Exhibit 10.1


 


EXECUTION COPY


 


STOCK
PURCHASE AGREEMENT


 


THIS STOCK
PURCHASE AGREEMENT (the “Agreement”) is made as of September 28, 2004 by
and between Artisoft, Inc., a Delaware corporation (including, without
limitation, all of the assets and liabilities of Vertical Networks (as defined
herein) acquired pursuant to the Acquisition Agreement (as defined herein)
immediately prior to consummation of the transactions contemplated by this
Agreement, the “Company”), and the investors set forth on Exhibit A hereto
(individually, an “Investor” and collectively, the “Investors”).


 


WITNESSETH:


 


WHEREAS, the
Company desires to sell to the Investors and the Investors desire to purchase
from the Company (the “Offering”), 24,159,468
shares (the “Shares”) of common stock, par value $0.01 per share, of the
Company (the “Common Stock”) at a price per share of $1.1386, for a total
purchase price of $27,507,970.26 pursuant to the terms of this Agreement;


 


WHEREAS, prior
to or concurrently with the consummation of the transactions contemplated by
this Agreement, the Company will acquire substantially all of the assets (other
than patents and specified assets that are not used or useful in connection
with or related to Vertical Networks’ business, as provided for in the Acquisition
Agreement (as defined herein)) and certain liabilities and obligations of
Vertical Networks, Incorporated (“Vertical Networks”) pursuant to the terms and
conditions of an Asset Purchase Agreement dated as of September 23, 2004 by and
between the Company and Vertical Networks (the “Acquisition Agreement”); and


 


WHEREAS, the
parties hereto desire to enter into this Agreement for the purpose of setting
forth certain representations, warranties and covenants made by each to the
other as an inducement to the execution and delivery of this Agreement and the
conditions precedent to the consummation of the transactions set forth in this
Agreement.


 


NOW,
THEREFORE, in consideration of the premises and of the mutual provisions,
agreements and covenants contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:


 


ARTICLE I


 


PURCHASE AND SALE OF THE SHARES


 


1.1           Authorization and
Sale of the Shares.  Subject to the terms
and conditions set forth in this Agreement, the Company has authorized the sale
of up to 24,159,468 Shares.


 


1.2           Agreement to Sell
and Purchase the Shares.  Subject to
the terms and conditions of this Agreement, each Investor, severally and not
jointly, agrees to purchase at the Closing (as such term is defined in Section
1.3), and the Company agrees to issue and sell to such Investor at the Closing,
for the purchase price set forth opposite such Investor’s name on Exhibit A



 
















 


(reflecting a per share
purchase price of $1.1386), that number of Shares set forth opposite such
Investor’s name on Exhibit A.


 


1.3           Delivery of the
Shares at Closing.  Except as set
forth in this Section 1.3, the completion of the purchase and sale of the
Shares (the “Closing”) shall occur on September 28, 2004 (the “Closing Date”),
at the offices of Testa, Hurwitz & Thibeault, LLP, 125 High Street, Boston,
MA 02110 at 10:00 AM Eastern time, or at such other time and place as may be
mutually agreed upon by the Company and the Investors.  At the Closing, the Company shall either (i)
deliver to the Investors one or more stock certificates representing the number
of Shares set forth on Exhibit A, each such certificate to be registered
in the name of each Investor or, if so indicated on the signature page of this
Agreement, in the name of a nominee designated by such Investor (except for any
Shares for which the purchase price is paid following the Closing Date pursuant
to clause (c) of the following paragraph, in which case such stock certificates
shall be delivered upon payment of such purchase price) or (ii) direct its
transfer agent to deliver such certificates to the Investors (at the address of
each Investor set forth on the signature pages hereto) within three business
days after the Closing Date (except for any Shares for which the purchase price
is paid following the Closing Date pursuant to clause (c) of the following
paragraph, in which case such stock certificates shall be delivered within
three business days after payment of such purchase price).


 


The Company’s
obligation to issue the Shares to the Investors shall be subject to the
following conditions, any one or more of which may be waived by the
Company:  (a) consummation of the
Company’s acquisition of the assets of Vertical Networks (the “Acquisition”)
pursuant to the Acquisition Agreement (which consummation may occur
concurrently with the Closing); (b) conversion of all issued and outstanding
shares of preferred stock of the Company into shares of Common Stock; (c) receipt
by the Company of a wire transfer of funds to an account designated by the
Company in the full amount of the purchase price for all of the Shares being
purchased hereunder as set forth on Exhibit A, provided, however,
that it is expressly agreed that approximately 25% of the purchase price for
the Shares being purchased hereunder by M/C Venture Partners may be made on
October 1, 2004 or such date thereafter, not later than October 6, 2004, as may
be agreed by the Company and M/C Venture Partners; and (d) the accuracy of the
representations and warranties made by the Investors and the satisfaction of
the undertakings of the Investors to be fulfilled prior to the Closing.


 


The Investors’
obligations to purchase the Shares shall be subject to the following
conditions, any one or more of which may be waived by the written consent of a
majority-in-interest of the Shares held by the Investors (the “Majority
Investors’ Consent”): (a) consummation of the Acquisition (which consummation
may occur concurrently with the Closing); (b) conversion of all issued and
outstanding shares of preferred stock of the Company into shares of Common
Stock as set forth in that certain consent, waiver and amendment agreement
dated the date hereof among the Company and the Stockholders named therein (the
“Consent, Waiver and Amendment Agreement”); (c) amendment, or exchange for new
warrants, of all issued and outstanding warrants to purchase Common Stock of
the Company, to the extent necessary to accomplish the following, provided that
such amended or new warrants shall (x) be exercisable (i) at an exercise price
of $1.1386 per share (or $4.00 per share in the case of those 


 


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certain warrants to purchase
82,610 shares of Common Stock issued by the Company on December 16, 2003) and
(ii) for the same number of shares of Common Stock as they were exercisable
immediately prior to the consummation of the transactions contemplated by this
Agreement and (y) not contain any anti-dilution protective provisions or other
similar provisions which would, upon issuance of additional shares of capital
stock of the Company, adjust the number of shares of Common Stock into which
such warrant is exercisable (other than adjustments for stock splits,
dividends, recapitalizations and other organic changes); (d) the Company
amending its 2004 Stock Incentive Plan, to increase the total number of shares
of Common Stock that may be granted pursuant to awards thereunder such that the
number of shares of Common Stock issuable pursuant to all of the Company’s
stock options and all awards granted thereunder is increased from 2,634,597 to
6,987,531  (representing 15.69% of the fully
diluted shares of capital stock of the Company immediately following the sale
of the Shares) (the “Plan Amendment”), which such Plan Amendment shall be
submitted for approval by the Company’s stockholders at its first annual
meeting of stockholders following the Closing (the “Annual Meeting”); (e) the
representations and warranties of the Company set forth herein shall be true
and correct as of the Closing Date in all respects (except for representations
and warranties that speak as of a specific date, which representations and
warranties shall be true and correct as of such date); and (f) the Investors
shall have received such documents as the Investors shall reasonably have
requested, including, a standard opinion of Company counsel as to the matters
set forth in the form attached as Exhibit B hereto and as to exemption
from the registration requirements of the Securities Act of 1933, as amended
(the “Securities Act”), of the sale of the Shares.


 


ARTICLE II


 


REPRESENTATIONS
AND WARRANTIES OF THE COMPANY


 


2.             Except as disclosed by the Company in a written
Disclosure Schedule provided by the Company to the Investors (the “Disclosure
Schedule”), the Company hereby represents, warrants and covenants to the
Investors, as follows:


 


2.1           Organization.  The Company is duly organized and validly
existing in good standing under the laws of the jurisdiction of its
organization.  Each of the Company and
its Subsidiaries (as defined in Rule 405 under the Securities Act) has all
requisite corporate power and authority to own, operate and occupy its
properties and to conduct its business as presently conducted and as described
in the documents filed by the Company under the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder (the
“Exchange Act”), since the end of its most recently completed fiscal year through
the date hereof, including, without limitation, its most recent report on Form
10-K (the “Exchange Act Documents”) and is registered or qualified to do
business and in good standing in each jurisdiction in which the nature of the
business conducted by it or the location of the properties owned or leased by
it requires such qualification and where the failure to be so qualified would
have a material adverse effect upon the condition (financial or otherwise),
results of operations, business or business prospects, properties or operations
of the Company and its Subsidiaries, considered as one enterprise (a “Material
Adverse Effect”), and no proceeding to which the 


 


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Company or any Subsidiary is a
party has been instituted in any such jurisdiction, revoking, limiting or
curtailing, or seeking to revoke, limit or curtail, such power and authority or
qualification.


 


2.2           Due Authorization and Valid Issuance.  The Company has all requisite corporate power
and authority to execute, deliver and perform its obligations under this
Agreement, and this Agreement has been duly authorized and validly executed and
delivered by the Company and constitutes the legal, valid and binding agreement
of the Company enforceable against the Company in accordance with its terms,
except as rights to indemnity and contribution may be limited by state or
federal securities laws or the public policy underlying such laws, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ and contracting
parties’ rights generally and except as enforceability may be subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).  The Shares being purchased by the Investors
hereunder will, upon issuance and payment therefor pursuant to the terms
hereof, be duly authorized, validly issued, fully-paid and nonassessable.


 


2.3           Non-Contravention.  The execution and delivery of this Agreement,
the issuance and sale of the Shares under this Agreement, the fulfillment of
the terms of this Agreement and the consummation of the transactions
contemplated hereby do not and will not (A) conflict with or constitute a violation
of, or default (with the passage of time or otherwise) under, (i) any
bond, debenture, note or other evidence of indebtedness, lease, contract,
indenture, mortgage, deed of trust, loan agreement, joint venture or other
agreement or instrument to which the Company or any Subsidiary is a party or by
which it or any of its Subsidiaries or their respective properties are bound,
(ii) the charter, by-laws or other organizational documents of the Company
or any Subsidiary, or (iii) any law, administrative regulation, ordinance
or order of any court or governmental agency, arbitration panel or authority
applicable to the Company or any Subsidiary or their respective properties,
except in the case of clauses (i) and (iii) for any such conflicts, violations
or defaults which are not reasonably likely to have a Material Adverse Effect
or (B) result in the creation or imposition of any lien, encumbrance,
claim, security interest or restriction whatsoever upon any of the material
properties or assets of the Company or any Subsidiary or an acceleration of
indebtedness pursuant to any obligation, agreement or condition contained in
any bond, debenture, note or any other evidence of indebtedness or any
indenture, mortgage, deed of trust or any other agreement or instrument to
which the Company or any Subsidiary is a party or by which any of them is bound
or to which any of the material property or assets of the Company or any
Subsidiary is subject.  No consent,
approval, authorization or other order of, or registration, qualification or
filing with, any regulatory body, administrative agency, or other governmental
body or any other person is required for the execution and delivery of this
Agreement by the Company, the valid issuance and sale of the Shares to be sold
pursuant to this Agreement and the performance by the Company of its other
obligations hereunder, other than such as have been made or obtained, and
except for any post-closing securities filings or notifications required to be
made under federal or state securities laws.


 


2.4           Capitalization.  The capitalization of the Company as of
March 31, 2004 is as set forth in the most recent applicable Exchange Act
Documents, increased as set forth in the next sentence.  The Company has not issued any capital stock
since that date other than pursuant to (i) 


 


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employee benefit plans
disclosed in the Exchange Act Documents, or (ii) outstanding warrants, options
or other securities disclosed in the Exchange Act Documents.  The Shares to be sold pursuant to this
Agreement have been duly authorized, and when issued and paid for in accordance
with the terms of this Agreement will be duly and validly issued, fully paid
and nonassessable.  The Shares shall
represent 54.61%of the outstanding capital stock of the Company immediately
following the Closing (calculated on a fully diluted basis).  The outstanding shares of capital stock of
the Company have been duly and validly issued and are fully paid and
nonassessable, have been issued in compliance with all federal and state
securities laws, and were not issued in violation of any preemptive rights or
similar rights to subscribe for or purchase securities.  Except as set forth in or contemplated by the
Exchange Act Documents, there are no outstanding rights (including, without
limitation, preemptive rights), warrants or options to acquire, or instruments
convertible into or exchangeable for, any unissued shares of capital stock or
other equity interest in the Company or any Subsidiary, or any contract,
commitment, agreement, understanding or arrangement of any kind to which the
Company is a party or of which the Company has knowledge and relating to the
issuance or sale of any capital stock of the Company or any Subsidiary, any such
convertible or exchangeable securities or any such rights, warrants or
options.  Without limiting the foregoing
and except as provided herein, no preemptive right, co-sale right, right of
first refusal, registration right, or other similar right exists with respect
to the Shares or the issuance and sale thereof. 
No further approval or authorization of any stockholder, the Board of
Directors of the Company or others is required for the issuance and sale of the
Shares.  The Company owns the entire
equity interest in each of its Subsidiaries, free and clear of any pledge,
lien, security interest, encumbrance, claim or equitable interest, other than
as described in the Exchange Act Documents. 
Except as disclosed in the Exchange Act Documents, there are no stockholders
agreements, voting agreements or other similar agreements with respect to the
Common Stock to which the Company is a party or, to the knowledge of the
Company, between or among any of the Company’s stockholders.


 


2.5           Legal Proceedings; Disagreements with
Advisors.  There is no material legal
or governmental proceeding pending or, to the knowledge of the Company,
threatened to which the Company or any Subsidiary is or may be a party or of
which the business or property of the Company or any Subsidiary is subject that
is not disclosed in the Exchange Act Documents. 
There are no disagreements of any kind presently existing, or reasonably
anticipated by the Company to arise, between the accountants and lawyers formerly
or presently employed by the Company and the Company is current with respect to
any fees owed to its accountants and lawyers.


 


2.6           No Violations.  Neither the Company nor any Subsidiary is in
violation of (i) its charter, bylaws, or other organizational document;
(ii) in violation of any law, administrative regulation, ordinance or
order of any court or governmental agency, arbitration panel or authority
applicable to the Company or any Subsidiary, which violation, individually or
in the aggregate, would be reasonably likely to have a Material Adverse Effect;
or (iii) is in default (and there exists no condition which, with the
passage of time or otherwise, would constitute a default) in the performance of
any bond, debenture, note or any other evidence of indebtedness in any indenture,
mortgage, deed of trust or any other agreement or instrument to which the
Company or any Subsidiary is a party or by which the Company or any Subsidiary
is bound or by which the


 


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properties of the Company or
any Subsidiary are bound, which would be reasonably likely to have a Material
Adverse Effect.


 


2.7           Governmental Permits, Etc.  With the exception of the matters which are
dealt with separately in Sections 2.1, 2.12, 2.13, and 2.14, each of the
Company and its Subsidiaries has all necessary franchises, licenses,
certificates and other authorizations from any foreign, federal, state or local
government or governmental agency, department, or body that are currently
necessary for the operation of the business of the Company and its Subsidiaries
as currently conducted and as described in the Exchange Act Documents except
where the failure to currently possess could not reasonably be expected to have
a Material Adverse Effect.


 


2.8           Intellectual Property.  Except as specifically disclosed in the
Exchange Act Documents (i) each of the Company and its Subsidiaries owns
or possesses sufficient rights to use all patents, patent rights, trademarks,
copyrights, licenses, inventions, trade secrets, trade names and know-how
(collectively, “Intellectual Property”) described or referred to in the
Exchange Act Documents as owned or possessed by it or that are necessary for
the conduct of its business as now conducted or as proposed to be conducted as
described in the Exchange Act Documents,  except where
the failure to currently own or possess would not have a Material Adverse
Effect, (ii) neither the Company nor any of its Subsidiaries is infringing, or
has received any notice of, or has any knowledge of, any asserted infringement
by the Company or any of its Subsidiaries of, any rights of a third party with
respect to any Intellectual Property that, individually or in the aggregate,
would have a Material Adverse Effect and (iii) neither the Company nor any
of its Subsidiaries has received any notice of, or has any knowledge of,
infringement by a third party with respect to any Intellectual Property rights
of the Company or of any Subsidiary that, individually or in the aggregate,
would have a Material Adverse Effect. 
Except as specifically disclosed in the Exchange Act Documents, all
software applications and portions of applications, including, without
limitation, interfaces, functions, and class definitions included in whole or
in part in any Company Software are either: 
(i) owned by the Company, (ii) currently in the public domain or
otherwise available for use, modification and distribution by the Company
without a license from or the approval or consent of any third party, or (iii)
licensed or otherwise used by the Company pursuant to the terms of valid,
binding written agreements (“Software Contract”).  Except as specifically disclosed in the
Exchange Act Documents, no Software Contract creates, or purports to create,
obligations or immunities with respect to any intellectual property rights of
the Company enforceable in any jurisdiction of the world, including but not
limited to, obligations requiring the disclosure or distribution of all or a
portion of the source code for any Company Software.  For purposes of this Agreement, “Company
Software” means any and all computer programs or portions thereof owned,
licensed, distributed, copied, modified, displayed, sublicensed or otherwise
used by the Company in connection with the operation of its business as now
conducted or as now proposed to be conducted as described in the Exchange Act
Documents.


 


2.9           Financial Statements; Solvency;
Obligations to Related Parties. 
(a) The financial statements of the Company and the related notes
contained in the Exchange Act Documents present fairly, in accordance with
generally accepted accounting principles, the financial position of the Company
and its Subsidiaries as of the dates indicated, and the results of its
operations and cash flows for the periods therein specified consistent with the
books and records of the 


 


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Company and its Subsidiaries
except that the unaudited interim financial statements were or are subject to
normal and recurring year-end adjustments which are not expected to be material
in amount except as otherwise described in the Exchange Act Documents.  Such financial statements (including the
related notes) have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
therein specified, except as may be disclosed  in
the notes to such financial statements, or in the case of unaudited statements,
as may be permitted by the Securities and Exchange Commission (the “SEC”) on
Form 10-Q under the Exchange Act and except as disclosed in the Exchange
Act Documents.  The other financial
information contained in the Exchange Act Documents has been prepared on a
basis consistent with the financial statements of the Company.


 


(b)           The fair saleable value of the Company’s
assets exceeds the amount that will be required to be paid on or in respect of
the Company’s existing liabilities and other obligations as such matures or is
otherwise payable; (ii) the Company’s assets do not constitute unreasonably
small capital to carry on its business for the current fiscal year as now
conducted and as proposed to be conducted taking into account the current and
projected capital requirements of the business conducted by the Company and
projected capital availability; and (iii) the current cash flow of the Company,
together with the proceeds the Company would receive upon liquidation of its
assets, after taking into account all anticipated uses of such amounts, would
be sufficient to pay all such liabilities and obligations when such is required
to be paid.  The Company does not intend
to incur liabilities and other obligations beyond its ability to pay such as
they mature or are required to be paid. The Company has no knowledge of any
facts or circumstances which lead it to believe that it will be required to
file for reorganization or liquidation under the bankruptcy or reorganization
laws of any jurisdiction, and has no present intention to so file.


 


(c)           Except as set forth in
any Exchange Act Documents, there are no obligations of Company to officers,
directors, stockholders or employees of Company other than:


 


(i)            for
payment of salary for services rendered and for bonus payments;


 


(ii)           reimbursements
for reasonable expenses incurred on behalf of Company;


 


(iii)          for other standard
employee benefits made generally available to all employees (including stock
option agreements outstanding under any stock option plan approved by the Board
of Directors of Company);


 


(iv)          obligations listed in
Company’s financial statements; and


 


(v)           under applicable laws.


 


Except as described above or in
any Exchange Act Filings, (i) none of the officers, directors or, to the
best of Company’s knowledge, key employees or stockholders of Company or any
members of their immediate families, are indebted to Company, individually or
in the aggregate, in excess of $60,000; and (ii) none of the officers,
directors or, to the best of the 


 


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Company’s knowledge, key
employees have any direct or indirect ownership interest in any firm or
corporation with which Company is affiliated or with which Company has a
business relationship, or any firm or corporation which competes with Company,
other than passive investments in publicly traded companies (representing less
than one percent (1%) of such company) which may compete with Company.  Except as described above, no officer,
director, or any member of their immediate families, is, directly or
indirectly, interested in any material contract with Company and no agreements,
understandings or proposed transactions are contemplated between Company and
any such person.  Except as set forth in
any Exchange Act Documents, Company is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.


 


2.10         No Material Adverse Change.  Except as disclosed in the Exchange Act
Documents, since March 31, 2004, there has not been (i) any material
adverse change in the financial condition or results of operations of the
Company and its Subsidiaries considered as one enterprise, (ii) any
material adverse event affecting the Company or its Subsidiaries,
(iii) any obligation, direct or contingent, that is material to the
Company and its Subsidiaries considered as one enterprise, incurred by the
Company, except obligations incurred in the ordinary course of business or with
respect to the transactions contemplated by this Agreement or the Acquisition
Agreement, (iv) any dividend or distribution of any kind declared, paid or
made on the capital stock of the Company or any of its Subsidiaries, or
(v) any loss or damage (whether or not insured) to the physical property
of the Company or any of its Subsidiaries which has been sustained which has a
Material Adverse Effect.


 


2.11         Disclosure. The representations and
warranties of the Company contained in this Article II as of the date
hereof and as of the Closing Date, do not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The Company understands and confirms that
the Investors will rely on the foregoing representations in effecting
transactions in the securities of the Company.


 


2.12         34 Act and OTCBB
Compliance.  The Company’s Common
Stock is registered pursuant to Section 12(g) of the Exchange Act and is
quoted on The Nasdaq Stock Market, Inc.’s The OTC Bulletin Board quotation
service (the “OTCBB”), and the Company has taken no action designed to, or
likely to have the effect of, terminating the registration of the Common Stock
under the Exchange Act or removal from quotation of the Common Stock from the
OTCBB, nor has the Company received any notification that the SEC, the OTCBB or
the National Association of Securities Dealers, Inc. (“NASD”) is contemplating
terminating such registration or quotation.


 


2.13         Reporting Status.  The Company has filed in a timely manner all
documents that the Company was required to file under the Exchange Act during the
12 months preceding the date of this Agreement. 
The following documents complied as to form in all material respects
with the SEC’s requirements as of their respective filing dates, and the
information contained therein as of the date thereof did 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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(a)           Forms 10-Q for the quarters ended March 31,
2004, December 31, 2003 and September 30, 2003; Form 10-K for the year ended
June 30, 2003; Definitive Proxy Statements on Schedule 14A filed on February 2,
2004 and October 16, 2003; Definitive Additional Proxy Materials filed on
February 23, 2004; Forms 8-K filed on April 29, 2004, February 24, 2004,
January 29, 2004, December 19, 2003, November 19, 2003, October 30, 2003 and
October 6, 2003 (and amendments thereto); and Registration Statement Nos.
333-113962, 333-111151, 333-109652 (as amended), 333-100756 (as amended, and
including the prospectus filed under Rule 424(b)(3) on October 22, 2003) and
333-102230; and


 


(b)           all other documents, if any, filed by the
Company with the SEC  since June 30,
2003.


 


2.14         Issuance and Quotation.  The Company shall comply with all
requirements of the NASD and the SEC with respect to the issuance of the Shares
and the OTCBB with respect to the quotation of the Shares on the OTCBB.


 


2.15         No Manipulation of
Stock.  The Company has not taken and
will not, in violation of applicable law, take, any action designed to or that
might reasonably be expected to cause or result in stabilization or
manipulation of the price of the Common Stock to facilitate the sale or resale
of the Shares.


 


2.16         Company Not an
“Investment Company”.  The Company
has been advised of the rules and requirements under the Investment Company Act
of 1940, as amended (the “Investment Company Act”).  The Company is not, and immediately after
receipt of payment for the Shares will not be, an “investment company” within
the meaning of the Investment Company Act and shall conduct its business in a
manner so that it will not become subject to the Investment Company Act.


 


2.17         Foreign Corrupt Practices;
Embargoed Person.  (a) Neither
the Company, nor to the knowledge of the Company, any agent or other person
acting on behalf of the Company, has (i) directly or indirectly, corruptly used
any funds for unlawful contributions, gifts, entertainment or other unlawful
expenses related to foreign or domestic political activity, (ii) made any
unlawful payment to foreign or domestic government officials or employees or to
any foreign or domestic political parties or campaigns from corporate funds,
(iii) failed to disclose to the extent required by law any contribution made by
the Company (or made by any person acting on its behalf of which the Company is
aware) which is in violation of law, or (iv) violated in any material respect
any provision of the Foreign Corrupt Practices Act of 1977, as amended.


 


(b)           None of the funds or other assets of the Company
constitute or shall constitute property of, or shall be beneficially owned,
directly or indirectly, by any person with whom U.S. persons are restricted
from engaging in financial or other transactions under United States law,
including, but not limited to, the International Emergency Economic Powers Act,
50 U.S.C. § 1701 et seq.,
The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq.,
and any executive orders or regulations promulgated under any such United
States laws (each, an


 


9
















 


 “Embargoed Person”), with the result
that the investments evidenced by the Shares are or would be in violation of
law; (ii) no Embargoed Person has or shall have any interest of any nature
whatsoever in the Company with the result that the investments evidenced by the
Shares are or would be in violation of law; and (iii) none of the funds of
the Company are or shall be derived from any unlawful activity with the result
that the investments evidenced by the Shares are or would be in violation of
law; provided, that with respect to the covenants contained in this
Section 2.17(b), the Company may assume that the Investors are not Embargoed
Persons.  Company certifies
that, to the Company’s knowledge, Company has not been designated, and is not
owned or controlled, by an Embargoed Person.


 


2.18         Accountants.  To the Company’s knowledge, KPMG LLP, who the
Company expects will express their opinion with respect to the financial
statements to be incorporated by reference from the Company’s Annual Report on
Form 10-K for the year ended June 30, 2003 into the Registration Statement
(as defined below) and the prospectus which forms a part thereof, are
independent accountants as required by the Securities Act and the rules and
regulations promulgated thereunder.


 


2.19         Contracts.  The contracts filed as exhibits to the
Exchange Act Documents are in full force and effect on the date hereof, and
neither the Company nor, to the Company’s knowledge, any other party to such
contracts is in breach of or default under any of such contracts which would
have a Material Adverse Effect.  The
Company has filed with the SEC all contracts and agreements required to be
filed by the Exchange Act.


 


2.20         Taxes.  The Company has filed all necessary federal,
state and foreign income and franchise tax returns due to be filed as of the
date hereof and has paid or accrued all taxes shown as due thereon, and the
Company has no knowledge of a tax deficiency which has been or might be
asserted or threatened against it which would have a Material Adverse Effect.


 


2.21         Transfer Taxes.  On the
Closing Date, all stock transfer or other taxes (other than income taxes) which
are required to be paid in connection with the sale and transfer of the Shares
to be sold to the Investor hereunder will be, or will have been, fully paid or
provided for by the Company and all laws imposing such taxes will be or will
have been fully complied with.


 


2.22         Private Offering.  Assuming the
correctness of the representations and warranties of the Investors set forth in
Section 5 hereof, the offer and sale of Shares hereunder is exempt from
registration under the Securities Act. The Company has not in the past nor will
it hereafter take any action to sell, offer for sale or solicit offers to buy
any securities of the Company which would bring the offer, issuance or sale of
the Shares as contemplated by this Agreement, within the provisions of Section
5 of the Securities Act, unless such offer, issuance or sale was or shall be
within the exemptions of Section 4 of the Securities Act.  Neither the Company nor any person acting on
behalf of the Company has offered or sold any of the Shares by any form of general
solicitation or general advertising (as those terms are used in Regulation D
under the Securities Act).  The Company
has offered the Shares for sale only to the Investors and certain other
“accredited investors” within the meaning of Rule 501 under the Securities Act.


 


10
















 


2.23         Controls and Procedures.  The Company
is in material compliance with all provisions of the Sarbanes-Oxley Act of 2002
which are applicable to it as of the Closing Date. The Company maintains a
system of internal control over financial reporting (as such term is defined in
the Exchange Act) 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 GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance
with management’s general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.  The Company’s certifying officers are
responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act) for the Company and they have (a) designed such
disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under their supervision, to ensure that material
information relating to the Company, including its Subsidiaries, is made known
to the certifying officers by others within those entities, particularly during
the periods in which the Exchange Act Documents have been prepared; (b) to the
extent required by the Exchange Act, evaluated the effectiveness of the
Company’s disclosure controls and procedures and presented in the Exchange Act
Documents their conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the periods covered by the Exchange Act
Documents based on such evaluation; and (c) since the last evaluation date
referred to in (b) above, there have been no material changes in the Company’s
internal control over financial reporting (as such term is defined in the
Exchange Act) or, to the Company’s knowledge, in other factors that could
significantly affect the Company’s internal control over financial reporting.


 


2.24         Acquisition.  Each of the
representations and warranties of each party to the Acquisition Agreement
(including, without limitation, those of Vertical Networks), as qualified by
the disclosure schedule provided by Vertical Networks, were true and correct in
all respects when made and were true and correct in all material respects at
the time of the consummation of the Acquisition.  The execution, delivery and performance by
the Company of the Acquisition Agreement and the consummation by the Company of
the transactions contemplated thereby, were within the powers of the Company
and were duly authorized by all necessary action of the Company.  The Acquisition Agreement constitutes a valid
and binding agreement of the Company enforceable against the Company in
accordance with its terms, except to the extent that the validity or binding
nature of such agreement may be subject or affected by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or conveyance or
other laws relating to or affecting the rights of creditors generally, or the
availability of any equitable or other specific remedy upon breach of such
agreements, or public policy. 
Immediately prior to, or concurrently with, the consummation of the
transactions contemplated hereby, the Company will have acquired, subject to
the terms and conditions of the Acquisition Agreement, good and marketable
title in and to, or a valid leasehold interest in, all of the assets to be
acquired pursuant to the Acquisition Agreement.


 


11
















 


ARTICLE III


 


AFFIRMATIVE COVENANTS OF THE COMPANY


 


3.             The Company hereby
covenants (i) with respect to Section 3.10, with all of the Investors for so
long as such Investors beneficially own any Shares, (ii) with respect to
Section 3.7, with those Investors who, after the issuance and sale of the
Shares pursuant to this Agreement, will beneficially own at least 20% of the
Common Stock (the “20% Investors”) for so long as such Investors beneficially
own any Shares, (iii) with respect to Sections 3.1, 3.4, 3.8, 3.9 and 3.11,
with the 20% Investors for so long as such Investors beneficially own at least
20% of the Common Stock, and (iv) in addition to and not in lieu of the
foregoing (it being understood that immediately following the Closing M/C
Venture Partners shall also qualify as a 20% Investor), with respect to
Sections 3.1-3.9 and 3.11, M/C Venture Partners for so long as M/C Venture
Partners owns at least 50% of the Shares initially purchased by it hereunder,
as follows:


 


3.1           Nasdaq Listing.  The Company will promptly seek to list all of
its Common Stock, including without limitation the Shares, on Nasdaq’s National
Market or SmallCap Marketplace or the American Stock Exchange if it at anytime
becomes eligible to do so; and at any time when such Common Stock is listed on
the Nasdaq’s SmallCap Marketplace or the American Stock Exchange, the Company
shall promptly seek to list all of its Common Stock on Nasdaq’s National
Market, including, without limitation, the Shares, if at anytime it becomes
eligible to do so.


