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EXHIBIT 3.1
STATEMENT OF THE RIGHTS AND PREFERENCES OF
SERIES C CONVERTIBLE PREFERRED STOCK OF
CAYENNE SOFTWARE, INC.
Section 1. DESIGNATION, AMOUNT AND PAR VALUE. The series of preferred
stock shall be designated as the Series C Convertible Preferred Stock (the
"Preferred Stock"), and the number of shares so designated shall be 150,000
(which shall not be subject to increase without the written consent of the
holders thereof). Each share of Preferred Stock shall have a par value of $1.00
per share and a stated value of $20.00 per share (the "Stated Value").
Section 2. DIVIDENDS.
a. Holders of Preferred Stock (the "Holders") shall be entitled to
receive, when and as declared by the Board of Directors of the Company (the
"Board of Directors") out of funds legally available therefor, and the Company
shall pay, cumulative dividends at the rate per share (as a percentage of the
Stated Value per share) equal to 5% per annum, payable, at the Company's option,
in cash or shares of Common Stock, in arrears at such time as the Company shall
determine, but in no event later than the Conversion Date (as hereinafter
defined). Dividends on the Preferred Stock shall accrue daily commencing the
Original Issue Date (as defined in Section 7), and shall be deemed to accrue on
such date whether or not earned or declared and whether or not there are
profits, surplus or other funds of the Company legally available for the payment
of dividends. The party that holds the Preferred Stock on an applicable record
date for any dividend payment will be entitled to receive such dividend payment
and any other accrued and unpaid dividends which accrued prior to such dividend
payment date, without regard to any sale or disposition of such Preferred Stock
subsequent to the applicable record date but prior to the applicable dividend
payment date. Except as otherwise provided herein, if at any time the Company
pays less than the total amount of dividends then accrued on account of the
Preferred Stock, such payment shall be distributed ratably among the holders of
the Preferred Stock based upon the number of shares held by each holder. Payment
of dividends on the Preferred Stock is further subject to the provisions of
Section 5(c)(iv).
b. Notwithstanding anything to the contrary contained herein, the Company
may not issue shares of Common Stock in payment of dividends on the Preferred
Stock if:
i. the number of shares of Common Stock at the time authorized,
unissued and unreserved for all purposes, or held as treasury stock, is
insufficient to issue such dividends in shares of Common Stock;
ii. the shares of Common Stock to be issued in respect of such
dividends are not registered for resale pursuant to an effective registration
statement that names the recipient of such dividend as a selling stockholder
thereunder; or
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iii. the shares of Common Stock to be issued in respect of such
dividends are not listed on the Nasdaq National Market, and any other exchange
on which the Common Stock is then listed for trading.
c. So long as any Preferred Stock shall remain outstanding, neither the
Company nor any subsidiary thereof shall redeem, purchase or otherwise acquire
directly or indirectly any Junior Securities (as defined in Section 7), nor
shall the Company directly or indirectly pay or declare any dividend or make any
distribution (other than a dividend or distribution described in Section 5)
upon, nor shall any distribution be made in respect of, any Junior Securities,
nor shall any monies be set aside for or applied to the purchase or redemption
(through a sinking fund or otherwise) of any Junior Securities unless all
dividends on the Preferred Stock for all past dividend periods shall have been
paid.
Section 3. VOTING RIGHTS. Except as otherwise provided herein and as
otherwise required by law, each holder of Preferred Stock shall be entitled to
vote on all matters submitted to the shareholders of the Corporation for their
consideration and shall be entitled to cast that number of votes equal to the
largest number of whole shares of Common Stock into which such holder's shares
of Preferred Stock could be converted, pursuant to the provisions of Section 5
hereof, at the record date for the determination of shareholders entitled to
vote on such matter. Except as otherwise required by law or expressly provided
herein, the holders of shares of Preferred Stock, Series A Preferred Stock,
Series B Preferred Stock and Common Stock shall vote together as a single class
on all matters submitted to the shareholders of the Corporation for their
consideration. So long as any shares of Preferred Stock are outstanding, the
Company shall not, without the affirmative vote of the holders of a majority of
the shares of the Preferred Stock then outstanding, alter or change adversely
the powers, preferences or rights given to the Preferred Stock or authorize or
create any class of stock ranking as to dividends or distribution of assets upon
a Liquidation (as defined in Section 4) senior to, prior to or pari passu with
the Preferred Stock.
