Document:

Exhibit 10.11

 

PURCHASE AGREEMENT

 

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

 

Recitals

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

2

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

4

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

6

 

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

 

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

 

4.9           SEC Filings.

 

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

 

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

 

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

 

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

 

7

 

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

 

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

 

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

 

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

 

4.15         Intellectual Property.

 

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

 

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

 

8

 

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

 

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

 

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

 

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

 

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

 

9

 

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

 

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

 

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

 

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

 

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

 

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

 

10

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

11

 

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

 

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

 

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

 

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

 

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

 

12

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

13

 

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

 

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

 

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

 

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

 

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

 

6.             Conditions to Closing.

 

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

 

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

 

14

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

15

 

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

 

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

 

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

 

6.3           Termination of
Obligations to Effect Closing; Effects.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

16

 

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

 

7.             Covenants and
Agreements of the Company.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

17

 

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

 

7.9           Director Designee.

 

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

 

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

 

8.             Survival and
Indemnification.

 

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

 

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

 

18

 

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

 

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

 

9.             Miscellaneous.

 

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

 

19

 

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

 

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

 

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

 

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

 

If to the
Company:

 

Unify
Corporation

2101 Arena
Blvd., Suite 100

Sacramento,
CA  95834

Attention:  : 
Pete DiCorti

Fax:  916-928-6408

 

With a copy
to:

 

Gray Cary Ware
& Freidenrich  LLP

400 Capitol
Mall, Suite 2400

Sacramento, CA
95814

Attention:   Kevin A. Coyle, Esq.

Fax:  916-930-3201

 

If to the
Investors:

 

to the
addresses set forth on the signature pages hereto.

 

20

 

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

 

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

 

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

 

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

 

21

 

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

 

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

 

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

 

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

 

[signature page follows]

 

22

 

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

 

	
  The Company:

  	
  UNIFY CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

23

 

	
  The
  Investors:

  	
  SPECIAL
  SITUATIONS FUND III, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name: Austin
  W. Marxe

  	
   

  
	
   

  	
  Title:
  General Partner

  	
   

  

 

Aggregate
Purchase Price:  $1,649,969

Number of
Shares:  2,323,900

Number of
Warrants:  929,560

 

 

Address for
Notice:

 

153 E. 53rd
Street

55th
Floor

New York,
NY  10022

 

with a copy
to:

 

Lowenstein
Sandler PC

65 Livingston
Avenue

Roseland,
NJ  07068

Attn:  John D. Hogoboom, Esq.

Telephone:     973.597.2500

Facsimile:      973.597.2400

 

 

	
   

  	
  SPECIAL
  SITUATIONS CAYMAN FUND, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name: Austin
  W. Marxe

  	
   

  
	
   

  	
  Title:
  General Partner

  	
   

  

 

Aggregate
Purchase Price:  $550,037

Number of
Shares:  774,700

Number of
Warrants:  309,880

 

Address for
Notice:

 

153 E. 53rd
Street

55th
Floor

New York,
NY  10022

 

24

 

with a copy
to:

 

Lowenstein
Sandler PC

65 Livingston
Avenue

Roseland, NJ  07068

Attn:  John D. Hogoboom, Esq.

Telephone:     973.597.2500

Facsimile:      973.597.2400

 

 

	
   

  	
  SPECIAL
  SITUATIONS PRIVATE EQUITY FUND, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name: Austin
  W. Marxe

  	
   

  
	
   

  	
  Title:
  General Partner

  	
   

  

 

Aggregate
Purchase Price:  $900,067

Number of
Shares:  1,267,700

Number of
Warrants:  507,080

 

153 E. 53rd
Street

55th
Floor

New York,
NY  10022

 

with a copy
to:

 

Lowenstein
Sandler PC

65 Livingston
Avenue

Roseland,
NJ  07068

Attn:  John D. Hogoboom, Esq.

Telephone:     973.597.2500

Facsimile:      973.597.2400

 

 

	
   

  	
  SPECIAL
  SITUATIONS TECHNOLOGY FUND, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name: Austin
  W. Marxe

  	
   

  
	
   

  	
  Title:
  General Partner

  	
   

  

 

Aggregate
Purchase Price:  $150,023

Number of
Shares:  211,300

 

25

 

Number of
Warrants:  84,520

 

Address for
Notice:

 

153 E. 53rd
Street

55th
Floor

New York,
NY  10022

 

with a copy
to:

 

Lowenstein
Sandler PC

65 Livingston
Avenue

Roseland,
NJ  07068

Attn:  John D. Hogoboom, Esq.

Telephone:     973.597.2500

Facsimile:      973.597.2400

 

 

	
   

  	
  SPECIAL
  SITUATIONS TECHNOLOGY FUND II, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name: Austin
  W. Marxe

  	
   

  
	
   

  	
  Title:
  General Partner

  	
   

  

 

Aggregate
Purchase Price:  $749,973

Number of
Shares:  1,056,300

Number of
Warrants:  422,520

 

Address for
Notice:

 

153 E. 53rd
Street

55th
Floor

New York,
NY  10022

 

with a copy
to:

 

Lowenstein
Sandler PC

65 Livingston
Avenue

Roseland,
NJ  07068

Attn:  John D. Hogoboom, Esq.

Telephone:     973.597.2500

Facsimile:      973.597.2400

 

26Exhibit 10.12

 

REGISTRATION RIGHTS AGREEMENT

 

This
Registration Rights Agreement (the “Agreement”) is made and entered into as of
this 26th day of April, 2004 by and among UNIFY
CORPORATION, a Delaware corporation (the “Company”), and the
“Investors” named in that certain Purchase Agreement by and among the Company
and the Investors (the “Purchase Agreement”).

 

The parties
hereby agree as follows:

 

1.             Certain
Definitions.

 

As used in
this Agreement, the following terms shall have the following meanings:

 

“Affiliate”
means, with respect to any person, any other person which directly or
indirectly controls, is controlled by, or is under common control with, such
person.

 

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

 

“Common
Stock” shall mean the Company’s common stock, par value $0.001 per share,
and any securities into which such shares may hereinafter be reclassified.

 

“Investors”
shall mean the Investors identified in the Purchase Agreement and any Affiliate
or permitted transferee of any Investor who is a subsequent holder of any
Warrants or Registrable Securities.

 

“Prospectus”
shall mean the prospectus included in any Registration Statement, as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Securities covered by such
Registration Statement and by all other amendments and supplements to the
prospectus, including post-effective amendments and all material incorporated
by reference in such prospectus.

 

“Register,”
“registered” and “registration” refer to a registration made by
preparing and filing a Registration Statement or similar document in compliance
with the 1933 Act (as defined below), and the declaration or ordering of
effectiveness of such Registration Statement or document.

 

“Registrable
Securities” shall mean the Shares and the shares of Common Stock issuable
(i) upon the exercise of the Warrants, if any, and (ii) any other securities
issued or issuable with respect to or in exchange for Registrable Securities;
provided, that, a security shall cease to be a Registrable Security upon (A)
sale pursuant to a Registration Statement or Rule 144 under the 1933 Act, or
(B) such security becoming eligible for sale by the Investors pursuant to Rule
144(k).

 

“Registration
Statement” shall mean any registration statement of the Company filed under
the 1933 Act that covers the resale of any of the Registrable Securities
pursuant to the provisions of this Agreement, amendments and supplements to
such Registration Statement, including post-effective amendments, all exhibits
and all material incorporated by reference in such Registration Statement.

 

“Required
Investors” means the Investors holding a majority of the Registrable
Securities.

 

 

“SEC”
means the U.S. Securities and Exchange Commission.

 

“Shares”
means the shares of Common Stock issued pursuant to the Purchase Agreement.

 

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

 

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

 

“Warrants”
means, the warrants to purchase shares of Common Stock issued to the Investors
pursuant to the Purchase Agreement, the form of which is attached to the
Purchase Agreement as Exhibit A.

 

2.             Registration.

 

(a)           Registration
Statements.

 

(i)            Promptly
following the closing of the purchase and sale of the securities contemplated by
the Purchase Agreement (the “Closing Date”) and concurrent with the filing with
the SEC by the Company of its Annual Report on Form 10-K for the fiscal year
ended April 30, 2004, but no later July 31, 2004 (the “Filing Deadline”), the
Company shall prepare and file with the SEC one Registration Statement on Form
S-3 (or, if Form S-3 is not then available to the Company, on such form of
registration statement as is then available to effect a registration for resale
of the Registrable Securities, subject to the Required Investors’ consent),
covering the resale of the Registrable Securities in an amount at least equal
to the number of Shares plus the number of shares of Common Stock necessary to
permit the exercise in full of the Warrants. 
Such Registration Statement shall include the plan of distribution
attached hereto as Exhibit A. 
Such Registration Statement also shall cover, to the extent allowable
under the 1933 Act and the rules promulgated thereunder (including Rule 416),
such indeterminate number of additional shares of Common Stock resulting from
stock splits, stock dividends or similar transactions with respect to the
Registrable Securities.  The Company
shall use its reasonable best efforts to obtain from each person who now has
piggyback registration rights a waiver of those rights with respect to the
Registration Statement.  The
Registration Statement (and each amendment or supplement thereto, and each
request for acceleration of effectiveness thereof) shall be provided in
accordance with Section 3(c) to the Investors and their counsel prior to its
filing or other submission.  If a
Registration Statement covering the Registrable Securities is not filed with
the SEC on or prior to the Filing Deadline, the Company will make pro rata
payments to each Investor, as liquidated damages and not as a penalty, in an
amount equal to 1.0% of the aggregate amount invested by such Investor for each
30-day period (or pro rata for any portion thereof) following the date by which
such Registration Statement should have been filed for which no Registration
Statement is filed with respect to the Registrable Securities.  Such payments shall be in partial
compensation to the Investors, and shall not constitute the Investors’ exclusive
remedy for such events.  Such payments
shall be made to each Investor in cash.

 

(ii)           Additional
Registrable Securities.  Upon the
written demand of any Investor and upon any change in the Warrant Price (as
defined in the Warrant) such that additional shares of Common Stock become
issuable upon the exercise of the Warrants, the Company shall prepare and file
with the SEC one or more Registration Statements on Form S-3

 

2

 

or amend the Registration Statement filed pursuant to clause (i) above,
if such Registration Statement has not previously been declared effective (or,
if Form S-3 is not then available to the Company, on such form of registration
statement as is then available to effect a registration for resale of such
additional shares of Common Stock (the “Additional Shares”), subject to the
Required Investors’ consent) covering the resale of the Additional Shares, but
only to the extent the Additional Shares are not at the time covered by an
effective Registration Statement.  Such
Registration Statement also shall cover, to the extent allowable under the 1933
Act and the rules promulgated thereunder (including Rule 416), such
indeterminate number of additional shares of Common Stock resulting from stock
splits, stock dividends or similar transactions with respect to the Additional
Shares.  The Company shall use its
reasonable best efforts to obtain from each person who now has piggyback
registration rights a waiver of those rights with respect to such Registration
Statement.  The Registration Statement
(and each amendment or supplement thereto, and each request for acceleration of
effectiveness thereof) shall be provided in accordance with Section 3(c) to the
Investors and their counsel prior to its filing or other submission.  If a Registration Statement covering the
Additional Shares is required to be filed under this Section 2(a)(ii) and is
not filed with the SEC within ten Business Days of the request of any Investor
or upon the occurrence of any of the events specified in this Section 2(a)(ii),
the Company will make pro rata payments to each Investor, as liquidated damages
and not as a penalty, in an amount equal to 1.0% of the aggregate amount
invested by such Investor for each 30-day period or pro rata for any portion
thereof following the date by which such Registration Statement should have
been filed for which no Registration Statement is filed with respect to the
Additional Shares.  Such payments shall
be in partial compensation to the Investors, and shall not constitute the
Investors’ exclusive remedy for such events. 
Such payments shall be made to each Investor in cash.

 

(b)          Expenses.  The Company will pay all expenses associated
with each registration, including filing and printing fees, the Company’s
counsel and accounting fees and expenses, costs associated with clearing the
Registrable Securities for sale under applicable state securities laws, listing
fees, fees and expenses of one counsel to the Investors and the Investors’
reasonable expenses in connection with the registration, but excluding
discounts, commissions, fees of underwriters, selling brokers, dealer managers
or similar securities industry professionals with respect to the Registrable
Securities being sold.

 

(c)           Effectiveness.

 

(i)            The
Company shall use commercially reasonable efforts to have the Registration
Statement declared effective as soon as practicable.  The Company shall notify the Investors by facsimile or e-mail as
promptly as practicable, and in any event, within twenty-four (24) hours, after
any Registration Statement is declared effective and shall simultaneously
provide the Investors with copies of any related Prospectus to be used in
connection with the sale or other disposition of the securities covered
thereby.  If (A)(x) a Registration
Statement covering the Registrable Securities is not declared effective by the
SEC within seventy-five (75) days after the earlier of the date on which such
Registration Statement is filed with the SEC and the Filing Deadline (the
“Effectiveness Deadline”), or (y) a Registration Statement covering Additional
Shares is not declared effective by the SEC within seventy-five (75) days
following the time such Registration Statement was required to be filed
pursuant to Section 2(a)(ii), or (B) after a Registration Statement has been
declared effective by the SEC, sales cannot be made

 

3

 

pursuant to such Registration Statement for any reason (including
without limitation by reason of a stop order, or the Company’s failure to update
the Registration Statement), but excluding the inability of any Investor to
sell the Registrable Securities covered thereby due to market conditions and
except as excused pursuant to subparagraph (ii) below, then the Company will
make pro rata payments to each Investor, as liquidated damages and not as a
penalty, in an amount equal to 1.0% of the aggregate amount invested by such
Investor for each 30- day period or pro rata for any portion thereof following
the date by which such Registration Statement should have been effective (the
“Blackout Period”).  Such payments shall
be in partial compensation to the Investors, and shall not constitute the
Investors’ exclusive remedy for such events. 
The amounts payable as liquidated damages pursuant to this paragraph
shall be paid monthly within three (3) Business Days of the last day of each
month following the commencement of the Blackout Period until the termination
of the Blackout Period.  Such payments
shall be made to each Investor in cash.

 

(ii)           For
not more than twenty (20) consecutive days or for a total of not more than
forty-five (45) days in any twelve (12) month period, the Company may delay the
disclosure of material non-public information concerning the Company, by
suspending the use of any Prospectus included in any registration contemplated
by this Section containing such information, the disclosure of which at the
time is not, in the good faith opinion of the Company, in the best interests of
the Company (an “Allowed Delay”); provided, that the Company shall promptly (a)
notify the Investors in writing of the existence of (but in no event, without
the prior written consent of an Investor, shall the Company disclose to such
Investor any of the facts or circumstances regarding) material non-public information
giving rise to an Allowed Delay, (b) advise the Investors in writing to cease
all sales under the Registration Statement until the end of the Allowed Delay
and (c) use commercially reasonable efforts to terminate an Allowed Delay as
promptly as practicable.

 

(d)          Underwritten
Offering.  If any offering pursuant
to a Registration Statement pursuant to Section 2(a) hereof involves an
underwritten offering, the Company shall have the right to select an investment
banker and manager to administer the offering, which investment banker or
manager shall be reasonably satisfactory to the Required Investors.

 

3.             Company
Obligations.  The Company will use
commercially reasonable efforts to effect the registration of the Registrable
Securities in accordance with the terms hereof, and pursuant thereto the
Company will, as expeditiously as possible:

 

(a)           use
commercially reasonable efforts to cause such Registration Statement to become
effective and to remain continuously effective for a period that will terminate
upon the earlier of (i) the date on which all Registrable Securities covered by
such Registration Statement as amended from time to time, have been sold, and
(ii) the date on which all Registrable Securities covered by such Registration
Statement may be sold pursuant to Rule 144(k) (the “Effectiveness Period”) and
advise the Investors in writing when the Effectiveness Period has expired;

 

(b)          prepare
and file with the SEC such amendments and post-effective amendments to the
Registration Statement and the Prospectus as may be necessary to keep the
Registration Statement effective for the period specified in Section 3(a) and
to comply with the

 

4

 

provisions of the 1933 Act and the 1934 Act with respect to the
distribution of all of the Registrable Securities covered thereby;

 

(c)           provide
copies to and permit counsel designated by the Investors to review each
Registration Statement and all amendments and supplements thereto no fewer than
seven (7) days prior to their filing with the SEC and not file any document to
which such counsel reasonably objects;

 

(d)          furnish
to the Investors and their legal counsel (i) promptly after the same is
prepared and publicly distributed, filed with the SEC, or received by the Company
(but not later than two (2) Business Days after the filing date, receipt date
or sending date, as the case may be) one (1) copy of any Registration Statement
and any amendment thereto, each preliminary prospectus and Prospectus and each
amendment or supplement thereto, and each letter written by or on behalf of the
Company to the SEC or the staff of the SEC, and each item of correspondence
from the SEC or the staff of the SEC, in each case relating to such
Registration Statement (other than any portion of any thereof which contains
information for which the Company has sought confidential treatment), and (ii)
such number of copies of a Prospectus, including a preliminary prospectus, and
all amendments and supplements thereto and such other documents as each
Investor may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Investor that are covered by the related
Registration Statement;

 

(e)           in
the event the Company selects an underwriter for the offering, the Company
shall enter into and perform its reasonable obligations under an underwriting
agreement, in usual and customary form, including, without limitation,
customary indemnification and contribution obligations, with the underwriter of
such offering;

 

(f)           if
required by the underwriter, or if any Investor is described in the
Registration Statement as an underwriter, the Company shall furnish, on the
effective date of the Registration Statement (except with respect to clause (i)
below) and on the date that Registrable Securities are delivered to an
underwriter, if any, for sale in connection with the Registration Statement
(including any Investor deemed to be an underwriter), (i) (A) in the case of an
underwritten offering, an opinion, dated as of the closing date of the sale of
Registrable Securities to the underwriters, from independent legal counsel
representing the Company for purposes of such Registration Statement, in form,
scope and substance as is customarily given in an underwritten public offering,
addressed to the underwriters and the Investors participating in such
underwritten offering or (B) in the case of an “at the market” offering, an
opinion, dated as of or promptly after the effective date of the Registration
Statement to the Investors, from independent legal counsel representing the
Company for purposes of such Registration Statement, in form, scope and
substance as is customarily given in a public offering, addressed to the
Investors, and (ii) a letter, dated as of the effective date of such
Registration Statement and confirmed as of the applicable dates described
above, from the Company’s independent certified public accountants in form and
substance as is customarily given by independent certified public accountants
to underwriters in an underwritten public offering, addressed to the
underwriters (including any Investor deemed to be an underwriter);

 

5

 

(g)          use
commercially reasonable efforts to (i) prevent the issuance of any stop order
or other suspension of effectiveness and, (ii) if such order is issued, obtain
the withdrawal of any such order at the earliest possible moment;

 

(h)          prior
to any public offering of Registrable Securities, use commercially reasonable
efforts to register or qualify or cooperate with the Investors and their
counsel in connection with the registration or qualification of such
Registrable Securities for offer and sale under the securities or blue sky laws
of such jurisdictions requested by the Investors and do any and all other
commercially reasonable acts or things necessary or advisable to enable the
distribution in such jurisdictions of the Registrable Securities covered by the
Registration Statement; provided, however, that the Company shall not be required
in connection therewith or as a condition thereto to (i) qualify to do business
in any jurisdiction where it would not otherwise be required to qualify but for
this Section 3(h), (ii) subject itself to general taxation in any jurisdiction
where it would not otherwise be so subject but for this Section 3(h), or (iii)
file a general consent to service of process in any such jurisdiction;

 

(i)            use
commercially reasonable efforts to cause all Registrable Securities covered by
a Registration Statement to be listed on each securities exchange, interdealer
quotation system or other market on which similar securities issued by the
Company are then listed;

 

(j)            immediately
notify the Investors, at any time when a Prospectus relating to Registrable
Securities is required to be delivered under the 1933 Act, upon discovery that,
or upon the happening of any event as a result of which, the Prospectus
included in a Registration Statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing, and at the request of any such
holder, promptly prepare and furnish to such holder a reasonable number of
copies of a supplement to or an amendment of such Prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such
Registrable Securities, such Prospectus shall not include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances then existing; and

 

(k)           otherwise
use commercially reasonable efforts to comply with all applicable rules and
regulations of the SEC under the 1933 Act and the 1934 Act, take such other
actions as may be reasonably necessary to facilitate the registration of the
Registrable Securities hereunder; and make available to its security holders,
as soon as reasonably practicable, but not later than the Availability Date (as
defined below), an earnings statement covering a period of at least twelve (12)
months, beginning after the effective date of each Registration Statement,
which earnings statement shall satisfy the provisions of Section 11(a) of the
1933 Act, including Rule 158 promulgated thereunder (for the purpose of this
subsection 3(k), “Availability Date” means the 45th day following the end of
the fourth fiscal quarter that includes the effective date of such Registration
Statement, except that, if such fourth fiscal quarter is the last quarter of
the Company’s fiscal year, “Availability Date” means the 90th day after the end
of such fourth fiscal quarter).

 

6

 

(l)            With a view to making
available to the Investors the benefits of Rule 144 (or its successor rule) and
any other rule or regulation of the SEC that may at any time permit the
Investors to sell shares of Common Stock to the public without registration,
the Company covenants and agrees to: 
(i) make and keep public information available, as those terms are
understood and defined in Rule 144, until the earlier of (A) six months after
such date as all of the Registrable Securities may be resold pursuant to Rule
144(k) or any other rule of similar effect or (B) such date as all of the
Registrable Securities shall have been resold; (ii) file with the SEC in a
timely manner all reports and other documents required of the Company under the
1934 Act; and (iii) furnish to each Investor upon request, as long as such
Investor owns any Registrable Securities, (A) a written statement by the
Company that it has complied with the reporting requirements of the 1934 Act,
(B) a copy of the Company’s most recent Annual Report on Form 10-K or Quarterly
Report on Form 10-Q, and (C) such other information as may be reasonably
requested in order to avail such Investor of any rule or regulation of the SEC
that permits the selling of any such Registrable Securities without
registration.

 

4.             Due Diligence
Review; Information.  The Company
shall make available, during normal business hours, for inspection and review
by the Investors, advisors to and representatives of the Investors (who may or
may not be affiliated with the Investors and who are reasonably acceptable to
the Company), any underwriter participating in any disposition of shares of
Common Stock on behalf of the Investors pursuant to a Registration Statement or
amendments or supplements thereto or any blue sky, NASD or other filing, all financial
and other records, all SEC Filings (as defined in the Purchase Agreement) and
other filings with the SEC, and all other corporate documents and properties of
the Company as may be reasonably necessary for the purpose of such review, and
cause the Company’s officers, directors and employees, within a reasonable time
period, to supply all such information reasonably requested by the Investors or
any such representative, advisor or underwriter in connection with such
Registration Statement (including, without limitation, in response to all
questions and other inquiries reasonably made or submitted by any of them),
prior to and from time to time after the filing and effectiveness of the
Registration Statement for the sole purpose of enabling the Investors and such
representatives, advisors and underwriters and their respective accountants and
attorneys to conduct initial and ongoing due diligence with respect to the
Company and the accuracy of such Registration Statement.

 

The Company shall not disclose material
nonpublic information to the Investors, or to advisors to or representatives of
the Investors, unless prior to disclosure of such information the Company
identifies such information as being material nonpublic information and
provides the Investors, such advisors and representatives with the opportunity
to accept or refuse to accept such material nonpublic information for review
and any Investor wishing to obtain such information enters into an appropriate
confidentiality agreement with the Company with respect thereto.

 

5.             Obligations
of the Investors.

 

(a)           Each
Investor shall furnish in writing to the Company such information regarding
itself, the Registrable Securities held by it and the intended method of
disposition of the Registrable Securities held by it, as shall be reasonably
required to effect the registration of such Registrable Securities and their
qualification under applicable state securities laws, and shall execute such
documents in connection with such registration, including

 

7

 

qualification under applicable state securities laws, as the Company
may reasonably request.  At least ten
(10) Business Days prior to the first anticipated filing date of any
Registration Statement, the Company shall notify each Investor of the
information the Company requires from such Investor if such Investor elects to
have any of the Registrable Securities included in the Registration
Statement.  An Investor shall use best
efforts to provide such information to the Company promptly upon request if
such Investor elects to have any of the Registrable Securities included in the
Registration Statement.  Each Investor
shall comply at all times with all federal and state securities laws applicable
to the distribution of the Registrable Securities by them.

 

(b)          Each
Investor, by its acceptance of the Registrable Securities agrees to cooperate
with the Company as reasonably requested by the Company in connection with the
preparation and filing of a Registration Statement hereunder, unless such
Investor has notified the Company in writing of its election to exclude all of
its Registrable Securities from such Registration Statement.

 

(c)           In
the event the Company, at the request of the Investors, determines to engage
the services of an underwriter, such Investor agrees to enter into and perform
its obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such other
actions as are reasonably required in order to expedite or facilitate the
dispositions of the Registrable Securities.

 

(d)          Each
Investor agrees that, upon receipt of any notice from the Company of either (i)
the commencement of an Allowed Delay pursuant to Section 2(c)(ii) or (ii) the
happening of an event pursuant to Section 3(j) hereof, such Investor will
immediately discontinue disposition of Registrable Securities pursuant to the
Registration Statement covering such Registrable Securities, until the
Investor’s receipt of the copies of the supplemented or amended prospectus
filed with the SEC and until any related post-effective amendment is declared
effective and, if so directed by the Company, the Investor shall deliver to the
Company (at the expense of the Company) or destroy (and deliver to the Company
a certificate of destruction) all copies in the Investor’s possession of the
Prospectus covering the Registrable Securities current at the time of receipt
of such notice.

 

(e)           No
Investor may participate in any third party underwritten registration hereunder
unless it (i) agrees to sell the Registrable Securities on the basis provided
in any underwriting arrangements in usual and customary form entered into by
the Company, (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements, and (iii) agrees to
pay its pro rata share of all underwriting discounts and commissions.  Notwithstanding the foregoing, no Investor
shall be required to make any representations to such underwriter, other than
those with respect to itself and the Registrable Securities owned by it,
including its right to sell the Registrable Securities, and any indemnification
in favor of the underwriter by the Investors shall be several and not joint and
limited in the case of any Investor, to the proceeds received by such Investor
from the sale of its Registrable Securities. 
The scope of any such indemnification in favor of an underwriter shall
be limited to the same extent as the indemnity provided in Section 6(b) hereof.

 

8

 

6.             Indemnification.

 

(a)           Indemnification
by the Company.  The Company will
indemnify and hold harmless each Investor and its officers, directors, members,
employees and agents, successors and assigns, and each other person, if any,
who controls such Investor within the meaning of the 1933 Act, against any
losses, claims, damages or liabilities, joint or several, to which they may
become subject under the 1933 Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon: (i) any untrue statement or alleged untrue statement of any
material fact contained in any Registration Statement, any preliminary
prospectus or final prospectus contained therein, or any amendment or
supplement thereof; (ii) any blue sky application or other document executed by
the Company specifically for that purpose or based upon written information
furnished by the Company filed in any state or other jurisdiction in order to
qualify any or all of the Registrable Securities under the securities laws
thereof (any such application, document or information herein called a “Blue
Sky Application”); (iii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading; (iv) any violation by the Company or its agents of any
rule or regulation promulgated under the 1933 Act applicable to the Company or
its agents and relating to action or inaction required of the Company in
connection with such registration; or (v) any failure to register or qualify
the Registrable Securities included in any such Registration in any state where
the Company or its agents has affirmatively undertaken or agreed in writing
that the Company will undertake such registration or qualification on an
Investor’s behalf (the undertaking of any underwriter chosen by the Company
being attributed to the Company) and will reimburse such Investor, and each
such officer, director or member and each such controlling person for any legal
or other expenses reasonably incurred by them in connection with investigating
or defending any such loss, claim, damage, liability or action; provided,
however, that the Company will not be liable in any such case if and to
the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission so made in conformity with information furnished by such
Investor or any such controlling person in writing specifically for use in such
Registration Statement or Prospectus.

 

(b)          Indemnification
by the Investors.  In connection
with any registration pursuant to the terms of this Agreement, each Investor
will furnish to the Company in writing such information as the Company
reasonably requests concerning the holders of Registrable Securities or the
proposed manner of distribution for use in connection with any Registration
Statement or Prospectus and agrees, severally but not jointly, to indemnify and
hold harmless, to the fullest extent permitted by law, the Company, its
directors, officers, employees, stockholders and each person who controls the
Company (within the meaning of the 1933 Act) against any losses, claims,
damages, liabilities and expense (including reasonable attorney fees) resulting
from (i) any untrue statement of a material fact or any omission of a material
fact required to be stated in the Registration Statement or Prospectus or
preliminary prospectus or amendment or supplement thereto or necessary to make
the statements therein not misleading, to the extent, but only to the extent
that such untrue statement or omission is contained in any information
furnished in writing by such Investor to the Company specifically for inclusion
in such Registration Statement or Prospectus or amendment or supplement thereto
or (ii) any violation by such Investor of any rule or regulation promulgated
under the 1933 Act applicable to such Investor and relating to action or
inaction required of such Investor in connection with

 

9

 

the distribution of Registrable Securities by it.  In no event shall the liability of an
Investor be greater in amount than the dollar amount of the proceeds (net of
all expense paid by such Investor in connection with any claim relating to this
Section 6 and the amount of any damages such Investor has otherwise been
required to pay by reason of such untrue statement or omission) received by
such Investor upon the sale of the Registrable Securities included in the Registration
Statement giving rise to such indemnification obligation.

 

(c)           Conduct
of Indemnification Proceedings.  Any
person entitled to indemnification hereunder shall (i) give prompt notice to
the indemnifying party of any claim with respect to which it seeks
indemnification and (ii) permit such indemnifying party to assume the defense
of such claim with counsel reasonably satisfactory to the indemnified party; provided
that any person entitled to indemnification hereunder shall have the right to
employ separate counsel and to participate in the defense of such claim, but
the fees and expenses of such counsel shall be at the expense of such person
unless (a) the indemnifying party has agreed to pay such fees or expenses, or
(b) the indemnifying party shall have failed to assume the defense of such
claim and employ counsel reasonably satisfactory to such person or (c) in the
reasonable judgment of any such person, based upon written advice of its
counsel, a conflict of interest exists between such person and the indemnifying
party with respect to such claims (in which case, if the person notifies the
indemnifying party in writing that such person elects to employ separate
counsel at the expense of the indemnifying party, the indemnifying party shall
not have the right to assume the defense of such claim on behalf of such
person); and provided, further, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations hereunder, except to the extent that such
failure to give notice shall materially adversely affect the indemnifying party
in the defense of any such claim or litigation.  It is understood that the indemnifying party shall not, in
connection with any proceeding in the same jurisdiction, be liable for fees or
expenses of more than one separate firm of attorneys at any time for all such
indemnified parties.  No indemnifying
party will, except with the consent of the indemnified party, consent to entry
of any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of such claim or
litigation.

 

(d)          Contribution.  If for any reason the indemnification
provided for in the preceding paragraphs (a) and (b) is unavailable to an
indemnified party or insufficient to hold it harmless, other than as expressly
specified therein, then the indemnifying party shall contribute to the amount
paid or payable by the indemnified party as a result of such loss, claim,
damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnified party and the indemnifying party, as well as
any other relevant equitable considerations. 
No person guilty of fraudulent misrepresentation within the meaning of
Section 11(f) of the 1933 Act shall be entitled to contribution from any person
not guilty of such fraudulent misrepresentation.  In no event shall the contribution obligation of a holder of Registrable
Securities be greater in amount than the dollar amount of the proceeds (net of
all expenses paid by such holder in connection with any claim relating to this
Section 6 and the amount of any damages such holder has otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission or
alleged omission) received by it upon the sale of the Registrable Securities
giving rise to such contribution obligation.

 

10

 

7.             Miscellaneous.

 

(a)           Amendments
and Waivers.  This Agreement may be
amended only by a writing signed by the Company and the Required
Investors.  The Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company shall have obtained the written consent to
such amendment, action or omission to act, of the Required Investors.

 

(b)          Notices.  All notices and other communications
provided for or permitted hereunder shall be made as set forth in Section 9.4
of the Purchase Agreement.

 

(c)           Assignments
and Transfers by Investors.  The
provisions of this Agreement shall be binding upon and inure to the benefit of
the Investors and their respective successors and assigns.  An Investor may transfer or assign, in whole
or from time to time in part, to one or more persons its rights hereunder in
connection with the transfer of Registrable Securities by such Investor to such
person, provided that such Investor complies with all laws applicable thereto
and provides written notice of assignment to the Company promptly after such
assignment is effected.

 

(d)          Assignments
and Transfers by the Company.  This
Agreement may not be assigned by the Company (whether by operation of law or
otherwise) without the prior written consent of the Required Investors,
provided, however, that the Company may assign its rights and delegate its
duties hereunder to any surviving or successor corporation in connection with a
merger or consolidation of the Company with another corporation, or a sale,
transfer or other disposition of all or substantially all of the Company’s
assets to another corporation, without the prior written consent of the
Required Investors, after notice duly given by the Company to each Investor.

 

(e)           Benefits
of the Agreement.  The terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective permitted successors and assigns of the parties.  Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.

 

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

 

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

 

(h)          Severability.  Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof but shall be interpreted as if it
were written so as to be enforceable to the maximum extent permitted

 

11

 

by applicable law, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.  To the extent
permitted by applicable law, the parties hereby waive any provision of law
which renders any provisions hereof prohibited or unenforceable in any respect.

 

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

 

(j)            Entire
Agreement.  This Agreement is
intended by the parties as a final expression of their agreement and intended
to be a complete and exclusive statement of the agreement and understanding of
the parties hereto in respect of the subject matter contained herein.  This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.

 

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

 

 

[signature page follows]

 

12

 

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

 

	
  The Company:

  	
  UNIFY CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

 

[SIGNATURE PAGE FOLLOWS]

 

13

 

	
  The Investors:

  	
  SPECIAL SITUATIONS FUND III, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name: Austin
  W. Marxe

  
	
   

  	
  Title:
  General Partner

  
	
   

  	
   

  
	
   

  	
  SPECIAL SITUATIONS CAYMAN FUND, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name: Austin
  W. Marxe

  
	
   

  	
  Title:
  General Partner

  
	
   

  	
   

  
	
   

  	
  SPECIAL SITUATIONS PRIVATE EQUITY FUND, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name: Austin
  W. Marxe

  
	
   

  	
  Title:
  General Partner

  
	
   

  	
   

  
	
   

  	
  SPECIAL SITUATIONS TECHNOLOGY FUND, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name: Austin
  W. Marxe

  
	
   

  	
  Title:
  General Partner

  
	
   

  	
   

  
	
   

  	
  SPECIAL SITUATIONS TECHNOLOGY FUND II, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name: Austin
  W. Marxe

  
	
   

  	
  Title:
  General Partner

  

 

14

 

Exhibit A

 

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;

 

- 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

 

16

 

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.

 

17

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