 


3.2           Insurance.  The Company carries and shall maintain  directors and officers insurance customary in amount (no
less than $15,000,000) and terms for the type and scope of its business and all
such policies shall be reasonably acceptable to each member of the Board of
Directors.  The Company shall obtain and
maintain, and cause each Subsidiary to maintain, insurance with responsible and
reputable insurance companies or associations in such amounts and covering such
risks as is customarily carried by companies engaged in similar businesses and
owning similar properties in the same general areas in which the Company or
such Subsidiary operates.


 


3.3           Indemnity and
Expense Reimbursement.  At all times
the Company shall maintain provisions in the bylaws or certificate of
incorporation of the Company indemnifying all directors against liability to
the maximum extent permitted under the laws of State of Delaware.  In addition, the Company and each director
designated by any of the Investors pursuant to Section 3.9 hereof shall
enter into contractual indemnification agreements acceptable to such
directors.  The Company shall also
promptly reimburse in full, each director of the Company who is not an employee
of the Company for all of his or her reasonable out-of-pocket expenses incurred
in attending each meeting of the Board of Directors of the Company or any
committee thereof.


 


3.4           Right of First Refusal.


 


(a)           Right of First
Refusal.  The Company shall not
issue, sell or exchange, agree or obligate itself to issue, sell or exchange,
or reserve or set aside for issuance, sale or 


 


12
















 


exchange, in a transaction not
involving a public offering, any (i) shares of Common Stock, (ii) any
other equity security of the Company, including without limitation, preferred
shares, (iii) any debt security of the Company (other than debt with no
equity feature) including without limitation, any debt security which by its
terms is convertible into or exchangeable for any equity security of the
Company, (iv) any security of the Company that is a combination of debt
and equity, or (v) any option, warrant or other right to subscribe for,
purchase or otherwise acquire any such equity security or any such debt
security of the Company, unless in each case the Company shall have first
offered to sell such securities (the “Offered Securities”) to the 20% Investors
and each other person or entity that has such a right (each an “Offeree” and
collectively, the “Offerees”) as follows: 
Each Offeree shall have the right to purchase (x) that portion of the
Offered Securities as the number of shares of Common Stock then held (including
shares then issuable upon the exercise or conversion of outstanding securities)
by such Offeree bears to the total number of shares of issued and outstanding
Common Stock of the Company calculated on a fully diluted basis to include (i)
the total number of shares of Common Stock subject to outstanding awards
granted under stock plans of the Company and (ii) the total number of shares
that could be issued upon the exercise or conversion of outstanding securities
(the “Basic Amount”), and (y) such additional portion of the Offered
Securities as such Offeree shall indicate it will purchase should the other
Offerees subscribe for less than their Basic Amounts (the “Undersubscription
Amount”), at a price and on such other terms as shall have been specified by
the Company in writing delivered to such Offeree (the “Offer”), which Offer by
its terms shall remain open and irrevocable for a period of twenty (20) days from
receipt of the offer.


 


(b)           Notice of Acceptance.  Notice of each Offeree’s intention to accept,
in whole or in part, any Offer made shall be evidenced by a writing signed by
such Offeree and delivered to the Company prior to the end of the 20-day period
of such offer, setting forth such of the Offeree’s Basic Amount as such Offeree
elects to purchase and, if such Offeree shall elect to purchase all of its
Basic Amount, such Undersubscription Amount as such Offeree shall elect to
purchase (the “Notice of Acceptance”). 
If the Basic Amounts subscribed for by all Offerees are less than the
total Offered Securities, then each Offeree who has set forth Undersubscription
Amounts in its Notice of Acceptance shall be entitled to purchase, in addition
to the Basic Amounts subscribed for, all Undersubscription Amounts it has
subscribed for; provided, however, that should the
Undersubscription Amounts subscribed for exceed the difference between the
Offered Securities and the Basic Amounts subscribed for (the “Available
Undersubscription Amount”), each Offeree who has subscribed for any
Undersubscription Amount shall be entitled to purchase only that portion of the
Available Undersubscription Amount as the Undersubscription Amount subscribed
for by such Offeree bears to the total Undersubscription Amounts subscribed for
by all Offerees, subject to rounding by the Board of Directors to the extent it
reasonably deems necessary.


 


(c)           Conditions to
Acceptances and Purchase.


 


(i)            Permitted Sales of
Refused Securities.  In the event
that Notices of Acceptance are not given by the Offerees in respect of all the
Offered Securities, the Company shall have ninety (90) days from the expiration
of the period set forth above to close the sale of all or any part of such
Offered Securities as to which a Notice of Acceptance has not been given by the
Offerees (the “Refused Securities”) to the Person or Persons specified in the
Offer, but 


 


13
















 


only for cash and otherwise in
all respects upon terms and conditions, including, without limitation, unit
price and interest rates, which are no more favorable, in the aggregate, to
such other person or persons or less favorable to the Company than those set
forth in the Offer.


 


(ii)           Reduction in Amount
of Offered Securities.  In the event
the Company shall propose to sell less than all the Refused Securities (any
such sale to be in the manner and on the terms specified above), then each
Offeree may, at its sole option and in its sole discretion, reduce the number
of, or other units of the Offered Securities specified in its respective
Notices of Acceptance to an amount which shall be not less than the amount of
the Offered Securities which the Offeree elected to purchase pursuant to (b)
above multiplied by a fraction, (i) the numerator of which shall be the
amount of Offered Securities which the Company actually proposes to sell, and
(ii) the denominator of which shall be the amount of all Offered
Securities the Company proposed to sell in its writing delivered pursuant to
Section 3.4(a) above.  In the event that
any Offeree so elects to reduce the number or amount of Offered Securities
specified in its respective Notices of Acceptance, the Company may not sell or
otherwise dispose of more than the reduced amount of the Offered Securities
until such securities have again been offered to the Offerees in accordance
with (a) above.


 


(iii)          Closing.  Upon the closing, which shall include full
payment to the Company, of the sale to such other person or persons of all or
less than all the Refused Securities, the Offerees shall purchase from the
Company, and the Company shall sell to the Offerees, the number of Offered
Securities specified in the Notices of Acceptance, as reduced pursuant to
Section 3.3(b) above if the Offerees have so elected, upon the terms and
conditions specified in the Offer.  The
purchase by the Offerees of any Offered Securities is subject in all cases to
the preparation, execution and delivery by the Company and the Offerees of a
purchase agreement relating to such Offered Securities reasonably satisfactory
in form and substance to the Company and the Offerees and their respective
counsel.


 


(d)           Further Sale.  In each case, any Offered Securities not
purchased by the Offerees or other person or persons in accordance with Section
3.4(c)(iii) above may not be sold or otherwise disposed of until they are again
offered to the Offerees under the procedures specified in Section
3.4(c)(i)-(iii) above.


 


(e)           Exceptions.  The rights of the Investors under this
Section 3.4 shall not apply to:


 


(i)            Common Stock issued as
a stock dividend to holders of Common Stock or upon any subdivision or
combination of shares of Common Stock,


 


(ii)           any capital stock or
derivative thereof granted to an employee, director or consultant under a stock
plan approved by the Board of Directors of the Company and its stockholders,


 


(iii)          any securities issued as
consideration for the acquisition of another entity by the Company by merger or
share exchange (whereby the Company owns no less than 


 


14
















 


51% of the voting power of the
surviving entity) or purchase of substantially all of such entity’s stock or
assets, if such acquisition is approved by the Board of Directors,


 


(iv)          any securities issued in
connection with a strategic partnership, joint venture or other similar
agreement, provided that the purpose of such arrangement is not primarily the
raising of capital and that such arrangement is approved unanimously by the Board
of Directors,


 


(v)           any securities issued
to a financial institution in connection with a bank loan or lease with such
financial institution provided that such is approved unanimously by the Board
of Directors; and


 


(vi)          securities issuable upon
the exercise or conversion of securities outstanding on the Closing Date, as
amended as contemplated by this Agreement.


 


3.5           Charter Amendment
and Further Assurances.  The Company
hereby agrees, if necessary, to seek shareholder approval at the Annual Meeting
for an amendment to its certificate of incorporation to implement any and all
terms of the transactions contemplated by this Agreement, including, without
limitation, eliminating all authorized shares of Series B Preferred Stock,
par value $1.00 per share (the “Series B”) and Series C Preferred
Stock, par value $1.00 per share (the “Series C’), of the Company, and to
take all further actions, execute all further documents and perform all further
things necessary to give effect to the provisions of this Agreement.


 


3.6           Stock Option Plans.  As soon as practicable hereafter but, in any
event sufficiently in advance of the Annual Meeting to present such amendment
to its stockholders at the Annual Meeting, the Company shall amend its 2004
Stock Incentive Plan (i) to delete Section 4(a)(2) thereof in its entirety and
(ii) to increase the total number of shares of Common Stock that may be granted
pursuant to awards thereunder such that the number of shares of Common Stock
issuable pursuant to all of the Company’s stock options and all awards granted
thereunder is increased from 6,987,531  to 8,768,865
shares  (representing an increase equal to
4.0% of the fully diluted shares of capital stock of the Company (immediately
after the sale of the Shares)).  Unless
unanimously approved by the Board of Directors otherwise, each stock option
agreement or stock purchase agreement involving employees, directors or
consultants of the Company adopted by the Company from time to time shall
provide that each option granted to or restricted stock purchased by existing
employees of the Company thereunder shall vest in equal monthly installments
over a four-year period and awards made to employees that commence employment
after the Closing shall vest (i) with respect to twenty-five percent (25%) of
the shares subject to such grant or purchase, one (1) year after the date
of such grant or purchase and (ii) with respect to the remaining shares
subject to such grant or purchase, on a monthly basis over a period of three
years thereafter.


 


3.7           Removal of Legends.  Upon the earlier of (i) registration of the
Shares for sale pursuant to Section 3.10 or (ii) Rule 144(k) becoming available
with respect to an Investors’ Shares, the Company shall, upon an Investor’s
written request (which in the case of clause (i) shall be accompanied by a
written certification by the Investor that (A) the Investor has a present 


 


15
















 


intention to dispose of Shares
covered by such Registration Statement pursuant to the plan of distribution
included in a currently available final prospectus related thereto, and (B) the
Investor will comply with the prospectus delivery requirements applicable to
such disposition, and which, in the case of clause (ii), shall be accompanied
by such reasonable and appropriate customary representations as may be
reasonably requested by the Company), promptly cause certificates evidencing
such Shares to be replaced with certificates which do not bear the restrictive
legend described in Section 5.6.  When
the Company is required to cause unlegended certificates to replace previously
issued legended certificates, if unlegended certificates are not delivered to
an Investor within ten (10) business days of submission by that Investor of
legended stock certificate(s) to the Company’s transfer agent together with a
representation letter in customary form, the Company shall be liable to the
Investor for a penalty equal to 1% of the aggregate purchase price of the
Shares evidenced by such certificate(s) for each thirty (30) day period (or
portion thereof) beyond such ten (10) days that the unlegended certificates
have not been so delivered.


 


3.8           Use of Proceeds.
The Company shall use the proceeds from the sale of the Shares for (a) the
Acquisition and (b) working capital and general corporate purposes.


 


3.9           Board and Committee
Configuration.


 


(a)           Size.  The Board of Directors of the Company
following the Closing shall consist of, and be fixed at, seven members.


 


(b)           Membership - Initial.  Immediately following the Closing, the
members of the Board of Directors shall consist of (and the Company agrees to
nominate for election) (1) the chief executive officer of the Company who shall
serve as a Class II director, (2) one member who shall serve as a Class II
director designated by the written consent of the majority-in-interest of the
shares of Common Stock held by the investors (including the affiliated
assignees of such investors, the “Series B Investors”) named on the
signature pages to the Company’s Series B purchase agreement dated as of
August 8, 2001 that were acquired upon the conversion of the shares of
Series B Preferred Stock held by them pursuant to the terms of the Consent,
Waiver and Amendment Agreement, acting as a single class, who shall initially
be Robert J. Majteles, (3) one member who shall serve as a Class II director
designated by the written consent of the majority-in-interest of the shares of
Common Stock held by the investors (including the affiliated assignees of such
investors, the “Series C Investors”) named on the signature pages to the
Company’s Series C purchase agreement dated as of June 27, 2003, as
amended that were acquired upon the conversion of the shares of Series C
Preferred Stock held by them pursuant to the terms of the Consent, Waiver and
Amendment Agreement, acting as a single class, who shall initially be Randy Stolworthy, (4) two members who
shall serve as Class III directors designated in writing by M/C Venture
Partners, who shall initially be John P. Ward and Matthew J. Rubins and (5) two
non-executive members who shall serve as Class I directors designated by the
mutual agreement of M/C Venture Partners and the Board of Directors of the
Company (reflected by approval of the Company’s Board of Directors (or its
Nominating or Corporate Governance committee) of a written designation by M/C
Venture Partners), provided that each such non-executive member has relevant
industry experience (each, an “Industry Director”), which such Industry
Directors shall initially be Michael P. Downey and Francis E. Girard.


 


16
















 


(c)           Membership -
Post-Annual Meeting.  Following the
date which is six months from the Closing Date, the members of the Board of
Directors shall consist of (and the Company agrees to nominate for election)
(1) the chief executive officer of the Company who shall serve as a Class II
director, (2) one member who shall serve as a Class II director designated by
the written consent of (i) Special Situations Fund III, L.P. (‘SSF’) so long as
SSF and its Affiliates continue to beneficially own at least 50% of the shares
of Common Stock acquired by SSF and its Affiliates upon the conversion of the
shares of Series B Preferred Stock held by them pursuant to the terms of the
Consent, Waiver and Amendment Agreement or (ii) in the event that SSF is not
entitled to appoint a director pursuant to clause (i), the majority-in-interest
of the shares of Common Stock held by the Series B and C Investors that were
acquired by them upon the conversion, pursuant to the terms of the Consent,
Waiver and Amendment Agreement, of the shares of Series B Preferred Stock and
Series C Preferred Stock held by them, acting as a single class, (3) two
members who shall serve as Class III directors designated in writing by M/C
Venture Partners (at least one of whom shall be an Industry Director) and (4)
three Industry Directors who shall serve as Class I directors designated by the
mutual agreement of M/C Venture Partners and the Board of Directors of the
Company (reflected by approval of the Company’s Board of Directors (or its
Nomination or Corporate Governance committee) of a written designation by M/C
Venture Partners).


 


(d)           Term.  The directors to be elected shall serve for
terms in accordance with the Company’s bylaws.


 


(e)           Vacancy.  A vacancy in any directorship provided for
pursuant to Sections 3.9(b) and (c) hereof shall be filled or in
accordance with such Sections 3.9(b) and (c) by a director designated by
the persons or entities that hold the right to designate such person under
Sections 3.9(b) and (c).


 


(f)            Committees.  The Company shall maintain Compensation,
Audit and Nominating or Corporate Governance committees, and the Investors’
designees shall be entitled to membership on the Compensation and Nominating or
Corporate Governance committees.


 


(g)           Regulatory
Compliance.  The Investors and the
Company shall review the board and committee configurations for compliance with
applicable laws rules and regulations (including applicable stock exchange
rules) from time to time and the foregoing rights shall be suspended with the
consent of the Investor(s) whose rights are being suspended, which consent
shall not be unreasonably withheld or delayed, to the extent necessary to be in
compliance with such rules and regulations.


 


3.10.        Registration of the Shares; Compliance with
the Securities Act.


 


(a)           Registration
Procedures and Other Matters.  The
Company shall:


 


(i)            subject to receipt of
necessary information from the Investors after prompt request from the Company
to the Investors to provide such information, prepare and file with the SEC,
within 45 days after the Closing Date, a registration statement on Form
S-3, 


 


17
















 


Form S-2, or Form S-1 (the
“Registration Statement”) to enable the resale of the Shares by the Investors
from time to time through any quotation system on which the Common Stock is
quoted or listed, if applicable, or in privately-negotiated transactions;


 


(ii)           use its best efforts,
subject to receipt of necessary information from the Investors after prompt
request from the Company to the Investors to provide such information (provided
that failure on the part of one Investor shall not relieve the Company from its
obligation to use best efforts with respect to complying Investors), to cause
the Registration Statement to become effective on or before December 31, 2004
(the date the Registration Statement is initially declared effective by the
SEC, the “Effective Date”), such efforts to include, without limiting the
generality of the foregoing, preparing and filing with the SEC in such period
any financial statements that are required to be filed prior to the
effectiveness of such Registration Statement; and, in the event that the filing
referred to in Section 3.10(a)(i) above is on a form other than
Form S-3, the Company shall use its best efforts, subject to receipt of
necessary information from the Investors after prompt request from the Company
to the Investors to provide such information (provided that failure on the part
of one Investor shall not relieve the Company from its obligation to use best
efforts with respect to complying Investors), to prepare and file with the SEC,
within 10 days after the Company first becomes eligible to file a registration
statement on Form S-3, a registration statement on Form S-3 (the “S-3
Registration Statement”) to enable the resale of the Shares by the Investors
from time to time through any quotation system on which the Common Stock is
quoted or listed or in privately-negotiated transactions; and to use its best
efforts to cause the S-3 Registration Statement to become effective as soon as
practicable thereafter, such efforts to include, without limiting the
generality of the foregoing, preparing and filing with the SEC as promptly as
practicable any financial statements that are required to be filed prior to the
effectiveness of such S-3 Registration Statement (the term “Registration
Statement” shall mean the S-1 or S-2 Registration Statement until the S-3
Registration Statement is declared effective by the SEC, after which time it
shall mean the S-3 Registration Statement).


 


(iii)          use its best efforts to
prepare and file with the SEC such amendments and supplements to the
Registration Statement and the Prospectus used in connection therewith as may
be necessary to keep the Registration Statement current, effective and free
from any material misstatement or omission to state a material fact for a
period not exceeding, with respect to each Investor’s Shares purchased hereunder,
the earlier of (x) the date on which such Investor may sell all Shares
then held by the Investor without restriction by the volume limitations of
Rule 144(e) of the Securities Act, or (y) such time as all Shares
purchased by such Investor in this offering have been sold pursuant to a
registration statement;


 


(iv)          furnish to the Investors
with respect to the Shares registered under the Registration Statement such
number of copies of the Registration Statement, Prospectuses and Preliminary
Prospectuses in conformity with the requirements of the Securities Act and such
other documents as the Investors may reasonably request, in order to facilitate
the public sale or other disposition of all or any of the Shares by the
Investors;


 


(v)           file documents required
of the Company for blue sky clearance in states specified in writing by any
Investor and use its best efforts to maintain such blue sky 


 


18
















 


qualifications during the
period the Company is required to maintain the effectiveness of the
Registration Statement pursuant to Section 3.10(a)(iii); 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;


 


(vi)          bear all expenses in
connection with the procedures in paragraph (i) through (v), (viii) and the
last paragraph of this Section 3.10(a) and the registration of the Shares
pursuant to the Registration Statement;


 


(vii)         advise the Investors,
promptly after it shall receive notice or obtain knowledge of the issuance of
any stop order by the SEC delaying or suspending the effectiveness of the
Registration Statement or of the initiation or threat of any proceeding for
that purpose; and it will promptly use its best efforts to prevent the issuance
of any stop order or to obtain its withdrawal at the earliest possible moment
if such stop order should be issued; and


 


(viii)        provide a “Plan of
Distribution” section of the Registration Statement substantially in the form
attached hereto as Exhibit C hereto (subject to the comments of the SEC).


 


Notwithstanding
anything to the contrary herein, the Registration Statement shall cover only
the Shares and any other securities with respect to which the Company has
registration obligations as of the date hereof. 
In no event at any time before the Registration Statement becomes
effective with respect to the Shares shall the Company publicly announce or
file any other registration statement, other than registrations on
Form S-8, without the prior written Majority Investors’ Consent.


 


The Company
understands that the Investors disclaim being underwriters, but any Investor
being deemed an underwriter by the SEC shall not relieve the Company of any
obligations it has hereunder; provided, however that if the
Company receives notification from the SEC that an Investor is deemed an
underwriter, then the period by which the Company is obligated to submit an
acceleration request to the SEC shall be extended to the earlier of
(x) the 90th day after such SEC notification, or (y) 120 days after
the initial filing of the Registration Statement with the SEC.


 


Within three
business days of the Effective Date, the Company shall advise its transfer
agent that the shares are subject to an effective registration statement and
can be reissued free of restrictive legend upon notice of a sale by an Investor
and confirmation by such Investor that it has complied with the prospectus
delivery requirements, provided that the Company has not advised the transfer
agent orally or in writing that the registration statement has been suspended;
provided, however, in the event the Company’s transfer agent requires an
opinion of counsel to the Company for an such reissuance, within three business
days of any such request for an opinion by the transfer agent, the Company
shall cause its counsel to issue a blanket opinion to the transfer agent
stating the foregoing.


 


19
















 


(b)           Transfer of Shares
After Registration; Suspension.


 


(i)            Each Investor,
severally and not jointly, agrees that it will not effect any disposition of
the Shares or its right to purchase the Shares that would constitute a sale
within the meaning of the Securities Act except as contemplated in the
Registration Statement referred to in Section 3.10(a) and as described
below or as otherwise permitted by law, and that it will promptly notify the
Company of any material changes in the information set forth in the Registration
Statement regarding the Investor or its plan of distribution.


 


(ii)           Except in the event
that paragraph (iii) below applies, the Company shall (x) if deemed
necessary by the Company, prepare and file from time to time with the SEC a
post-effective amendment to the Registration Statement or a supplement to the
related Prospectus or a supplement or amendment to any document incorporated
therein by reference or file any other required document 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, as thereafter
delivered to purchasers of the Shares being sold thereunder, 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;
(y) provide the Investors copies of any documents filed pursuant to
Section 3.10(b)(ii)(x); and (z) inform each Investor that the Company
has complied with its obligations in Section 3.10(b)(ii)(x) (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 Investor
to that effect, will use its best efforts to secure the effectiveness of such
post-effective amendment as promptly as possible and will promptly notify the
Investor pursuant to Section 3.10(b)(ii)(x) hereof when the amendment
has become effective).


 


(iii)          Subject to paragraph
(iv) below, in the event (w) 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; (x) 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; (y) 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 Shares for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; or (z) of any event or circumstance which, upon the advice of its
counsel, 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 deliver a notice in writing to
each Investor (the “Suspension Notice”) to the effect of the foregoing and,
upon receipt of such Suspension Notice, the Investor will refrain from selling
any Shares pursuant to the Registration Statement (a 


 


20
















 


“Suspension”) until the
Investor’s 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.  In the event of
any Suspension, the Company will use its best efforts to cause the use of the
Prospectus so suspended to be resumed as soon as reasonably practicable within
20 business days after the delivery of a Suspension Notice to the
Investors.  In addition to and without
limiting any other remedies (including, without limitation, at law or at
equity) available to the Investors, each Investor shall be entitled to specific
performance in the event that the Company fails to comply with the provisions
of this Section 3.10(b)(iii).


 


(iv)          Notwithstanding the
foregoing paragraphs of this Section 3.10(b), the Investors shall not be
prohibited from selling Shares under the Registration Statement as a result of
Suspensions on more than two occasions of not more than 30 days each in any
twelve month period, unless, in the good faith judgment of the Company’s Board
of Directors, upon the advice of counsel, the sale of Shares under the
Registration Statement in reliance on this Section 3.10(b)(iv) would be
reasonably likely to cause a violation of the Securities Act or the Exchange
Act and result in liability to the Company.


 


(v)           Provided that a
Suspension is not then in effect, any Investor may sell Shares under the
Registration Statement, provided that it arranges for delivery of a current
Prospectus to the transferee of such Shares in compliance with applicable
law.  Upon receipt of a request therefor,
the Company has agreed to provide an adequate number of current Prospectuses to
the Investors and to supply copies to any other parties requiring such
Prospectuses.


 


(vi)          In the event of a sale
of Shares by an Investor pursuant to the Registration Statement, the Investor
must also deliver to the Company’s transfer agent, with a copy to the Company,
a Certificate of Subsequent Sale substantially in the form attached hereto as Exhibit D,
so that the Shares may be properly transferred.


 


(c)           Indemnification.  For the purpose of this Section 3.10(c):


 


(x)            the term “Selling
Stockholder” shall include each Investor and any affiliate of such Investor;


 


(y)           the term “Registration
Statement” shall include the Prospectus in the form first filed with the SEC
pursuant to Rule 424(b) of the Securities Act or filed as part of the
Registration Statement at the time of effectiveness if no Rule 424(b)
filing is required, exhibit, supplement or amendment included in or relating to
the Registration Statement referred to in Section 3.10(a); and


 


(z)            the term “untrue
statement” shall include any untrue statement or alleged untrue statement, or
any omission or alleged omission to state in the Registration Statement 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.


 


21
















 


(i)            The Company agrees to
indemnify and hold harmless each Selling Stockholder from and against any
losses, claims, damages or liabilities to which such Selling Stockholder may
become subject (under the Securities Act or otherwise) insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of, or are based upon (x) any breach of the representations or
warranties of the Company contained in this Section 3.10 or failure to
comply with the covenants and agreements of the Company contained in this
Section 3.10, (y) any untrue statement of a material fact contained
in the Registration Statement as amended at the time of effectiveness or any omission
of a material fact required to be stated therein or necessary to make the
statements therein not misleading, or (z) any failure by the Company to
fulfill any undertaking included in the Registration Statement as amended at
the time of effectiveness, and the Company will reimburse such Selling
Stockholder for any reasonable legal or other expenses reasonably incurred in
investigating, defending or preparing to defend any such action, proceeding or
claim, or preparing to defend any such action, proceeding or claim, provided,
however, that the Company shall not be liable in any such case to the
extent that such loss, claim, damage or liability arises out of, or is based
upon, an untrue statement made in such Registration Statement or any omission
of a material fact required to be stated therein or necessary to make the
statements therein not misleading in reliance upon and in conformity with
written information furnished to the Company by or on behalf of such Selling
Stockholder specifically for use in preparation of the Registration Statement
or the failure of such Selling Stockholder to comply with its covenants and
agreements contained in Section 3.10(b) hereof respecting sale of the Shares or
any statement or omission in any Prospectus that is corrected in any subsequent
Prospectus that was delivered to the Selling Stockholder prior to the pertinent
sale or sales by the Selling Stockholder. 
The Company shall reimburse each Selling Stockholder for the amounts
provided for herein on demand as such expenses are incurred.


 


(ii)           Each Investor,
severally but not jointly, agrees to indemnify and hold harmless the Company
(and each person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act, each officer of the Company who signs
the Registration Statement and each director of the Company) from and against
any losses, claims, damages or liabilities to which the Company (or any such
officer, director or controlling person) may become subject (under the
Securities Act or otherwise), insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of, or are
based upon, (x) any failure to comply with the covenants and agreements
contained in Section 3.10(b) hereof respecting sale of the Shares, or
(y) any untrue statement of a material fact contained in the Registration
Statement or any omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading if such untrue
statement or omission was made in reliance upon and in conformity with written
information furnished by or on behalf of such Investor specifically for use in
preparation of the Registration Statement, and such Investor will reimburse the
Company (or such officer, director or controlling person), as the case may be,
for any legal or other expenses reasonably incurred in investigating, defending
or preparing to defend any such action, proceeding or claim; provided
that such Investor’s obligation to indemnify the Company shall be limited to
the net amount received by such Investor from the sale of the Shares giving
rise to such obligation.


 


22
















 


(iii)          Promptly after receipt
by any indemnified person of a notice of a claim or the beginning of any action
in respect of which indemnity is to be sought against an indemnifying person
pursuant to this Section 3.10(c), such indemnified person shall notify the
indemnifying person in writing of such claim or of the commencement of such action,
but the omission to so notify the indemnifying person will not relieve it from
any liability which it may have to any indemnified person under this
Section 3.10(c) (except to the extent that such omission materially and
adversely affects the indemnifying person’s ability to defend such action) or
from any liability otherwise than under this Section 3.10(c).  Subject to the provisions hereinafter stated,
in case any such action shall be brought against an indemnified person, the
indemnifying person shall be entitled to participate therein, and, to the
extent that it shall elect by written notice delivered to the indemnified
person promptly after receiving the aforesaid notice from such indemnified
person, shall be entitled to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified person.  After notice from the indemnifying person to
such indemnified person of its election to assume the defense thereof, such
indemnifying person shall not be liable to such indemnified person for any
legal expenses subsequently incurred by such indemnified person in connection
with the defense thereof, provided, however, that if there exists
or shall exist a conflict of interest that would make it inappropriate, in the
opinion of counsel to the indemnified person, for the same counsel to represent
both the indemnified person and such indemnifying person or any affiliate or
associate thereof, the indemnified person shall be entitled to retain its own
counsel at the reasonable expense of such indemnifying person; provided,
however, that no indemnifying person shall be responsible for the fees
and expenses of more than one separate counsel (together with appropriate local
counsel) for all indemnified parties.  In
no event shall any indemnifying person be liable in respect of any amounts paid
in settlement of any action unless the indemnifying person shall have approved
the terms of such settlement; provided that such consent shall not be
unreasonably withheld.  No indemnifying
person shall, without the prior written consent of the indemnified person,
effect any settlement of any pending or threatened proceeding in respect of
which any indemnified person is or could have been a party and indemnification
could have been sought hereunder by such indemnified person, unless such
settlement includes an unconditional release of such indemnified person from
all liability on claims that are the subject matter of such proceeding.


 


(iv)          If the indemnification
provided for in this Section 3.10(c) is unavailable to or insufficient to
hold harmless an indemnified person under subsection (i) or (ii) above in
respect of any losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) referred to therein, then each indemnifying
person shall contribute to the amount paid or payable by such indemnified
person as a result of such losses, claims, damages or liabilities (or actions
in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the Company on the one hand and the applicable Investor, as
well as any other Selling Shareholders under such registration statement on the
other in connection with the statements or omissions or other matters which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations.  The relative fault shall be determined by
reference to, among other things, in the case of an untrue statement, whether
the untrue statement relates to information supplied by the Company on the one
hand or an Investor or other Selling Shareholder on the other and the parties’
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement.  The
Company and each Investor, severally but not jointly, agree that it would not
be just and equitable if contribution 


 


23
















 


pursuant to this subsection
(iv) were determined by pro rata allocation (even if the Investor and other
Selling Shareholders were treated as one entity for such purpose) or by any
other method of allocation which does not take into account the equitable
considerations referred to above in this subsection (iv).  The amount paid or payable by an indemnified
person as a result of the losses, claims, damages or liabilities (or actions in
respect thereof) referred to above in this subsection (iv) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
person in connection with investigating or defending any such action or
claim.  Notwithstanding the provisions of
this subsection (iv), each Investor shall not be required to contribute any
amount in excess of the amount by which the net amount received by such
Investor from the sale of the Shares to which such loss relates exceeds the
amount of any damages which such Investor has otherwise been required to pay by
reason of such untrue statement.  No
person guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation.  Each Investor’s obligations in this
subsection to contribute shall be in proportion to its sale of Shares to which
such loss relates and shall not be joint with any other Selling Shareholders.


 


(v)           The parties to this
Agreement hereby acknowledge that they are sophisticated business persons who
were represented by counsel during the negotiations regarding the provisions
hereof including, without limitation, the provisions of this
Section 3.10(c), and are fully informed regarding said provisions.  They further acknowledge that the provisions
of this Section 3.10(c) fairly allocate the risks in light of the ability
of the parties to investigate the Company and its business in order to assure
that adequate disclosure is made in the Registration Statement as required by
the Act and the Exchange Act.  The
parties are advised that federal or state public policy as interpreted by the
courts in certain jurisdictions may be contrary to certain of the provisions of
this Section 3.10(c), and the parties hereto hereby expressly waive and
relinquish any right or ability to assert such public policy as a defense to a
claim under this Section 3.10(c) and further agree not to attempt to
assert any such defense.


 


(d)           Delayed
Effectiveness.   The Company and each
Investor, severally but not jointly, agree that such Investor will suffer
damages if the Company fails to fulfill its obligations pursuant to Section
3.10(a) and 3.10(b) hereof and that it would not be possible to ascertain the
extent of such damages with precision. 
Accordingly, the Company hereby agrees to pay liquidated damages
(“Liquidated Damages”) to each Investor under the following circumstances:  (i) if the Registration Statement is not
declared effective by the SEC on or prior to March 31, 2005 (the “Effectiveness
Deadline”) (such an event, an “Effectiveness Default”); or (ii) if the
Registration Statement (after its effectiveness date) ceases to be effective and
available to such Investor for any continuous period that exceeds 30 days or
for one or more periods that exceed in the aggregate 60 days in any 12-month
period (such an event, a “Suspension Default” and together with an
Effectiveness Default, a “Registration Default”).  In the event of a Registration Default, the
Company shall as Liquidated Damages pay to such Investor, for each 30-day
period of a Registration Default, an amount in cash equal to 1% of the
aggregate purchase price paid by the Investor pursuant to this Agreement; provided
that in no event shall the aggregate amount of cash to be paid as Liquidated
Damages pursuant to this Section 3.10(d) exceed 9% of the aggregate purchase
price paid by such Investor.  The Company
shall pay the Liquidated Damages as follows: (i) in connection with an
Effectiveness Default, on April 1,


 


24
















 


2005, and each 30th day
thereafter until the Registration Statement is declared effective by the SEC;
or (ii) in connection with a Suspension Default, on either (x) the 31st
consecutive day of any Suspension or (y) the 61st day (in the aggregate) of any
Suspensions in any 12-month period, and each 30th day thereafter
until the Suspension is terminated in accordance with Section 3.10(b).  Notwithstanding the foregoing, all periods
shall be tolled during delays directly caused by the action or inaction of any
Investor, and the Company shall have no liability to any Investor in respect of
any such delay.  The Liquidated Damages payable
herein shall apply on a pro rata basis for any portion of a 30-day period of a
Registration Default.


 


(e)           Termination of
Conditions and Obligations.  The
conditions precedent imposed by Section 5.5 or this Section 3.10 upon
the transferability of the Shares shall cease and terminate as to any
particular number of the Shares when such Shares shall have been effectively
registered under the Securities Act and sold or otherwise disposed of in
accordance with the intended method of disposition set forth in the
Registration Statement covering such Shares, at the time such Shares are
eligible for sale pursuant to Rule 144(k) (and the Investor provides the
Company with such reasonable and appropriate customary representations as may
be reasonably requested by the Company) or at such time as an opinion of
counsel reasonably satisfactory to the Company shall have been rendered to the
effect that such conditions are not necessary in order to comply with the
Securities Act.


 


(f)            Information
Available.  So long as the
Registration Statement is effective covering the resale of Shares owned by any
Investor, the Company will furnish to such Investors, upon the reasonable
request of an Investor, an adequate number of copies of the Prospectuses to
supply to any other party requiring such Prospectuses; and upon the reasonable
request of such Investor, the President or the Chief Financial Officer of the
Company (or an appropriate designee thereof) will meet with such Investor or a
representative thereof at the Company’s headquarters to discuss all information
relevant for disclosure in the Registration Statement covering the Shares and
will otherwise cooperate with any Investor conducting an investigation for the
purpose of reducing or eliminating such Investor’s exposure to liability under
the Securities Act, including the reasonable production of information at the
Company’s headquarters; provided, that the Company shall not be required
to disclose any confidential information to or meet at its headquarters with
any Investor until and unless the Investor shall have entered into a
confidentiality agreement in form and substance reasonably satisfactory to the
Company with the Company with respect thereto.


 


3.11         Rule 144.  The Company covenants that it will timely
file the reports required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by the SEC thereunder (or,
if the Company is not required to file such reports, it will, upon the request
of any Investor holding Shares purchased hereunder made after the first
anniversary of the Closing Date, make publicly available such information as
necessary to permit sales pursuant to Rule 144 under the Securities Act), and
it will take such further action as any such Investor may reasonably request,
all to the extent required from time to time to enable such Investor to sell
Shares purchased hereunder without registration under the Securities Act within
the limitation of the exemptions provided by (a) Rule 144 under the Securities
Act, as such Rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the


 


25





















SEC.  Upon
request, the Company will provide to an Investor written certification of its
compliance with the provisions of this Section 3.11.


 


ARTICLE IV


 


NEGATIVE COVENANTS OF THE COMPANY


 


4.             The Company hereby covenants with (i) M/C Venture
Partners that so long as M/C Venture Partners owns at least 50% of the Shares
initially purchased by it hereunder and (ii) (i) with respect to Sections 4.6
and 4.11 with all of the 20% Investors for so long as such Investors
beneficially own at least 20% of the Common Stock, in addition to any other
vote required by law or the Certificate of Incorporation of the Company,
without the prior written consent of M/C Venture Partners, the Company will
not:


 


4.1           Change in Control; Sale of Assets; Merger.  Enter into any transaction,
or series of related transactions, constituting a Change of Control (or agree
to enter into any such transaction or series of related transactions, or permit
any Subsidiary to do so).  For purposes
of this Section 4.1, “Change of Control” shall mean the existence or occurrence
of any of the following: (a) the sale, conveyance or disposition of all or
substantially all of the assets of the Company; (b) the effectuation of a
transaction or series or related transactions in which more than fifty percent
(50%) of the voting power of the Company is disposed of (other than as a direct
result of normal, uncoordinated trading activities in the Common Stock
generally); (c) the consolidation, merger or other business combination of the
Company with or into any other entity, immediately following which the prior
stockholders of the Company fail to own, directly or indirectly, at least fifty
percent (50%) of the voting equity of the surviving entity; and (d) a
transaction or series of related transactions in which any person or group,
other than the Investors and their affiliates, acquires more than fifty percent
(50%) of the voting equity of the Company, provided, that the Company
shall not be deemed to have violated this Section 4.1(d) in the event the
Investors sell, convey or transfer more than 50% of the outstanding equity
securities of the Company to an unaffiliated third party.


 


4.2           Creation of Senior or Pari Passu Equity; Issuance of
Equity Securities.  Create or
authorize the creation of any additional class or series of shares of stock (or
any debt security which by its terms is convertible into or exchangeable for
any equity security of the Company and any security which is a combination of
debt and equity) unless the same ranks junior to the Common Stock as to
dividends and the distribution of assets on the liquidation, dissolution or
winding up of the Company; or issue, or agree to issue, any equity security (or
any security convertible, exercisable or exchangeable for or into any equity
security) of the Company other than securities set forth in Section 3.4(e).


 


4.3           Repurchases, Redemptions, Dividends.  Purchase or redeem, or set aside any sums for
the purchase or redemption of, or pay any dividend or make any distribution on,
any shares of capital stock of the Company, except for dividends or other
distributions payable on the Common Stock solely in the form of additional
shares of Common Stock, or permit any Subsidiary to do any of the foregoing,
and other than shares of Common Stock repurchased from employees or 


 


26
















 


consultants at the original purchase price thereof
pursuant to awards granted prior to the date hereof under a stock plan approved
by the Company’s Board of Directors.


 


4.4           Transfers of Intellectual Property.  Transfer any ownership or interest in, or
material rights relating to, or the granting of any liens or encumbrances on,
any of the Intellectual Property to any person or entity which is not a member
of the consolidated group of the Company and its Subsidiaries; provided,
however, that this restriction shall not apply to transfers of
Intellectual Property accomplished in the ordinary course of business (such as
pursuant to software license agreements in the ordinary course of business).


 


4.5           Liquidation or Dissolution.  Consent to or effect any liquidation,
dissolution or winding up of the Company or any recapitalization or
reorganization of the Company, or permit any Subsidiary to do any of the
foregoing.


 


4.6           Change in Size of Board.
 Increase or decrease the number of
directors constituting the size of the Board of Directors from seven (7)
members.


 


4.7           Change to Charter/By-laws.  Amend, alter or repeal any provision of the
certificate of incorporation or by-laws of the Company (other than to effect a
reverse stock split which has been unanimously approved by the Company’s Board
of Directors, other than the members nominated by M/C Venture Partners, and is
required as the sole remaining condition to list of the Common Stock on a national
securities exchange or have the Common Stock quoted on The Nasdaq Stock
Market).


 


4.8           Change in Nature of
Business.  Make, or permit any
Subsidiary to make, any change in the nature of its business from that
contemplated by the Acquisition or in the Exchange Act Documents existing on
the date hereof and by the Acquisition.


 


4.9           Restrictions on Indebtedness.  Create, incur, assume or suffer to exist, or
permit any Subsidiary to create, incur, assume or suffer to exist, any
liability with respect to indebtedness for money borrowed which exceeds, in the
aggregate, $3,000,000, provided that indebtedness for borrowed money
assumed, guaranteed, endorsed or upon which the Company or any Subsidiary has
otherwise become directly or contingently liable on, shall count as
indebtedness for money borrowed for the purpose of this restriction.


 


4.10         Change in Authorized
Capital Stock.  Increase or decrease
in the authorized amount of any shares of capital stock of the Company (other
than to effect a reverse stock split which has been unanimously approved by the
Company’s Board of Directors, other than the members nominated by M/C Venture
Partners, and is required as the sole remaining condition to list of the Common
Stock on a national securities exchange or have the Common Stock quoted on The
Nasdaq Stock Market), whether any such change shall be by means of amendment to
the Certificate of Incorporation or by merger, consolidation or otherwise other
than as required pursuant to Section 3.5.


 


4.11         No Disparate Voting Rights.  Take any action, including, without
limitation, amendments to the Certificate of Incorporation,
that would enable any holder of a share of capital 


 


27
















 


stock of the Company to vote such shares on any matter at a rate
exceeding the number of votes that such share would be entitled to had it been
purchased at a purchase price equal to one share of Common Stock of the Company
on the date of its purchase (and the Company shall not use indebtedness to
evade this covenant).


 


4.12         Issuance of Compensatory Equity Awards.  Grant any options or other rights to purchase
capital stock except to employees, directors and consultants as authorized by
vote of the Company’s Board of Directors or its Compensation Committee, if such
committee has been formed.


 


ARTICLE V


 


REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTORS


 


5.             Each Investor, severally and not jointly, represents and
warrants to, and covenants with, the Company that:


 


5.1           Authorization. 
The Investor has all requisite power and authority to execute, deliver
and perform its obligations under this Agreement.  The execution of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary action on the part of such Investor and this Agreement has
been duly executed and delivered and constitutes the valid and binding
obligation of the Investor enforceable in accordance with its terms, except as
rights to indemnity and contribution may be limited by state or federal
securities laws or the public policy underlying such laws, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ and contracting
parties’ rights generally and except as enforceability may be subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).


 


5.2           Purchase Entirely for Own Account.  The Common Stock to be purchased by the Investor
will be acquired for investment for the Investor’s own account, not as a
nominee or agent, and not with a view to the resale or distribution of any part
thereof in violation of the Securities Act, and such Investor has no present
intention of selling, granting any participation in, or otherwise distributing
the same.  Such Investor does not have
any contract, undertaking, agreement, or arrangement with any person to sell,
transfer, or grant participation to any person with respect to any of the
Shares.  Nothing contained herein shall
be deemed a representation or warranty by such Investor to hold the Shares for
any period of time.


 


5.3           Disclosure of Information.  The Investor acknowledges that it has
received all the information that it has requested relating to the Company and
the purchase of the Shares.  The Investor
further represents that it has had an opportunity to ask questions and receive
answers from the Company regarding the terms and conditions of the offering of
the Shares.  The foregoing, however, does
not limit or modify the representations and warranties of the Company in this
Agreement or the right of the Investor to rely thereon.


 


28
















 


5.4           Accredited Investor.  The Investor is an “accredited investor”
within the meaning of Rule 501 of Regulation D of the SEC, as presently in
effect and the Investor is also knowledgeable, sophisticated and experienced in
making, and is qualified to make decisions with respect to the transactions
contemplated hereby.


 


5.5           Restricted Securities.  Investor understands that the Common Stock
that it is purchasing is characterized as “restricted securities” under the
federal securities laws inasmuch as it is being acquired from the Company in a
transaction not involving a public offering, and that under such laws and
applicable regulations such securities may be resold without registration under
the Act, only in certain limited circumstances. 
In this connection, the Investor represents that it is familiar with SEC
Rule 144, as presently in effect, and understands the resale limitations
imposed thereby and by the Act.


 


5.6           Legends.  It
is understood that the certificates evidencing the Common Stock shall bear a
legend, reading substantially as follows:


 


“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY
STATE AND ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AS SET FORTH IN THIS
CERTIFICATE.  THE SECURITIES REPRESENTED
HEREBY MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED, OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS EXCEPT PURSUANT TO RULE
144(K) OR PURSUANT TO AN OPINION OF COUNSEL, REASONABLY ACCEPTABLE TO COUNSEL
FOR THE COMPANY, TO THE EFFECT THAT THE PROPOSED SALE, TRANSFER, OR DISPOSITION
MAY BE EFFECTUATED WITHOUT REGISTRATION UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS.”


 


5.7           Investor Questionnaire.  The Investor covenants to execute and deliver
to the Company at or promptly following the Closing an investor questionnaire
supplied by the Company to facilitate the registration of the Shares pursuant
to the registration rights set forth herein and the information contained
therein shall be true and correct.


 


5.8           Agreement to Vote in favor of Plan Amendments.  M/C Venture Partners covenants to vote at the
Annual Meeting in favor of the Plan Amendments set forth in Section 1.3 and
Section 3.6 hereof.


 


5.9           Prohibited Transactions.  During the last thirty (30) days prior to the
date hereof, neither such Investor nor any Affiliate of such Investor which (x)
had knowledge of the transactions contemplated hereby, (y) has or shares
discretion relating to such Investor’s investments or trading or information
concerning such Investor’s investments, including in respect of the Securities,
or (z) is subject to such Investor’s review or input concerning such
Affiliate’s investments or trading (collectively, “Trading Affiliates”) has,
directly or indirectly, 


 


29
















 


effected or agreed to effect any short sale, whether or not against the
box, established any “put equivalent position” (as defined in Rule 16a-1(h)
under the Exchange Act) with respect to the Common Stock, granted any other
right (including, without limitation, any put or call option) with respect to
the Common Stock or with respect to any security that includes, relates to or
derived any significant part of its value from the Common Stock or otherwise
sought to hedge its position in the Securities (each, a “Prohibited
Transaction”).  Prior to the earliest to
occur of (i) the termination of this Agreement, (ii) the Effective Date or
(iii) the Effectiveness Deadline, such Investor shall not, and shall cause its
Trading Affiliates not to, engage, directly or indirectly, in a Prohibited
Transaction.  Such Investor acknowledges
that the representations, warranties and covenants contained in this Section
5.9 are being made for the benefit of the Investors as well as the Company and
that each of the other Investors shall have an independent right to assert any
claims against such Investor arising out of any breach or violation of the
provisions of this Section 5.9.


 


ARTICLE VI


 


SURVIVAL; INDEMNITY


 


6.1           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 herein shall survive the execution of this
Agreement, the delivery to the Investors of the Shares being purchased and the
payment therefor; provided, that the representations and warranties of the
parties hereunder shall only survive for a period of one year following the Closing
Date.


 


6.2           Indemnity. 
Company agrees to indemnify and hold each Investor, and its respective
directors, managers, officers, shareholders, members, partners, affiliates,
employees, attorneys and agents (each, an “Indemnified Person”), harmless from
and against any and all suits, actions, proceedings, claims, damages, losses,
liabilities and expenses of any kind or nature whatsoever (including attorneys’
fees and disbursements and other costs of investigation or defense, including
those incurred upon any appeal) which may be instituted or asserted against or
incurred by any such Indemnified Person as the result of their investment in
the Shares under this Agreement or with respect to any breach (or alleged
breach) of any representation, warranty or covenant of the Company contained in
this Agreement or with respect to the execution, delivery, enforcement,
performance and administration of, or in any other way arising out of or
relating to, this Agreement or transactions contemplated by or referred to herein
and any actions or failures to act with respect to any of the foregoing, except
to the extent that any such indemnified liability is finally determined by a
court of competent jurisdiction to have resulted from such Indemnified Person’s
gross negligence or willful misconduct. 
The Company shall reimburse each Investor for amounts provided for
herein on demand as such expenses are incurred. 
NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO THE COMPANY OR
TO ANY OTHER PARTY OR TO ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OR
ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR
INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS
A RESULT OF THEIR INVESTMENT IN THE SHARES UNDER THIS AGREEMENT OR AS A RESULT
OF ANY 


 


30
















 


OTHER TRANSACTION CONTEMPLATED HEREUNDER.  THE COMPANY SHALL NOT BE RESPONSIBLE OR
LIABLE TO ANY INDEMNIFIED PERSON OR TO ANY OTHER PARTY OR TO ANY SUCCESSOR,
ASSIGNEE OR THIRD PARTY BENEFICIARY OR ANY OTHER PERSON ASSERTING CLAIMS
DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY,
CONSEQUENTIAL OR SPECIAL DAMAGES WHETHER OR NOT SUCH DAMAGES WERE REASONABLY
FORESEEABLE.


 


ARTICLE VII


 


MISCELLANEOUS


 


7.1           Notices.  All
notices, requests, consents and other communications hereunder shall be in
writing, shall be mailed (A) if within the United States by first-class
registered or certified airmail, or nationally recognized overnight express
courier, postage prepaid, or by facsimile, or (B) if delivered from outside the
United States, by International Federal Express or facsimile, and shall be
deemed given and received (i) if delivered by first-class registered or
certified mail, three business days after so mailed, (ii) if delivered by
nationally recognized overnight carrier, one business day after so mailed,
(iii) if delivered by International Federal Express, two business days after so
mailed, (iv) if delivered by facsimile, upon electronic confirmation of receipt
and shall be delivered as addressed as follows:


 


(a)           if to the Company, to:


 


Artisoft, Inc.


5 Cambridge Center


Cambridge, MA 02142


Attn:  Chief Executive Officer


 


(b)           with a copy to:


 


Wilmer Cutler Pickering Hale
and Dorr LLP


60 State Street


Boston, MA  02109


Attn:  Peter B. Tarr, Esq.


 


(c)           if to the Investors, at their respective addresses on the
signature page hereto, or at such other address or addresses as may have been
furnished to the Company in writing, with a copy to counsel to M/C Venture
Partners:


 


Testa, Hurwitz &
Thibeault, LLP


125 High Street


Boston, MA  02110


Attn:  Jocelyn M. Arel, Esq.


 


31
















 


7.2           Changes. 
This Agreement may not be modified, waived or amended except pursuant to
an instrument in writing signed by the Company and with Investors constituting
the Majority Investors’ Consent (provided, that, if such modification, waiver
or amendment does not equally affect all 20% Investors to whom such
modification, waiver or amendment is applicable (taking into account the
relative ownership interests of such 20% Investors), such modification, waiver
or amendment must be signed by all 20% Investors).


 


7.3           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.


 


7.4           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.


 


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


 


7.6           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.


 


7.7           Press Release. 
The Company shall on the Closing Date issue a press release disclosing
the material terms of the transactions contemplated hereby (including at least
the number of Shares sold and proceeds therefrom).


 


7.8           Prior Agreements. 
This Agreement constitutes the entire agreement between the parties and
supersedes any prior understandings or agreements (including without limitation
oral agreements) concerning the purchase and sale of the Shares.


 


32
















 


7.9           Costs, Expenses and Taxes.  The Company agrees to pay the reasonable
out-of-pocket costs and expenses of M/C Venture Partners incurred in connection
with the transactions contemplated by this Agreement, including the reasonable
fees and expenses of Testa, Hurwitz & Thibeault, LLP, special counsel for
M/C Venture Partners, as well as the reasonable fees and out-of-pocket expenses
of legal counsel, independent public accountants, technical professionals and
other outside experts retained by M/C Venture Partners in connection with the
transactions contemplated by this Agreement and the amendment or enforcement of
this Agreement.


 


7.10         Transfer of Rights. 
All covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto (including without
limitation transferees of any Shares), whether so expressed or not, provided,
however, that rights conferred to the Investors may be transferred to a
transferee of Shares only if the Company has been given written notice thereof
and either (i) there is transferred to such transferee at least 1,000 Shares or
(ii) such transferee is a partner, retired partner, partnership, member, former
member, shareholder or affiliate of a party hereto.


 


7.11         Independent Nature of Investors’ Obligations and Rights.  The obligations of each Investor under this
Agreement are several and not joint with the obligations of any other Investor,
and no Investor shall be responsible in any way for the performance of the
obligations of any other Investor under this Agreement. Nothing contained
herein or in any other document, and no action taken by any Investor pursuant
thereto, shall be deemed to constitute the Investors as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Investors are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by this
Agreement.  Each Investor shall be
entitled to independently protect and enforce its rights, including without
limitation, the rights arising out of this Agreement or out of the other
related documents, and it shall not be necessary for any other Investor to be
joined as an additional party in any proceeding for such purpose. Each Investor
has been represented by its own separate legal counsel in their review and
negotiation of this Agreement.  The
Company has elected to provide all Investors with the same terms and documents
for the convenience of the Company and not because it was required or requested
to do so by the Investors.


 


[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]


 


33
















 


IN WITNESS WHEREOF, the
parties hereto have executed this Agreement as of the date first above written.


 


	
  ARTISOFT, INC.

  	
  Investor: 

  	
  M/C Venture Partners V, L.P.

  
	
   

  	
  By:  

  	
  M/C VP V, LLC, its General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:  

  	
    /s/Duncan G. Perry

  	
   

  	
  By:  

  	
    /s/John P. Ward

  
	
  Name:  Duncan G. Perry

  	
  Print Name:  

  	
  John P. Ward

  
	
  Title:  Chief Financial Officer

  	
  Title: 

  	
  General Partner

  
	
   

  	
   

  
	
   

  	
  Address: 

  	
  75 State Street, Suite 2500,

  
	
   

  	
   

  	
  Boston, MA 02109

  
	
   

  	
   

  
	
   

  	
  Tax ID No.:

  	
   

  
	
   

  	
   

  
	
   

  	
  Contact name: 

  	
  John P. Ward

  
	
   

  	
   

  
	
   

  	
  Telephone: 

  	
  (617) 345-7200

  
	
   

  	
   

  
	
   

  	
  Name in which shares should be registered  

  (if different):

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investor:

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  
	
   

  	
  Tax ID No.:

  	
   

  
	
   

  	
   

  
	
   

  	
  Contact name:

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone:

  	
   

  
	
   

  	
   

  
	
   

  	
  Name in which shares should be registered  

  (if different):

  
	
   

  	
   

  
													



 
















 


	
   

  	
  Investor: 

  	
  M/C Venture Investors, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:  

  	
    /s/John P. Ward

  
	
   

  	
  Print Name:  

  	
  John P. Ward

  
	
   

  	
  Title:  

  	
  General Partner

  
	
   

  	
   

  
	
   

  	
  Address: 

  	
  75 State Street, Suite 2500,

  
	
   

  	
   

  	
  Boston, MA 02109

  
	
   

  	
   

  
	
   

  	
  Tax ID No.: 

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Contact name: 

  	
  John P. Ward

  
	
   

  	
   

  	
   

  
	
   

  	
  Telephone: 

  	
  (617) 345-7200

  
	
   

  	
   

  
	
   

  	
  Name in which shares should be registered  

  (if different):

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investor: 

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Tax ID No.: 

  	
   

  
	
   

  	
   

  
	
   

  	
  Contact name:

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone:

  	
   

  
	
   

  	
   

  
	
   

  	
  Name in which shares should be registered  

  (if different):

  
	
   

  	
   

  
											



 


Signature
Pages to Stock Purchase Agreement


 
















 


	
   

  	
  Investor: 

  	
  Chestnut Venture Partners, L.P.

  
	
   

  	
   

  
	
   

  	
  By: Chestnut Street Partners, Inc., its

  
	
   

  	
   

  	
  General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:  

  	
    /s/John P. Ward

  
	
   

  	
  Print Name:  

  	
  John P. Ward

  
	
   

  	
  Title:  

  	
  General Partner

  
	
   

  	
   

  
	
   

  	
  Address: 

  	
  75 State Street, Suite 2500,

  
	
   

  	
   

  	
  Boston, MA 02109

  
	
   

  	
   

  
	
   

  	
  Tax ID No.: 

  	
   

  
	
   

  	
   

  
	
   

  	
  Contact name: 

  	
  John P. Ward

  
	
   

  	
   

  
	
   

  	
  Telephone: 

  	
  (617) 345-7200

  
	
   

  	
   

  
	
   

  	
  Name in which shares should be registered 

  (if different):

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investor: 

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  By: 

  	
   

  
	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  
	
   

  	
  Tax ID No.: 

  	
   

  
	
   

  	
   

  
	
   

  	
  Contact name:

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone: 

  	
   

  
	
   

  	
   

  
	
   

  	
  Name in which shares should be registered  

  (if different):

  
	
   

  	
   

  
												



 
















 


	
   

  	
  Investor: 

  	
  Special Situations Fund III, L.P.

  
	
   

  	
  By: 

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ David M. Greenhouse

  
	
   

  	
  Print Name: 

  	
  David M. Greenhouse

  
	
   

  	
  Title: 

  	
  Managing Director

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Tax ID No.: 

  	
   

  
	
   

  	
   

  
	
   

  	
  Contact name:

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone:

  	
   

  
	
   

  	
   

  
	
   

  	
  Name in which shares should be registered  

  (if different):

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investor:

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  By: 

  	
   

  
	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Tax ID No.: 

  	
   

  
	
   

  	
   

  
	
   

  	
  Contact name:

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone: 

  	
   

  
												



 
















 


	
   

  	
  Investor: Special Situations Cayman

  
	
   

  	
   

  	
  Fund, L.P.

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ David M. Greenhouse

  
	
   

  	
  Print Name: 

  	
  David M. Greenhouse

  
	
   

  	
  Title: 

  	
  Managing Director

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Tax ID No.: 

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Contact name:

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone: 

  	
   

  
	
   

  	
   

  
	
   

  	
  Name in which shares should be registered  

  (if different):

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investor: 

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Tax ID No.: 

  	
   

  
	
   

  	
   

  
	
   

  	
  Contact name:

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone: 

  	
   

  
											



 
















 


	
   

  	
  Investor: Special Situations Private Equity

  
	
   

  	
   

  	
   Fund, L.P.

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ David M. Greenhouse

  
	
   

  	
  Print Name: 

  	
  David M. Greenhouse

  
	
   

  	
  Title: 

  	
  Managing Director

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Tax ID No.: 

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Contact name:

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone: 

  	
   

  
	
   

  	
   

  
	
   

  	
  Name in which shares should be registered  

  (if different):

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investor: 

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Tax ID No.: 

  	
   

  
	
   

  	
   

  
	
   

  	
  Contact name:

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone: 

  	
   

  
											



 
















 


	
   

  	
  Investor: Special Situations Technology

  
	
   

  	
   

  	
   Fund, L.P.

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ David M. Greenhouse

  
	
   

  	
  Print Name: 

  	
  David M. Greenhouse

  
	
   

  	
  Title: 

  	
  Managing Director

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Tax ID No.: 

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Contact name:

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone: 

  	
   

  
	
   

  	
   

  
	
   

  	
  Name in which shares should be registered  

  (if different):

  
	
   

  	
   

  
	
   

  	
  Investor: 

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Tax ID No.: 

  	
   

  
	
   

  	
   

  
	
   

  	
  Contact name:

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone: 

  	
   

  
												



 
















 


	
   

  	
  Investor: Special Situations Technology

  
	
   

  	
   

  	
   Fund II, L.P.

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ David M. Greenhouse

  
	
   

  	
  Print Name: 

  	
  David M. Greenhouse

  
	
   

  	
  Title: 

  	
  Managing Director

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Tax ID No.: 

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Contact name:

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone: 

  	
   

  
	
   

  	
   

  
	
   

  	
  Name in which shares should be registered  

  (if different):

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investor: 

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Tax ID No.: 

  	
   

  
	
   

  	
   

  
	
   

  	
  Contact name:

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone: 

  	
   

  
												



 
















 


	
   

  	
  Investor: 

  	
  Pathfinder Ventures II, L.L.C.

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:  

  	
    /s/Steven C. Zahnow

  
	
   

  	
  Print Name:  

  	
  Steven C. Zahnow

  
	
   

  	
  Title: Managing Member of RRS Ventures,

  
	
   

  	
   

  	
  L.L.C., Manager of Pathfinder 
  Ventures II, L.L.C.

  
	
   

  	
   

  
	
   

  	
  Address: 

  	
  2431 N. 24th Street, Suite C-207,

  
	
   

  	
   

  	
  Phoenix, AZ  85016

  
	
   

  	
   

  
	
   

  	
  Tax ID No.: 

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Contact name: 

  	
  Steven C. Zahnow

  
	
   

  	
   

  	
   

  
	
   

  	
  Telephone: 

  	
  (603)553-0082

  
	
   

  	
   

  
	
  Name in which shares
  should be registered (if different):

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investor: 

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
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  Telephone:

  	
   

  
												



 
















 


	
   

  	
  Investor: 

  	
  Constable Capital LLC

  
	
   

  	
  By:

  	
  Constable Advisors, LLC

  
	
   

  	
   

  	
  Its managing member

  
	
   

  	
   

  	
   

  
	
   

  	
  By:  

  	
    /s/Rick Hartfield

  
	
   

  	
  Print Name:

  	
  Donald M. Constable

  
	
   

  	
  Title: 

  	
  Managing Member 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address: 

  	
  18300 Minnetake Boulevard,

  
	
   

  	
   

  	
  Deephaven, MN  55391

  
	
   

  	
   

  
	
   

  	
  Tax ID No.: 

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Contact name: 

  	
  Rick Hartfield

  
	
   

  	
   

  	
   

  
	
   

  	
  Telephone: 

  	
  952-476-0424

  
	
   

  	
   

  
	
   

  	
  Name in which shares should be registered  

  (if different):

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investor: 

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Tax ID No.:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Contact name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Telephone:

  	
   

  
															



 
















 


	
   

  	
  Investor: 

  	
  Constable Capital QP LLC

  
	
   

  	
  By:

  	
  Constable Advisors, LLC

  
	
   

  	
   

  	
  Its managing member

  
	
   

  	
   

  	
   

  
	
   

  	
  By:  

  	
    /s/Rick Hartfield

  
	
   

  	
  Print Name:  

  	
  Donald M. Constable

  
	
   

  	
  Title: 

  	
  Managing Member 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address: 

  	
  18300 Minnetake Boulevard,

  
	
   

  	
   

  	
  Deephaven, MN  55391

  
	
   

  	
   

  
	
   

  	
  Tax ID No.: 

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Contact name: 

  	
  Rick Hartfield

  
	
   

  	
   

  	
   

  
	
   

  	
  Telephone: 

  	
  952-476-0424

  
	
   

  	
   

  
	
   

  	
  Name in which shares should be registered  

  (if different):

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investor: 

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Tax ID No.:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Contact name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Telephone:

  	
   

  
																		



 
















 


	
   

  	
  Investor:

  	
  Household Investment Funding, Inc.

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:  

  	
    /s/M.J. Forde

  
	
   

  	
  Print Name:  

  	
  M.J. Forde

  
	
   

  	
  Title: 

  	
  Vice President 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address: 

  	
  2700 Sanders Road

  
	
   

  	
   

  	
  Prospect Heights, IL  60070

  
	
   

  	
   

  
	
   

  	
  Tax ID No.: 

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Contact name: 

  	
  M.J. Forde

  
	
   

  	
   

  	
   

  
	
   

  	
  Telephone: 

  	
  (847) 564-6153

  
	
   

  	
   

  
	
   

  	
  Name in which shares should be registered  

  (if different):

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investor: 

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Tax ID No.: 

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Contact name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Telephone:

  	
   

  
											



 
















 


	
   

  	
  Investor:

  	
  Daniel B. and Linda O.

  	
  Ahlberg

  
	
   

  	
   

  	
  JT WROS

  	
   

  
	
   

  	
  By:

  	
  Perkins Capital Management, Inc.,

  
	
   

  	
   

  	
  Attorney-in-Fact

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:  

  	
    /s/Richard C. Perkins

  
	
   

  	
  Print Name:  

  	
  Richard C. Perkins

  
	
   

  	
  Title: 

  	
  Vice President 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address: 

  	
  730 East Lake Street

  
	
   

  	
   

  	
  Wayzata, MN 55391

  
	
   

  	
   

  
	
   

  	
  Tax ID No.: 

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Contact name: 

  	
  Richard C. Perkins

  
	
   

  	
   

  	
   

  
	
   

  	
  Telephone: 

  	
  (952) 473-8367

  
	
   

  	
   

  
	
   

  	
  Name in which shares should be registered  

  (if different):

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investor: 

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Tax ID No.: 

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Contact name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Telephone:

  	
   

  
															



 
















 


	
   

  	
  Investor:

  	
  Alice Ann Corporation

  
	
   

  	
  By:

  	
  Perkins Capital Management, Inc.,

  
	
   

  	
   

  	
  Attorney-in-Fact

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:  

  	
    /s/Richard C. Perkins

  
	
   

  	
  Print Name:  

  	
  Richard C. Perkins

  
	
   

  	
  Title: 

  	
  Vice President 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address: 

  	
  730 East Lake Street

  
	
   

  	
   

  	
  Wayzata, MN 55391

  
	
   

  	
   

  
	
   

  	
  Tax ID No.: 

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Contact name: 

  	
  Richard C. Perkins

  
	
   

  	
   

  	
   

  
	
   

  	
  Telephone: 

  	
  (952) 473-8367

  
	
   

  	
   

  
	
   

  	
  Name in which shares should be registered  

  (if different):

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investor: 

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Tax ID No.: 

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Contact name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Telephone:

  	
   

  
												



 
















 


	
   

  	
  Investor:

  	
  Robert G. Allison

  
	
   

  	
  By:

  	
  Perkins Capital Management, Inc.,

  
	
   

  	
   

  	
  Attorney-in-Fact

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:  

  	
    /s/Richard C. Perkins

  
	
   

  	
  Print Name:  

  	
  Richard C. Perkins

  
	
   

  	
  Title: 

  	
  Vice President 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address: 

  	
  730 East Lake Street

  
	
   

  	
   

  	
  Wayzata, MN 55391

  
	
   

  	
   

  
	
   

  	
  Tax ID No.: 

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Contact name: 

  	
  Richard C. Perkins

  
	
   

  	
   

  	
   

  
	
   

  	
  Telephone: 

  	
  (952) 473-8367

  
	
   

  	
   

  
	
   

  	
  Name in which shares should be registered  

  (if different):

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investor: 

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Tax ID No.: 

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Contact name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Telephone:

  	
   

  
												



 
















 


	
   

  	
  Investor:

  	
  David C. and Carole O. Brown

  
	
   

  	
   

  	
  TTEE’s FBO David C. and  

  Carole O. Brown Rev Tr u/a dtd 

  10/23/97

  
	
   

  	
  By:

  	
  Perkins Capital Management, Inc.,

  
	
   

  	
   

  	
  Attorney-in-Fact

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:  

  	
    /s/Richard C. Perkins

  
	
   

  	
  Print Name:

  	
  Richard C. Perkins

  
	
   

  	
  Title: 

  	
  Vice President 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address: 

  	
  730 East Lake Street

  
	
   

  	
   

  	
  Wayzata, MN 55391

  
	
   

  	
   

  
	
   

  	
  Tax ID No.: 

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Contact name: 

  	
  Richard C. Perkins

  
	
   

  	
   

  	
   

  
	
   

  	
  Telephone: 

  	
  (952) 473-8367

  
	
   

  	
   

  
	
   

  	
  Name in which shares should be registered  

  (if different):

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investor: 

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Tax ID No.: 

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Contact name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Telephone:

  	
   

  
													



 
















 


	
   

  	
  Investor:

  	
  Piper Jaffray & Co As Custodian

  
	
   

  	
   

  	
  FBO Robert H. Clayburgh IRA

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Perkins Capital Management, Inc.,

  
	
   

  	
   

  	
  Attorney-in-Fact

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:  

  	
    /s/Richard C. Perkins

  
	
   

  	
  Print Name:  

  	
  Richard C. Perkins

  
	
   

  	
  Title: 

  	
  Vice President 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address: 

  	
  730 East Lake Street

  
	
   

  	
   

  	
  Wayzata, MN 55391

  
	
   

  	
   

  
	
   

  	
  Tax ID No.: 

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Contact name: 

  	
  Richard C. Perkins

  
	
   

  	
   

  	
   

  
	
   

  	
  Telephone: 

  	
  (952) 473-8367

  
	
   

  	
   

  
	
   

  	
  Name in which shares should be registered  

  (if different):

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investor: 

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Tax ID No.: 

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Contact name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Telephone:

  	
   

  
												



 





















 


	
   

  	
  Investor:
  Piper Jaffray & Co as Custodian

  
	
   

  	
   

  	
  FBO Bradley A. Erickson IRA

  
	
   

  	
  By: Perkins
  Capital Management, Inc.,

  
	
   

  	
   

  	
  Attorney-in-Fact

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/Richard C. Perkins

  
	
   

  	
  Print Name:

  	
  Richard C.
  Perkins

  
	
   

  	
  Title:

  	
  Vice
  President

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  730 East
  Lake Street

  
	
   

  	
   

  	
  Wayzata, MN
  55391

  
	
   

  	
   

  
	
   

  	
  Tax ID No.:

  	
   

  
	
   

  	
   

  
	
   

  	
  Contact
  name: 

  	
  Richard C.
  Perkins

  
	
   

  	
   

  
	
   

  	
  Telephone:

  	
  (952)
  473-8367

  
	
   

  	
   

  
	
   

  	
  Name in
  which shares should be registered (if different):

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investor:

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Tax ID No.:

  	
   

  
	
   

  	
   

  
	
   

  	
  Contact
  name:

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone:

  	
   

  
																



 
















 


	
   

  	
  Investor:
  Piper Jaffray & Co As Cust

  
	
   

  	
   

  	
  Michael E.
  McElligott SPN/PRO

  
	
   

  	
  By: Perkins
  Capital Management, Inc.,

  
	
   

  	
   

  	
  Attorney-in-Fact

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/Richard C. Perkins

  
	
   

  	
  Print Name:

  	
  Richard C. Perkins

  
	
   

  	
  Title:

  	
  Vice
  President

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  730 East
  Lake Street

  
	
   

  	
   

  	
  Wayzata, MN
  55391

  
	
   

  	
   

  
	
   

  	
  Tax ID No.:

  	
   

  
	
   

  	
   

  
	
   

  	
  Contact
  name:

  	
  Richard C.
  Perkins

  
	
   

  	
   

  
	
   

  	
  Telephone:

  	
  (952)
  473-8367

  
	
   

  	
   

  
	
   

  	
  Name in
  which shares should be registered (if different):

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investor:

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Tax ID No.:

  	
   

  
	
   

  	
   

  
	
   

  	
  Contact
  name:

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone:

  	
   

  
															



 
















 


	
   

  	
  Investor: 

  	
  Alan R.
  Reckner

  
	
   

  	
  By: Perkins
  Capital Management, Inc.,

  
	
   

  	
   

  	
  Attorney-in-Fact

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/Richard C. Perkins

  
	
   

  	
  Print Name: 

  	
  Richard C.
  Perkins

  
	
   

  	
  Title:

  	
  Vice
  President

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  730 East
  Lake Street

  
	
   

  	
   

  	
  Wayzata, MN
  55391

  
	
   

  	
   

  
	
   

  	
  Tax ID No.:

  	
   

  
	
   

  	
   

  
	
   

  	
  Contact
  name:

  	
  Richard C.
  Perkins

  
	
   

  	
   

  
	
   

  	
  Telephone:

  	
  (952)
  473-8367

  
	
   

  	
   

  
	
   

  	
  Name in
  which shares should be registered (if different):

  
	
   

  	
   

  
	
   

  	
  Investor:

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Tax ID No.:

  	
   

  
	
   

  	
   

  
	
   

  	
  Contact
  name:

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone:

  	
   

  
															



 
















 


	
   

  	
  Investor:

  	
  Manuel A.
  Villafana

  	
   

  
	
   

  	
  By: Perkins
  Capital Management, Inc.,

  
	
   

  	
   

  	
  Attorney-in-Fact

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/Richard C. Perkins

  
	
   

  	
  Print Name:

  	
  Richard C.
  Perkins

  
	
   

  	
  Title:

  	
  Vice
  President

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  730 East
  Lake Street

  
	
   

  	
   

  	
  Wayzata, MN
  55391

  
	
   

  	
   

  
	
   

  	
  Tax ID No.:

  	
   

  
	
   

  	
   

  
	
   

  	
  Contact
  name:

  	
  Richard C.
  Perkins

  
	
   

  	
   

  
	
   

  	
  Telephone:

  	
  (952)
  473-8367

  
	
   

  	
   

  
	
   

  	
  Name in
  which shares should be registered (if different):

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investor:

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Tax ID No.:

  	
   

  
	
   

  	
   

  
	
   

  	
  Contact
  name:

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone:

  	
   

  
																



 
















 


	
   

  	
  Investor: 

  	
  Donald O and
  Janet M Voight

  
	
   

  	
   

  	
  TTEE’s FBO
  Janet M. Voight

  
	
   

  	
   

  	
  Trust u/a
  dtd 8/29/96

  
	
   

  	
  By: Perkins
  Capital Management, Inc.,

  
	
   

  	
   

  	
  Attorney-in-Fact

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/Richard C. Perkins

  
	
   

  	
  Print Name:

  	
  Richard C.
  Perkins

  
	
   

  	
  Title:

  	
  Vice
  President

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  730 East
  Lake Street

  
	
   

  	
   

  	
  Wayzata, MN
  55391

  
	
   

  	
   

  
	
   

  	
  Tax ID No.:

  	
   

  
	
   

  	
   

  
	
   

  	
  Contact
  name:

  	
  Richard C.
  Perkins

  
	
   

  	
   

  
	
   

  	
  Telephone:

  	
  (952)
  473-8367

  
	
   

  	
   

  
	
   

  	
  Name in
  which shares should be registered (if different):

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investor:

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Tax ID No.:

  	
   

  
	
   

  	
   

  
	
   

  	
  Contact
  name:

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone:

  	
   

  
															



 
















 


	
   

  	
  Investor:
  Piper Jaffray & Co as Cust FBO

  
	
   

  	
   

  	
  James B.
  Wallace SPN/PRO

  
	
   

  	
  By: Perkins
  Capital Management, Inc.,

  
	
   

  	
   

  	
  Attorney-in-Fact

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/Richard C. Perkins

  
	
   

  	
  Print Name: 

  	
  Richard C.
  Perkins

  
	
   

  	
  Title:

  	
  Vice
  President

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  730 East
  Lake Street

  
	
   

  	
   

  	
  Wayzata, MN 55391

  
	
   

  	
   

  
	
   

  	
  Tax ID No.:

  	
   

  
	
   

  	
   

  
	
   

  	
  Contact
  name:

  	
  Richard C.
  Perkins

  
	
   

  	
   

  
	
   

  	
  Telephone:

  	
  (952)
  473-8367

  
	
   

  	
   

  
	
   

  	
  Name in
  which shares should be registered (if different):

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investor:

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Tax ID No.:

  	
   

  
	
   

  	
   

  
	
   

  	
  Contact
  name:

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone:

  	
   

  
																



 
















 


	
   

  	
  Investor:

  	
  Dennis D.
  Gonyea

  
	
   

  	
  By: Perkins
  Capital Management, Inc.,

  
	
   

  	
   

  	
  Attorney-in-Fact

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/Richard C. Perkins

  
	
   

  	
  Print Name:

  	
  Richard C.
  Perkins

  
	
   

  	
  Title:

  	
  Vice
  President

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  730 East
  Lake Street

  
	
   

  	
   

  	
  Wayzata, MN
  55391

  
	
   

  	
   

  
	
   

  	
  Tax ID No.:

  	
   

  
	
   

  	
   

  
	
   

  	
  Contact
  name:

  	
  Richard C.
  Perkins

  
	
   

  	
   

  
	
   

  	
  Telephone:

  	
  (952)
  473-8367

  
	
   

  	
   

  
	
   

  	
  Name in
  which shares should be registered (if different):

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investor:

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Tax ID No.:

  	
   

  
	
   

  	
   

  
	
   

  	
  Contact
  name:

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone:

  	
   

  
																	



 
















 


	
   

  	
  Investor:
  Daniel S. and Patrice M. Perkins

  
	
   

  	
   

  	
    JTWROS

  
	
   

  	
  By: Perkins
  Capital Management, Inc.,

  
	
   

  	
   

  	
  Attorney-in-Fact

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By 

  	
    /s/Richard C. Perkins

  
	
   

  	
  Print Name: 

  	
  Richard C.
  Perkins

  
	
   

  	
  Title: 

  	
  Vice
  President

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  730 East
  Lake Street

  
	
   

  	
   

  	
  Wayzata, MN
  55391

  
	
   

  	
   

  
	
   

  	
  Tax ID No.:

  	
   

  
	
   

  	
   

  
	
   

  	
  Contact
  name:

  	
  Richard C.
  Perkins

  
	
   

  	
   

  
	
   

  	
  Telephone:

  	
  (952)
  473-8367

  
	
   

  	
   

  
	
   

  	
  Name in
  which shares should be registered (if different):

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investor:

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Tax ID No.:

  	
   

  
	
   

  	
   

  
	
   

  	
  Contact
  name:

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone:

  	
   

  
														



 
















 


	
   

  	
  Investor:
  Piper Jaffray & Co as Cust FBO

  
	
   

  	
   

  	
  James G.
  Peters IRA

  
	
   

  	
  By: Perkins
  Capital Management, Inc.,

  
	
   

  	
   

  	
  Attorney-in-Fact

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By 

  	
    /s/Richard C. Perkins

  
	
   

  	
  Print Name: 

  	
  Richard C.
  Perkins

  
	
   

  	
  Title: 

  	
  Vice
  President

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  730 East
  Lake Street

  
	
   

  	
   

  	
  Wayzata, MN
  55391

  
	
   

  	
   

  
	
   

  	
  Tax ID No.:

  	
   

  
	
   

  	
   

  
	
   

  	
  Contact
  name:

  	
  Richard C.
  Perkins

  
	
   

  	
   

  
	
   

  	
  Telephone:

  	
  (952)
  473-8367

  
	
   

  	
   

  
	
   

  	
  Name in
  which shares should be registered 

  (if different):

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investor:

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Tax ID No.:

  	
   

  
	
   

  	
   

  
	
   

  	
  Contact
  name:

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone:

  	
   

  
																	



 
















 


	
   

  	
  Investor:
  Piper Jaffray & Co as Cust FBO

  
	
   

  	
   

  	
  David H.
  Potter IRA

  
	
   

  	
  By: Perkins
  Capital Management, Inc.,

  
	
   

  	
   

  	
  Attorney-in-Fact

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By 

  	
    /s/Richard C. Perkins

  
	
   

  	
  Print Name: 

  	
  Richard C.
  Perkins

  
	
   

  	
  Title: 

  	
  Vice
  President

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  730 East
  Lake Street

  
	
   

  	
   

  	
  Wayzata, MN
  55391

  
	
   

  	
   

  
	
   

  	
  Tax ID No.:

  	
   

  
	
   

  	
   

  
	
   

  	
  Contact
  name:

  	
  Richard C.
  Perkins

  
	
   

  	
   

  
	
   

  	
  Telephone:

  	
  (952)
  473-8367

  
	
   

  	
   

  
	
   

  	
  Name in
  which shares should be registered (if different):

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investor:

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Tax ID No.:

  	
   

  
	
   

  	
   

  
	
   

  	
  Contact
  name:

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone:

  	
   

  
																



 
















 


SCHEDULE OF INVESTORS


 


	
  Investor

  	
   

  	
  Shares

  	
   

  	
  Purchase Price

  	
   

  
	
  M/C Venture Partners V, L.P.

  	
   

  	
  16,579,463

  	
   

  	
  $

  	
  18,877,376.57

  	
   

  
	
  M/C Venture Investors, LLC

  	
   

  	
  308,852

  	
   

  	
  $

  	
  351,658.89

  	
   

  
	
  Chestnut Venture Partners, L.P. (1)

  	
   

  	
  677,116

  	
   

  	
  $

  	
  770,964.28

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Special Situations Fund III, L.P.

  	
   

  	
  2,342,466

  	
   

  	
  $

  	
  2,667,131.79

  	
   

  
	
  Special Situations Cayman Fund, L.P.

  	
   

  	
  758,352

  	
   

  	
  $

  	
  863,459.59

  	
   

  
	
  Special Situations Private Equity Fund,
  L.P.

  	
   

  	
  733,074

  	
   

  	
  $

  	
  834,678.06

  	
   

  
	
  Special Situations Technology Fund, L.P.

  	
   

  	
  63,196

  	
   

  	
  $

  	
  71,954.97

  	
   

  
	
  Special Situations Technology Fund II, L.P.

  	
   

  	
  315,980

  	
   

  	
  $

  	
  359,774.83

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pathfinder Ventures II, L.L.C.

  	
   

  	
  1,450,000

  	
   

  	
  $

  	
  1,650,970.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Constable Capital LLC

  	
   

  	
  93,097

  	
   

  	
  $

  	
  106,000.24

  	
   

  
	
  Constable Capital QP LLC

  	
   

  	
  82,558

  	
   

  	
  $

  	
  94,000.54

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Household Investment Funding, Inc.

  	
   

  	
  439,136

  	
   

  	
  $

  	
  500,000.25

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Daniel & Linda Ahlberg

  	
   

  	
  25,159

  	
   

  	
  $

  	
  28,646.50

  	
   

  
	
  Alice Ann Corporation

  	
   

  	
  25,159

  	
   

  	
  $

  	
  28,646.50

  	
   

  
	
  Robert G. Allison

  	
   

  	
  25,159

  	
   

  	
  $

  	
  28,646.50

  	
   

  
	
  David C. and Carole O. Brown

  	
   

  	
  20,128

  	
   

  	
  $

  	
  22,917.20

  	
   

  
	
  Robert H. Clayburgh

  	
   

  	
  25,159

  	
   

  	
  $

  	
  28,646.50

  	
   

  
	
  Bradley A. Erickson

  	
   

  	
  20,128

  	
   

  	
  $

  	
  22,917.20

  	
   

  
	
  Michael E. McElligott

  	
   

  	
  18,794

  	
   

  	
  $

  	
  21,398.94

  	
   

  
	
  Alan R. Reckner

  	
   

  	
  20,128

  	
   

  	
  $

  	
  22,917.20

  	
   

  
	
  Manuel A. Villafana

  	
   

  	
  25,159

  	
   

  	
  $

  	
  28,646.50

  	
   

  
	
  Janet M. Voight

  	
   

  	
  23,650

  	
   

  	
  $

  	
  26,927.71

  	
   

  
	
  James B. Wallace

  	
   

  	
  23,650

  	
   

  	
  $

  	
  26,927.71

  	
   

  
	
  Dennis D. Gonyea

  	
   

  	
  25,159

  	
   

  	
  $

  	
  28,646.50

  	
   

  
	
  Daniel & Patrice Perkins

  	
   

  	
  17,612

  	
   

  	
  $

  	
  20,052.55

  	
   

  
	
  James G. Peters

  	
   

  	
  9,057

  	
   

  	
  $

  	
  10,312.74

  	
   

  
	
  David H. Potter

  	
   

  	
  12,077

  	
   

  	
  $

  	
  13,750.32

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Totals

  	
   

  	
  24,159,468

  	
   

  	
  $

  	
  27,507,970.26

  	
   

  



 










(1)  For the purposes of this Agreement,
collectively “M/C Venture Partners.”


 
















 


Exhibit B


 


FORM OF COMPANY COUNSEL LEGAL OPINION


 
















 


Exhibit C


 


CERTIFICATE OF SUBSEQUENT SALE


 


[Name and Address of Transfer Agent]


 


RE:                              Sale of Shares of Common
Stock of Artisoft, Inc. (the “Company”) pursuant to the Company’s Prospectus
dated _______________ , ______ (the “Prospectus”)


 


Dear Sir/Madam:


 


The undersigned hereby certifies, in
connection with the sale of shares of Common Stock of the Company included in
the table of Selling Shareholders in the Prospectus, that the undersigned has
sold the shares pursuant to the Prospectus and in a manner described under the
caption “Plan of Distribution” in the Prospectus and that such sale complies
with all securities laws applicable to the undersigned, including, without
limitation, the Prospectus delivery requirements of the Securities Act of 1933,
as amended.


 


	
  Selling
  Shareholder (the beneficial owner):

  	
   

  
	
   

  
	
  Record
  Holder (e.g., if held in name of nominee):

  	
   

  
	
   

  
	
  Restricted
  Stock Certificate No.(s):

  	
   

  
	
   

  
	
  Number of
  Shares Sold:

  	
   

  
	
   

  
	
  Date of
  Sale:

  	
   

  
						



 


In the event that you receive a stock
certificate(s) representing more shares of Common Stock than have been sold by
the undersigned, then you should return to the undersigned a newly issued
certificate for such excess shares in the name of the Record Holder and BEARING A RESTRICTIVE LEGEND.  Further, you should place a stop transfer on
your records with regard to such certificate.


 


	
   

  	
  Very truly
  yours,

  
	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
  cc:

  	
  [Company
  Name and Address]

  	
   

  
									



 


 
















 


Exhibit C


 


Plan of
Distribution


 


The selling stockholders, which as used
herein includes donees, pledgees, transferees or other successors-in-interest
selling shares of common stock or interests in shares of common stock received
after the date of this prospectus from a selling stockholder as a gift, pledge,
partnership distribution or other transfer, may, from time to time, sell,
transfer or otherwise dispose of any or all of their shares of common stock or
interests in shares of common stock on any stock exchange, market or trading
facility on which the shares are traded or in private transactions.  These dispositions may be at fixed prices, at
prevailing market prices at the time of sale, at prices related to the
prevailing market price, at varying prices determined at the time of sale, or
at negotiated prices.


 


The selling stockholders may use any one or
more of the following methods when disposing of shares or interests therein:


 


• ordinary brokerage
transactions and transactions in which the broker-dealer solicits purchasers;


 


• block trades in which the
broker-dealer will attempt to sell the shares as agent, but may position and
resell a portion of the block as principal to facilitate the transaction;


 


• purchases by a
broker-dealer as principal and resale by the broker-dealer for its account;


 


• an exchange distribution
in accordance with the rules of the applicable exchange;


 


• privately negotiated
transactions;


 


• short sales effected
after the date the registration statement of which this Prospectus is a part is
declared effective by the SEC;


 


• through the writing or
settlement of options or other hedging transactions, whether through an options
exchange or otherwise;


 


• broker-dealers may agree
with the selling stockholders to sell a specified number of such shares at a
stipulated price per share;


 


• a combination of any such
methods of sale; and


 


• any other method
permitted pursuant to applicable law.


 


The selling stockholders may, from time to
time, pledge or grant a security interest in some or all of the shares of
common stock owned by them and, if they default in the performance of their
secured obligations, the pledgees or secured parties may offer and sell the
shares of 


 


                








 


common stock, from time to time, under this prospectus, or under an
amendment to this prospectus under Rule 424(b)(3) or other applicable provision
of the Securities Act amending the list of selling stockholders to include the
pledgee, transferee or other successors in interest as selling stockholders
under this prospectus.  The selling
stockholders also may transfer the shares of common stock in other
circumstances, in which case the transferees, pledgees or other successors in
interest will be the selling beneficial owners for purposes of this prospectus.


 


In connection with the sale of our common
stock or interests therein, the selling stockholders may enter into hedging
transactions with broker-dealers or other financial institutions, which may in
turn engage in short sales of the common stock in the course of hedging the
positions they assume.  The selling
stockholders may also sell shares of our common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities.  The selling stockholders may also enter into
option or other transactions with broker-dealers or other financial
institutions or the creation of one or more derivative securities which require
the delivery to such broker-dealer or other financial institution of shares
offered by this prospectus, which shares such broker-dealer or other financial
institution may resell pursuant to this prospectus (as supplemented or amended
to reflect such transaction).


 


The aggregate proceeds to the selling
stockholders from the sale of the common stock offered by them will be the
purchase price of the common stock less discounts or commissions, if any.  Each of the selling stockholders reserves the
right to accept and, together with their agents from time to time, to reject,
in whole or in part, any proposed purchase of common stock to be made directly
or through agents.  We will not receive
any of the proceeds from this offering. Upon any exercise of the warrants by
payment of cash, however, we will receive the exercise price of the warrants.


 


The selling stockholders also may resell all
or a portion of the shares in open market transactions in reliance upon Rule
144 under the Securities Act of 1933, provided that they meet the criteria and
conform to the requirements of that rule.


 


The selling stockholders and any
underwriters, broker-dealers or agents that participate in the sale of the
common stock or interests therein may be “underwriters” within the meaning of
Section 2(11) of the Securities Act.  Any
discounts, commissions, concessions or profit they earn on any resale of the
shares may be underwriting discounts and commissions under the Securities
Act.  Selling stockholders who are
“underwriters” within the meaning of Section 2(11) of the Securities Act will
be subject to the prospectus delivery requirements of the Securities Act.


 


To the extent required, the shares of our
common stock to be sold, the names of the selling stockholders, the respective
purchase prices and public offering prices, the names of any agents, dealer or
underwriter, any applicable commissions or discounts with respect to a
particular offer will be set forth in an accompanying prospectus supplement or,
if appropriate, a post-effective amendment to the registration statement that
includes this prospectus.


 
















 


In order to comply with the securities laws
of some states, if applicable, the common stock may be sold in these
jurisdictions only through registered or licensed brokers or dealers.  In addition, in some states the common stock
may not be sold unless it has been registered or qualified for sale or an
exemption from registration or qualification requirements is available and is
complied with.


 


We have advised the selling stockholders that
the anti-manipulation rules of Regulation M under the Exchange Act may apply to
sales of shares in the market and to the activities of the selling stockholders
and their affiliates.  In addition, we
will make copies of this prospectus (as it may be supplemented or amended from
time to time) available to the selling stockholders for the purpose of
satisfying the prospectus delivery requirements of the Securities Act.  The selling stockholders may indemnify any
broker-dealer that participates in transactions involving the sale of the
shares against certain liabilities, including liabilities arising under the
Securities Act.


 


We have agreed to indemnify the selling
stockholders against liabilities, including liabilities under the Securities
Act and state securities laws, relating to the registration of the shares
offered by this prospectus.


 


We have agreed with the selling stockholders
to keep the registration statement of which this prospectus constitutes a part
effective until the earlier of (1) such time as all of the shares covered by
this prospectus have been disposed of pursuant to and in accordance with the
registration statement or (2) the date on which the shares may be sold pursuant
to Rule 144(k) of the Securities Act.