Section 4. LIQUIDATION. Upon any liquidation, dissolution or winding-up of
the Company, whether voluntary or involuntary (a "Liquidation"), the holders of
Preferred Stock shall be entitled to receive out of the assets of the Company,
whether such assets are capital or surplus, for each share of Preferred Stock an
amount equal to the Stated Value plus all accrued but unpaid dividends per
share, whether declared or not, before any distribution or payment shall be made
to the holders of any Junior Securities, and if the assets of the Company shall
be insufficient to pay in full such amounts, then the entire assets to be
distributed shall be distributed among the holders of Preferred Stock ratably in
accordance with the respective amounts that would be payable on such shares if
all amounts payable thereon were paid in full. A sale, conveyance or disposition
of all or substantially all of the assets of the Company or the effectuation by
the Company of a transaction or series of related transactions in which more
than 50% of the voting power of the Company is disposed of, or a consolidation
or merger of the Company with or into any other company or companies shall not
be treated as a Liquidation, but instead shall be subject to the provisions of
Section 5. The Company shall mail written notice of any such Liquidation, not
less than 45 days prior to the payment date stated therein, to each record
holder of Preferred Stock.
Section 5. CONVERSION.
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a.(i) Each share of Preferred Stock shall be convertible into shares of
Common Stock (subject to reduction pursuant to Sections 5(a)(iii) and 5(a)(iv)
at the Conversion Ratio (as defined in Section 7) at the option of the holder in
whole or in part at any time after the Original Issue Date. The holder shall
effect conversions by surrendering the certificate or certificates representing
the shares of Preferred Stock to be converted to the Company, together with the
form of conversion notice attached hereto as Exhibit A (the "Holder Conversion
Notice"). Each Holder Conversion Notice shall specify the number of shares of
Preferred Stock to be converted and the date on which such conversion is to be
effected, which date may not be prior to the date the holder delivers such
Holder Conversion Notice by facsimile (the "Holder Conversion Date"). If no
Holder Conversion Date is specified in a Holder Conversion Notice, the Holder
Conversion Date shall be the date that the Holder Conversion Notice is deemed
delivered pursuant to Section 5(h). Subject to Sections 5(b), 5(a)(iii) and
5(a)(iv), each Holder Conversion Notice, once given, shall be irrevocable. If
the holder is converting less than all shares of Preferred Stock represented by
the certificate or certificates tendered by the holder with the Holder
Conversion Notice, the Company shall promptly deliver to such holder a
certificate for such number of shares as have not been converted.
(ii) Subject to the conditions set forth in this Section 5(a)(ii),
all outstanding and unconverted shares of Preferred Stock may be converted, at
the option of the Company, into shares of Common Stock (subject to reduction
pursuant to Sections 5(a)(iii) and 5(a)(iv)) at the Conversion Ratio on or after
the second anniversary of the date on which the Underlying Securities
Registration Statement (as defined in Section 7) has been declared effective by
the Securities and Exchange Commission (the "Commission"), provided, that such
Underlying Securities Registration Statement is effective on the Company
Conversion Date (as defined below) and that the Underlying Shares (as defined in
Section 7) are then listed on the Nasdaq National Market or Nasdaq SmallCap
Market and each other securities exchange or market on which the Common Stock is
then listed. The conversion date for any conversion pursuant to this Section
5(a)(ii) (the "Company Conversion Date") shall be not earlier than 20 days nor
later than 5 days prior to the date on which the Company shall deliver to the
holders of such outstanding and unconverted shares of Preferred Stock a notice
of such conversion in the form attached hereto as Exhibit B (the "Company
Conversion Notice"). A Holder Conversion Date and a Company Conversion Date are
sometimes collectively referred to herein as the "Conversion Date" and a Holder
Conversion Notice and a Company Conversion Notice are sometimes collectively
referred to as a "Conversion Notice." Any conversion pursuant to this Section
5(a)(ii) shall be subject to Section 5(b) with respect to consequences of the
Company's failure to deliver shares of Common Stock in respect of a conversion
under this Section and to Sections 5(a)(iii) and 5(a)(iv).
(iii) Certain Regulatory Approval. If on the Conversion Date
applicable to any conversion under this Section 5(a), (A) the Common Stock is
then listed for trading on the Nasdaq National Market or the American Stock
Exchange or if the rules of the Nasdaq Stock Market are hereafter amended to
extend Rule 4460(i) promulgated thereby (or any successor or replacement
provision thereof) to the Nasdaq SmallCap Market and the Common Stock is then
listed for trading on such market and (B) the Conversion Price then in effect is
such that the aggregate number of shares of Common Stock that would then be
issuable upon conversion of all outstanding shares of Preferred Stock, together
with any shares of Common Stock previously issued upon conversion of
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Preferred Stock, would equal or exceed 20% of the number of shares of Common
Stock outstanding on the Original Issue Date (the "Issuable Maximum"), and the
Company has not previously obtained "Shareholder Approval" (as defined below),
then the Company shall issue to the converting holder of the Preferred Stock an
amount of shares of Common Stock equal to the Issuable Maximum, such amount to
be calculated based on each holder's percentage of total number of Preferred
Shares outstanding on the Original Issue Date, and, with respect to any shares
of Common Stock that would be issuable to such holder in respect of the
Conversion Notice at issue in excess of the Issuable Maximum, (I) if the
Conversion Price is equal to or less than $1.00 per share, the Company shall
have the option or (II) if the Conversion Price is greater than $1.00 per share,
the converting holder shall have the option to require the Company, to either
(1) as promptly as possible, but in no event later than 60 days after such
Conversion Date, convene a meeting of the holders of the Common Stock and obtain
the Shareholder Approval or (2) redeem, from funds legally available therefor at
the time of such redemption, the balance of the Preferred Stock subject to such
Conversion Notice at a price per share equal to the product of (i) the average
Per Share Market Value for the ten (10) Trading Days immediately preceding (1)
the Conversion Date or (2) the date of payment in full by the Company of such
redemption price, whichever is greater, and (ii) the Conversion Ratio calculated
on (1) the Conversion Date or (2) calculated as if the Conversion Date (for
purposes of determining the Conversion Price) were the date of payment by the
Company of such redemption price, whichever date yields a lower Conversion Price
denominator for the determination of the Conversion Ratio; provided, however,
that if the Company shall elect to obtain Shareholder Approval under paragraph
(1) above and the Company fails for any reason to obtain such Shareholder
Approval within the time period set forth in (1) above, the Company shall be
obligated to redeem the Preferred Stock not converted as a result of the
provisions of this Section in accordance with the provisions of paragraph (2)
above, and in such case the interest contemplated by the immediately succeeding
sentence shall be deemed to accrue from the Conversion Date. If the Company
shall elect to redeem shares of Preferred Stock pursuant to this Section and
fails for any reason to pay the redemption price under (2) above within seven
days after the Conversion Date, the Company will pay interest on such redemption
price at a rate of 15% per annum to the converting holder of Preferred Stock,
accruing from the Conversion Date until the redemption price plus any accrued
interest thereon is paid in full. The entire redemption price, including
interest thereon, shall be paid in cash. "Shareholder Approval" means the
approval by a majority of the total votes cast on the proposal, in person or by
proxy, at a meeting of the shareholders of the Company held in accordance with
the Company's Articles of Organization and by-laws, of the issuance by the
Company of shares of Common Stock exceeding the Issuable Maximum as a
consequence of the conversion of Preferred Stock into Common Stock at a price
less than the greater of the book or market value on the Original Issue Date as
and to the extent required pursuant to Rule 4460(i) of the Nasdaq Stock Market
or Rule 713 of the American Stock Exchange (or any successor or replacement
provision thereof), as applicable.
(iv) If on any Conversion Date applicable to a conversion under
Section 5(a) or a redemption pursuant to Section 6, the average Per Share Market
Value for the five Trading Days immediately preceding such Conversion Date
exceeds the Initial Conversion Price (defined in Section 5(c)(i)) by more than
50%, the Conversion Price otherwise applicable to such conversion or repayment
shall be increased by an amount equal to 50% of the difference between (A) the
average Per Share Market Value for the five Trading Days immediately preceding
such Conversion Date, and (B) 150% of the Initial Conversion Price.
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b. Not later than three Trading Days after the Conversion Date, the
Company will deliver to the holder (i) a certificate or certificates which shall
be free of restrictive legends and trading restrictions (other than those then
required by law and as set forth in the Purchase Agreement) representing the
number of shares of Common Stock being acquired upon the conversion of shares of
Preferred Stock (subject to reduction pursuant to Section 5(a)(iii)) and (ii)
one or more certificates representing the number of shares of Preferred Stock
not converted; provided, however, that the Company shall not be obligated to
issue certificates evidencing the shares of Common Stock issuable upon
conversion of any shares of Preferred Stock until certificates evidencing such
shares of Preferred Stock are either delivered for conversion to the Company or
any transfer agent for the Preferred Stock or Common Stock, or the holder of
such Preferred Stock notifies the Company that such certificates have been lost,
stolen or destroyed and provides a bond (or other adequate security reasonably
acceptable to the Company) reasonably satisfactory to the Company to indemnify
the Company from any loss incurred by it in connection therewith. The Company
shall, upon request of the holder of the Preferred Stock, use its best efforts
to deliver any certificate or certificates required to be delivered by the
Company under this Section. If such certificate or certificates are not
delivered by the date required under this Section 5(b), the holder shall be
entitled by written notice to the Company at any time on or before its receipt
of such certificate or certificates thereafter, to rescind such conversion, in
which event the Company shall immediately return the certificates representing
the shares of Preferred Stock tendered for conversion. If the Company fails to
deliver to the holder such certificate or certificates pursuant to this Section,
including for purposes hereof, any shares of Common Stock to be issued on the
Conversion Date on account of accrued but unpaid dividends hereunder, by the
seventh Trading Day after the Conversion Date, the Company shall pay to such
holder, in cash, as liquidated damages and not as a penalty, $1,500 for each
such Subsequent Trading Day after the Conversion Date until such certificates
are delivered. If the Company fails to deliver to the holder such certificate or
certificates pursuant to this Section prior to the 30th day after the Conversion
Date, the Company shall, at the holder's option (i) redeem, from funds legally
available therefor at the time of such redemption, such number of shares of
Preferred Stock then held by such holder, as requested by such holder, and (ii)
pay all accrued but unpaid dividends on account of the Preferred Stock for which
the Company shall have failed to issue Common Stock certificates hereunder, in
cash. The redemption price per share shall be equal to the product of (A) the
average Per Share Market Value for the ten (10) Trading Days immediately
preceding (1) the Conversion Date or (2) the date of payment in full by the
Company of such redemption price, whichever is greater, and (ii) the Conversion
Ratio calculated on (1) the Conversion Date or (2) calculated as if the
Conversion Date (for purposes of determining the Conversion Price) were the date
of payment by the Company of such redemption price, whichever date yields a
lower Conversion Price denominator for the determination of the Conversion
Ratio. If the holder has requested that the Company redeem shares of Preferred
Stock pursuant to this Section and the Company fails for any reason to pay the
redemption price under (2) above within seven days after such notice, the
Company will pay interest on the redemption price at a rate of 15% per annum, in
cash to such holder, accruing from such seventh day until the redemption price
and any accrued interest thereon is paid in full.
c. i. The conversion price for each share of Preferred Stock (the
"Conversion Price") in effect on any Conversion Date shall be the lesser of (a)
the lower of (1) the average Per Share Market Value for the ten (10) Trading
Days immediately preceding the Original Issue Date and (2)
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the average Per Share Market Value for the ten (10) Trading Days immediately
preceding any issuance of Common Stock by the Company under Section 4(2) of the
Securities Act within 60 days of the Original Issue Date which is approved by or
on behalf of the original holder of Preferred Stock (the "Initial Conversion
Price"), and (b) the average of the lowest Per Share Market Values for the five
(5) Trading Days during the thirty (30) consecutive Trading Days immediately
preceding such Conversion Date.
ii. If the Company, at any time while any shares of Preferred Stock
are outstanding, (a) shall pay a stock dividend or otherwise make a distribution
or distributions on shares of its Junior Securities payable in shares of Common
Stock, (b) subdivide outstanding shares of Common Stock into a larger number of
shares, (c) combine outstanding shares of Common Stock into a smaller number of
shares, or (d) issue by reclassification of shares of Common Stock any shares of
capital stock of the Company, the Initial Conversion Price shall be multiplied
by a fraction of which the numerator shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding before such event and of
which the denominator shall be the number of shares of Common Stock outstanding
after such event. Any adjustment made pursuant to this Section 5(c)(ii) shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or re-classification.
iii. If the Company, at any time while any shares of Preferred
Stock are outstanding, shall issue rights or warrants to all holders of Common
Stock entitling them to subscribe for or purchase shares of Common Stock at a
price per share less than the Per Share Market Value of Common Stock at the
record date mentioned below, the Initial Conversion Price shall be multiplied by
a fraction, of which the denominator shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding on the date of issuance of
such rights or warrants plus the number of additional shares of Common Stock
offered for subscription or purchase, and of which the numerator shall be the
number of shares of Common Stock (excluding treasury shares, if any) outstanding
on the date of issuance of such rights or warrants plus the number of shares
which the aggregate offering price of the total number of shares so offered
would purchase at such Per Share Market Value. Such adjustment shall be made
whenever such rights or warrants are issued, and shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such rights or warrants. However, upon the expiration of any right or
warrant to purchase Common Stock the issuance of which resulted in an adjustment
in the Initial Conversion Price pursuant to this Section 5(c)(iii), if any such
right or warrant shall expire and shall not have been exercised, the Initial
Conversion Price shall immediately upon such expiration be recomputed and
effective immediately upon such expiration be increased to the price which it
would have been (but reflecting any other adjustments in the Initial Conversion
Price made pursuant to the provisions of this Section 5 after the issuance of
such rights or warrants) had the adjustment of the Initial Conversion Price made
upon the issuance of such rights or warrants been made on the basis of offering
for subscription or purchase only that number of shares of Common Stock actually
purchased upon the exercise of such rights or warrants actually exercised.
iv. If the Company, at any time while shares of Preferred Stock are
outstanding, shall distribute to all holders of Common Stock (and not to holders
of Preferred Stock) evidences of its
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indebtedness or assets or rights or warrants to subscribe for or purchase any
security (excluding those referred to in Sections 5(c)(ii) and (iii) above),
then in each such case the Initial Conversion Price at which each share of
Preferred Stock shall thereafter be convertible shall be determined by
multiplying the Initial Conversion Price in effect immediately prior to the
record date fixed for determination of stockholders entitled to receive such
distribution by a fraction of which the denominator shall be the Per Share
Market Value of Common Stock determined as of the record date mentioned above,
and of which the numerator shall be such Per Share Market Value of the Common
Stock on such record date less the then fair market value at such record date of
the portion of such assets or evidence of indebtedness so distributed applicable
to one outstanding share of Common Stock as determined by the Board of Directors
in good faith; provided, however, that in the event of a distribution exceeding
ten percent (10%) of the net assets of the Company, such fair market value shall
be determined by a nationally recognized or major regional investment banking
firm or firm of independent certified public accountants of recognized standing
(which may be the firm that regularly examines the financial statements of the
Company) (an "Appraiser") selected in good faith by the holders of a majority in
interest of the shares of Preferred Stock then outstanding; and provided,
further, that the Company, after receipt of the determination by such Appraiser
shall have the right to select an additional Appraiser, in good faith, in which
case the fair market value shall be equal to the average of the determinations
by each such Appraiser. In either case the adjustments shall be described in a
statement provided to the holders of Preferred Stock of the portion of assets or
evidences of indebtedness so distributed or such subscription rights applicable
to one share of Common Stock. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the record
date mentioned above.
v. All calculations under this Section 5 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be.
vi. Whenever the Initial Conversion Price is adjusted pursuant to
Section 5(c)(ii),(iii) or (iv), the Company shall promptly mail to each holder
of Preferred Stock, a notice setting forth the Initial Conversion Price after
such adjustment and setting forth a brief statement of the facts requiring such
adjustment.
vii. In case of any reclassification of the Common Stock, any
consolidation or merger of the Company with or into another person pursuant to
which the Company will not be the surviving entity, the sale or transfer of all
or substantially all of the assets of the Company or any compulsory share
exchange pursuant to which the Common Stock is converted into other securities,
cash or property, the holders of the Preferred Stock then outstanding shall have
the right thereafter to, at their option, convert such shares only into the
shares of stock and other securities, cash and property receivable upon or
deemed to be held by holders of Common Stock following such reclassification,
consolidation, merger, sale, transfer or share exchange, and the holders of the
Preferred Stock shall be entitled upon such event to receive such amount of
securities, cash or property as the shares of the Common Stock of the Company
into which such shares of Preferred Stock could have been converted immediately
prior to such reclassification, consolidation, merger, sale, transfer or share
exchange would have been entitled. The terms of any such consolidation, merger,
sale, transfer or share exchange shall include such terms so as to continue to
give to the holder of Preferred Stock the right to receive the securities, cash
or property set forth in this Section
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5(c)(vii) upon any conversion following such consolidation, merger, sale,
transfer or share exchange. This provision shall similarly apply to successive
reclassifications, consolidations, mergers, sales, transfers or share exchanges.
viii. If:
A. the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
B. the Company shall declare a special nonrecurring cash
dividend on or a redemption of its Common Stock; or
C. the Company shall authorize the granting to all holders
of the Common Stock rights or warrants to subscribe for
or purchase any shares of capital stock of any class or
of any rights; or
D. the approval of any stockholders of the Company shall be
required in connection with any reclassification of the
Common Stock of the Company, any consolidation or merger
to which the Company is a party, any sale or transfer of
all or substantially all of the assets of the Company,
of any compulsory share of exchange whereby the Common
Stock is converted into other securities, cash or
property; or
E. the Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of
the Company;
then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of Preferred Stock, and shall cause to be mailed to
the holders of Preferred Stock at their last addresses as they shall appear upon
the stock books of the Company, at least 30 calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange; provided, however, that
the failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice. Holders are entitled to convert shares of Preferred Stock during
the 30-day period commencing the date of such notice to the effective date of
the event triggering such notice.
d. The Company covenants that it will at all times reserve and keep
available out of its authorized and unissued Common Stock solely for the purpose
of issuance upon conversion of Preferred Stock and payment of dividends on
Preferred Stock, each as herein provided, free from
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preemptive rights or any other actual contingent purchase rights of persons
other than the holders of Preferred Stock, such number of shares of Common Stock
as shall be issuable (taking into account the adjustments and restrictions of
Section 5(c)) upon the conversion of all outstanding shares of Preferred Stock
and payment of dividends hereunder. The Company covenants that all shares of
Common Stock that shall be so issuable shall, upon issue, be duly and validly
authorized, issued and fully paid, nonassessable and freely tradeable.
e. Upon a conversion hereunder the Company shall not be required to issue
stock certificates representing fractions of shares of Common Stock, but may if
otherwise permitted, make a cash payment in respect of any final fraction of a
share based on the Per Share Market Value at such time. If the Company elects
not, or is unable, to make such a cash payment, the holder of a share of
Preferred Stock shall be entitled to receive, in lieu of the final fraction of a
share, one whole share of Common Stock.
f. The issuance of certificates for shares of Common Stock on conversion
of Preferred Stock shall be made without charge to the holders thereof for any
documentary stamp or similar taxes that may be payable in respect of the issue
or delivery of such certificate, provided that the Company shall not be required
to pay any tax that may be payable in respect of any transfer involved in the
issuance and delivery of any such certificate upon conversion in a name other
than that of the holder of such shares of Preferred Stock so converted and the
Company shall not be required to issue or deliver such certificates unless or
until the person or persons requesting the issuance thereof shall have paid to
the Company the amount of such tax or shall have established to the satisfaction
of the Company that such tax has been paid.
g. Shares of Preferred Stock converted into Common Stock shall be canceled
and shall have the status of authorized but unissued shares of undesignated
stock.
h. Any and all notices or other communications or deliveries to be
provided by the holders of the Preferred Stock hereunder, including, without
limitation, any Conversion Notice, shall be in writing and delivered personally,
by facsimile, sent by a nationally recognized overnight courier service or sent
by certified or registered mail, postage prepaid, addressed to the attention of
the Chief Financial Officer of the Company at the facsimile telephone number or
address of the principal place of business of the Company as set forth in the
Purchase Agreement. Any and all notices or other communications or deliveries to
be provided by the Company hereunder shall be in writing and delivered
personally, by facsimile, sent by a nationally recognized overnight courier
service or sent by certified or registered mail, postage prepaid, addressed to
each holder of Preferred Stock at the facsimile telephone number or address of
such holder appearing on the books of the Company, or if no such facsimile
telephone number or address appears, at the principal place of business of the
holder. Any notice or other communication or deliveries hereunder shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 4:30 p.m. (Eastern Time),
(ii) the date after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section later than 4:30 p.m. (Eastern Time) on any date and earlier than 11:59
p.m. (Eastern Time) on such date, (iii) four days after deposit in the United
States mails, (iv) the Business Day following the date of mailing, if sent by
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nationally recognized overnight courier service, or (v) upon actual receipt by
the party to whom such notice is required to be given.
i. Any right or power of the Holders may be waived with respect to any
transaction by an instrument in writing signed by the Holders of not less than
two-thirds (2/3) of the then-outstanding shares of Preferred Stock (excluding
any shares then held by the Company or any subsidiary of the Company).
Section 6. REDEMPTIONS.
a. The Company shall have the right, exercisable at any time upon 30
Trading Days notice to the holders of the Preferred Stock given at any time on
or after the third anniversary after the Original Issue Date, to redeem, from
funds legally available therefor at the time of such redemption, all or any
portion of the shares of Preferred Stock which have not previously been
converted or redeemed, at a price per share equal to the product of (i) the
average Per Share Market Value for the ten (10) Trading Days immediately
preceding (1) the date of the redemption notice referenced above or (2) the date
of payment in full by the Company of the redemption price hereunder, whichever
is greater, and (ii) the Conversion Ratio calculated as if the Conversion Date
(for purposes of determining the Conversion Price) were (1) the date of such
redemption notice or (2) the date of payment by the Company of such redemption
price, whichever date yields a lower Conversion Price denominator for the
determination of the Conversion Ratio. The entire redemption price shall be paid
in cash. Holders of Preferred Stock may convert any shares of Preferred Stock,
including shares subject to a redemption notice given under this Section, during
the period from the date of such redemption notice through the 30th Trading Day
thereafter.
b. The Company shall have the right, exercisable at any time upon 30
Trading Days notice to the Purchaser, given at any time after the Company has
announced publicly a merger or consolidation in which the Company will not be
the surviving entity, to redeem, from funds legally available therefor at the
time of such redemption, all (but not less than all) of the then outstanding and
unconverted shares of Preferred Stock. The redemption price for shares of
Preferred Stock to be redeemed pursuant to this Section will be determined in
accordance with Section 6(a) above and the payment of such redemption price
shall be subject to the provisions of Section 6(c) below. Holders of Preferred
Stock may convert any shares of Preferred Stock, including shares subject to a
redemption notice given under this Section, during the period from the date of
such redemption notice through the 30th Trading Day thereafter.
c. If any portion of the redemption price under Section 6(a) or (b) shall
not be paid by the Company within seven calendar days after the date due under
such Sections, such redemption price shall be increased by 15% per annum until
paid (which amount shall be paid as liquidated damages and not as a penalty). In
addition, if any portion of such redemption price remains unpaid for more than
seven calendar days after the date due, the holder of the Preferred Stock
subject to such redemption may elect, by written notice to the Company given
within 45 days after the date due, to either (i) demand conversion in accordance
with the formula and the time frame therefor set forth in Section 5 of all of
the shares of Preferred Stock for which such redemption price, plus accrued
liquidated damages thereof, has not been paid in full (the "Unpaid Redemption
Shares"), in which
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event the Per Share Market Value for such shares shall be the lower of the Per
Share Market Value calculated on the date such redemption price was originally
due and the Per Share Market Value as of the holder's written demand for
conversion, or (ii) invalidate ab initio such redemption, notwithstanding
anything herein contained to the contrary. If the holder elects option (i)
above, the Company shall within five Trading Days of its receipt of such
election deliver to the holder the shares of Common Stock issuable upon
conversion of the Unpaid Redemption Shares subject to such holder conversion
demand and otherwise perform its obligations hereunder with respect thereto; or,
if the Holder elects option (ii) above, the Company shall promptly, and in any
event not later than five Trading Days from receipt of holder's notice of such
election, return to the holder all of the Unpaid Redemption Shares. If, upon a
holder election under option (i) above, the Company fails to deliver the shares
of Common Stock issuable upon conversion of the Unpaid Redemption Shares within
the time period set forth in this Section, the Company shall pay to the holder
in cash, as liquidated damages and not as a penalty, $1,500 per day until the
Company delivers such Common Stock to the holder.
Section 7. DEFINITIONS. For the purposes hereof, the following terms shall
have the following meanings:
"Business Day" means any day of the year on which commercial banks
are not required or authorized to be closed in New York, New York.
"Common Stock" means shares now or hereafter authorized of the class
of Common Stock, par value $0.01 per share, of the Company and stock of any
other class into which such shares may hereafter have been reclassified or
changed.
"Conversion Ratio" means, at any time, a fraction, of which the
numerator is Stated Value plus accrued but unpaid dividends (including any
accrued but unpaid interest thereon), and of which the denominator is the
Conversion Price at such time.
"Junior Securities" means the Common Stock and all other equity
securities of the Company, except the Series A Convertible Preferred Stock and
Series B Convertible Preferred Stock.
"Original Issue Date" shall mean the date of the first issuance of
any shares of the Preferred Stock regardless of the number of transfers of any
particular shares of Preferred Stock and regardless of the number of
certificates which may be issued to evidence such Preferred Stock.
"Per Share Market Value" means on any particular date (a) the
closing bid price per share of the Common Stock on such date on the Nasdaq
National Market or other stock exchange on which the Common Stock has been
listed or if there is no such price on such date, then the closing bid price on
such exchange on the date nearest preceding such date, or (b) if the Common
Stock is not listed on the Nasdaq National Market or any stock exchange, the
closing bid price for a share of Common Stock in the over-the-counter market, as
reported by the Nasdaq Stock Market at the close of business on such date, or
(c) if the Common Stock is not quoted on the Nasdaq Stock Market, the closing
bid price for a share of Common Stock in the over-the-counter market as reported
by the National Quotation Bureau Incorporated (or similar organization or agency
succeeding to its
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functions of reporting prices), or (d) if the Common Stock is not reported by
the National Quotation Bureau Incorporated (or similar organization or agency
succeeding to its functions of reporting prices), then the average of the "Pink
Sheet" quotes for the relevant conversion period, as determined in good faith by
the holder, or (e) if the Common Stock is not publicly traded the fair market
value of a share of Common Stock as determined by an Appraiser selected in good
faith by the holders of a majority in interest of the shares of the Preferred
Stock; provided, however, that the Company, after receipt of the determination
by such Appraiser, shall have the right to select an additional Appraiser, in
which case, the fair market value shall be equal to the average of the
determinations by each such Appraiser.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
"Purchase Agreement" means the Convertible Preferred Stock Purchase
Agreement, dated as of the Original Issue Date, between the Company and the
original holder of the Preferred Stock.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated the Original Issue Date, by and between the Company and the
original holder of Preferred Stock.
"Trading Day" means (a) a day on which the Common Stock is traded on
the Nasdaq National Market or principal national securities exchange or market
on which the Common Stock has been listed, or (b) if the Common Stock is not
listed on the Nasdaq National Market or any stock exchange or market, a day on
which the Common Stock is traded in the over-the-counter market, as reported by
the OTC Bulletin Board, or (c) if the Common Stock is not quoted on the OTC
Bulletin Board, a day on which the Common Stock is quoted in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding its functions of
reporting prices).
"Underlying Shares" means the number of shares of Common Stock into
which the Shares are convertible in accordance with the terms hereof and the
Purchase Agreement.
"Underlying Securities Registration Statement" means the
registration statement filed by the Company, pursuant to the Registration Rights
Agreement, covering the Underlying Shares and the Warrant Shares.
"Warrant Shares" means the number of shares of Common Stock issuable
upon the exercise in full of the Warrants.
"Warrants" means the Common Stock purchase warrants issued by the
Company to and as directed by the original holder of the Preferred Stock
simultaneously with the closing of the purchase of Preferred Stock under the
Purchase Agreement, pursuant to which the holders of the Warrants shall,
collectively, have the right to acquire an aggregate of 700,000 shares of Common
Stock (subject to adjustment as provided therein) at the exercise price per
share set forth therein.
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EXHIBIT A
NOTICE OF CONVERSION
AT THE ELECTION OF HOLDER
(To be Executed by the Registered Holder
in order to Convert shares of Preferred Stock)
The undersigned hereby irrevocably elects to convert the number of shares of
Series C Convertible Preferred Stock indicated below, into shares of Common
Stock, par value $.01 per share (the "Common Stock"), of Cayenne Software, Inc.
(the "Company") according to the conditions hereof, as of the date written
below. If shares are to be issued in the name of a person other than
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates and opinions as reasonably
requested by the Company in accordance therewith. No fee will be charged to the
holder for any conversion, except for such transfer taxes, if any.
Conversion calculations:
Date to Effect Conversion
Number of shares of Preferred Stock to be Converted
Number of shares of Common Stock to be Issued
Applicable Conversion Price
Signature
Name:
Address:
15
EXHIBIT B
NOTICE OF CONVERSION AT
THE ELECTION OF THE COMPANY
The undersigned in the name and on behalf of Cayenne Software, Inc. (the
"Company") hereby notifies the addressee hereof that the Company hereby elects
to exercise its right to convert [ ] shares of its Series C Convertible
Preferred Stock (the "Preferred Stock") held by the Holder into shares of Common
Stock, par value $.01 per share (the "Common Stock") of the Company according to
the terms hereof, as of the date written below. No fee will be charged to the
Holder for any conversion hereunder, except for such transfer taxes, if any
which may be incurred by the Company if shares are to be issued in the name of a
person other than the person to whom this notice is addressed.
Conversion calculations:
Date to effect Conversion
Number of shares of Preferred Stock to be Converted
Number of shares of Common Stock to be Issued
Applicable Conversion Price
Name of Holder:
Address of Holder: