, Wilson Sonsini has represented solely the Company, and not any
Purchaser or any stockholder, director or employee of the Company or any
Purchaser; and (c) gives its informed consent to Wilson Sonsini’s representation
of the Company in the Investment.

 

(b) Each party to this Agreement acknowledges that Cooley Godward LLP
(“Cooley”), outside counsel to the Purchasers, has in the past performed and is
or may now or in the future represent the Company in matters unrelated to the
Investment. The applicable rules of professional conduct require that Cooley
inform the parties hereunder of this representation and obtain their consent.
Cooley has served as outside counsel to the Purchasers and has negotiated the
terms of the Investment solely on behalf of the Purchasers. The Purchasers and
the Company each hereby (a) acknowledge that they have had an opportunity to ask
for and have obtained information relevant to such representation, including
disclosure of the reasonably foreseeable adverse consequences of such
representation; (b) acknowledge that with respect to the Investment, Cooley has
represented solely the Purchasers, and not the Company or any stockholder,
director or employee of the Company; and (c) gives its informed consent to
Cooley’s representation of the Purchasers in the Investment.

 

12.11 Reasonable Efforts. The Purchasers, on the one hand, and the Company, on
the other hand, agree to use reasonable efforts to satisfy the conditions
contained in Section 7 and Section 8, respectively, and to consummate the
transactions contemplated by this Agreement.

 

12.12 Termination of Agreement. In the event that the Closing has not occurred
on or prior to April 30, 2003, this Agreement may be terminated by either
Trident Capital, Inc. as designated representative of the Purchasers or the
Company by providing written notice to the other party in accordance with
Section 11 hereof.

 

27

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives as of the day and year first above
written.

 

COMPANY:

 

EPICOR SOFTWARE CORPORATION

 

 

By:

 

/s/ Lee Kim

--------------------------------------------------------------------------------

   

Lee Kim

   

Chief Financial Officer

 

TRIDENT CAPITAL FUND-V, L.P.

TRIDENT CAPITAL FUND-V AFFILIATES FUND, L.P.

TRIDENT CAPITAL FUND-V AFFILIATES FUND (Q), L.P.

TRIDENT CAPITAL FUND-V PRINCIPALS FUND, L.P.

TRIDENT CAPITAL PARALLEL FUND-V, C.V.

 

Executed on behalf of the forgoing funds by the undersigned, as an authorized
signatory of the respective general partner of each such fund:

 

/s/ Donald R. Dixon

--------------------------------------------------------------------------------

(signature)

 

Donald R. Dixon

--------------------------------------------------------------------------------

(print name)

 

 

 

28

--------------------------------------------------------------------------------

 

EXHIBIT A

 

SCHEDULE OF PURCHASERS

 

Name

--------------------------------------------------------------------------------

  

No. of

Shares

--------------------------------------------------------------------------------

  

Aggregate

Purchase Price

--------------------------------------------------------------------------------

             

TRIDENT CAPITAL FUND-V, L.P.

           

505 Hamilton Avenue

Suite 200

Palo Alto, CA 94301

  

268,751

  

$

5,133,144.10

TRIDENT CAPITAL FUND-V AFFILIATES FUND, L.P.

           

505 Hamilton Avenue

Suite 200

Palo Alto, CA 94301

  

1,562

  

$

29,834.20

TRIDENT CAPITAL FUND-V AFFILIATES FUND (Q), L.P.

           

505 Hamilton Avenue

Suite 200

Palo Alto, CA 94301

  

1,490

  

$

28,459.00

TRIDENT CAPITAL FUND-V PRINCIPALS FUND, L.P.

           

505 Hamilton Avenue

Suite 200

Palo Alto, CA 94301

  

7,779

  

$

148,578.90

TRIDENT CAPITAL PARALLEL FUND-V, C.V.

           

505 Hamilton Avenue

Suite 200

Palo Alto, CA 94301

  

20,418

  

$

389,983.80

Total

  

300,000

  

$

5,730,000.00

 

--------------------------------------------------------------------------------

 

EXHIBIT B

 

FORM OF CERTIFICATE OF DESIGNATION OF

SERIES D PREFERRED STOCK

--------------------------------------------------------------------------------

 

CERTIFICATE OF DESIGNATION

OF PREFERENCES OF SERIES D PREFERRED STOCK

OF

EPICOR SOFTWARE CORPORATION,

a Delaware Corporation

 

The undersigned, Lee Kim, hereby certifies that:

 

(a) He is the duly elected and acting Chief Financial Officer of Epicor Software
Corporation, a Delaware corporation (the “Corporation”).

 

(b) Pursuant to the authority conferred upon the Board of Directors of the
Corporation by the second paragraph of Article IV of the Corporation’s Second
Restated Certificate of Incorporation (the “Certificate”), the Board of
Directors of the Corporation on February 11, 2003 adopted the following
resolutions creating a series of preferred stock designated as Series D
Preferred Stock;

 

WHEREAS, the Certificate provides for a class of shares known as Preferred
Stock, issuable from time to time in one or more series; and

 

WHEREAS, the Board of Directors of the Corporation is authorized by the
Certificate to determine the powers, rights, preferences, qualifications,
limitations and restrictions granted to or imposed upon any wholly unissued
series of Preferred Stock, to fix the number of shares constituting any such
series, and to determine the designation thereof, or any of them; and

 

WHEREAS, the Board of Directors of the Corporation desires, pursuant to its
authority as aforesaid, to determine and fix the powers, rights, preferences,
qualifications, limitations and restrictions relating to a series of Preferred
Stock and the number of shares constituting, and the designation of, such
series:

 

NOW, THEREFORE, BE IT RESOLVED, that pursuant to the authority vested in the
Board of Directors of the Corporation in accordance with the provisions of the
Certificate, the series of Preferred Stock is hereby created, and the Board of
Directors hereby fixes and determines the designation of, the number of shares
constituting, and the rights, preferences, privileges and restrictions relating
to, such series of Preferred Stock as follows:

 

1. Designation. The series of Preferred Stock of the Corporation shall be
designated as “Series D Preferred Stock,” $.001 par value.

 

2. Authorized Number. The number of shares constituting the Series D Preferred
Stock shall be Three Hundred Thousand (300,000) shares. The Board of Directors
is authorized to decrease the number of shares of any series of preferred stock
prior or subsequent to the issue of that series, but not below the number of
shares of such series then outstanding. In case the number of shares of any
series shall be so decreased, the shares constituting such decrease shall resume
the status which they had prior to the adoption of the resolution originally
fixing the number of shares of such series.

 

--------------------------------------------------------------------------------

 

3. Dividend Rights. Subject to the prior rights, if any, of holders of all
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Series D Preferred Stock shall be entitled to receive, when
and as declared by the Board of Directors, out of any assets of the Corporation
legally available therefor, such dividends as may be declared from time to time
by the Board of Directors. Such dividends shall be paid to the holders of the
Series D Preferred Stock pari passu with any dividends paid to the holders of
the Corporation’s Series C Preferred Stock, $.001 per share (“Series C Preferred
Stock”), pro rata based upon the number of shares of Common Stock into which the
shares of Series D Preferred Stock are then convertible, to the holders of the
Series D Preferred Stock, and senior to any dividends paid to the holders of the
Corporation’s Common Stock or any series of Preferred Stock other than Series C
Preferred Stock. The Board of Directors shall not pay any dividend to the
holders of the Common Stock or any Preferred Stock unless and until it has paid
an equivalent dividend, pro rata based upon the number of shares of Common Stock
into which the shares of Series D Preferred Stock are then convertible, to the
holders of the Series D Preferred Stock.

 

4. Liquidation Preference.

 

(A) Subject to the prior rights, if any, of holders of all classes of stock at
the time outstanding having prior rights as to liquidation, in the event of any
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, the holders of the Series D Preferred Stock shall be entitled to
receive, on a pari passu basis, pro rata based upon the number of shares of
Common Stock into which the shares of Series C Preferred Stock and Series D
Preferred Stock are then convertible, with any such distribution to the holders
of the Series C Preferred Stock and prior and in preference to any distribution
of any of the assets or surplus funds of the Corporation to the holders of the
Common Stock, Series A Junior Participating Preferred Stock or any other series
of Preferred Stock by reason of their ownership thereof, the amount of $19.10
per share of Series D Preferred Stock (as adjusted for any stock dividends,
combinations or splits with respect to such shares) plus all accrued or declared
but unpaid dividends on such share for each share of Series D Preferred Stock
then held by such holder. Subject to the prior rights, if any, of holders of all
classes of stock at the time outstanding having prior rights as to liquidation,
if upon the occurrence of such event, the assets and funds of the Corporation
available for distribution among the holders of Series C Preferred Stock and
Series D Preferred Stock shall be insufficient to permit the payment to such
holders of the full preferential amounts to which they are entitled under the
Certificate (including their respective Certificates of Designation), then the
entire assets and funds of the Corporation legally available for distribution
shall be distributed among such holders in proportion to the full preferential
amount each such holder is otherwise entitled to receive.

 

(B) Subject to the prior rights, if any, of holders of all classes of stock at
the time outstanding having prior rights as to liquidation, upon the completion
of the distribution required by subparagraph (A) of this Section 4 and subject
to the limitations set forth in Section 4(C) below, the entire remaining assets
and funds of the Corporation legally available for distribution, if any, shall
be distributed pro rata among the holders of Common Stock, the Series A Junior
Participating Preferred Stock, Series C Preferred Stock and Series D Preferred
Stock in proportion to the shares of Common

 

-2-

--------------------------------------------------------------------------------

 

Stock held by them and the shares of Common Stock which they then have the right
to acquire upon conversion of the shares of Series C Preferred Stock and Series
D Preferred Stock then held by them.

 

(C) In the event the holders of the Series D Preferred Stock would receive an
aggregate of $38.20 or more per share of Series D Preferred Stock (as adjusted
for any stock dividends, combinations, or splits with respect to such shares)
plus all accrued or declared but unpaid dividends on such share pursuant to the
provisions set forth in Section 4(A) and 4(B), then anything herein to the
contrary notwithstanding, the holders of the Series D Preferred Stock shall be
entitled to receive only the amount of $38.20 per share of Series D Preferred
Stock (as adjusted for any stock dividends, combinations, or splits with respect
to such shares) plus all accrued or declared but unpaid dividends on such share
under such Sections 4(A) and 4(B), at which time the Series D Preferred Stock
will no longer participate and all further proceeds will be shared by the
holders of the Series A Junior Participating Preferred Stock and the Common
Stock and such other shares of capital stock as may be authorized from time to
time as provided in other Certificates of Designation or the Certificate.

 

(D) For purposes of this Section 4, (i) any acquisition of the Corporation by
means of merger or other form of corporate reorganization in which outstanding
shares of the Corporation are exchanged for securities or other consideration
issued, or caused to be issued, by the acquiring corporation or its subsidiary
(other than a mere reincorporation transaction) in which in excess of 50% of the
Corporation’s voting power is transferred or (ii) a sale of all or substantially
all of the assets of the Corporation or (iii) any other transaction or series of
related transactions (by the Corporation, by third party tender offer or
otherwise) in which in excess of 50% of the Corporation’s voting power is
transferred, shall be treated as a liquidation, dissolution or winding up of the
Corporation and shall entitle the holders of Series D Preferred Stock to receive
at the closing (and at each date after the closing on which additional amounts
(such as earnout payments, escrow amounts or other contingent payments) are paid
to stockholders of the Corporation as a result of the transaction) in cash,
securities or other property (valued as provided in Section 4(E) below) an
aggregate amount per share (based on the amounts payable at closing plus any
additional amounts after the closing as aforesaid) equal to the greater of: (1)
the amount per share specified in Sections 4(A), 4(B) and 4(C) above, or (2) the
amount per share that the holders of Series D Preferred Stock would have been
entitled to receive had all holders of all series of Preferred Stock converted
all their shares of Preferred Stock into Common Stock immediately prior to such
event at the then effective Conversion Price (as defined below).

 

(E) Whenever the distribution provided for in this Section 4 shall be payable in
securities or property other than cash, the value of such distribution shall be
as follows:

 

(i) Securities not subject to investment letter or other similar restrictions on
free marketability:

 

(A) If traded on a securities exchange (which shall include the Nasdaq National
Market System), the value shall be deemed to be the average of the closing
prices of the securities on such exchange over the 30-day period ending three
(3) days prior to the closing;

 

-3-

--------------------------------------------------------------------------------

 

(B) If traded over-the-counter, the value shall be deemed to be the average of
the closing bid or sale prices (whichever are applicable) over the 30-day period
ending three (3) days prior to the closing; and

 

(C) If there is no public market, the value shall be the fair market value
thereof, as determined in good faith by the Board of Directors of the
Corporation.

 

(ii) The method of valuation of securities subject to investment letter or other
restrictions on free marketability (other than restrictions arising solely by
virtue of a shareholders’ status as an affiliate or former affiliate) shall be
to make an appropriate discount from the market value determined as above in
(i)(A), (B) or (C) to reflect the approximate fair market value thereof, as
determined in good faith by the Board of Directors of the Corporation.

 

5. Reserved.

 

6. Conversion. The holders of Series D Preferred Stock shall have conversion
rights as follows (the “Conversion Rights”):

 

(A) Right to Convert. Each share of Series D Preferred Stock shall be
convertible into such number of fully paid and nonassessable shares of Common
stock as determined by dividing the Original Issue Price of such of Series D
Preferred Stock by the Conversion Price at the time in effect for a share of
Series D Preferred Stock. The Original Issue Price per share of Series D
Preferred Stock is $19.10. The Conversion Price per share of Series D Preferred
Stock initially shall be $1.91, subject to adjustment from time to time as
provided below.

 

(B) Automatic Conversion. Provided that (i) (A) a registration statement under
the Securities Act of 1933, as amended (the “Securities Act”), is then effective
with the Securities and Exchange Commission for the resale under the Securities
Act by the holder thereof of the Common Stock issuable upon conversion of the
Series D Preferred Stock or (B) all Common Stock issuable upon conversion of the
Series D Preferred Stock then held by such holder and its affiliates can be sold
without compliance with the registration requirements of the Securities Act
pursuant to Rule 144(k) under the Securities Act and the holder has received an
opinion from counsel to the Corporation that all Common Stock issuable upon
conversion of the Series D Preferred Stock then held by the holder and its
affiliates may be sold pursuant to Rule 144(k) and the Corporation has caused
the restrictive legend relating to restriction on resale under the Securities
Act to be removed from the certificates representing the Common Stock or (C)
holder shall hold less than one percent of the Common Stock then outstanding as
set forth under Rule 144(e)(1) under the Securities Act, and has the ability to
sell all of such holder’s (and all of holder’s affiliates’) Common Stock
issuable upon conversion of the Series D Preferred Stock and Series C Preferred
Stock under Rule 144 of the Securities Act within a three (3) month period, (ii)
such shares of Common Stock are then listed for resale on the Nasdaq National
Market or a national securities exchange, and (iii) the average price
(determined as provided below) of the Common Stock for twenty (20) consecutive
trading days has exceeded $5.73 per share, as adjusted for stock dividends,
combinations or splits, then each share of Series D Preferred Stock shall
automatically be converted into shares of Common Stock at the then effective and
applicable Conversion Price ten (10) days after written notification to the
holders of the

 

-4-

--------------------------------------------------------------------------------

 

Series D Preferred Stock by the Corporation that the conditions have been met.
Such average price shall be calculated a follows:

 

(i) If traded on a securities exchange (which shall include the Nasdaq National
Market System), the value shall be deemed to be the average of the closing
prices of the securities on such exchange over the applicable 20-day period; and

 

(ii) If traded over the counter, the value shall be deemed to be the average of
the closing bid or sale prices (whichever are applicable) over the applicable
20-day period.

 

(C) Mechanics of Conversion. Before any holder of Series D Preferred Stock shall
be entitled to convert the same into shares of Common Stock, the holder shall
surrender the certificate or certificates therefor, duly endorsed, at the office
of this Corporation or of any transfer agent for the Series D Preferred Stock,
and shall give written notice by facsimile transmission or by mail, postage
prepaid, to this Corporation at its principal corporate office, of the election
to convert the same and shall state therein the name or names in which the
certificate or certificates for shares of Common Stock are to be issued. This
Corporation shall, as soon as practicable thereafter, issue and deliver to the
address of record of such holder of Series D Preferred Stock (or such other
address as the holder shall designate in writing in the notice to the
Corporation of the election to convert), or to the nominee or nominees of such
holder, a certificate or certificates for the number of shares of Common Stock
to which such holder shall be entitled as aforesaid. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of the Series D Preferred Stock to be converted, or in the
case of automatic conversion pursuant to Section 6(B), ten (10) days following
written notification as provided in Section 6(B), and the person or persons
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such shares
of Common Stock as of such date.

 

(D) Adjustments to Conversion Ratio for Stock Dividends and for Combinations or
Subdivisions of Common Stock. In the event that this Corporation at any time or
from time to time after the purchase date of the Series D Preferred Stock shall
declare or pay, without consideration, any dividend on the Common Stock payable
in Common Stock or in any right to acquire Common Stock for no consideration, or
shall effect a subdivision of the outstanding shares of Common Stock into a
greater number of shares of Common Stock (by stock split, reclassification or
otherwise than by payment of a dividend in Common Stock or in any right to
acquire Common Stock), or in the event the outstanding shares of Common Stock
shall be combined or consolidated, by reclassification or otherwise, into a
lesser number of shares of Common Stock, then the Conversion Price per share of
Series D Preferred Stock then in effect shall be proportionately decreased or
increased, as appropriate; provided, that the Corporation shall take no such
action with respect to the Common Stock unless the Corporation shall
simultaneously reserve out of authorized, unissued and unreserved shares of
Common Stock a sufficient number of shares of Common Stock to be available for
full conversion of the Series D Preferred Stock at the new Conversion Price. In
the event that this Corporation shall declare or pay, without consideration, any
dividend on the Common Stock payable in any right to acquire Common Stock for no
consideration then the

 

-5-

--------------------------------------------------------------------------------

 

Corporation shall be deemed to have made a dividend payable in Common Stock in
an amount of shares equal to the maximum number of shares issuable upon exercise
of such rights to acquire Common Stock.

 

(E) Adjustments for Reclassification and Reorganization. If the Common Stock
issuable upon conversion of the Series D Preferred Stock shall be changed into
the same or a different number of shares of any other class or classes of stock,
whether by capital reorganization, reclassification or otherwise (other than a
subdivision or combination of shares provided for in Section 6(D) above or a
merger or other reorganization referred to in Section 4(D) above), the number of
shares of such other class or classes of stock into which the Series D Preferred
Stock shall be convertible shall, concurrently with the effectiveness of such
reorganization or reclassification, be proportionately adjusted so that the
Series D Preferred Stock shall be convertible into, in lieu of the number of
shares of Common Stock which the holders would otherwise have been entitled to
receive, a number of shares of such other class or classes of stock equivalent
to the number of shares of Common Stock that would have been subject to receipt
by the holders upon conversion of the Series D Preferred Stock immediately
before that change; provided, that the Corporation shall take no such action
with respect to the Common Stock unless the Corporation shall simultaneously
reserve out of authorized, unissued and unreserved shares of such class or
series into which the Common Stock has been changed a sufficient number of
shares of such class or series into which the Common Stock has been changed to
be available for full conversion of the Series D Preferred Stock.

 

(F) Rights Offerings. In the event the Corporation shall grant or shall have
granted as of the date of the filing of this Certificate of Designation any
rights to subscribe for, or any rights or options to purchase, Common Stock or
any stock or other securities convertible into or exchangeable for Common Stock
(such convertible or exchangeable stock or securities being herein called
“Convertible Securities”), whether or not such rights or options or the right to
convert or exchange any such Convertible Securities are immediately exercisable,
which rights or options do not result in any adjustment to the number of shares
of Common Stock or other classes of stock into which the Series D Preferred
Stock can be converted under either Section 6(D) or Section 6(E) above, then the
Corporation shall distribute such rights or options to the holders of Series D
Preferred Stock as though they were holders, at the time of such distribution,
of that number of shares of Common Stock into which the shares of Series D
Preferred Stock held by each holder could then be converted.

 

(G) No Impairment. This Corporation will not, by amendment of its Certificate or
through any reorganization, recapitalization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by this Corporation, but will at all times in
good faith assist in the carrying out of all the provisions of this Section 6
and in the taking of all such action as may be necessary or appropriate in order
to protect the conversion rights of the holders of the Series D Preferred Stock
against impairment.

 

(H) No Fractional Shares and Certificate as to Adjustments.

 

-6-

--------------------------------------------------------------------------------

 

(i) No fractional shares shall be issued upon conversion of the Series D
Preferred Stock, and the number of shares of Common Stock to be issued shall be
rounded to the nearest whole share. Whether or not fractional shares are
issuable upon such conversion shall be determined on the basis of the total
number of shares of Series D Preferred Stock the holder is at the time
converting into Common Stock and the number of shares of Common Stock issuable
upon such aggregate conversion.

 

(ii) Upon the occurrence of each adjustment or readjustment of the number of
shares of Common Stock into which the Series D Preferred Stock can be converted
pursuant to this Section 6, this Corporation, at its expense, shall promptly
compute such adjustment or readjustment in accordance with the terms hereof and
prepare and furnish to each holder of Series D Preferred Stock a certificate
setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. This Corporation shall,
upon the written request at any time of any holder of Series D Preferred Stock,
furnish or cause to be furnished to such holder a like certificate setting forth
(A) such adjustment and readjustment, (B) the Conversion Price per share of
Series D Preferred Stock at the time in effect, and (C) the number of shares of
Common Stock and the amount, if any, of other property which at the time would
be received upon the conversion of the Series D Preferred Stock.

 

(I) Notice of Record Date. In the event of any taking by this Corporation of a
record of the holders of any class of securities for the purpose of determining
the holders thereof who are entitled to receive any dividend (other than a cash
dividend) or other distribution, any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities or
property, or to receive any other right, this Corporation shall mail to each
holder of Series D Preferred Stock, at least twenty (20) days prior to the date
specified therein, a notice specifying the date on which any such record is to
be taken for the purpose of such dividend, distribution or right, and the amount
and character of such dividend, distribution or right.

 

(J) Reservation of Stock Issuable upon Conversion. This Corporation shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock (or other security into which the Common Stock shall have been
changed) solely for the purpose of effecting the conversion of the Series D
Preferred Stock such number of its shares of Common Stock (or other security) as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series D Preferred Stock; and if at any time the
number of authorized but unissued shares of Common Stock (or other security)
shall not be sufficient to effect the conversion of all the then outstanding
Series D Preferred Stock, in addition to such other remedies as shall be
available to the holder of such Series D Preferred Stock, this Corporation will
take such corporate action as may, in the opinion of its counsel, be necessary
to increase its authorized but unissued shares of Common Stock (or other
security) to such number of shares as shall be sufficient for such purposes.

 

(K) Notices. Any notice required by the provisions of this Section 6 to be given
to the holders of Series D Preferred Stock shall be deemed given if deposited in
the United States mail, postage prepaid, and addressed to each holder of record
at the holder’s address appearing on the books of this Corporation.

 

-7-

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7. Voting Rights. Except as otherwise provided by law, each holder of shares of
Series D Preferred Stock shall be entitled to vote with the holders of Common
Stock on an as-converted basis as a single class with such shares of Common
Stock and such other shares of capital stock that vote with shares of Common
Stock on all matters presented for stockholder vote and shall be entitled to
notice of any stockholder’s meeting in accordance with the Bylaws of the
Corporation. Fractional votes shall not, however, be permitted and any
fractional voting rights resulting from the conversion of Series D Preferred
Stock into Common Stock (in the case of each holder, after aggregating all
fractional shares held by such holder into the maximum number of whole shares)
shall be rounded to the nearest whole number (with one-half being rounded
upward).

 

8. Protective Provisions. Notwithstanding anything to the contrary in the
foregoing provisions, this Corporation shall not without first obtaining the
approval (by vote or written consent, as provided by law) of the holders of at
least a majority of the voting power of the then outstanding shares Series D
Preferred Stock, voting together as one class:

 

(A) alter or change the rights, preferences or privileges of the shares of
Series D Preferred Stock so as to affect adversely such shares;

 

(B) create (by new authorization, reclassification, recapitalization,
designation or otherwise) or issue any class or series of stock or any other
securities convertible into equity securities of the Corporation having any
right, preference or privilege senior to or pari passu with the Series D
Preferred Stock with respect to voting, dividends, redemption, repurchase or
upon liquidation;

 

(C) increase the authorized number of shares of the Series D Preferred Stock; or

 

(D) amend this Section 8.

 

9. Status of Converted Stock. In the event any Series D Preferred Stock shall be
converted pursuant to Section 6 hereof, the shares so converted shall be
promptly cancelled after the conversion thereof. All such shares shall upon
their cancellation become authorized but unissued shares of Preferred Stock and
may be released as part of a new series of Preferred Stock to be created by
resolution or resolutions of the Board of Directors, subject to the conditions
and restrictions on issuance set forth herein.

 

* * *

 

RESOLVED FURTHER, that the Chairman of the Board, the Chief Executive Officer,
the President or any Vice President, the Secretary, the Chief Financial Officer,
the Treasurer, or any Assistant Secretary or Assistant Treasurer of this
Corporation are each authorized to execute, verify, and file a Certificate of
Designation of Preferences in accordance with Delaware law.

 

[Remainder of Page Intentionally Left Blank]

 

 

-8-

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IN WITNESS WHEREOF, the undersigned has executed this certificate and does
affirm the foregoing as true under penalty of perjury this 11th day of February,
2003.

 

     

/s/    Lee Kim         

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Lee Kim, Cheif Financial Officer

 

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EXHIBIT C

 

FORM OF TRANSFER AGENT INSTRUCTIONS

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[Epicor Software Letterhead]

 

___________, 2003

 

_______________, as Transfer Agent

____________________________

____________________________

Attention: ___________________

 

Re: IRREVOCABLE INSTRUCTIONS

 

Ladies and Gentlemen:

 

Pursuant to the Series D Preferred Stock Purchase Agreement, dated as of
________ __, 2003 (the “Purchase Agreement”), by and between Epicor Software
Corporation, a Delaware corporation (the “Company”), and each of the holders of
Preferred Stock (as defined below) named on the signature page thereto (each, an
“Original Holder” and collectively, the “Original Holders”), the Company has
agreed, upon the terms and subject to the conditions of the Purchase Agreement,
to issue to the Original Holders, and the Original Holders have agreed to
purchase from the Company, upon the terms and subject to the conditions of the
Purchase Agreement, shares (the “Preferred Shares”) of Series D Preferred Stock,
$0.001 par value per share (the “Preferred Stock”), of the Company. As a
condition precedent to the several obligations of the Original Holders to
purchase the Preferred Shares, the Original Holders require the Company to give
the instructions contained in this letter to __________ (the “Transfer Agent”)
and to obtain the Transfer Agent’s acknowledgment and acceptance hereof to
assure that the Original Holders and each other holder of the Preferred Shares
(such other holders, together with the Original Holders, the “Holders”) will be
assured (upon the terms and conditions set forth herein) of the timely issuance
and receipt of shares of Common Stock, $0.001 par value per share (“Common
Stock”), of the Company, upon conversion of the Preferred Shares.

 

1. DELIVERIES BY THE COMPANY. Contemporaneously with the delivery of these
instructions, the Company is delivering to the Transfer Agent the following:

 

(a) a list showing the name and address of each holder of record of the
Preferred Shares and the date of issuance and number of Preferred Shares
initially issued to each such holder, and the aggregate number of shares of
Common Stock for which such Preferred Shares are initially convertible;

 

(b) the form of Conversion Notice (the “Conversion Notice”) relating to the
Preferred Stock; and

 

(c) an opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation,
counsel to the Company, as to the following matters: (i) the shares of Common
Stock issuable upon conversion of the Preferred Shares (the “Conversion Shares”)
have been duly authorized and, when issued and delivered in accordance with the
Certificate of Designation of Preferences of the Preferred Stock (the
“Certificate of Designations”), will be validly issued,

 

1.

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fully paid and non-assessable and (ii) subject to the accuracy of the
Purchaser’s representations contained in Section 5 of the Purchase Agreement,
the issuance by the Company of the Conversion Shares in conformity with the
terms of the Certificate of Designations is exempt from the registration
requirements of Section 5 of the Securities Act of 1933, as amended (the
“Securities Act”), subject to the timely filing of a Form D pursuant to
Securities and Exchange Commission Regulation D. The Conversion Shares are
referred to herein as the “Common Shares.”

 

2. ISSUANCE OF COMMON SHARES.

 

(a) The Company hereby appoints the Transfer Agent, and by its acceptance hereof
the Transfer Agent hereby agrees to act, as transfer agent of the Common Stock
to be issued upon conversion of the Preferred Stock. The Company hereby
irrevocably instructs the Transfer Agent to issue Common Shares upon conversion
of all or any part of the outstanding Preferred Shares from time to time upon
receipt of a copy of a Conversion Notice from the holder of record of such
Preferred Shares, unless the Company shall object in writing to the Conversion
Notice within two Trading Days (as defined below) of receipt thereof (such
objection an “Objection Notice”), which objection shall be limited only to the
propriety and terms of the conversion in accordance with the terms of the
Certificate of Designations. Copies of Conversion Notices and Objection Notices
may be given by telephone line facsimile transmission to the Transfer Agent or
otherwise given to the Transfer Agent. The certificates for Preferred Shares
shall be surrendered in connection with the conversion thereof by a Holder, and
if less than all of the outstanding Preferred Shares evidenced by a particular
certificate are so converted, a new certificate representing the balance of the
Preferred Shares not so converted shall be issued in exchange therefor.

 

(b) The certificates for Common Shares issued shall bear the following legend:

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE “ACT”) AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT
OR, IN THE OPINION OF COUNSEL OR BASED ON OTHER WRITTEN EVIDENCE IN THE FORM AND
SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR
TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.”

 

Upon receipt by the Transfer Agent of an opinion of counsel, stating that (1)
the Common Shares represented by the Certificate have been transferred to a
person in connection with an offering registered under the Securities Act, or
(2) that the shares are eligible for resale in accordance with Rule 144(k) of
the Securities Act, the Transfer Agent will prepare and issue, within three (3)
Trading Days (or within a shorter period that is consistent with delivery
requirements of the Nasdaq National Market (“Nasdaq”) if Nasdaq adopts new rules
or regulations regarding a shorter delivery period) after such request and
certificate are received, substitute certificates (in the name of the
transferee, in connection with clause (1) above or the name of the holder or a
transferee in the case of clause (2) above) without the above-referenced

 

2.

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restrictive legend and shall remove any stop-transfer restriction against
transfer of the Common Shares relating to the registration requirements of the
Securities Act. As used herein, “Trading Day” means a day on whichever of (x)
the national securities exchange, (y) Nasdaq or (z) the Nasdaq SmallCap Market,
which at the time constitutes the principal securities market for the Common
Stock, is open for general trading of securities.

 

3. CONVERSION OBLIGATIONS ABSOLUTE; NO CONTRARY INSTRUCTIONS.

 

(a) If a Holder shall have given a Conversion Notice for conversion of Preferred
Shares, subject to the right of the Company to provide an Objection Notice, the
Company shall issue and deliver as stated in such Conversion Notice the Common
Shares issuable upon such conversion within three (3) Trading Days (or within a
shorter period that is consistent with Nasdaq’s delivery requirements if Nasdaq
adopts new rules or regulations regarding a shorter delivery period) after such
Conversion Notice is given and the Holder converting shall be deemed to be the
holder of record of the Common Shares issuable upon such conversion as of the
close of business on the date such Conversion Notice is given to the Company,
and all rights with respect to that portion of the Preferred Shares so converted
shall forthwith terminate except the right to receive the Common Shares or other
securities, cash, or other assets as provided in the Certificate of
Designations. By its acceptance of these instructions, the Transfer Agent
acknowledges and agrees that, if a Holder shall have given a Conversion Notice
as provided herein, subject to the right of the Company to provide an Objection
Notice, the Company’s obligation to issue and deliver the certificates for
Common Shares upon such conversion shall be absolute and unconditional,
irrespective of any action or inaction by the converting Holder to enforce the
same, any waiver or consent with respect to any provision thereof, the recovery
of any judgment against any person or any action to enforce the same, any
failure or delay in the enforcement of any other obligation of the Company to
such Holder, or any setoff, counterclaim, recoupment, limitation or termination,
or any breach or alleged breach by such Holder or any other person of any
obligation to the Company, or any violation or alleged violation of law by such
Holder or any other person, and irrespective of any other circumstance which
might otherwise limit such obligation of the Company to such Holder in
connection with such conversion. In lieu of delivering physical certificates
representing the Common Shares issuable upon conversion of shares of Preferred
Stock, provided the Transfer Agent is participating in the Depository Trust
Company (“DTC”) Fast Automated Securities Transfer program, upon written request
of a Holder, if such Common Shares are eligible therefor (taking into account
the existence of restrictive legends) the Transfer Agent shall electronically
transmit the Common Shares issuable upon such conversion to such Holder by
crediting the account of such Holder or such Holder’s broker with DTC through
its Deposit Withdrawal Agent Commission system.

 

(b) Upon receipt of the Conversion Notice the Transfer Agent will initiate the
issuance process and will request that the Company confirm the issuance of the
Common Shares issuable upon such conversion. Subject to the right of the Company
to provide an Objection Notice, the Company shall not give any instruction to
the Transfer Agent which is contrary to these instructions herein or fail to
give any confirmation required by the Transfer Agent to complete the issuance.
Subject to the right of the Company to provide an Objection Notice, the Company
hereby irrevocably instructs the Transfer Agent to disregard any request,
instruction or other communication from or on behalf of the Company which is
contrary to or inconsistent with

 

3.

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this instruction. The Company shall not appoint any transfer agent (other than
the Transfer Agent) or registrar for its Common Stock unless at the time of such
appointment any such successor accepts instructions of like tenor with these
instructions.

 

(c) In the event that the Company shall provide an Objection Notice, the
Transfer Agent shall promptly contact the Company and the holder and shall use
commercially reasonable efforts to resolve the matters set forth in the
Objection Notice. In such event, the Transfer Agent shall not issue any Common
Shares unless it shall receive either (i) written instruction from both the
Company and the holder with respect to such conversion or (ii) it shall have
received an order from a court of competent jurisdiction.

 

4. TRANSFER AGENT DUTIES. The obligations and duties of the Transfer Agent under
these instructions are at all times and in all respects subject to the
requirements of the Securities Exchange Act of 1934, as amended (the “1934
Act”), and the rules and regulations of the SEC thereunder applicable to
transfer agents registered with the SEC. These instructions relate only to the
Transfer Agent’s duties as transfer agent for Common Shares issuable upon
conversion of the Preferred Stock and do not otherwise limit or affect the
Transfer Agent’s other duties, obligations and agreements relating to its
service as transfer agent and registrar for the Common Stock.

 

5. INDEMNIFICATION. The Company agrees to indemnify and hold harmless the
Transfer Agent, each officer, director, employee and agent of the Transfer
Agent, and each person, if any, who controls the Transfer Agent within the
meaning of the Securities Act or the 1934 Act against any losses, claims,
damages or liabilities, joint or several, to which it, they or any of them, or
such controlling person, may become subject, under the Securities Act, the 1934
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon the performance by
the Transfer Agent of its duties pursuant to these instructions; and will
reimburse the Transfer Agent, and each officer, director, employee and agent of
the Transfer Agent, and each such controlling person for any legal or other
expenses reasonably incurred by it or any of them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any case if such loss,
claim, damage or liability arises out of or is based upon any action not taken
in good faith, or any act or omission that constitutes gross negligence or
willful misconduct.

 

Promptly after receipt by an indemnified party under this Section 5 of notice of
the commencement of any action, such indemnified party will, if a claim in
respect thereof is to be made against the Company under this Section 5, notify
in writing the Company of the commencement thereof, and failure so to notify the
Company will relieve the Company from any liability under this Section 5 as to
the particular item for which indemnification is then being sought if such
failure shall have materially prejudiced the Company’s right to defend or
contest such action, but not from any other liability which it may have to any
indemnified party. In case any such action is brought against any indemnified
party, and it notifies the Company of the commencement thereof, the Company will
be entitled to participate with any other indemnifying party, similarly
notified, to assume the defense thereof, with counsel who shall be to the
reasonable satisfaction of such indemnified party, and after notice from such
indemnifying party to such indemnified party under this Section 5, shall be
liable for any legal or other expenses

 

4.

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subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. The Company shall not be
liable to any such indemnified party on account of any settlement of any claim
or action effected without the consent of the Company.

 

6. MISCELLANEOUS.

 

(a) These instructions shall be governed by and interpreted in accordance with
the laws of the State of [California], without regard to its conflict of laws
provisions.

 

(b) Neither these instructions nor any term hereof (including this paragraph)
may be amended, changed, waived, discharged or terminated unless such amendment,
change, waiver, discharge or termination is in writing signed by the Company,
the Transfer Agent, and, with respect to the Holders, the holders of at least
75% of the Preferred Shares then outstanding. The Holders are hereby expressly
made third-party beneficiaries of these instructions.

 

5.

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If the Transfer Agent accepts these instructions and its appointment as transfer
agent for the Common Shares issuable upon conversion of the Preferred Stock,
please so indicate by signing in the place provided below and returning a copy
to the Company.

 

Very truly yours,

 

EPICOR SOFTWARE CORPORATION

By:

       

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Print Name:

       

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Title:

       

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Accepted and agreed as of the date first set forth above:

 

____________, as Transfer Agent

 

By:

       

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Print Name:

       

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Title:

       

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6.

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APPENDIX I

 

EPICOR SOFTWARE CORPORATION

STOCK CERTIFICATE QUESTIONNAIRE

 

Pursuant to Section 3 of the Agreement, please provide us with the following
information:

 

1.

 

The exact name that your Shares are to be registered in (this is the name that
will appear on your stock certificate(s)). You may use a nominee name if
appropriate:

 

_____________________________________________________

2.

 

The relationship between the Purchaser of the Securities and the Registered
Holder listed in response to item 1 above:

 

_____________________________________________________

2.

 

The mailing address of the Registered Holder listed in response to item 1 above:

 

_____________________________________________________

       

_____________________________________________________

       

_____________________________________________________

4.

 

The Social Security Number or Tax Identification Number of the Registered Holder
listed in the response to item 1 above:

 

_____________________________________________________

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APPENDIX II

 

EPICOR SOFTWARE CORPORATION

 

REGISTRATION STATEMENT QUESTIONNAIRE

 

The undersigned holder of Series C Preferred Stock, $0.001 par value per share
(the “Series C Shares”), and/or Series D Preferred Stock, $0.001 par value per
share (the “Series D Shares” and collectively with the Series C Shares, the
“Shares”), of Epicor Software Corporation (“Epicor,” the “Company” or
“Registrant”) or common stock, $0.001 par value (the “common stock” and,
together with the Shares, the “Registrable Securities”) of Epicor understands
that the Registrant has filed or intends to file with the Securities and
Exchange Commission (the “Commission”) a registration statement on Form S-3 (the
“Shelf Registration Statement”) for the registration and resale under Rule 415
of the Securities Act of 1933, as amended (the “Securities Act”), of the
Registrable Securities, in accordance with the terms of the Series D Preferred
Stock Purchase Agreement, dated as of             , 2003 (the “Agreement”),
between Epicor and the initial purchasers named therein. A copy of the Agreement
is available from Epicor upon request at the address set forth below. All
capitalized terms not otherwise defined herein shall have the meaning ascribed
thereto in the Agreement.

 

Each beneficial owner of Registrable Securities is entitled to the benefits of
the Agreement. In order to sell or otherwise dispose of any Registrable
Securities pursuant to the Shelf Registration Statement, a beneficial owner of
Registrable Securities generally will be required to be named as a selling
securityholder in the related prospectus, deliver a prospectus to purchasers of
Registrable Securities and be bound by those provisions of the Agreement
applicable to such beneficial owner (including certain indemnification
provisions, as described below). Beneficial owners that do not complete this
Questionnaire and deliver it to Epicor as provided below will not be named as
selling securityholders in the prospectus and therefore will not be permitted to
sell any Registrable Securities pursuant to the Shelf Registration Statement.

 

Certain legal consequences arise from being named as a selling securityholder in
the Shelf Registration Statement and the related prospectus. Accordingly,
holders and beneficial owners of Registrable Securities are advised to consult
their own securities law counsel regarding the consequences of being named or
not being named as a selling securityholder in the Shelf Registration Statement
and the related prospectus.

 

 

 

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The undersigned (the “Selling Securityholder”) hereby provides the following
information to Epicor and represents and warrants that such information is
accurate and complete:

 

QUESTIONNAIRE

 

  1.   (a) Full Legal Name of Selling Securityholder:

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(b) Full Legal Name of Registered Holder (if not the same as (a) above) through
which Registrable Securities listed in Item

3 below are held:

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  2.   Address for Notices to Selling Securityholder:

 

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Telephone:

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Fax:

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Contact Person:

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  3.   Beneficial Ownership of Registrable Securities:

 

Amount of Registrable Securities beneficially owned:

 

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  4.   Beneficial Ownership of Other Securities of Epicor owned by the Selling
Securityholder:

 

Except as set forth below in this Item 4, the undersigned is not the beneficial
or registered owner of any securities of Epicor other than the Registrable
Securities listed above in Item 3.

Type and Amount of common stock beneficially owned by the Selling
Securityholder:

 

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  5.   Relationships with Epicor:

 

Except as set forth below, neither the undersigned nor any of its affiliates,
officers, directors or principal Epicor (or its predecessors or affiliates)
during the past three years.

State any exceptions here:

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  6.   Plan of Distribution:

 

Except as set forth below, the undersigned (including its donees or pledgees)
intends to distribute the Registrable Securities listed above in Item 3 pursuant
to the Shelf Registration Statement only as follows (if at all): Such
Registrable Securities may be sold from time to time directly by the undersigned
or, alternatively, through underwriters, broker-dealers or agents. If the
Registrable Securities are sold through underwriters or broker-dealers, the
Selling Securityholder will be responsible for underwriting discounts or
commissions or agent’s commissions. Such Registrable Securities may be sold in
one or more transactions at fixed prices, at prevailing market prices at the
time of sale, at varying prices determined at the time of sale, or at negotiated
prices. Such sales may be effected in transactions (which may involve block
transactions) (i) on any national securities exchange or quotation service on
which the Registrable Securities may be listed or quoted at the time of sale,
(ii) in the over-the-counter market, or (iii) in transactions otherwise than on
such exchanges or services or in the over-the-counter market.

 

State any exceptions here:

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The undersigned acknowledges that it understands its obligation to comply with
the provisions of the Exchange Act and the rules thereunder relating to stock
manipulation, particularly Regulation M thereunder (or any successor rules or
regulations), in connection with any offering of Registrable Securities pursuant
to the Agreement. The undersigned agrees that neither it nor any person acting
on its behalf will engage in any transaction in violation of such provisions.

 

The Selling Securityholder hereby acknowledges its obligations under the
Agreement to indemnify and hold harmless certain persons as set forth therein.

 

Pursuant to the Agreement, Epicor has agreed under certain circumstances to
indemnify the Selling Securityholder against certain liabilities.

 

In accordance with the undersigned’s obligation under the Agreement to provide
such information as may be required by law for inclusion in the Shelf
Registration Statement, the undersigned agrees to promptly notify Epicor of any
inaccuracies or changes in the information provided herein that may occur
subsequent to the date hereof at any time while the Shelf Registration Statement
remains effective. All notices hereunder and pursuant to the Agreement shall be
made in writing at the address set forth below. By signing below, the
undersigned consents to the disclosure of the information contained herein in,
its answers to Items 1 through 6 above and the inclusion of such information in
the Shelf Registration Statement and the related prospectus. The undersigned
understands that such information will be relied upon by Epicor in connection
with the preparation or amendment of the Shelf Registration Statement and the
related prospectus.

 

 

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IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused this
Questionnaire to be executed and delivered either in person or by its duly
authorized agent.

 

 

Dated:

             

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Beneficial Owner

               

By:

--------------------------------------------------------------------------------

               

Name:

--------------------------------------------------------------------------------

               

Title:

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PLEASE RETURN THE COMPLETED AND EXECUTED

QUESTIONNAIRE TO EPICOR SOFTWARE CORPORATION AT:

 

195 Technology Drive

Irvine, California 92718

Facsimile: (949) 585-4447

Attn: John Ireland

 

with a copy to:

 

Wilson Sonsini Goodrich & Rosati

Professional Corporation

650 Page Mill Road

Palo Alto, California 94304-1050

Facsimile: (650) 493-6811

Attn: Katharine A. Martin

 

 

 

 

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APPENDIX III

 

SELLER’S CERTIFICATE OF SALE

 

The undersigned, an officer of, or other person duly authorized by

____________________________________________________________________________________________________________

[fill in official name of

 

________________________________ hereby certifies that he/she [said institution]
is the purchaser

individual or institution]

 

of the Shares evidenced by the attached stock certificate(s) and as such, sold
such Shares on

_________________________________________ in accordance with registration
statement

[date]

 

number _____________________________________________________________________ and
the

[fill in the number of or otherwise identify registration statement]

 

requirement of delivering a current prospectus has been complied with in
connection with such sale.

 

Print or Type:

 

Name of Seller (Individual or Institution):

 

Name of Individual representing Seller

(if an Institution):

 

Title of Individual representing Seller

(if an Institution):

 

Signature by:

 

Individual Seller or Individual

representing Seller: