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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C., 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MAY 31, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-14376
ORACLE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 94-2871189
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
500 ORACLE PARKWAY
REDWOOD CITY, CALIFORNIA 94065
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(415) 506-7000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, PAR VALUE $0.01 PER SHARE
PREFERRED STOCK PURCHASE RIGHTS
(TITLE OF CLASS)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES [X] NO [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [_]
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of July 31, 1997 was $27,587,690,611. This calculation does not
reflect a determination that persons are affiliates for any other purposes.
Number of shares of common stock outstanding as of July 31, 1997: 653,228,341.
DOCUMENTS INCORPORATED BY REFERENCE:
Part III--Portions of the registrant's definitive proxy statement to be issued
in conjunction with registrant's annual stockholders' meeting to be held on
October 13, 1997.
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ORACLE CORPORATION
FISCAL YEAR 1997 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
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PAGE
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PART I.
Item 1. Business..................................................... 3
Item 2. Properties................................................... 12
Item 3. Legal Proceedings............................................ 12
Item 4. Submission of Matters to a Vote of Security Holders.......... 12
Item 4A. Executive Officers of the Registrant......................... 13
PART II.
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters...................................................... 14
Item 6. Selected Financial Data...................................... 15
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 15
Item 8. Financial Statements and Supplementary Data.................. 24
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 24
PART III.
Item 10. Directors and Executive Officers of the Registrant........... 24
Item 11. Executive Compensation....................................... 24
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................... 24
Item 13. Certain Relationships and Related Transactions............... 24
PART IV.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K.......................................................... 24
Signatures................................................... 49
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FORWARD-LOOKING STATEMENTS
In addition to historical information, this Annual Report contains forward-
looking statements. These forward-looking statements are subject to certain
risks and uncertainties that could cause actual results to differ materially
from those reflected in these forward-looking statements. Factors that might
cause such a difference include, but are not limited to, those discussed in
the section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Factors That May Affect Future Results
and Market Price of Stock." Readers are cautioned not to place undue reliance
on these forward-looking statements, which reflect management's opinions only
as of the date hereof. The Company undertakes no obligation to revise or
publicly release the results of any revision to these forward-looking
statements. Readers should carefully review the risk factors described in
other documents the Company files from time to time with the Securities and
Exchange Commission, including the Quarterly Reports on Form 10-Q to be filed
by the Company in fiscal year 1998.
PART I
ITEM 1. BUSINESS
Oracle Corporation ("Oracle" or the "Company") is the world's leading
independent supplier of software for information management. In 1979, the
Company introduced the first commercially available relational database
management system for the storing, manipulating and sharing of information.
The Company's primary information management products can be categorized into
three primary product families: Server Technologies (distributed database
servers, connectivity products and gateways), Application Development and
Business Intelligence Tools (tools for application design, development and
data access) and Business Applications (modules for financial management,
supply chain management, manufacturing, project systems, human resources and
sales force automation). The Company's principal product, Oracle8(TM), is a
multimedia, object-relational database management system ("DBMS") that runs on
a broad range of computers, including massively parallel, clustered,
symmetrical multi-processing, minicomputers, workstations, personal computers
and laptop computers and over 85 different operating systems, primarily UNIX,
Windows and Windows NT. The Oracle8(TM) relational DBMS is a key component of
Oracle's database server offering for relational, object-relational, text,
spatial, video and other types of data. The Company's Application Development
and Business Intelligence Tools and Business Applications run on a broad range
of operating systems including UNIX, Windows and Windows NT. The Company also
offers consulting, education, support and systems integration services in
support of its customers' use of the Company's software products.
The Company was incorporated on October 29, 1986 in connection with a
reincorporation of the Company's predecessor in Delaware, which was completed
on March 12, 1987. The Company's primary operating subsidiary, Oracle
Corporation, a California corporation, was incorporated in June 1977. In May
1995, Oracle Corporation was merged into Oracle Systems Corporation, a
Delaware corporation, whose name was changed to Oracle Corporation. Unless the
context otherwise requires, the "Company" or "Oracle" refers to Oracle
Corporation, its predecessor and its subsidiaries. The Company maintains its
executive offices and principal facilities at 500 Oracle Parkway, Redwood
City, California 94065. Its telephone number is (415) 506-7000.
BACKGROUND
Computer software can be classified into two broad categories: system software
and application software. System software includes (1) operating systems,
which control the computer hardware, (2) compilers and interpreters, which
translate programs into a form that can be executed by a computer,
(3) communications software, which permits computers to send data across a
network, and (4) database management systems, which are used to create,
retrieve and modify data stored in computers. Application software automates
the performance of specific business data processing functions such as payroll
processing, general ledger accounting and inventory control.
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Database management systems software permits multiple users and applications
to access data concurrently while protecting the data against user and program
errors and against computer and network failures. Database management systems
are used to support the data access and data management requirements of
transaction processing and decision-support systems.
The comparative advantage of a relational DBMS over a non-relational DBMS is
that users need not know how or where their data is stored in the computer. To
access data, users simply specify what data they desire, not how to retrieve
it. Relational systems navigate automatically to the data, making database
information readily accessible to all users, irrespective of their familiarity
with the structure of the database. Regardless of how the data is actually
stored in the computer memory, the results of database queries are presented
to users in familiar, two-dimensional tables of rows and columns of data.
Relational DBMSs therefore are widely used for management information and
decision-support systems which require flexible access to large quantities of
data.
Relational databases are often chosen to support data warehouses. A data
warehouse is designed to store large amounts of historical or reference data
which typically is used to support the decision-making and information needs
of an enterprise. Because they facilitate application development and
maintenance, relational DBMSs also have become widely used in mid-range and
low-end transaction processing environments. As their performance and
reliability have improved, relational DBMSs increasingly have been chosen to
support mission-critical data processing applications.
Managing multimedia information such as video, audio, text, messaging, spatial
and multi-dimensional data, often dictates the use of relational DBMSs. The
Company believes that such use of relational DBMSs is particularly important
as application development becomes more prevalent on the Internet.
Traditionally, web-based systems have been primarily transaction-oriented in
nature. Because Internet applications are becoming more information-oriented,
relational DBMSs have become more widely used for web-based systems. As the
various forms of information on the Internet become more complex and widely
used (video, audio, text, messaging, spatial and multi-dimensional data), the
Company believes the demand for more sophisticated relational DBMSs will
increase.
Object-oriented technology allows companies to more closely model their
systems to an enterprise's business. In an object-oriented development
environment, developers can define objects (data structures) and methods
(operations) that correspond directly to a business application. To support
these features, Oracle8 includes many new object-relational features such as
custom object types, methods and object views.
PRODUCT DEVELOPMENT HISTORY
In 1976, International Business Machines Corporation ("IBM") published the
specifications for a simple, English-like command language called SQL
(pronounced "sequel"), with which users define, retrieve, manipulate and
control data stored in a relational DBMS. In 1977, the Company was formed to
develop a relational DBMS using IBM's published specifications for the SQL
language. Two years later, in June 1979, the Company introduced the Oracle
relational DBMS, the first commercially available relational DBMS. IBM's first
relational DBMS product, SQL/DS, was released in February 1982. In 1985, IBM
announced DB2, its second relational DBMS product, and its second product to
implement SQL. SQL has become the industry standard command language for
relational DBMS products. In October 1986, the American National Standards
Institute ("ANSI") approved a standard definition for the SQL command
language, which was also adopted by the International Standards Organization
("ISO"). The SQL standard was updated with additional capabilities in 1989,
and a second enhanced standard ("SQL92") was finalized in 1992.
The Company has periodically released updated versions of the Oracle
relational DBMS containing performance and functionality enhancements for
distributed computing, on-line transaction processing and decision support
applications. Complementing the core server technology, Oracle also develops
and markets a comprehensive family of application development tools for
different types of applications. These application tools provide both
development and deployment environments for building scalable, client server
applications running on a broad
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range of platforms. The most recent version of Oracle's tool set includes
Oracle Designer/2000 and Developer/2000, the core development tools for client
server applications development. In addition, the Company introduced Oracle
Web Tools in 1997 which allow users to convert Oracle based client server
applications to web applications. In the data warehousing area, Oracle offers
business intelligence tools including Discoverer/2000 and Oracle Express,
which provide query, analysis and decision support capabilities.
The Company initially entered the business applications market in the late
1980's. Oracle's business applications products provide a comprehensive global
business solution that allows for complete enterprise automation. The business
applications product suite includes over 30 client server applications modules
for financial management, supply chain management, project systems,
manufacturing, sales force automation and human resources. In 1997, the
Company introduced Web Applications which allow users to operate in a "thin-
client" environment and companies to benefit from lower cost of ownership and
easier systems management.
In 1992, the Company introduced Version 7 of the Oracle relational DBMS
("Oracle7"), which was developed to improve the product's ability to support
large numbers of users and higher rates of transaction processing, to provide
enhanced application development capabilities such as DBMS server-enforced
business rules for data integrity, and to permit multiple computers running
DBMSs of Oracle and other vendors to cooperatively share data with other
computers across a communications network.
In 1994, the Company acquired the Rdb relational DBMS and associated software
products (now known as "Oracle Rdb") from Digital Equipment Corporation
("DEC"). This product has many of the same attributes as the Oracle7
relational DBMS, but it operates only on hardware and operating systems
developed by DEC.
In 1995, the Company acquired the Express(R) family of on-line analytical
processing ("OLAP") software products from Information Resources, Inc. ("IRI")
in order to enhance its existing data warehousing strategy. These products
complement Oracle's existing products for the development and maintenance of
data warehouses and enable customers to manage and perform complex analyses of
business data.
In October, 1996, the Company introduced Network Computing Architecture(TM)
(NCA). Oracle's Network Computing Architecture is a cross-platform environment
for developing and deploying object-based, network-centric applications,
including robust Web applications. Through this architecture, existing client
server applications can take advantage of Web technology with minimal change.
It also allows customers to implement distributed object technologies. Based
on open de facto standards, CORBA and HTTP, Oracle's Network Computing
Architecture supports the Netscape ONE client, the network computer and
Microsoft's ActiveX Desktop. Network Computing Architecture enables customers
to protect existing IT investments while taking advantage of new technologies
by dynamically linking Internet, client server and legacy systems.
In 1997, Oracle acquired Datalogix, a provider of client server solutions for
process manufacturing applications.
In June 1997, the Company introduced Oracle8, the latest major version of its
primary product. Oracle8 is based on an advanced scalable architecture and
leverages the broadest range of hardware. Key new features include object
relational technology, data partitioning, server managed back-up and recovery,
advanced queuing, heterogeneous services, index only tables and binary large
objects.
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PRODUCTS
The Company's product strategy is to deliver to its customers scalable
solutions for personal, workgroup, department and enterprise computing as well
as the public. The Company's products span all of these markets and are
contained within three primary product families: Server Technologies,
Application Development and Business Intelligence Tools and Business
Applications, as follows:
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SERVER TOOLS APPLICATIONS
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ORACLE8 DESIGNER/2000 FINANCIALS
ORACLE8 ENTERPRISE EDITION DEVELOPER/2000 HUMAN RESOURCES
WEB APPLICATION SERVER WEB TOOLS MANUFACTURING
EXPRESS SERVER DATABASE DESIGNER SALES FORCE AUTOMATION
ENTERPRISE MANAGER POWER OBJECTS SUPPLY CHAIN MANAGEMENT
GROUPWARE PROJECTS
OLAP TOOLS DATAWAREHOUSING
WEB APPLICATIONS
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SERVER TECHNOLOGIES
Products
The Company's Server Technologies product family consists of an integrated set
of database server and networking products. The principal product is the
Oracle relational DBMS. The Oracle relational DBMS gives users the ability to
define, retrieve, manipulate and control data stored on multiple computers,
using the industry standard SQL language. With the current version, Oracle8,
additional capabilities have been included that allow users to manage
unstructured information such as text, spatial, video, messaging,
multidimensional data and object-relational information.
With the introduction of Oracle's Network Computing Architecture, Oracle
introduced Oracle Web Application Server, a middleware component of Oracle's
three-tier strategy. Oracle Web Application Server is an open-software
platform for developing, deploying and managing distributed software
application programs. Based on CORBA (Common Object Request Broker), the
Oracle Web Applications Server ("thin-client") allows distributed transaction
processing with large numbers of users and data while improving performance
and lowering incremental deployment and maintainence costs. The current
version 3.0 can run on Netscape, Microsoft and Oracle data servers.
Oracle Express Server, acquired in 1995 as part of IRI's Express family of
products, is an advanced calculation engine and data cache for data
warehousing and OLAP (On-line Analytical Processing) and a key component of
Oracle's server technology family. The Express Server uses a multidimensional
model that reflects how users view their business. Oracle Express integrates
cross-departmental data, enabling managers to view their business from a
common information base, along multiple dimensions. It provides users with the
ability to work with all of the data in a data warehouse. Express can also go
beyond the warehouse and integrate data from disparate systems--relational,
legacy or external. This integration enables new applications, such as fact-
based selling, activity-based costing and product profitability analysis to
transcend the boundaries of a single department.
Another component of the Server Technologies product family is the Oracle Open
Gateway products (Oracle Transparent Gateway(R) and Oracle Procedural
Gateway(R)). These products allow non-Oracle DBMSs to be integrated into a
distributed database environment. Users can employ the SQL language to access
data stored in other relational DBMSs such as IBM's DB2 and data stored in
older hierarchical DBMSs or file systems.
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Key Features
The Oracle8 relational DBMS supports a client server architecture between
application programs and database servers, as well as a network computing
architecture among client devices, applications servers and database servers.
Additionally, Oracle8 permits transparent data sharing across a communications
network so that application programs and users can access data without knowing
or specifying the location of the data within the network. The Oracle8 object-
relational DBMS provides features to support the operational requirements of
on-line transaction processing (OLTP), decision support and data warehouse
environments for high systems availability and performance. The Oracle
relational DBMS provides optional parallel server technology that further
extends scalability and availability by allowing multiple, loosely coupled or
clustered machines to access cooperatively a logical database spread across
multiple disks. Furthermore, the Oracle8 DBMS provides optional parallel query
capabilities that enable quick searching of large amounts of data for large-
scale decision support and data warehouse applications. The Oracle8 relational
DBMS also contains replication features that automatically copy data among
multiple locations, providing systems architects and application developers
with additional flexibility for managing data distribution and access
throughout an enterprise.
The Company's database technology has supported the management of unstructured
data, such as text, audio and video, since the introduction of Oracle 7.3.
With the release of Oracle8, object-relational capabilities of the Company's
database technology have been extended to support high-speed transactions,
powerful decision-support and leading edge network computing applications.
Among the key features of the Oracle Express Server are functions that
analyze, forecast, model and ask what-if questions of the data. The server has
built-in functions for mathematical, financial, statistical, logical and
string manipulation. Express Server can store and manage multidimensional
arrays of data or provide direct analysis of relational data with a
sophisticated multidimensional caching scheme. Other key features include the
ability to structure data in ways users understand, portability to leading
server platforms and on operating systems such as Microsoft, IBM, Digital and
Hewlett-Packard, scalability from PC to mainframe, simultaneous accessibility
to several multidimensional databases, accessibility through published
Application Programming Interfaces (APIs) which include Dynamic Link Library
(DLL), Visual Basic custom control and Dynamic Data Exchange (DDE), and the
ability to combine relational and multidimensional data through APIs which
include a SQL interface to any database that complies with the Open Database
Connectivity (ODBC) standard, native SQL support for Oracle, Sybase, Ingres,
Teradata, DB2 and SQLServer (both Sybase and Microsoft).
Applications developed with the Oracle relational DBMS are scalable from the
desktop to massively parallel computers and are portable to a wide variety of
hardware and operating system environments with little or no change to the
underlying structure.
APPLICATION DEVELOPMENT AND BUSINESS INTELLIGENCE TOOLS
Products
The Company provides a number of application development tools for different
types of applications. For the personal and workgroup markets, Oracle offers
Oracle Power Objects(R), a simple, easy-to-use development tool for
client/server and web applications. For the departmental and enterprise
systems, Oracle offers two products: Designer/2000(TM) and Developer/2000(TM).
Designer/2000 is a set of development tools for modeling and generating both
client server and web applications. Developer/2000 is an application
development and deployment tool which offers a robust development environment
for building scalable database applications that can be deployed on a variety
of platforms, including the World Wide Web. The Company also offers a suite of
business intelligence tools, Oracle Discoverer(TM) and Oracle(R) Express(R),
which provide query, analysis and decision support capabilities to a wide
range of users accessing data warehouses and data marts.
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Key Features
The Company's application development tools are being developed to run on
Oracle's Network Computing Architecture, with the goal of providing
enterprise-class performance and compatibility with other applications. These
tools run on a variety of platforms, support graphical user interfaces and
allow for an efficient use of hardware resources.
BUSINESS APPLICATIONS
Products
Oracle Applications consist of over 30 integrated software modules for
financial management, supply chain management, manufacturing, project systems,
human resources and sales force automation. These applications combine
business functionality with innovative technologies, such as data warehousing
and workflow, to build enterprise-wide solutions. Oracle currently provides or
is in the process of developing industry solutions for the Consumer Packaged
Goods, Energy, Healthcare, Telecommunications, Government/Higher Education,
Industrial, Financial Services and other industries. Oracle Applications are
designed for rapid implementation and continuous process improvement.
Oracle also provides a family of applications that have been specifically
designed for the World Wide Web--Oracle Applications for the Web. These
applications enable customers to lower the cost of their business operations
by providing their customers, suppliers and employees self-service access to
selected business information using the World Wide Web.
The Company is currently developing web-deployed applications which will have
a "thin-client" technology based on the Oracle Network Computing Architecture
and have the potential to reduce the costs of deployment and maintenance
associated with traditional client server applications.
For better management, Oracle Applications Data Warehouse provides businesses
the enterprise-wide view of information required for informed decision making.
Key Features
Oracle is the only applications vendor that builds an integrated set of
technologies: applications, tools and database. This enables the Company to
build application enhancements within each technology layer for improved
scalability and performance. Oracle's flexible and open applications
architecture enables customers to tailor the applications with minimal
programming and easily integrate Oracle Applications with third party and
legacy systems. Release 10.7 of Oracle Applications is fully compliant with
year 2000 requirements.
With web-deployed Oracle Applications, customers can reduce administrative and
installation costs associated with traditional two-tier architectures by
running Oracle Applications on any Java-enabled Web browser. This enables the
applications to be run on traditional PCs and new low-cost clients such as
network computers.
CONSULTING, EDUCATION AND SUPPORT SERVICES
In most of its sales offices around the world, the Company has trained
consulting and education personnel who offer consulting and education services
that help customers realize the potential of the Company's products in meeting
their information management needs. Consultants and instructors supplement the
Company's product offerings by providing services to assist customers in the
implementation of applications based on the Company's products and to ensure
that customers have the necessary training to use the Company's products.
Consulting and education revenues represented approximately 26% of total
revenues in fiscal 1997 and 24% of total revenues in each of fiscal 1996 and
1995.
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The Company offers a wide range of support services that include on-site,
telephone or Internet access to support personnel as well as software updates.
Telephone support is provided by local offices as well as Oracle's five global
support centers around the world. The prices of the Company's support services
are generally based on the level of support services provided and the number
of users authorized to access the Company's software products. Support
revenues represented approximately 23%, 21% and 20% of total revenues in
fiscal 1997, 1996 and 1995, respectively.
The Company believes that its broad-based service offerings and its current
and planned product offerings facilitate the transfer of technology to
customers and stimulate demand for the Company's products.
MARKETING AND SALES
Direct and Indirect Sales Organization
In the United States, the Company markets its products and services primarily
through its own direct sales and service organization. Sales and service
groups are based in the Company's headquarters in Redwood City, California,
and in field offices that, as of May 31, 1997, were located in approximately
60 United States metropolitan areas.
Outside the United States, the Company markets its products primarily through
the sales and service organizations of approximately 60 subsidiaries. These
subsidiaries license and support the Company's products both within their
local countries and certain other foreign countries where the Company does not
operate through a direct sales subsidiary. See Note 8 of Notes to Consolidated
Financial Statements for a summary of operations by geographic region.
The Company also markets its products through value-added relicensors,
hardware providers, systems integrators and independent software vendors that
combine the Oracle relational DBMS, application development tools and business
applications with computer hardware or software application packages for
redistribution.
Additionally, the Company markets its products through independent
distributors in international territories not covered by its subsidiaries'
direct sales organizations.
As of May 31, 1997, headcount in the United States included 9,634 sales and
service employees while the international sales and service groups consisted
of 13,015 employees.
Additional Customer Information
Revenues from international customers (including end users and resellers)
amounted to approximately 53%, 57% and 58% of the Company's total revenues in
fiscal 1997, 1996 and 1995, respectively. See Note 8 of Notes to Consolidated
Financial Statements for a summary of operations by geographic region.
PRODUCT DEVELOPMENT
The Company continually enhances its existing products and develops new
products in order to meet its customers' ever-changing requirements and to
expand its product base. Research and development expenditures were 10% of
total revenues in fiscal 1997, 1996 and 1995, respectively (in each case prior
to the effect of amounts capitalized in accordance with Statement of Financial
Accounting Standards No. 86).
Significant areas of product development expenditures during fiscal 1997
included the following:
. Enhancing and extending the Oracle relational DBMS, including extending
its distributed database capability, optimizing its performance in
production applications, increasing its data capacity and ability to
handle large user populations, adding additional security features,
incorporating object oriented extensions to SQL and adding the ability
to manage large objects, including video, audio, text and more complex
structures of data;
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. Developing and enhancing network software products, including
application development tools for networks, application deployment
platforms for networks, and network management products, including
support for the Internet and the World Wide Web;
. Developing new and enhanced network-oriented groupware products for
document management, communication and personal productivity;
. Developing new and enhanced application development and business
intelligence tools;
. Developing and enhancing client server and network computing business
applications for financial management, supply chain management, project
systems, manufacturing, sales force automation and human resources,
including vertical industry extensions to meet specific industry
solutions initiative ("ISI") requirements;
. Developing reference design specifications for a family of low-cost,
easy-to-use network computing devices and applications, as well as some
applications development for network computer devices; and
. Porting new versions and releases of the Company's products to the
numerous computer models on which prior versions and releases operate,
as well as extending the Company's products to make effective use of new
hardware technologies.
COMPETITION
The computer software industry is intensely competitive and rapidly evolving.
The Company competes in various markets. Prospective customers often perform a
detailed technical evaluation or benchmark of competitive products as a part
of the DBMS, applications software and software development tools selection
process. Technical support is therefore a critical element in the Company's
sales and delivery process. Consequently, sales representatives typically are
teamed with technical support specialists who can answer technical questions,
help customers run benchmarks against competitive products and develop
prototype databases and Oracle-based applications.
The principal independent software competitors in the enterprise and
departmental DBMS marketplace include Informix Corporation, Sybase, Inc.,
Computer Associates International, Inc., Progress Software Corporation and
Software AG. In the workgroup and personal DBMS marketplace, the Company
competes with several desktop software vendors, including Microsoft
Corporation. In addition, hardware systems vendors sell or license database
software with which the Company competes, including International Business
Machines Corporation. In the application development and business intelligence
tools market, the Company competes primarily with Visual Basic, a product
owned by Microsoft Corporation, PowerBuilder, a product owned by Sybase, Inc.,
and Forte Software, Inc. The Company also competes in the client server
business applications software market. Competitors include SAP
Aktiengeschellschaft, Peoplesoft, Inc. and The Baan Company in the financial,
manufacturing and human resources applications markets. The Company also
competes with systems integrators and consulting organizations in the services
marketplace. In the data warehousing market, the Company's OLAP products
compete with those of Red Brick Systems, Inc., Arbor Software Corporation,
Cognos, Inc. and Business Objects, S. A.
In the enterprise market (massively parallel, clustered, symmetrical multi-
processing, mainframes, minicomputers and workstations), the Company believes
that the most important considerations for end user software customers are
performance, functionality, product reliability, ease of use, quality of
technical support and total cost of ownership, including initial price and
deployment costs as well as ongoing maintenance costs. In the workgroup
market, the Company believes that the principal competitive factors are
strength in distribution and marketing, brand name recognition,
price/performance characteristics, ease of use, ability to link with
enterprise systems and product integration. The Company believes that it
competes effectively in each of these markets, although the competition is
intense in each market.
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PRODUCT AND SERVICES REVENUES
The Company's standard end user license agreement for the Company's products
provides for an initial fee to use the product in perpetuity up to a maximum
number of users on a specified computer. The Company currently offers either
CPU-based or user-based pricing for most products. The Company also enters
into other license agreement types, typically with major end user customers,
which allow for the use of the Company's products, usually restricted by the
number of users, the number of employees, the number of CPUs or the license
term. Fees from licenses with standard acceptance periods (15 days for
commercial customers, and 30 days for shrink-wrap, government and
telemarketing customers) are recognized as revenue upon shipment if there are
no significant post-delivery obligations and payment is due within one year.
If the acceptance period is longer than standard, revenues are not recognized
until the end of the acceptance period. The Company provides for sales returns
based on historical rates of return.
The Company receives sublicense fees from its Oracle Alliance members (value-
added relicensors, hardware providers, systems integrators and independent
software vendors) based on the sublicenses granted by the Oracle Alliance
member. Sublicense fees typically are based on a percentage of the Company's
list price and are generally recognized as they are reported by the reseller.
In general, the Company prices its support services based on the level of
support services provided and the number of users authorized to access the
Company's software products. Most customers take support initially and renew
their support agreements annually. Support usually consists of two parts: (1)
technical support, including telephone consultation on the use of the products
and problem resolution; and (2) system updates for software products and user
documentation. The Company generally bills support fees at the beginning of
each support period. Support revenues are recognized ratably over the contract
period. Revenues related to consulting and education services to be performed
by the Company generally are recognized over the period during which the
applicable service is to be performed or on a services-performed basis.
The Company's quarterly revenues and expenses reflect distinct seasonality.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations."
PRODUCT PROTECTION
The Company relies on a combination of trade secret, copyright, patent,
trademark and other proprietary or intellectual property rights laws, license
agreements and technical measures to protect its rights in its software
products. The Company owns several issued patents and has numerous patent
applications pending before the United States Patent and Trademark Office.
The Company has registered "ORACLE" as a trademark in the United States and in
over 100 foreign countries and has additional registrations pending. The
Company also has registered over 45 other trademarks in the United States for
other product names and also has registration applications pending for
products and services names in the United States and foreign countries.
The Company's products generally are licensed to end users on a "right to use"
basis pursuant to a nontransferable perpetual license that restricts the use
of the products to the customer's operations on either a single CPU or up to a
maximum number of users across a network of services. Although the Company's
license agreements prohibit a customer from disclosing the proprietary
information contained in the Company's products to any other person, it is
technologically possible for competitors of the Company to copy aspects of the
Company's products in violation of the Company's rights. The Company's
products are generally licensed pursuant to signed license agreements, or may
be licensed pursuant to "shrink-wrap" licenses that are not signed by the
licensee. The enforceability of such shrink-wrap licenses has not been
conclusively determined in all jurisdictions. The Company also distributes
certain of its workgroup products through the Internet pursuant to on-line
licenses that are acknowledged by the licensee. The enforceability of such
licenses has not yet been determined by the courts. In addition, the laws of
certain foreign countries do not protect the Company's proprietary rights in
its products to the same extent as do the laws of the United States.
11
<PAGE>
The Company believes that its trade secret, copyright, patent, trademark and
other proprietary and intellectual property rights are important. However,
because of the rapid pace of technological change in the computer software
industry, factors such as the knowledge, ability and experience of the
Company's personnel, brand recognition and ongoing product support may be more
significant in maintaining the Company's competitive advantages.
EMPLOYEES
As of May 31, 1997, the Company employed 29,431 full-time persons, including
21,617 in sales and services, 1,032 in marketing, 3,970 in research and
development and 2,812 in general and administrative positions. Of such
employees, 14,181 were located in the United States and 15,250 were employed in
approximately 60 other countries outside the United States.
None of the Company's employees is represented by a labor union. The Company
has experienced no work stoppages and believes that its employee relations are
good.
ITEM 2. PROPERTIES
The Company's headquarters facilities consist of approximately 1,900,000 square
feet of office space in Redwood City and Belmont, California, of which
1,400,000 square feet is located in six buildings. The Company owns two of the
buildings, is in the process of completing the purchase of two additional
buildings, and has options to acquire the other two buildings, which are
currently leased. As discussed in Note 2 to the Consolidated Financial
Statements, the Company has capitalized leases for the two buildings which it
is in the process of acquiring as well as both of the leased buildings. The
Company also owns the land under its main headquarters buildings and owns or
controls additional land near its headquarters site on which it is currently
constructing an additional headquarters building. In addition, the Company has
purchased land in the UK and has constructed a 100,000 square foot facility to
be used for its UK subsidiary's headquarters and is constructing an additional
100,000 square foot facility in the UK. The Company also purchased land in New
Hampshire where it has constructed a 70,000 square foot field office site.
Additionally, the Company has purchased land in Virginia and Rocklin,
California, on which the Company is constructing 200,000 and 100,000 square
foot buildings, respectively. The Company also leases office space in numerous
locations in the United States and many other countries.
The Company believes that its facilities are adequate for its current needs and
that suitable additional or substitute space will be available as needed to
accommodate expansion of the Company's operations. See Notes 2 and 5 of Notes
to Consolidated Financial Statements for information regarding the Company's
lease obligations.
ITEM 3. LEGAL PROCEEDINGS
The Company is subject to various legal proceedings and claims, either asserted
or unasserted, which arise in the ordinary course of business. While the
outcome of these claims cannot be predicted with certainty, management does not
believe that the outcome of any of these legal matters will have a material
adverse effect on the Company's consolidated results of operations or
consolidated financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
12
<PAGE>
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME OFFICE(S)
---- ---------
<S> <C>
Lawrence J. Ellison..... Chief Executive Officer and Chairman of the Board
Raymond J. Lane......... President, Chief Operating Officer and Director
Jeffrey O. Henley....... Executive Vice President, Chief Financial Officer and Director
David J. Roux........... Executive Vice President, Corporate Development
Robert W. Shaw.......... Executive Vice President, Worldwide Consulting Services and
Vertical Markets
Daniel Cooperman........ Senior Vice President, General Counsel and Secretary
Thomas A. Williams...... Vice President and Corporate Controller
</TABLE>
Mr. Ellison, 52, has been Chief Executive Officer since he co-founded the
Company in May 1977. Mr. Ellison has been Chairman of the Board since June
1995 and served as Chairman of the Board from April 1990 until September 1992.
He also served as President of the Company from May 1977 to June 1996. Mr.
Ellison is co-chairman of California's Council on Information Technology and
is a member of President Clinton's Export Council. Mr. Ellison is also a
director of SuperGen, Inc., a pharmaceutical company, as well as Apple
Computer, Inc., a computer hardware company.
Mr. Lane, 50, has been President and Chief Operating Officer of the Company
since July 1996. Mr. Lane served as Executive Vice President of the Company
and President of Worldwide Operations from October 1993 to June 1996, and has
been a Director since June 1995. He served as a Senior Vice President of the
Company and President of Oracle USA from June 1992 to September 1993. Before
joining Oracle, Mr. Lane served as Senior Vice President and Managing Partner
of the Worldwide Information Technology Group at Booz-Allen & Hamilton from
July 1986 to May 1992. He served on the Booz-Allen & Hamilton Executive
Committee and its Board of Directors from April 1987 to May 1992. Mr. Lane is
also a member of the Board of Trustees of Carnegie Mellon University.
Mr. Henley, 52, has been Executive Vice President and Chief Financial Officer
of the Company since March 1991, and has been a Director since June 1995.
Prior to joining Oracle, he served as Executive Vice President and Chief
Financial Officer of Pacific Holding Company, a privately held company with
diversified interests in manufacturing and real estate, from August 1986 to
February 1991. Mr. Henley is also a director of Tricord Systems, Inc., a
computer hardware company.
Mr. Roux, 40, has been Executive Vice President of Corporate Development since
March 1996, and Senior Vice President of Corporate Development of the Company
since September 1994. Before joining Oracle, Mr. Roux served as Senior Vice
President, Marketing and Business Development at Central Point Software from
April 1992 to July 1994. From October 1991 to April 1992, he served as Senior
Vice President of the Portable Computing Group at Lotus Development
Corporation and from June 1990 to October 1991, he served as Vice President of
Business Development at Lotus Development Corporation. Mr. Roux is also a
director of Voxware, Inc., a digital speech processing technology company, and
the Western NIS Enterprise Fund.
Mr. Shaw, 49, has been Executive Vice President of Worldwide Consulting
Services and Vertical Markets since February 1997, and Senior Vice President
of Worldwide Applications and Services of the Company from August 1995 to
January 1997. From June 1992 to July 1995, Mr. Shaw served as Senior Vice
President of Global Services of the Company. Prior to joining Oracle, Mr. Shaw
served as a Vice President of the West Coast Informations Systems group of
Booz-Allen & Hamilton from June 1989 to June 1992.
13
<PAGE>
Mr. Cooperman, 46, has been Senior Vice President, General Counsel and
Secretary of the Company since February 1997. Prior to joining Oracle, Mr.
Cooperman had been associated with the law firm of McCutchen, Doyle, Brown &
Enersen since October 1977, and had served there as a partner since June 1983.
From September 1995 until February 1997, Mr. Cooperman was Chair of the law
firm's Business & Transactions Group, and from April 1989 through September
1995, he served as the Managing Partner of the law firm's San Jose Office.
Mr. Williams, 45, has been a Vice President of the Company since October 1990
and Corporate Controller since May 1989. Prior to joining Oracle, Mr. Williams
held various positions in the Audit Division of Arthur Andersen LLP, an
international public accounting firm, including Partner from September 1987 to
May 1989.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock has been traded in the over-the-counter market and
the NASDAQ National Market since the Company's initial public offering in 1986.
According to records of the Company's transfer agent, the Company had
approximately 8,396 stockholders of record as of May 31, 1997. Because many of
such shares are held by brokers and other institutions on behalf of
stockholders, the Company is unable to estimate the total number of
stockholders represented by these record holders. The following table sets
forth the low and high sale price as of the close of market of the Company's
Common Stock in each of the Company's last eight fiscal quarters.
<TABLE>
<CAPTION>
LOW SALE PRICE HIGH SALE PRICE
-------------- ---------------
<S> <C> <C>
Fiscal 1997:
Fourth Quarter................................ $33.63 $48.13
Third Quarter................................. 37.00 51.00
Second Quarter................................ 34.50 50.13
First Quarter................................. 32.00 42.13
Fiscal 1996:
Fourth Quarter................................ $26.49 $36.00
Third Quarter................................. 26.33 36.67
Second Quarter................................ 23.33 32.50
First Quarter................................. 22.67 29.58
</TABLE>
The Company's policy has been to reinvest earnings to fund future growth.
Accordingly, the Company has not paid dividends and does not anticipate
declaring dividends on its Common Stock in the foreseeable future.
During fiscal 1997, the Company issued and sold securities without registration
under the Securities Act of 1933 (the "Securities Act") in reliance on Section
4(2) thereof. On May 12, 1997, the Company issued and sold 3,000,000 Series A
Equity Call Warrants to an institutional investor pursuant to a Warrant
Purchase Agreement dated May 7, 1997 (Exhibit 4.2), and the related pricing
agreement, for an aggregate purchase price of $17,946,000. On May 19, 1997, the
Company issued and sold 3,000,000 Series I Equity Call Warrants to an
institutional investor pursuant to a Warrant Purchase Agreement dated as of May
14, 1997 (Exhibit 4.5), and the related pricing agreement, for an aggregate
purchase price of $17,952,000. There were no underwriters employed in
connection with either of the two transactions.
On July 14, 1997, the Company announced a three-for-two stock split in the form
of a common stock dividend to be distributed on August 15, 1997 to stockholders
of record as of August 1, 1997. Per share data and numbers of common shares
contained in these consolidated financial statements and in Management's
Discussion and Analysis of Financial Condition and Results of Operations have
not been adjusted to reflect the stock split that will be effective in the
first quarter of fiscal 1998.
14
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues............. $5,684,336 $4,223,300 $2,966,878 $2,001,147 $1,502,768
Operating income..... 1,262,985 904,891 649,721 419,953 216,979
Net income........... 821,457 603,279 441,518 283,720 98,256
Earnings per share... 1.22 0.90 0.66 0.43 0.15
Total assets......... 4,624,315 3,357,243 2,424,517 1,594,984 1,184,020
Short-term debt...... 3,361 5,623 9,599 6,898 10,684
Long-term debt....... 300,836 897 81,721 82,845 86,380
Stockholders' equity. 2,369,712 1,870,449 1,211,358 740,553 528,039
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
In fiscal 1997, 1996 and 1995, the Company continued to improve its operating
margins (prior to the effects of the fiscal 1997 and 1996 adjustments for
acquired in-process research and development) over the corresponding prior
year periods due to increases in revenue growth, coupled with lower general
and administrative expenses as a percentage of revenues. The Company's revenue
growth rate was 35%, 42% and 48% in fiscal 1997, 1996 and 1995, respectively.
Sales and marketing expenses continued to represent the largest category of
operating expenses, constituting 35% of revenues in fiscal 1997 and 37% of
revenues in fiscal years 1996 and 1995. Cost of services as a percentage of
total revenues increased to 27% in fiscal 1997 from 26% in both fiscal year
1996 and 1995. The Company's investment in research and development remained
constant at 10% of revenues in fiscal years 1997, 1996 and 1995, prior to the
impact of capitalized software development costs. General and administrative
expenses as a percentage of revenues decreased to 5% in 1997 from 6% in both
fiscal 1996 and 1995. Overall, operating income as a percentage of revenues
was 22% (23% prior to the adjustment for acquired in-process research and
development), 21% (23% prior to the adjustment for acquired in-process
research and development), and 22% in fiscal 1997, 1996 and 1995,
respectively.
Domestic revenues increased 47% in both fiscal 1997 and 1996, while
international revenues increased 25% and 39% in fiscal 1997 and 1996,
respectively. International revenues were unfavorably affected in both fiscal
1997 and 1996 when compared to the corresponding prior year periods as a
result of the strengthening of the U.S. dollar against certain major
international currencies. International revenues expressed in local currency
increased by approximately 31% and 41% in fiscal 1997 and 1996, respectively.
Revenues from international customers were approximately 53%, 57% and 58% of
revenues in fiscal 1997, 1996 and 1995, respectively. Management expects that
the Company's international operations will continue to provide a significant
portion of total revenues. However, international revenues will be adversely
affected if the U.S. dollar continues to strengthen against certain major
international currencies.
Quarterly revenues reflect distinct seasonality. See "Quarterly Results of
Operations" below.
REVENUES:
<TABLE>
<CAPTION>
FISCAL YEAR 1997 CHANGE FISCAL YEAR 1996 CHANGE FISCAL YEAR 1995
(DOLLARS IN THOUSANDS) ---------------- ------ ---------------- ------ -----------------
<S> <C> <C> <C> <C> <C>
Licenses and Other...... $2,896,696 26% $2,296,572 37% $1,673,731
Percentage of revenues.. 51.0% 54.4% 56.4%
Services................ $2,787,640 45% $1,926,728 49% $1,293,147
Percentage of revenues.. 49.0% 45.6% 43.6%
Total Revenues........ $5,684,336 35% $4,223,300 42% $2,966,878
</TABLE>
15
<PAGE>
LICENSES AND OTHER REVENUES. During the past three fiscal years, the Company's
customer and product base has broadened as the Company has increased both the
number of channels that it uses to market its products, as well as the number
of computers and operating systems on which its relational DBMS operates, and
as additional software products have been acquired or introduced. License
revenues for software used on computers utilizing the UNIX operating system
decreased to 70% of license revenues in fiscal years 1997 and 1996 from 73% in
fiscal 1995. License revenues for use on desktop computers increased from 17%
in 1995 to 19% in 1996 and 23% in fiscal 1997. License revenues from software
for use on computers utilizing other proprietary operating systems, including
DEC, IBM and other proprietary vendors were 7%, 11% and 10% in fiscal 1997,
1996 and 1995, respectively.
License revenues represent fees earned for granting customers licenses to use
the Company's software products. License revenues also include revenues from
the Company's systems integration business, documentation revenues, certain
software development revenues and other miscellaneous revenues, which
constituted 3% of total license and other revenues in both fiscal 1997 and
1996, and 4% of total license and other revenues in fiscal 1995. License and
other revenue growth rates were 26% and 37% in fiscal 1997 and 1996,
respectively. The lower license and other revenues growth rate experienced in
fiscal 1997 was due primarily to relatively lower growth rates experienced by
the overall database market, continued weakness in the performance of certain
of its international subsidiaries and the strengthening of the U.S. dollar.
SERVICES REVENUES. Support, consulting and education services revenues each
increased in fiscal 1997 and 1996 over the corresponding prior year levels. The
Company's support revenues continued to constitute the largest portion of
services revenues, and grew 46% and 55% in fiscal 1997 and 1996, respectively.
This growth reflects the continued increase in the installed base of the
Company's products under support contracts as well as an increase in the number
of customers electing higher support service offerings. Consulting and
education services grew 44% in both fiscal 1997 and 1996 as the Company
continued to expand its services to assist customers in the use and
implementation of applications based on the Company's products.
OPERATING EXPENSES:
<TABLE>
<CAPTION>
FISCAL YEAR 1997 CHANGE FISCAL YEAR 1996 CHANGE FISCAL YEAR 1995
(DOLLARS IN THOUSANDS) ---------------- ------ ---------------- ------ ----------------
<S> <C> <C> <C> <C> <C>
Sales and Marketing..... $1,970,394 27% $1,549,231 40% $1,103,345
Percentage of revenues.. 34.7% 36.7% 37.2%
Cost of Services........ $1,550,466 41% $1,096,013 41% $ 779,012
Percentage of revenues.. 27.3% 26.0% 26.3%
Research and Development
(1).................... $ 555,476 43% $ 389,093 49% $ 260,597
Percentage of revenues.. 9.8% 9.2% 8.8%
General and Administra-
tive................... $ 308,215 32% $ 233,141 34% $ 174,203
Percentage of revenues.. 5.4% 5.5% 5.9%
Acquired In-Process
Research and
Development............ $ 36,800 (28%) $ 50,931 * --
Percentage of revenues.. 0.6% 1.2% --
</TABLE>
- --------
* Not meaningful
(1) Pursuant to Statement of Financial Accounting Standards No. 86, the
Company capitalized software development costs equal to 0.5%, 1.1% and
1.6% of total revenues during fiscal 1997, 1996 and 1995, respectively.
International expenses were favorably affected in both fiscal 1997 and 1996
when compared to the corresponding prior year periods due to the strengthening
of the U.S. dollar against certain major international currencies.
SALES AND MARKETING EXPENSES. The Company continues to place significant
emphasis, both domestically and internationally, on direct sales through its
own sales force. However, the Company also continues to market its products
through indirect channels in order to increase market share while reducing
distribution costs. As a
16
<PAGE>
percentage of licenses and other revenues, sales and marketing expenses
increased slightly in both fiscal 1997 and 1996 when compared to the
corresponding prior year periods, due primarily to increased sales expenses
incurred in anticipation of higher license growth rates than experienced.
Included in sales and marketing expenses is the amortization of capitalized
software development costs (see below).
COST OF SERVICES. The cost of providing services consists largely of
consulting, education and support personnel expenses. As a percentage of
services revenues, cost of services were 56% in fiscal 1997, having decreased
from 57% in fiscal 1996 and 60% in fiscal 1995. The Company's service margins
for fiscal 1997 were positively affected versus the prior years due primarily
to higher margins in the consulting area and a higher percentage of support
revenues which have higher margins than consulting and education revenues.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses would
have been 10% of total revenues in each of the 1997, 1996 and 1995 fiscal
years, without the capitalization of software development costs in accordance
with Statement of Financial Accounting Standards No. 86. Before considering
the impact of software capitalization, research and development expenses
increased 34% and 42% in fiscal 1997 and 1996, respectively. The fiscal 1997
increase was due in part to increases in research and development staff hired
in connection with the acquisitions of Datalogix International, Inc. and the
on-line analytical processing business of Information Resources, Inc. The
fiscal 1996 increase was due in part to research and development staff hired
in connection with the acquisitions of the on-line analytical processing
business of Information Resources, Inc. and the Rdb and repository businesses
of Digital Equipment Corporation. The Company capitalized $28,064,000,
$48,031,000 and $48,187,000, of computer software development costs in fiscal
1997, 1996 and 1995, respectively, which represented 5%, 11% and 16% of total
expenditures for research and development in fiscal 1997, 1996 and 1995.
Amortization of capitalized software development costs is charged to sales and
marketing expenses and totaled $28,156,000, $48,815,000 and $48,662,000, in
fiscal 1997, 1996 and 1995, respectively. The Company believes that research
and development expenditures are essential to maintaining its competitive
position and expects these costs to continue to constitute a significant
percentage of revenues.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses as a
percentage of revenues decreased in both fiscal 1997 and 1996 when compared to
their corresponding prior year periods, due primarily to higher revenue
levels.
ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT. Based on the results of third-
party appraisals, the Company recorded special charges of $36,800,000 in the
third quarter of fiscal 1997 and $50,931,000 in the first quarter of fiscal
1996 to expense in-process research and development costs related to the
acquisitions of Datalogix International, Inc. and the on-line analytical
processing business of Information Resources, Inc., respectively. In the
opinion of management and the appraiser, the acquired in-process research and
development had not yet reached technological feasibility and had no
alternative future uses.
OTHER INCOME (EXPENSE):
<TABLE>
<CAPTION>
FISCAL YEAR 1997 CHANGE FISCAL YEAR 1996 CHANGE FISCAL YEAR 1995
(DOLLARS IN THOUSANDS) ---------------- ------ ---------------- ------ ----------------
<S> <C> <C> <C> <C> <C>
Other Income (Expense).. $ 20,542 41% $ 14,619 58% $ 9,261
Percentage of revenues.. 0.4% 0.3% 0.3%
Changes in other income and non-operating expenses primarily reflect
fluctuations in interest income and expense related to changes in cash and debt
balances and interest rates, as well as foreign exchange and other
miscellaneous items. Additionally, the Company realized a gain of approximately
$3,100,000 during the first quarter of fiscal 1996 related to the sale of a
portion of its investment in Datalogix International, Inc.
PROVISION FOR INCOME TAXES:
<CAPTION>
FISCAL YEAR 1997 CHANGE FISCAL YEAR 1996 CHANGE FISCAL YEAR 1995
(DOLLARS IN THOUSANDS) ---------------- ------ ---------------- ------ ----------------
<S> <C> <C> <C> <C> <C>
Provision for Income
Taxes.................. $462,070 46% $316,231 45% $217,464
Percentage of revenues.. 8.1% 7.5% 7.3%
</TABLE>
17
<PAGE>
The Company's effective tax rates have historically differed from the federal
statutory rate primarily because of tax credits, certain foreign sales
corporation income that is not taxed, state taxes, foreign income taxes
provided at rates greater than the federal statutory rate, as well as foreign
losses that could not be utilized. See Note 7 of Notes to Consolidated
Financial Statements. The effective tax rate was 36% in fiscal 1997, 34.4% in
fiscal 1996 and 33% in fiscal 1995. The increase in the tax rate in fiscal 1997
is due to the expiration of the federal research and development credit and the
relative profitability of various foreign subsidiaries.
NET INCOME AND EARNINGS PER SHARE:
<TABLE>
<CAPTION>
FISCAL YEAR 1997 CHANGE FISCAL YEAR 1996 CHANGE FISCAL YEAR 1995
(DOLLARS IN THOUSANDS) ---------------- ------ ---------------- ------ ----------------
<S> <C> <C> <C> <C> <C>
Net Income.............. $821,457 36% $603,279 37% $441,518
Percentage of revenues.. 14.5% 14.3% 14.9%
Earnings Per Share...... $ 1.22 36% $ 0.90 36% $ 0.66
</TABLE>
QUARTERLY RESULTS OF OPERATIONS
The Company believes that fourth quarter revenues and expenses are affected by
a number of seasonal factors, including the Company's sales compensation plans.
The Company believes that these seasonal factors are common in the computer
software industry. Such factors historically have resulted in first quarter
revenues in any year being lower than revenues in the immediately preceding
fourth quarter. The Company expects this trend to repeat in the first quarter
of fiscal 1998. In addition, the Company's European operations generally
provide lower revenues in the summer months because of the generally reduced
economic activity in Europe during the summer.
The following table sets forth selected unaudited quarterly information for the
Company's last eight fiscal quarters. The Company believes that all necessary
adjustments (which consisted only of normal recurring adjustments) have been
included in the amounts stated below to present fairly the results of such
periods when read in conjunction with the financial statements and related
notes included elsewhere herein.
<TABLE>
<CAPTION>
FISCAL 1997 QUARTER ENDED
--------------------------------------------
FEBRUARY
AUGUST 31 NOVEMBER 30 28 MAY 31
---------- ----------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues....................... $1,052,320 $1,311,373 $1,372,612 $1,948,031
Operating Income............... $ 168,875 $ 274,188 $ 260,127 $ 559,795
Net Income..................... $ 112,771 $ 179,496 $ 169,253 $ 359,937
Earnings Per Share (1)......... $ 0.17 $ 0.27 $ 0.25 $ 0.54
Number of Common and Common
Equivalent Shares Outstanding. 673,810 675,949 673,186 668,508
<CAPTION>
FISCAL 1996 QUARTER ENDED
--------------------------------------------
FEBRUARY
AUGUST 31 NOVEMBER 30 29 MAY 31
---------- ----------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues....................... $ 771,803 $ 967,184 $1,020,239 $1,464,074
Operating Income............... $ 74,191 $ 204,612 $ 219,942 $ 406,146
Net Income..................... $ 53,763 $ 136,901 $ 146,290 $ 266,325
Earnings Per Share (1)......... $ 0.08 $ 0.20 $ 0.22 $ 0.40
Number of Common and Common
Equivalent Shares Outstanding. 669,776 670,710 670,479 671,667
</TABLE>
--------
(1) Earnings per share before the effect of the adjustment for acquired in-
process research and development were $0.29 and $0.13 per share in the
quarters ended February 28, 1997 and August 31, 1995, respectively.
18
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31,
-------------------------------------------
1997 CHANGE 1996 CHANGE 1995
---------- ------ -------- ------ --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Working capital.................. $1,348,957 63% $829,501 48% $562,045
Cash and cash investments........ 1,329,527 51% 882,871 51% 585,818
Cash provided by operating activ-
ities........................... 1,030,504 16% 889,157 56% 568,684
Cash used for investing activi-
ties............................ 777,381 41% 551,488 11% 495,769
Cash used for financing activi-
ties............................ 57,122 (35%) 88,291 451% 16,034
</TABLE>
Working capital increased in both fiscal 1997 and 1996 over the corresponding
prior year periods, due primarily to increased cash flow from operations as
well as proceeds from the issuance of Senior Notes in fiscal 1997 (see below),
offset in part by stock repurchases, which resulted in higher cash levels.
The Company generated higher positive cash flows from operations in both
fiscal 1997 and 1996, due primarily to improved profitability and strong cash
collections.
Cash used for investing activities increased in both fiscal 1997 and 1996 as
compared to the corresponding prior year periods due primarily to changes in
the levels of cash investments. In both periods, the Company made significant
investments in capital expenditures. In addition, the Company acquired
Datalogix International, Inc. for $82,000,000 in cash in the third quarter of
fiscal 1997 ($58,000,000 net of cash assumed) and the on-line analytical
processing business of Information Resources, Inc. for $100,000,000 in cash in
the first quarter of fiscal 1996. The Company expects to continue to invest in
capital assets and capitalized software development activities to support its
growth.
The Company's Board of Directors has approved the repurchase of up to
47,000,000 shares of Common Stock on the open market to reduce the dilutive
effect of the Company's stock plans. Pursuant to this repurchase program, the
Company purchased 12,807,500 shares of the Company's Common Stock for
approximately $528,209,000 in fiscal 1997, 4,478,134 shares of the Company's
Common Stock for approximately $113,087,000 in fiscal 1996, 4,201,875 shares
of the Company's Common Stock for approximately $75,859,000 in fiscal 1995 and
13,437,000 shares of the Company's Common Stock for approximately $124,787,000
prior to fiscal 1995. The Company used cash flow from operations and proceeds
from the issuance of Senior Notes in fiscal 1997 to repurchase the Company's
Common Stock and to invest in working capital and other assets to support its
growth.
During fiscal 1995 and 1994, the Company sold 5,752,500 put warrants. On March
24, 1995, 3,502,500 of these put warrants were canceled at minimal cost and
the remaining warrants expired without being exercised. Additionally, the
Company purchased 3,595,500 call options in fiscal 1995 and 1994. On July 6,
1995, the Company sold 2,189,250 of the call options and credited the net
proceeds of $17,175,000 to equity. The remaining 1,406,250 call options were
exercised in October 1995 at $21.08 per share for a total of $29,648,000 and
were included in stock repurchases for fiscal 1996.
During fiscal 1997, the Company sold 6,000,000 warrants, each of which
entitles the holder to purchase one share of Common Stock at prices between
$77.00 and $77.55. These warrants expire in May 2000 and the proceeds of
$35,898,000 were credited to equity.
During the third quarter of fiscal 1997, the Company issued $150,000,000 in
6.72% Senior Notes due in the year 2004 and $150,000,000 in 6.91% Senior Notes
due in the year 2007. The Senior Notes are unsecured general obligations of
the Company that rank on parity with all other unsecured and unsubordinated
indebtedness of the Company that may be outstanding.
At May 31, 1997, the Company also had other outstanding debt of approximately
$4,197,000, primarily in the form of other notes payable and capital leases.
19
<PAGE>
Subsequent to May 31, 1997, the Company announced the completion of the merger
of its wholly owned subsidiary, Network Computer, Inc., and Navio
Communications, Inc. in a stock for stock exchange. Additionally, the Company
announced that it had reached agreement to acquire all of the outstanding
shares of Treasury Services Corporation, subject to certain regulatory
approvals and other conditions, for up to $120 million in cash. Both of these
acquisitions will be accounted for using the purchase method of accounting and
are expected to result in one time charges for the write-off of in-process
research and development expenses in the first quarter of fiscal 1998.
The Company anticipates that current cash balances, as well as anticipated
cash flows from operations, will be sufficient to meet its working capital and
capital expenditure needs at least through May 31, 1998.
FACTORS THAT MAY AFFECT FUTURE RESULTS AND MARKET PRICE OF STOCK
The Company operates in a rapidly changing environment that involves numerous
risks, some of which are beyond the Company's control. The following
discussion highlights some of these risks.
MANAGEMENT OF GROWTH. The Company has a history of rapid growth. The Company's
future operating results will depend on management's ability to manage growth,
continuously hire and retain significant numbers of qualified employees,
forecast revenues and control expenses. An unexpected decline in the growth
rate of revenues without a corresponding and timely slowdown in expense growth
could have a material adverse effect on the Company's business, results of
operations or financial condition.
COMPETITIVE ENVIRONMENT. The computer software industry is an intensely
competitive industry with several large vendors that develop and market
databases, applications, development tools or decision support products.
Certain of these vendors have significantly more financial and technical
resources than the Company. The introduction of new competitive products into
one or more of the Company's various markets could have a material adverse
effect on the Company's business, results of operations or financial
condition. In addition, new distribution methods (e.g. electronic channels)
and opportunities presented by the Internet have removed many of the barriers
to entry historically faced by small and start-up companies in the software
industry. The Company expects to face increasing competition from such
companies in the various markets in which it competes.
PRICING. Intense competition in the various markets in which the Company
competes may put pressure on the Company to reduce prices on certain products,
particularly in the database marketplace where certain vendors offer deep
discounts in an effort to recapture or gain marketshare. In addition, the
bundling of software products for promotional purposes or as a long-term
pricing strategy by certain of the Company's competitors could have the effect
over time of significantly reducing the prices that the Company can charge for
its products. Shifts toward the use of operating systems on which the Company
experiences relatively greater price competition could result in lower average
license prices, thereby reducing license revenues for the Company. Any such
price reductions and resulting lower license revenues could have a material
adverse effect on the Company's business, results of operations or financial
condition if the Company cannot offset these price reductions with a
corresponding increase in sales volumes.
INTERNATIONAL SALES. A substantial portion of the Company's revenues is
derived from international sales and is therefore subject to the risks
attendant thereto, including the general economic conditions in each country,
the overlap of different tax structures, the difficulty of managing an
organization spread over various countries, changes in regulatory
requirements, compliance with a variety of foreign laws and regulations and
longer payment cycles in certain countries. The Company has experienced
relatively slower growth rates in certain international countries during the
last several years, primarily as a result of weaker economies relative to the
rest of the world, slower adoption of information technology, a strong U.S.
dollar which negatively affects reported revenue growth in U.S. dollars, and
senior management changes in several major countries. There can be no
assurance that the Company will be able to successfully address each of these
challenges in the near term. Other risks associated with international
operations include import and export licensing requirements, trade
restrictions and changes in tariff rates.
20
<PAGE>
A significant portion of the Company's business is conducted in currencies
other than the U.S. dollar. Changes in the value of major foreign currencies
relative to the value of the U.S. dollar therefore could adversely affect
future revenues and operating results. Foreign currency transaction gains and
losses are primarily related to sublicense fee agreements between the Company
and selling distributors and subsidiaries. These gains and losses are charged
against earnings in the period incurred.
The Company has reduced its transaction and translation gains and losses
associated with converting foreign currencies into U.S. dollars by using
forward foreign exchange contracts to hedge transaction and translation
exposures in major currencies. Such contracts meet the criteria established in
FASB 52 for hedge accounting treatment. The Company finds it impractical to
hedge all foreign currencies in which it conducts business. As a result, the
Company will continue to experience foreign currency gains and losses.
INDUSTRY GROWTH AND ECONOMIC CONDITIONS. The strength and profitability of the
Company's business depends on the overall demand for computer software and
growth in the computer industry. Because the Company's sales are primarily to
major corporate, government, education and other business customers, the
Company's business also partly depends on general economic and business
conditions. A softening of demand for computer software, caused by a weakening
of the economy or otherwise, may result in decreased revenues or declining
revenue growth rates for the Company. For example, industry analysts have
noted that a significant amount of current demand for applications software is
generated by customers in the process of replacing and upgrading applications
not designed to automatically accommodate the change in date from December 31,
1999 to January 1, 2000. Once such customers have completed their preparations
for the year 2000, the software industry and the Company may experience a
significant deceleration from the strong annual growth rates recently
experienced in the applications software marketplace.
NEW PRODUCTS. The markets for the Company's products are characterized by
rapid technological advances in hardware and software development, evolving
standards in computer hardware and software technology and frequent new
product introductions and enhancements. Product introductions and short
product life cycles necessitate high levels of expenditure for research and
development. To maintain its competitive position, the Company must enhance
and improve existing products and continue to introduce new products and new
versions of existing products that keep pace with technological developments,
satisfy increasingly sophisticated customer requirements and achieve market
acceptance. The Company's inability to port to or run on new or increasingly
popular operating systems, or the Company's failure to successfully improve,
position and/or price its products, could have a material adverse effect on
the Company's business, results of operations or financial condition.
Significant undetected errors or delays in new products or new versions of a
product may affect market acceptance of the Company's products and could have
a material adverse effect on the Company's business, results of operations or
financial condition. If the Company were to experience delays in the
commercialization and introduction of new or enhanced products, if customers
were to experience significant problems with the implementation and
installation of products or if customers were dissatisfied with product
functionality or performance, this could have a material adverse effect on the
Company's business, results of operations or financial condition.
There can be no assurance that the Company's new products will achieve
significant market acceptance or will generate significant revenue. Additional
products that the Company plans to directly or indirectly market in the future
are in various stages of development. Some of these products, such as web
applications server and network computing software, are in business areas that
are relatively new to the Company's product development and sales and product
marketing personnel. See "New Business Areas."
UNEVEN PATTERNS OF QUARTERLY OPERATING RESULTS. The Company's revenues in
general, and its license revenues in particular, are relatively difficult to
forecast and vary from quarter to quarter due to various factors, including
(i) the relatively long sales cycles for the Company's products, (ii) the size
and timing of individual license transactions, which tend to be initiated by
customers at the end of a fiscal quarter as a negotiating tactic, (iii) the
timing of the introduction of new products or product enhancements by the
Company or its competitors, (iv) the
21
<PAGE>
potential for delay or deferral of customer implementations of the Company's
software, (v) changes in customer budgets and (vi) seasonality of technology
purchases and other general economic conditions. Accordingly, the Company's
quarterly results are difficult to predict until the end of the quarter, and
delays in product delivery or closing of sales near the end of a quarter can
cause quarterly revenues and net income to fall significantly short of
anticipated levels.
The Company's license revenues in any quarter are substantially dependent on
orders booked and shipped in that quarter. Because the Company's operating
expenses are based on anticipated revenue levels and because a high percentage
of the Company's expenses are relatively fixed, a delay in the recognition of
revenue from even a limited number of license transactions could cause
significant variations in operating results from quarter to quarter and could
cause net income to fall significantly short of anticipated levels.
SALES FORCE AND ALTERNATE DISTRIBUTION CHANNELS. The Company historically has
relied heavily on its direct sales force. However, the Company is moving
increasingly toward indirect, electronic and other alternate distribution
channels to meet competitive demands. In addition, the Company is training and
reorganizing part of its sales force to provide specialized expertise within
certain vertical markets. There can be no assurance that the Company will be
successful in increasing sales within these alternate distribution channels or
within these markets. If the Company is not successful, it may lose
significant sales opportunities.
UNCERTAINTY OF EMERGING AREAS. The impact on the Company of emerging areas
such as the Internet, on-line services and electronic commerce is uncertain.
There can be no assurance that the Company will be able to provide a product
offering that will satisfy new customer demands in these areas. In addition,
standards for network protocols, as well as other industry adopted and de
facto standards for the Internet, are evolving rapidly. There can be no
assurance that standards chosen by the Company will position its products to
compete effectively for business opportunities as they arise on the Internet
and other emerging areas.
NEW BUSINESS AREAS. The Company has in recent years expanded its technology
into a number of new business areas to foster long-term growth, including
Internet/electronic commerce, interactive media and data warehousing. It also
has begun to promote the use of network computers. These areas are relatively
new to the Company's product development and sales and marketing personnel.
There is no assurance that the Company will compete effectively or will
generate significant revenues in these new areas. The success of network
computers and, in particular, the Company's current network computer products
is difficult to predict because network computers represent a method of
computing that is new to the entire computer industry. The successful
introduction of network computers to the market will depend in large measure
on (i) the commitment by hardware and software vendors to manufacture, promote
and distribute network computers, (ii) the lower cost of ownership relative to
personal computers, and (iii) the ease of use. There can be no assurance that
sufficient numbers of vendors will undertake this commitment, that the market
will accept network computers or that network computers will generate
significant revenues to the Company. See "New Products."
HIRING AND RETENTION OF EMPLOYEES. The Company's continued growth and success
depend to a significant extent on the continued service of its senior
management and other key employees and the hiring of new qualified employees.
Competition for highly-skilled business, product development, technical and
other personnel is intense. There can be no assurance that the Company will be
successful in continuously recruiting new personnel and in retaining existing
personnel. None of the Company's employees is subject to a long-term
employment or a noncompetition agreement. The loss of one or more key
employees or the Company's inability to attract additional qualified employees
or retain other employees could have a material adverse effect on the
continued growth of the Company. In addition, the Company may experience
increased compensation costs in order to attract and retain skilled employees.
FUTURE ACQUISITIONS. As part of its business strategy, the Company has
recently completed the acquisition of Navio Communications, Inc. and has
announced plans to acquire Treasury Services Corporation, subject to certain
regulatory approvals and other conditions, and expects to make acquisitions
of, or significant investments in, businesses that offer complementary
products, services and technologies. Any acquisitions or investments will
22
<PAGE>
be accompanied by the risks commonly encountered in acquisitions of
businesses. Such risks include, among other things, the difficulty of
assimilating the operations and personnel of the acquired businesses, the
potential disruption of the Company's ongoing business, the inability of
management to maximize the financial and strategic position of the Company,
the maintenance of uniform standards, controls, procedures and policies and
the impairment of relationships with employees and clients as a result of any
integration of new management personnel. These factors could have a material
adverse effect on the Company's business, results of operations or financial
condition. Consideration paid for future acquisitions, if any, could be in the
form of cash, stock, rights to purchase stock or a combination thereof.
Dilution to existing stockholders and to earnings per share may result to the
extent that shares of stock or other rights to purchase stock are issued in
connection with any such future acquisitions.
RELATIVE PRODUCT PROFITABILITY. Certain of the Company's revenues are derived
from products which, as a percentage of revenues, currently require a higher
level of development, distribution and support expenditures compared to
certain of its other core products. To the extent that revenues generated from
such products become a greater percentage of the Company's total revenues, the
Company's operating margins may be adversely affected, unless the expenses
associated with such products decline as a percentage of revenues.
ENFORCEMENT OF THE COMPANY'S INTELLECTUAL PROPERTY RIGHTS. Despite the
Company's efforts to protect its intellectual property rights, it may be
possible for unauthorized third parties to copy certain portions of the
Company's products or to reverse engineer or obtain and use technology or
other information that the Company regards as proprietary. In addition, the
laws of certain countries do not protect the Company's proprietary rights to
the same extent as do the laws of the United States. Accordingly, there can be
no assurance that the Company will be able to protect its proprietary
technology against unauthorized third party copying or use, which could
adversely affect the Company's competitive position.
The Company from time to time receives notices from third parties claiming
infringement by the Company's products of third party patent and other
intellectual property rights. The Company expects that software products will
increasingly be subject to such claims as the number of products and
competitors in the Company's industry segments grows and the functionality of
products overlaps. Regardless of its merit, responding to any such claim could
be time-consuming, result in costly litigation and require the Company to
enter into royalty and licensing agreements which may not be offered or
available on terms acceptable to the Company. If a successful claim is made
against the Company and the Company fails to develop or license a substitute
technology, the Company's business, results of operations or financial
condition could be materially adversely affected.
POSSIBLE VOLATILITY OF STOCK PRICE. The market price of the Company's Common
Stock has experienced significant fluctuations and may continue to fluctuate
significantly. The market price of the Common Stock may be significantly
affected by factors such as the announcement of new products or product
enhancements by the Company or its competitors, technological innovation by
the Company or its competitors, quarterly variations in the Company's or its
competitors' results of operations, changes in prices of the Company's or its
competitors' products and services, changes in revenue and revenue growth
rates for the Company as a whole or for specific geographic areas, business
units, products or product categories, changes in earnings estimates by market
analysts, speculation in the press or analyst community and general market
conditions or market conditions specific to particular industries. The stock
prices for many companies in the technology sector have experienced wide
fluctuations which often have been unrelated to their operating performance.
Such fluctuations may adversely affect the market price of the Company's
Common Stock.
LONG-TERM INVESTMENT CYCLE. Developing and localizing software is expensive
and the investment in product development often involves a long payback cycle.
The Company's plans for its fiscal year ending May 31, 1998 include
significant investments in software research and development and related
product opportunities from which significant revenues are not anticipated for
several years.
23
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this item is submitted as a separate section of this Form 10-K.
See Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information regarding directors required by Item 10 is incorporated by
reference from the Company's definitive proxy statement for its annual
stockholders' meeting to be held on October 13, 1997.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated by reference from the
Company's definitive proxy statement for its annual stockholders' meeting to be
held on October 13, 1997. The information specified in Item 402 (k) and (l) of
Regulation S-K and set forth in the Company's definitive proxy statement for
its annual stockholders' meeting to be held on October 13, 1997 is not
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 is incorporated by reference from the
Company's definitive proxy statement for its annual stockholders' meeting to be
held on October 13, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is incorporated by reference from the
Company's definitive proxy statement for its annual stockholders' meeting to be
held on October 13, 1997.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) 1. FINANCIAL STATEMENTS
The following financial statements are filed as a part of this report:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants............................. 28
Consolidated Financial Statements:
Balance Sheets as of May 31, 1997 and 1996.......................... 29
Statements of Operations for the years ended May 31, 1997, 1996 and
1995............................................................... 30
Statements of Stockholders' Equity for the years ended May 31, 1997,
1996 and 1995...................................................... 31
Statements of Cash Flows for the years ended May 31, 1997, 1996 and
1995............................................................... 32
Notes to Consolidated Financial Statements.......................... 33
</TABLE>
(A) 2. FINANCIAL STATEMENT SCHEDULES
The following financial statement schedule is filed as a part of this
report:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
II Valuation and Qualifying Accounts.................................. 48
</TABLE>
All other schedules are omitted because they are not required or the
required information is shown in the financial statements or notes
thereto.
24
<PAGE>
(A) 3. EXHIBITS
The following exhibits are filed herewith or are incorporated by reference to
exhibits previously filed with the Commission. The Company shall furnish copies
of exhibits for a reasonable fee (covering the expense of furnishing copies)
upon request.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------
<C> <S>
3.01(1) Registrant's Restated Certificate of Incorporation, as amended to
March 11, 1987.
3.02(3) Certificate of Amendment of Certificate of Incorporation, dated
June 30, 1989.
3.03(1) Registrant's Bylaws, as adopted October 30, 1986.
3.04(6) Amendment to Registrant's Bylaws, dated January 13, 1989.
3.05(5) Amendment to Registrant's Bylaws, dated December 3, 1990.
3.06(5) Certificate of Designation specifying the terms of the Series A
Junior Participating Preferred Stock of Registrant, filed with the
Secretary of State of Delaware on December 7, 1990.
3.07(5) Rights Agreement between Oracle Systems Corporation and the Bank of
America, N.T. & S.A., dated December 3, 1990.
3.08(1) Specimen Certificate of Registrant's Common Stock.
3.09(13) Certificate of Amendment of Certificate of Incorporation, dated
November 4, 1993.
3.10(14) Amendment Number One to Rights Agreement, dated December 3, 1990,
between Oracle Systems Corporation and the Bank of America, N.T.
& S.A.
3.11(14) Rights Agreement, dated August 1, 1991, between Oracle Systems
Corporation and Harris Trust Company of California.
3.12(16) Certificate of Amendment of Certificate of Incorporation, dated
January 13, 1995.
3.13(18) Certificate of Amendment of Certificate of Incorporation of the
Company filed with the Delaware Secretary of State on October 29,
1996.
4.1(19) Indenture between Oracle Corporation and State Street Bank and
Trust Company of California, N.A., dated February 24, 1997.
4.2 Warrant Purchase Agreement between Oracle Corporation and Morgan
Stanley & Co. Incorporated, as agent for Morgan Stanley & Co.
International Limited dated May 7, 1997.
4.3 Warrant Agreement between Oracle Corporation and BankBoston, N.A.
dated May 12, 1997.
4.4 Warrant Certificate dated May 12, 1997.
4.5 Warrant Purchase Agreement between Oracle Corporation and Goldman,
Sachs & Co. dated May 14, 1997.
4.6 Warrant Agreement between Oracle Corporation and BankBoston, N.A.
dated May 19, 1997.
4.7 Warrant Certificate dated May 19, 1997.
10.01(2)* Registrant's Stock Option Plan (1985), as amended to date, and
related documents.
10.02(2)* Stock Option Agreement with Lawrence J. Ellison for the purchase of
720,000 shares of the Registrant's Common Stock, dated October 2,
1986.
10.03(4)* 1990 Directors' Stock Option Plan, as adopted July 30, 1990, and
related documents.
10.04(7)* 1990 Executive Officers' Stock Option Plan, as adopted October 15,
1990, and related documents.
10.05(8)* 1991 Long-Term Equity Incentive Plan, as adopted July 31, 1991.
10.06(10)* Oracle Systems Corporation Employee Stock Purchase Plan (1992), as
adopted August 24, 1992.
10.07(11)* 1993 Directors' Stock Option Plan, as adopted May 24, 1993.
10.08(15)* Amendment to 1993 Directors' Stock Option Plan, as adopted May 31,
1994.
10.09(3) Lease Agreement for 500 Centrum Plaza Drive by and between Oracle
Corporation and Centrum V Associates, dated May 10, 1989.
10.10(3) Lease Agreement for 400 Centrum Plaza Drive by and between Oracle
Corporation and Centrum V Associates, dated May 10, 1989.
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------
<C> <S>
10.11(4) Lease Agreement for 300 Centrum Plaza Drive by and between Oracle
Corporation and Centrum V Associates, dated December 11, 1989.
10.12(4) Lease Agreement for 100 Square by and between Oracle Corporation UK
Limited, Oracle Systems Corporation and Guidefront Limited, dated
June 8, 1989.
10.13(12) Loan purchase and sale agreement among Oracle Corporation and
Connecticut General Life Insurance Company, dated August 19, 1993,
the related notes and related documents.
10.14(13)* 1993 Oracle Corporation Deferred Compensation Plan.
10.15(9) Preferred Strategic Relationship Agreement by and among Oracle
Systems Corporation, Oracle Corporation, Oracle Corporation Japan,
and Nippon Steel Corporation, dated December 9, 1991.
10.16(9) Holding Warrant Agreement by and among Oracle Systems Corporation,
Oracle Corporation, Oracle Japan Holding, Inc., Nippon Steel
Corporation, and Nippon Steel Europe B.V., dated December 9, 1991.
10.17(9) Common Stock Warrant Certificate of Oracle Japan Holding, Inc.,
dated December 9, 1991.
10.18(9) Certificate of Designations, Preferences and Rights of Series A
Convertible Preferred Stock of Oracle Japan Holding, Inc., dated
December 9, 1991.
10.19(9) Oracle Japan Warrant Agreement by and among Oracle Systems
Corporation, Oracle Corporation, Oracle Japan Holding, Inc., Nippon
Steel Corporation, and Nippon Steel Europe B.V., dated December 9,
1991.
10.20(9) Common Stock Warrant Certificate of Oracle Corporation Japan, dated
December 9, 1991.
10.21(9) Product Activities Agreement by and among Oracle Systems
Corporation, Oracle Corporation, and Nippon Steel Corporation,
dated December 9, 1991.
10.22(9) Integration Agreement among Oracle Systems Corporation, Oracle
Corporation, Oracle Corporation Japan, Oracle Japan Holding, Inc.,
Nippon Steel Corporation, Nippon Steel U.S.A., and Nippon Steel
Europe B.V., dated December 9, 1991.
10.23(9) Tax Sharing and Payment Agreement by and between Oracle Systems
Corporation, Oracle Corporation, Oracle Japan Holding, Inc., Nippon
Steel Corporation, and Nippon Steel Europe B.V., dated December 9,
1991.
10.24(17)* Restatement of Employment Agreement with David Roux as of August
31, 1996.
10.25 Amendment No 1 to 1991 Long-Term Equity Incentive Plan dated
December 9, 1996.
21.01 Subsidiaries of the Registrant.
23.01 Consent of Arthur Andersen LLP.
27.1 Financial Data Schedule.
</TABLE>
- --------
* Indicates management contract or compensatory plan or arrangement.
(1) Incorporated by reference to the Form S-1 Registration Statement filed
March 27, 1987, File No. 33-12941.
(2) Incorporated by reference to the Form S-8 Registration Statement filed
February 24, 1986, File No. 33-3536, as amended.
(3) Incorporated by reference to the Form 10-K filed August 25, 1989.
(4) Incorporated by reference to the Form 10-K filed on August 27, 1990.
(5) Incorporated by reference to the Form 8-K filed on December 10, 1990.
(6) Incorporated by reference to the Form 10-Q filed on January 11, 1991.
(7) Incorporated by reference to the Form 10-K filed on August 28, 1991.
(8) Incorporated by reference to the Form S-8 Registration Statement filed
December 23, 1991, File No. 33-44702.
26
<PAGE>
(9) Incorporated by reference to the Form 10-Q filed on January 13, 1992.
(10) Incorporated by reference to the Form 10-Q filed on January 7, 1993.
(11) Incorporated by reference to the Form 10-K filed on July 22, 1993.
(12) Incorporated by reference to the Form 10-Q filed on September 23, 1993.
(13) Incorporated by reference to the Form 10-Q filed on January 11, 1994.
(14) Incorporated by reference to the Form 8-A filed on February 28, 1994.
(15) Incorporated by reference to the Form 10-K filed on July 27, 1994.
(16) Incorporated by reference to the Form 10-K filed on August 25, 1995.
(17) Incorporated by reference to the Form 10-Q filed on October 11, 1996.
(18) Incorporated by reference to the Form 10-Q filed on January 10, 1997.
(19) Incorporated by reference to the Form 10-Q filed on April 10, 1997.
(B) REPORTS ON FORM 8-K
None.
27
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Oracle Corporation:
We have audited the accompanying consolidated balance sheets of Oracle
Corporation, a Delaware corporation, and subsidiaries as of May 31, 1997 and
1996, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended May 31,
1997. These financial statements and the schedule referred to below are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Oracle Corporation and
subsidiaries as of May 31, 1997 and 1996, and the results of their operations
and their cash flows for each of the three years in the period ended May 31,
1997, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed under Item 14(a)2
is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not a part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in our audits
of the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
San Jose, California
June 16, 1997
28
<PAGE>
ORACLE CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF MAY 31, 1997 AND 1996
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
MAY 31,
----------------------
1997 1996
---------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents.............................. $ 890,162 $ 715,742
Short-term cash investments............................ 323,028 125,166
Trade receivables, net of allowance for doubtful ac-
counts of $127,840 in 1997 and $105,711 in 1996....... 1,540,470 1,084,858
Other receivables...................................... 168,469 119,118
Prepaid and refundable income taxes.................... 274,366 171,560
Prepaid expenses and other current assets.............. 74,601 68,021
---------- ----------
Total current assets.................................. 3,271,096 2,284,465
LONG-TERM CASH INVESTMENTS.............................. 116,337 41,963
PROPERTY, net........................................... 868,948 685,754
COMPUTER SOFTWARE DEVELOPMENT COSTS, net of accumulated
amortization of $36,303 in 1997 and $78,025 in 1996.... 98,981 99,072
OTHER ASSETS............................................ 268,953 245,989
---------- ----------
Total assets.......................................... $4,624,315 $3,357,243
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable and current maturities of long-term debt. $ 3,361 $ 5,623
Accounts payable....................................... 185,444 169,895
Income taxes........................................... 203,646 181,999
Accrued compensation and related benefits.............. 394,153 295,048
Customer advances and unearned revenues................ 602,862 434,435
Value added tax and sales tax payable.................. 121,914 99,409
Other accrued liabilities.............................. 410,759 268,555
---------- ----------
Total current liabilities............................. 1,922,139 1,454,964
LONG-TERM DEBT.......................................... 300,836 897
OTHER LONG-TERM LIABILITIES............................. 24,226 21,726
DEFERRED INCOME TAXES................................... 7,402 9,207
COMMITMENTS (Note 5).................................... -- --
STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value--authorized, 1,000,000
shares; outstanding: none............................. -- --
Common stock, $0.01 par value, and additional paid in
capital--authorized, 2,000,000,000 shares; outstand-
ing: 651,980,213 shares in 1997 and 655,825,902 shares
in 1996............................................... 696,018 475,833
Retained earnings...................................... 1,686,170 1,382,203
Accumulated foreign currency translation adjustments
and unrealized gain on equity securities.............. (12,476) 12,413
---------- ----------
Total stockholders' equity............................ 2,369,712 1,870,449
---------- ----------
Total liabilities and stockholders' equity............ $4,624,315 $3,357,243
========== ==========
</TABLE>
See notes to consolidated financial statements.
29
<PAGE>
ORACLE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MAY 31, 1997, 1996 AND 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
----------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES
Licenses and other........................ $2,896,696 $2,296,572 $1,673,731
Services.................................. 2,787,640 1,926,728 1,293,147
---------- ---------- ----------
Total revenues........................... 5,684,336 4,223,300 2,966,878
---------- ---------- ----------
OPERATING EXPENSES
Sales and marketing....................... 1,970,394 1,549,231 1,103,345
Cost of services.......................... 1,550,466 1,096,013 779,012
Research and development.................. 555,476 389,093 260,597
General and administrative................ 308,215 233,141 174,203
Acquired in-process research and develop-
ment..................................... 36,800 50,931 --
---------- ---------- ----------
Total operating expenses................. 4,421,351 3,318,409 2,317,157
---------- ---------- ----------
OPERATING INCOME........................... 1,262,985 904,891 649,721
---------- ---------- ----------
OTHER INCOME (EXPENSE)
Interest income........................... 47,381 30,235 21,095
Interest expense.......................... (6,806) (6,632) (6,970)
Other..................................... (20,033) (8,984) (4,864)
---------- ---------- ----------
Total other income (expense)............. 20,542 14,619 9,261
---------- ---------- ----------
INCOME BEFORE PROVISION FOR INCOME TAXES... 1,283,527 919,510 658,982
Provision for income taxes................ 462,070 316,231 217,464
---------- ---------- ----------
NET INCOME................................. $ 821,457 $ 603,279 $ 441,518
========== ========== ==========
EARNINGS PER SHARE......................... $ 1.22 $ 0.90 $ 0.66
========== ========== ==========
COMMON AND COMMON EQUIVALENT SHARES
OUTSTANDING............................... 672,863 670,658 665,399
========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
30
<PAGE>
ORACLE CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED MAY 31, 1997, 1996 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED
FOREIGN
COMMON STOCK AND CURRENCY
ADDITIONAL PAID-IN TRANSLATION
CAPITAL ADJUSTMENTS
---------------------- AND UNREALIZED
NUMBER OF RETAINED GAIN ON EQUITY
SHARES AMOUNT EARNINGS SECURITIES TOTAL
----------- --------- ---------- -------------- ----------
<S> <C> <C> <C> <C> <C>
BALANCES, May 31, 1994.. 644,311,763 $ 254,500 $ 488,595 $ (2,542) $ 740,553
Common stock issued un-
der stock option plans. 7,009,377 19,679 -- -- 19,679
Common stock issued
under stock purchase
plan................... 2,916,367 40,968 -- -- 40,968
Reclassification of put
warrant obligations.... -- 328 (336) -- (8)
Repurchase of common
stock.................. (4,201,875) (2,187) (73,672) -- (75,859)
Effect of common stock
dividend............... -- 1,967 (1,967) -- --
Tax benefits from stock
plans.................. -- 23,731 -- -- 23,731
Foreign currency trans-
lation adjustments..... -- -- -- 20,776 20,776
Net income.............. -- -- 441,518 -- 441,518
----------- --------- ---------- -------- ----------
BALANCES, May 31, 1995.. 650,035,632 338,986 854,138 18,234 1,211,358
Common stock issued un-
der stock option plans. 7,145,391 31,720 -- -- 31,720
Common stock issued
under stock purchase
plan................... 3,123,013 61,071 -- -- 61,071
Reclassification of put
warrant obligations.... -- 1,053 37,385 -- 38,438
Proceeds from sale of
call options........... -- 17,175 -- -- 17,175
Repurchase of common
stock.................. (4,478,134) (2,676) (110,411) -- (113,087)
Effect of common stock
dividend............... -- 2,188 (2,188) -- --
Tax benefits from stock
plans.................. -- 26,316 -- -- 26,316
Foreign currency trans-
lation adjustments..... -- -- -- (12,147) (12,147)
Unrealized gain on eq-
uity securities........ -- -- -- 6,326 6,326
Net income.............. -- -- 603,279 -- 603,279
----------- --------- ---------- -------- ----------
BALANCES, May 31, 1996.. 655,825,902 475,833 1,382,203 12,413 1,870,449
Common stock issued un-
der stock option plans. 5,876,177 46,013 -- -- 46,013
Common stock issued
under stock purchase
plan................... 3,085,634 92,171 -- -- 92,171
Sale of warrants to pur-
chase stock............ -- 35,898 -- -- 35,898
Repurchase of common
stock.................. (12,807,500) (10,719) (517,490) -- (528,209)
Tax benefits from stock
plans.................. -- 56,822 -- -- 56,822
Foreign currency trans-
lation adjustments..... -- -- -- (18,565) (18,565)
Unrealized loss on eq-
uity securities........ -- -- -- (6,324) (6,324)
Net income.............. -- -- 821,457 -- 821,457
----------- --------- ---------- -------- ----------
BALANCES, May 31, 1997.. 651,980,213 $ 696,018 $1,686,170 $(12,476) $2,369,712
=========== ========= ========== ======== ==========
</TABLE>
See notes to consolidated financial statements.
31
<PAGE>
ORACLE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MAY 31, 1997, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................... $ 821,457 $ 603,279 $ 441,518
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization............... 264,773 219,494 147,772
Write-off of acquired in-process research
and development............................ 36,800 50,931 --
Provision for doubtful accounts............. 92,635 64,412 53,784
Changes in assets and liabilities, net of
effects of acquisitions;
Increase in trade receivables.............. (628,025) (449,780) (347,311)
Increase in prepaid and refundable income
taxes..................................... (102,864) (20,377) (80,183)
Increase in prepaid expenses and other cur-
rent assets............................... (8,893) (37,685) (5,464)
Increase in accounts payable............... 16,807 48,392 24,113
Increase in income taxes................... 78,050 86,367 90,713
Increase in other accrued liabilities...... 275,534 210,984 181,638
Increase in customer advances and unearned
revenues.................................. 175,657 127,126 77,223
Increase (decrease) in deferred income tax-
es........................................ 6,286 (25,351) (13,341)
Increase (decrease) in other non-current
liabilities............................... 2,287 11,365 (1,778)
--------- --------- ---------
Net cash provided by operating activities.... 1,030,504 889,157 568,684
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of cash investments............... (524,313) (238,960) (176,536)
Proceeds from maturities of cash invest-
ments...................................... 252,077 177,491 130,824
Capital expenditures........................ (390,741) (308,392) (262,046)
Capitalization of computer software develop-
ment costs................................. (28,064) (48,031) (48,187)
Increase in other assets, net of cash ac-
quired from acquisitions................... (86,340) (133,596) (139,824)
--------- --------- ---------
Net cash used for investing activities....... (777,381) (551,488) (495,769)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (payments) under notes pay-
able and long-term debt.................... 298,321 (81,624) 5,346
Payments of capital leases.................. (1,316) (3,546) (6,168)
Proceeds from common stock issued........... 138,184 92,791 60,647
Proceeds from sales of call options......... -- 17,175 --
Proceeds from sales of warrants............. 35,898 -- --
Repurchase of common stock.................. (528,209) (113,087) (75,859)
--------- --------- ---------
Net cash used for financing activities....... (57,122) (88,291) (16,034)
--------- --------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH....... (21,581) (13,794) 18,467
--------- --------- ---------
Net increase in cash and cash equivalents.... 174,420 235,584 75,348
CASH AND CASH EQUIVALENTS
Beginning of year............................ 715,742 480,158 404,810
--------- --------- ---------
End of year.................................. $ 890,162 $ 715,742 $ 480,158
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
32
<PAGE>
ORACLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
Oracle Corporation designs, develops, markets and supports computer software
products with a wide variety of uses, including database management,
application development and business intelligence tools and business
applications. The Company also offers consulting, education and support
services in support of its customers' use of its software products.
Basis of Financial Statements
The consolidated financial statements include the accounts of the Company and
its subsidiaries. All intercompany transactions and balances between the
companies have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Foreign Currency Translation
In general, the functional currency of a foreign operation is deemed to be the
local country's currency. Consequently, assets and liabilities of operations
outside the United States are translated into United States dollars using
current exchange rates, and the effects of foreign currency translation
adjustments are included as a component of stockholders' equity. At May 31,
1997 and 1996, accumulated foreign translation balances were $(12,478,000) and
$6,087,000, respectively.
The Company hedges certain portions of its exposure to foreign currency
fluctuations through a variety of strategies and financial instruments. The
primary hedging instruments are forward foreign exchange contracts. At May 31,
1997, the Company had approximately $226,628,000 of forward foreign exchange
contracts outstanding used to hedge intercompany accounts of certain of its
international subsidiaries, and approximately $100,299,000 of equity hedges
outstanding used to hedge the net assets of certain of its international
subsidiaries. The intercompany balances primarily reflect sub-license fees
owed to Oracle Corporation or intercompany loans. The fair value of foreign
currency contracts is estimated based on the spot rate of the various hedged
currencies as of the end of the period. Gains and losses associated with
currency rate changes on forward foreign exchange contracts used to hedge
intercompany accounts are recorded currently in income, as they offset
corresponding gains and losses on the foreign currency-denominated assets and
liabilities being hedged. Net foreign exchange transaction losses and expenses
were $6,645,000, $4,232,000 and $3,732,000 in fiscal 1997, 1996 and 1995,
respectively, and are included in other income and expense. Net gains on
equity hedges were $7,598,000 and $9,051,000 in fiscal 1997 and 1996,
respectively, and net losses on equity hedges were $10,213,000 in fiscal 1995.
These net gains and losses on equity hedges were recorded as a component of
accumulated foreign currency translation adjustments in stockholders' equity.
As of May 31, 1997, the fair value (and carrying amount) of outstanding
foreign forward exchange contracts were as follows:
<TABLE>
<CAPTION>
CONTRACT
AMOUNT FAIR VALUE
------------ ------------
<S> <C> <C>
Intercompany account hedges................... $226,628,000 $226,629,000
Equity hedges................................. $100,299,000 $ 91,659,000
</TABLE>
33
<PAGE>
ORACLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
At May 31, 1997, maturities of the Company's forward foreign exchange and
equity hedge contracts were twelve months or less in term.
Supplemental Statements of Cash Flows Data
The Company paid income taxes in the amount of $533,914,000, $438,791,000 and
$223,725,000, and interest expense of $843,000, $8,616,000 and $6,087,000
during the fiscal years ended 1997, 1996 and 1995, respectively. In fiscal
1997, 1996 and 1995, the Company received income tax refunds in the amount of
$13,273,000, $6,201,000 and $809,000, respectively. The Company purchased
equipment under capital leases in the amount of $946,000, $803,000 and
$1,438,000 in fiscal 1997, 1996 and 1995, respectively.
Non-cash transactions in fiscal 1996 included the expiration of $38,438,000 of
put warrants which were reclassified from liabilities to stockholders' equity.
Substantially all of the Company's cash and cash equivalents at May 31, 1997
consisted of highly liquid investments in time deposits of major world banks,
commercial paper, money market mutual funds and tax-free municipal securities
with original maturities or puts of 90 days or less. The Company considers
such investments to be cash equivalents for purposes of the statements of cash
flows. Cash investments at May 31, 1997 primarily consisted of tax-exempt
municipal securities, commercial paper and U.S. Government Agency Paper with
original maturities or puts of 91 days or more. No individual investment
security equaled or exceeded 2% of total assets.
Investments in Debt and Equity Securities
In accordance with SFAS No. 115 and based on the Company's intentions
regarding these instruments, the Company has classified all marketable debt
securities and long-term debt investments as held-to-maturity and has
accounted for these investments at amortized cost. The Company has classified
its marketable equity securities as available for sale (included in "Other
Assets" in the accompanying consolidated balance sheets) and recorded net
unrealized holding gains in equity of $2,000 and $6,326,000 as of May 31, 1997
and 1996, respectively, which were included in "Accumulated foreign currency
translation adjustments and unrealized gain on equity securities" in the
accompanying consolidated balance sheets.
At May 31, 1997, the amortized cost basis, aggregate fair value and gross
unrealized holding gains and losses by major security type were as follows:
<TABLE>
<CAPTION>
AMORTIZED AGGREGATE FAIR UNREALIZED
COST VALUE GAINS/(LOSSES)
--------- -------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Fiscal 1997:
Debt securities issued by states
of the United States and politi-
cal subdivisions of the states.. $251,670 $251,993 $ 323
Corporate debt securities........ 187,695 187,786 91
-------- -------- -----
Total cash investments......... $439,365 $439,779 $ 414
======== ======== =====
Fiscal 1996:
Debt securities issued by states
of the United States and politi-
cal subdivisions of the states.. $131,119 $130,625 $(494)
Corporate debt securities........ 36,010 36,101 91
-------- -------- -----
Total cash investments......... $167,129 $166,726 $(403)
======== ======== =====
</TABLE>
All of the Company's long-term investments mature within 29 months.
34
<PAGE>
ORACLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Concentration of Credit Risk
Financial instruments which potentially subject the Company to concentrations
of credit risk consist primarily of cash investments and trade receivables.
The Company has cash investment policies that limit investments to investment
grade securities. The Company performs ongoing credit evaluations of its
customer's financial condition and the risk with respect to trade receivables
is further mitigated by the fact that the Company's customer base is highly
diversified.
Property
Property is stated at cost. Capital leases are recorded at the present value
of the future minimum lease payments at the date of acquisition. Depreciation
is computed using the straight-line method based on estimated useful lives of
the assets which range from three to forty years. Capital leases and leasehold
improvements are amortized over the estimated useful lives or lease terms, as
appropriate.
In fiscal 1997, 1996 and 1995, the Company purchased approximately $15,000,
$300,000 and $1,000,000, respectively, in computer equipment and maintenance
services from nCUBE Corporation, the principal shareholder of which is
Lawrence J. Ellison, Chief Executive Officer of the Company, for use for a
variety of internal development and production purposes.
Software Development Costs
The Company capitalizes internally generated software development costs in
compliance with Statement of Financial Accounting Standards No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise
Marketed." Capitalization of computer software development costs begins upon
the establishment of technological feasibility for the product. Capitalized
software development costs amounted to $28,064,000, $48,031,000 and
$48,187,000 in fiscal 1997, 1996 and 1995, respectively.
Amortization of capitalized computer software development costs begins when
the products are available for general release to customers, and is computed
on a product-by-product basis as the greater of: (a) the ratio of current
gross revenues for a product to the total of current and anticipated future
gross revenues for the product; or (b) the straight-line method over the
remaining estimated economic life of the product (generally two to three
years). Amortization amounted to $28,156,000, $48,815,000 and $48,662,000, for
the fiscal years ended May 31, 1997, 1996 and 1995, respectively, and is
included in sales and marketing expenses.
Acquisitions
As of December 31, 1996, the Company had a minority investment in Datalogix
International, Inc. of approximately 13.4%. Effective January 1, 1997, the
Company completed a merger transaction, by which it acquired the remaining
outstanding shares of Datalogix International, Inc. for approximately
$82,000,000 in cash. The Company received an appraisal of certain intangible
assets which indicated that $36,800,000 of the acquired intangible assets
consisted of in-process research and development. In the opinion of management
and the appraiser, the acquired in-process research and development had not
yet reached technological feasibility and had no alternative future uses.
Accordingly, the Company recorded a special charge of $36,800,000 in the
accompanying consolidated statement of operations in fiscal 1997. The
remaining intangible assets acquired, with an assigned value of approximately
$20,000,000, were included in "Other Assets" in the accompanying consolidated
balance sheets and are being amortized over a five year period. Amortization
expense of approximately $1,700,000 was included in the accompanying
consolidated statement of operations in fiscal 1997.
35
<PAGE>
ORACLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
On July 27, 1995, the Company completed the acquisition of the on-line
analytical processing business of Information Resources, Inc. for
approximately $100,000,000 in cash. The Company received an appraisal of
certain intangible assets which indicated that $50,931,000 of the acquired
intangible assets consisted of in-process research and development. In the
opinion of management and the appraiser, the acquired in-process research and
development had not yet reached technological feasibility and had no
alternative future uses. Accordingly, the Company recorded a special charge of
$50,931,000 in the accompanying consolidated statement of operations in fiscal
1996. The remaining intangible assets acquired, with an assigned value of
approximately $33,000,000, were included in "Other Assets" in the accompanying
consolidated balance sheets and are being amortized over a five year period.
Amortization expenses of approximately $6,000,000 and $5,000,000 were included
in the accompanying consolidated statement of operations in fiscal 1997 and
1996, respectively.
On November 30, 1994, the Company completed the acquisition of the Rdb
database and repository businesses of Digital Equipment Corporation, including
all related software products and customer support services, for approximately
$108,000,000 in cash. Intangible assets, with an assigned value of
approximately $105,000,000, were included in "Other Assets" in the
accompanying consolidated balance sheets and are being amortized over a seven
year period. Amortization expense of approximately $15,000,000 in fiscal 1997
and 1996, and $8,000,000 in fiscal 1995, were included in the accompanying
consolidated statements of operations.
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of
Effective June 1, 1996, the Company adopted Statement of Financial Accounting
Standards No. 121 ("SFAS No. 121"), "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of." The adoption of
SFAS No. 121 did not have a material impact on the results of operations or
financial position of the Company.
Long Term Debt
Based on the borrowing rates currently available to the Company for loans
similar in terms and average maturities, the stated value of long term debt
approximated market value at May 31, 1997.
Revenue Recognition
The Company generates several types of revenue including the following:
License and Sublicense Fees. The Company's standard end user license
agreement for the Company's products provides for an initial fee to use the
product in perpetuity up to a maximum number of users on a specified computer.
The Company also enters into other license agreement types, typically with
major end user customers, which allow for the use of the Company's products,
usually restricted by the number of employees, the number of users, the number
of computers or the license term. Fees from licenses with standard acceptance
periods (15 days for commercial customers, and 30 days for shrink-wrap,
government and telemarketing customers) are recognized as revenue upon
shipment if there are no significant post-delivery obligations and payment is
due within one year. If the acceptance period is longer than standard,
revenues are not recognized until the end of the acceptance period. The
Company provides for sales returns based on historical rates of return.
The Company receives sublicense fees from its Oracle Alliance Members (value-
added relicensors, hardware providers, systems integrators and independent
software vendors) based on the sublicenses granted by the Oracle Alliance
member. Sublicense fees typically are based on a percentage of the Company's
list price and are generally recognized as they are reported by the reseller.
36
<PAGE>
ORACLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Support Agreements. Support agreements generally call for the Company to
provide technical support and certain software updates to customers. Revenue
on technical support and software update rights is recognized ratably over the
term of the support agreement and is included in services revenue in the
accompanying statement of operations.
Consulting and Education Services. The Company provides consulting and
education services to its customers; revenue from such services is generally
recognized as the services are performed.
Deferred Revenues. Deferred revenues primarily relate to post-contract
support which has been paid by the customers prior to the performance of these
services.
Accounting for Stock-Based Compensation
Effective June 1, 1996, the Company adopted the disclosure provisions of
Financial Accounting Standards No. 123, ("SFAS No. 123"), "Accounting for
Stock-Based Compensation." In accordance with the provisions of SFAS No. 123,
the Company applies Accounting Principles Board Opinion 25 and related
interpretations in accounting for its employee stock option plans. Note 6 to
the Consolidated Financial Statements contains a summary of the pro forma
effects on reported net income and earnings per share for fiscal 1997 and 1996
based on the fair value of options and shares granted as prescribed by SFAS
No. 123.
Income Taxes
Deferred income taxes are provided for timing differences in recognizing
certain income, expense and credit items for financial reporting purposes and
tax reporting purposes. Such deferred income taxes primarily relate to the
methods of accounting for capitalized software development costs, the timing
of recognition of certain revenue items, the timing of the deductibility of
certain reserves and accruals for income tax purposes and the timing of
recognition of dividends from subsidiaries.
Earnings Per Share
On July 14, 1997, the Company announced a three-for-two stock split in the
form of a common stock dividend to be distributed on August 15, 1997 to
stockholders of record as of August 1, 1997. Per share data and numbers of
common shares contained in these consolidated financial statements and in
Management's Discussion and Analysis of Financial Condition and Results of
Operations have not been adjusted to reflect the stock split that will be
effective in the first quarter of fiscal 1998.
Earnings per share was computed based on the weighted average number of common
and common equivalent shares outstanding during the period. Common equivalent
shares are calculated using the treasury stock method and represent
incremental shares issuable upon the exercise of outstanding stock options and
warrants.
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 128 "Earnings per
Share," which will be adopted by the Company in the third quarter of fiscal
1998. SFAS No. 128 requires companies to compute net income per share under
two different methods, basic and diluted, and to disclose the methodology used
for the calculation. If SFAS No. 128 had been applied by the Company during
fiscal 1997 and 1996, basic net income per share would have been $1.25 and
$0.92 and diluted net income per share would have been $1.22 and $0.90,
respectively.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current
year presentation.
37
<PAGE>
ORACLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. PROPERTY
Property consists of:
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
--------------------
1997 1996
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Computer equipment.................................... $ 681,324 $ 523,991
Furniture and fixtures................................ 217,109 172,355
Automobiles........................................... 6,653 4,764
Buildings and improvements............................ 486,208 344,071
Land.................................................. 85,980 83,413
--------- ---------
Total............................................... 1,477,274 1,128,594
Accumulated depreciation and amortization............. (608,326) (442,840)
--------- ---------
Property, net....................................... $ 868,948 $ 685,754
========= =========
</TABLE>
In fiscal 1997, the Company became a 74% limited partner in III Centrum
Associates Limited Partnership, a real estate limited partnership which owns
one of the buildings leased by the Company at its headquarters site, by making
a capital contribution of $2.5 million. Additionally, in fiscal 1997, the
Company loaned the partnership $60.4 million in the form of a promissory note
secured by a deed of trust which was used to pay off a mortgage on a building
owned by the partnership. The Company has the right to leave the partnership
on January 1, 2000, and to take title to the building without making further
capital contributions. The Company continues to lease the building from the
partnership. As a result of the loan and capital contribution, the Company has
capitalized the building lease, and the $62.9 million in payments have been
classified as buildings and improvements.
During fiscal 1994, the Company purchased $85.1 million in mortgage notes.
These notes are the obligations of IV Centrum Associates, a real estate
limited partnership, which owns two buildings leased by the Company at its
headquarters site. The Company also became a 74% limited partner in IV Centrum
Associates by making a capital contribution of approximately $4 million. The
Company intends to leave the partnership in the first quarter of fiscal 1998
and to take full title to both buildings without making further capital
contributions. As a result of the original note purchases and capital
contribution, the Company capitalized the two building leases, and the
$89.1 million in payments have been classified as buildings and improvements.
Additionally, during fiscal 1994, the Company entered into an arrangement
whereby it leased an office building adjacent to its headquarters site and
concurrently acquired the land under the building and all outstanding mortgage
notes for a total of $22.1 million. The Company has various options to extend
the lease and to purchase the building at various times during the lease term.
As a result of the land and note purchases, the Company has capitalized the
building lease, and the $22.1 million in payments have been classified as land
and buildings and improvements.
Equipment under capital leases included in property at May 31, 1997 and 1996
was $29,452,000 and $30,428,000, respectively. Accumulated amortization of
leased equipment at such dates was $27,698,000 and $27,650,000, respectively.
38
<PAGE>
ORACLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
As of May 31, 1997, future minimum annual lease payments under capital leases
together with their present value were:
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
------------------ (IN THOUSANDS)
<S> <C>
1998..................................................... $1,104
1999..................................................... 452
2000..................................................... 269
2001..................................................... 45
------
Total minimum lease payments........................... 1,870
Amount representing interest............................. (269)
------
Present value of minimum lease payments................ $1,601
======
</TABLE>
3. NOTES PAYABLE AND CURRENT MATURITIES OF LONG-TERM DEBT
At May 31, 1997 and 1996, the Company had unsecured short-term borrowings from
banks which were payable on demand in the amounts of $2,532,000 and $4,377,000,
respectively. Interest on the borrowings outstanding at May 31, 1997 ranged
from 2% to 15%. The Company also had current maturities of long-term debt of
$829,000 and $1,246,000 at May 31, 1997 and 1996, respectively.
4. LONG-TERM DEBT
Long-term debt consists of:
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
-------------------
1997 1996
-------- ---------
(IN THOUSANDS)
<S> <C> <C>
Senior Notes....................................... $300,000 $ --
Other.............................................. 64 100
Capital lease obligations (See Note 2)............. 1,601 2,043
-------- ---------
Total............................................ 301,665 2,143
Current maturities................................. (829) (1,246)
-------- ---------
Long-term debt..................................... $300,836 $ 897
======== =========
</TABLE>
During the third quarter of fiscal 1997, the Company issued $150,000,000 in
6.72% Senior Notes due in the year 2004 and $150,000,000 in 6.91% Senior Notes
due in the year 2007. The Senior Notes are unsecured general obligations of the
Company that rank on a parity with all other unsecured and unsubordinated
indebtedness of the Company that may be outstanding.
As of May 31, 1997, maturities of long-term debt (excluding the Senior Notes
discussed above and the lease payments related to capitalized facilities
discussed in Note 2) are:
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
------------------ (IN THOUSANDS)
<S> <C>
1998..................................................... $31
1999..................................................... 25
2000..................................................... 8
---
Total.................................................. $64
===
</TABLE>
39
<PAGE>
ORACLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. COMMITMENTS
In December 1996, the Company entered into a seven year master lease facility
which provides for the construction or purchase of up to $150,000,000 of
property and improvements to be leased to the Company. The Company's
obligation to make lease payments generally will begin at the end of the
construction period. Rent will be payable quarterly in arrears over a term of
seven years. The Company's obligations under the lease facility currently are
collateralized by U.S. treasury securities. The Company has the discretion to
substitute other collateral for the treasury securities. The Company may, at
its option, purchase the leased properties during the term of the lease at
approximately the amount expended by the lessor to construct or purchase such
properties. In the event that the Company does not exercise its purchase
option, the Company has agreed to guarantee that the properties will have a
specified residual value which will be determined at the lease inception date
for each property. As of May 31, 1997, the Company has drawn down
approximately $46,500,000 of the master lease facility. Leases under the
provisions of this agreement are accounted for as operating leases.
Facilities and certain furniture and equipment are leased under operating
leases. As of May 31, 1997, future minimum annual lease payments (excluding
the master lease facility discussed above and the lease payments related to
capitalized facilities discussed in Note 2) are as follows:
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
------------------ (IN THOUSANDS)
<S> <C>
1998..................................................... $129,777
1999..................................................... 104,827
2000..................................................... 79,079
2001..................................................... 55,935
2002..................................................... 43,768
Thereafter............................................... 192,880
--------
Total.................................................. $606,266
========
</TABLE>
Rent expense was $184,468,000, $179,227,000 and $132,647,000, for fiscal years
1997, 1996 and 1995, respectively. Rent expense in fiscal 1997, 1996 and 1995
is net of sublease income of approximately $1,394,000, $2,020,000 and
$2,076,000, respectively.
6. STOCKHOLDERS' EQUITY
Stock Option Plans
The Company's 1985 Stock Option Plan provided for the issuance of incentive
stock options to employees of the Company and non-qualified options to
employees, directors, consultants and independent contractors of the Company.
Under the terms of this plan, options were generally granted at not less than
fair market value, became exercisable as established by the Board (generally
ratably over four to five years), and generally expire ten years from the date
of grant. As of May 31, 1997, options to purchase 1,655,022 shares were
outstanding and vested. As of May 31, 1997, there were no options for shares
of Common Stock available for future grant under this plan.
In fiscal 1991, the Company adopted both the 1990 Directors Stock Option Plan
and the 1990 Executive Officers Stock Option Plan which provide for the
issuance of non-qualified stock options to directors and non-qualified or
incentive stock options to executive officers of the Company, respectively.
Under the terms of these plans, options to purchase up to 9,630,000 shares of
Common Stock were reserved for issuance, generally are granted at not less
than fair market value, become exercisable as established by the Board
(generally ratably over four years), and generally expire ten years from the
date of grant. As of May 31, 1997, options to purchase 1,144,127 shares of
Common Stock were outstanding, of which 919,127 shares were vested. Options
for 2,306,920 shares were available for future grant under these plans at
May 31, 1997.
40
<PAGE>
ORACLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In fiscal 1992, the Company adopted the Long-term Equity Incentive Plan which
provides for the issuance of non-qualified stock options and incentive stock
options, as well as stock purchase rights, stock appreciation rights (in
connection with options), and long-term performance awards to eligible
employees, officers, directors who are also employees or consultants, and
advisors of the Company. Under the terms of this plan, options to purchase
22,500,000 shares of Common Stock were reserved for issuance, generally are
granted at not less than fair market value, become exercisable as established
by the Board (generally ratably over four years), and generally expire ten
years from the date of grant. An additional 18,000,000 shares of Common Stock
were reserved for issuance under the plan in both fiscal 1994 and fiscal 1996.
In fiscal 1997, an additional 34,000,000 shares of Common Stock were reserved
for issuance under the plan. As of May 31, 1997, options to purchase
40,342,450 shares of Common Stock were outstanding, of which 16,360,953 shares
were vested. Options for 39,978,146 shares were available for future grant
under the plan at May 31, 1997. To date, the Company has not issued any stock
purchase rights, stock appreciation rights or long-term performance awards
under this plan.
In fiscal 1993, the Company's Board of Directors adopted the 1993 Directors
Stock Option Plan (the "1993 Directors Plan") which provides for the issuance
of non-qualified stock options to outside directors. Under the terms of this
plan, options to purchase 2,250,000 shares of Common Stock were reserved for
issuance, are granted at not less than fair market value, become exercisable
over four years, and expire ten years from the date of grant. Under the terms
of the 1993 Directors Plan, all grants of options to purchase shares of the
Company's Common Stock are automatic and nondiscretionary. The plan provides
for initial stock option grants of 22,500 shares to each individual who was an
outside director on May 24, 1993. In addition, the Chairman of the Executive
Committee of the Company's Board of Directors was automatically granted
options to purchase 180,000 shares of the Company's Common Stock. Each
individual who becomes an outside director after May 24, 1993 shall
automatically be granted options to purchase 56,250 shares. The 1993 Directors
Plan also provides for subsequent stock option grants. On May 31 of each year
beginning on May 31, 1994, each outside director will be granted options to
purchase 16,875 shares of the Company's Common Stock, provided that on such
date the outside director has served on the Company's Board of Directors for
at least six months. In addition, each outside director who has served as a
Chairman of the Executive or Finance and Audit Committee of the Company's
Board of Directors will be granted options to purchase 39,375 shares of Common
Stock on May 31 of each year beginning on May 31, 1994, provided that the
outside director has served as a Chairman of any such committee for at least
one year. As of May 31, 1997, options to purchase 488,188 shares of common
stock were outstanding, of which 169,998 were vested. Options for 1,536,814
shares were available for future grant under this plan at May 31, 1997.
41
<PAGE>
ORACLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table summarizes stock option plan activity:
<TABLE>
<CAPTION>
SHARES
UNDER
OPTION OPTION PRICES
---------- ----------------
<S> <C> <C>
Balance, May 31, 1994..................... 37,508,414 $ 0.10 -- $16.06
Granted................................. 8,375,025 15.36 -- 24.67
Exercised............................... (6,368,127) 15.50 -- 24.67
Canceled................................ (2,215,530) 1.28 -- 21.33
----------
<CAPTION>
WEIGHTED AVERAGE
EXERCISE PRICE
----------------
<S> <C> <C>
Balance, May 31, 1995..................... 37,299,782 $ 9.21
Granted................................. 12,457,219 30.34
Exercised............................... (7,066,368) 4.42
Canceled................................ (2,472,707) 18.44
----------
Balance, May 31, 1996..................... 40,217,926 $ 16.04
----------
Granted................................. 11,443,612 38.55
Exercised............................... (5,877,143) 8.12
Canceled................................ (2,154,608) 25.00
----------
Balance, May 31, 1997..................... 43,629,787 $ 22.50
==========
</TABLE>
As of May 31, 1997, the Company had reserved 87,451,667 shares of Common Stock
for the exercise of options. The range of exercise prices for options
outstanding at May 31, 1997 was $1.14 to $47.25. The range of exercise prices
for options is due primarily to the increasing price of the Company's stock
over the period of the grants.
The following table summarizes information about stock options outstanding at
May 31, 1997:
<TABLE>
<CAPTION>
WEIGHTED
WEIGHTED AVERAGE
NUMBER AVERAGE WEIGHTED NUMBER EXERCISE
OUTSTANDING REMAINING AVERAGE EXERCISABLE PRICE OF
RANGE OF EXERCISE AS OF CONTRACTUAL EXERCISE AS OF EXERCISABLE
PRICE 5/31/97 LIFE PRICE 5/31/97 OPTIONS
----------------- ----------- ----------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$ 1.14 -- $ 1.33 1,162,529 3.43 $ 1.33 937,529 $ 1.33
$ 1.38 -- $ 2.03 4,908,882 4.09 $ 2.02 4,908,882 $ 2.02
$ 2.04 -- $ 9.36 4,759,307 5.19 $ 5.72 4,318,182 $ 5.86
$ 9.69 -- $15.17 4,610,394 6.47 $13.53 3,224,818 $13.47
$ 15.22 -- $21.33 5,062,635 7.27 $19.16 2,407,275 $18.94
$ 21.42 -- $27.92 4,742,095 7.76 $24.13 1,434,471 $23.80
$ 28.25 -- $33.25 2,911,326 8.62 $31.60 704,436 $31.65
$ 33.50 -- $33.88 4,448,026 8.57 $33.87 1,122,625 $33.87
$ 34.38 -- $37.63 4,394,595 8.85 $34.98 32,204 $35.54
$ 38.13 -- $47.25 6,629,998 9.53 $41.12 14,678 $43.14
---------- ---- ------ ---------- ------
$ 1.14 -- $47.25 43,629,787 7.28 $22.50 19,105,100 $11.60
---------- ---- ------ ---------- ------
</TABLE>
42
<PAGE>
ORACLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Stock Purchase Plan
In October 1987, the Company adopted an Employee Stock Purchase Plan (the
"1987 Purchase Plan"), and reserved 36,000,000 shares of Common Stock for
issuance thereunder. In September 1992, the plan was amended to reserve an
additional 1,125,000 shares of Common Stock for the purpose of ensuring that
sufficient shares remained available for a full allocation of shares to all
participants in the offering period ended September 30, 1992. The 1987
Purchase Plan was terminated on September 30, 1992, and the remaining shares
became available for issuance under the 1992 Purchase Plan.
In August 1992, the Company adopted the Employee Stock Purchase Plan (1992)
(the "Employee Stock Purchase Plan"), and reserved 9,000,000 shares of Common
Stock for issuance thereunder. An additional 9,000,000 and 7,000,000 shares of
Common Stock were reserved for issuance under the plan in fiscal 1994 and
fiscal 1997, respectively. Under the stock purchase plan, the Company's
employees may purchase shares of Common Stock at a price per share that is 85%
of the lesser of the fair market value as of the beginning or the end of the
semi-annual option period. Through May 31, 1997, 15,020,681 shares had been
issued and 10,392,621 shares are reserved for future issuances under this
plan.
During fiscal 1997 and 1996, the Company issued 3,085,634 and 3,123,013
shares, respectively, under the Employee Stock Purchase Plan. If the Company
had elected to recognize the compensation cost based on the fair value of the
employee's purchase rights, the cost would have been estimated using the
Black-Scholes model with the following assumptions for each of the two six-
month periods in fiscal 1997 and 1996: (i) dividend yield of zero percent for
all periods, (ii) expected life of one-half year for all periods, (iii)
expected volatility of 37.5%, and (iv) risk-free interest rates within a range
of 6.11% to 6.37%. The weighted-average fair value of each purchase right
granted in fiscal 1997 and 1996 was $9.52 and $6.29 per share, respectively.
Shareholder Rights Plan
On December 3, 1990, the Board adopted a Shareholder Rights Plan. Pursuant to
the Plan, the Company distributed Preferred Stock Purchase Rights as a
dividend at the rate of one Right for each share of the Company's Common Stock
held by stockholders of record as of December 31, 1990. The Board also
authorized the issuance of Rights for each share of Common Stock issued after
the record date, until the occurrence of certain specified events. The
Shareholder Rights Plan was adopted to provide protection to stockholders in
the event of an unsolicited attempt to acquire the Company.
The Rights are not exercisable until the earlier of (i) ten days following an
announcement that a person or group has acquired beneficial ownership of 20%
of the Company's Common Stock or (ii) ten business days (or such later date as
may be determined by the Board) following the announcement of a tender offer
which would result in a person or group obtaining beneficial ownership of 20%
or more of the Company's outstanding Common Stock, subject to certain
exceptions (the earlier of such dates being called the "Distribution Date").
The Rights are initially exercisable for one forty-five hundredth of a share
of the Company's Series A Junior Participating Preferred Stock at a price of
$55.56 per one forty-five hundredth share, subject to adjustment. However, if
(i) after the Distribution Date the Company is acquired in certain types of
transactions, or (ii) any person or group (with certain exceptions) acquires
beneficial ownership of 20% of the Company's Common Stock, then holders of
Rights (other than the 20% holder) will be entitled to receive upon exercise
of the Right, Common Stock of the Company (or in the case of acquisition of
the Company, Common Stock of the acquiror) having a market value of two times
the exercise price of the Right.
The Company is entitled to redeem the Rights, for $0.00022 per Right, at the
discretion of the Board of Directors, until certain specified times. The
rights are not exercisable until the Company's period for redemption has
passed. The Company may also require the exchange of rights, at a rate of one
share of Common Stock, or one forty-five hundredth share of Series A Junior
Participating Preferred Stock, for each Right, under certain circumstances.
The Company also has the ability to amend the Rights, subject to certain
limitations.
43
<PAGE>
ORACLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Stock Repurchases
The Company's Board of Directors has approved the repurchase of up to
47,000,000 shares of Common Stock on the open market to reduce the dilutive
effect of the Company's stock plans. Pursuant to this repurchase program, the
Company purchased 12,807,500 shares of the Company's Common Stock for
approximately $528,209,000 in fiscal 1997, 4,478,134 shares of the Company's
Common Stock for approximately $113,087,000 in fiscal 1996, 4,201,875 shares of
the Company's Common Stock for approximately $75,859,000 in fiscal 1995 and
13,437,000 shares of the Company's Common Stock for approximately $124,787,000
prior to fiscal 1995.
Stock Warrants
During fiscal 1995 and 1994, the Company sold 5,752,500 put warrants. On March
24, 1995, 3,502,500 of these put warrants were canceled at minimal cost and the
remaining warrants expired without being exercised. Additionally, the Company
purchased 3,595,500 call options in fiscal 1995 and 1994. On July 6, 1995, the
Company sold 2,189,250 of the call options and credited the net proceeds of
$17,175,000 to equity. The remaining 1,406,250 call options were exercised in
October 1995 at $21.08 per share for a total of $29,648,000.
During fiscal 1997, the Company sold 6,000,000 warrants, each of which entitles
the holder to purchase one share of Common Stock at prices between $77.00 and
$77.55. These warrants expire in May 2000 and the proceeds of $35,898,000 were
credited to equity.
Accounting for Stock-Based Compensation
Pro forma information regarding net income and earnings per share is required
by SFAS No. 123. This information is required to be determined as if the
Company had accounted for its employee stock options granted subsequent to May
31, 1995 under the fair value method of that statement. The fair value of
options granted for fiscal years ending May 31, 1997 and May 31, 1996 reported
below has been estimated at the date of grant using a Black-Scholes option
pricing model with the following weighted average assumptions:
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
-------------------------
EMPLOYEE STOCK OPTIONS 1997 1996
---------------------- ------------ ------------
<S> <C> <C>
Expected life from vest date (in years):
Employees.................................... 0.41 0.41
Officers and Directors....................... 0.43 -- 6.14 0.43 -- 6.14
Risk-free interest rates....................... 5.6 -- 6.8% 5.3 -- 6.7%
Volatility..................................... 37.5% 37.5%
Dividend yield................................. -- --
</TABLE>
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options that have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions, including the expected stock price volatility.
The Company's options have characteristics significantly different from those
of traded options, and changes in the subjective input assumptions can
materially affect the fair value estimate. Based upon the above assumptions,
the weighted average fair value of employee stock options granted during fiscal
1997 and 1996 was $17.40 and $13.33 per share, respectively.
44
<PAGE>
ORACLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized over the options' vesting period. Had the Company's stock option
and stock purchase plan been accounted for under SFAS No. 123, net income and
earnings per share would have been reduced to the following pro forma amounts:
<TABLE>
<CAPTION>
YEAR ENDED MAY
31,
-----------------
1997 1996
-------- --------
(IN THOUSANDS,
EXCEPT PER SHARE
DATA)
<S> <C> <C>
Net income:
As reported.......................................... $821,457 $603,279
Pro forma............................................ $737,779 $572,913
Earnings per share:
As reported.......................................... $ 1.22 $ 0.90
Pro forma............................................ $ 1.10 $ 0.86
</TABLE>
The effects of applying SFAS No. 123 on pro forma disclosures of net income
and earnings per share for fiscal 1997 and 1996 are not likely to be
representative of the pro forma effects on net income and earnings per share
in future years.
7. INCOME TAXES
The following is a geographical breakdown of the Company's income before
taxes:
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
------------------------------
1997 1996 1995
---------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Domestic................................ $ 952,131 $680,172 $526,815
Foreign................................. 331,396 239,338 132,167
---------- -------- --------
Total................................. $1,283,527 $919,510 $658,982
========== ======== ========
The provision for income taxes consists of the following:
<CAPTION>
YEAR ENDED MAY 31,
------------------------------
1997 1996 1995
---------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Current Payable:
Federal............................... $ 318,976 $253,514 $189,012
State................................. 55,387 42,738 31,831
Foreign............................... 169,080 109,712 108,695
---------- -------- --------
Total current....................... 543,443 405,964 329,538
---------- -------- --------
Deferred Payable (Prepaid):
Federal............................... (53,480) (67,865) (63,398)
State................................. (11,136) (8,129) (4,282)
Foreign............................... (16,757) (13,739) (44,394)
---------- -------- --------
Total deferred...................... (81,373) (89,733) (112,074)
---------- -------- --------
Total................................. $ 462,070 $316,231 $217,464
========== ======== ========
</TABLE>
The provision for income taxes differs from the amount computed by applying
the federal statutory rate to the Company's income before taxes as follows:
45
<PAGE>
ORACLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
----------------------------
1997 1996 1995
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Tax provision at statutory rate........... $449,234 $321,829 $230,643
Tax credits............................... (13,455) (692) (4,600)
Tax benefit of exempt FSC income.......... (22,130) (20,831) (16,368)
State tax, net of federal benefit......... 31,632 22,800 17,308
Foreign taxes provided at rates other than
the U.S. statutory rate.................. (6,538) (10,373) (8,575)
Foreign losses not tax benefited.......... 13,335 8,396 4,104
Other..................................... 9,992 (4,898) (5,048)
-------- -------- --------
Provision for income taxes................ $462,070 $316,231 $217,464
======== ======== ========
</TABLE>
The components of the deferred tax assets and liabilities, as reflected on the
balance sheet, consist of the following:
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
-----------------------------
1997 1996 1995
--------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Deferred Tax Liabilities:
Capitalized software development costs. $ (40,506) $(34,858) $(33,681)
Other tax liabilities.................. (793) (16,319) (27,450)
--------- -------- --------
Total deferred tax liabilities....... (41,299) (51,177) (61,131)
Deferred Tax Assets:
Reserves and accruals.................. 121,616 74,802 45,990
Differences in timing of revenue recog-
nition................................ 104,561 51,366 47,698
Foreign earnings deemed repatriated.... 25,400 49,325 22,938
Net operating loss carryovers.......... 24,935 16,417 19,516
Depreciation and amortization.......... 65,368 29,670 6,294
Other tax assets....................... 21,944 40,381 30,939
--------- -------- --------
Total deferred tax assets............ 363,824 261,961 173,375
Valuation allowance.................... (8,784) (7,815) (4,243)
--------- -------- --------
Net.................................. $ 313,741 $202,969 $108,001
--------- -------- --------
Recorded as:
Prepaid and refundable income taxes.... $ 274,366 $171,560 $135,491
Deferred income taxes.................. (7,402) (9,207) (27,490)
Other assets........................... 46,777 40,616 --
--------- -------- --------
$ 313,741 $202,969 $108,001
========= ======== ========
</TABLE>
The Company provides United States income taxes on the earnings of foreign
subsidiaries unless they are considered permanently invested outside the
United States. As of May 31, 1997, the cumulative amount of earnings upon
which United States income taxes have not been provided are approximately
$35,183,000. At May 31, 1997, the unrecognized deferred tax liability for
these earnings is approximately $8,477,000.
Certain foreign subsidiaries of the Company have net operating loss
carryforwards at May 31, 1997, totaling approximately $61,430,000, which may
be used to offset future taxable income. The carryforwards expire at various
dates; $1,555,000 in 2000, $4,573,000 in 2001, $31,507,000 in 2002, $3,901,000
in 2003, $4,132,000 in 2004, and the remaining balance has no expiration. As
of May 31, 1997, the Company has recorded a gross
46
<PAGE>
ORACLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
deferred tax asset related to the loss carryforwards of $24,935,000, and a
related valuation allowance of $8,784,000. At May 31, 1996 and 1995, the
deferred assets were $16,417,000 and $19,516,000, respectively, and the related
valuation allowance attributed to loss carryforwards were $7,815,000 and
$4,243,000, respectively.
8. SEGMENT INFORMATION
The Company operates in one industry segment: the development and marketing of
computer software and related services. The Company's products are marketed
internationally through the Company's subsidiaries and through distributors.
Intercompany revenues are generally based on a sublicense fee, representing a
percentage of license and support revenues generated by non-U.S. operations
from their unaffiliated customers.
The following table presents a summary of operations by geographic region:
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
--------------------------------
1997 1996 1995
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues from Unaffiliated Customers:
Domestic operations................... $2,664,962 $1,815,725 $1,234,330
---------- ---------- ----------
International operations:
Europe/Middle East/Africa operations. 1,881,157 1,541,308 1,165,181
Asia Pacific operations.............. 809,604 605,244 385,787
Other Americas operations............ 328,613 261,023 181,580
---------- ---------- ----------
Total international operations...... 3,019,374 2,407,575 1,732,548
---------- ---------- ----------
Consolidated........................... $5,684,336 $4,223,300 $2,966,878
========== ========== ==========
Intercompany revenues:
Domestic operations................... $ 646,389 $ 508,201 $ 365,814
========== ========== ==========
Operating Income (Excluding Acquired
In-Process Research and Development):
Domestic operations................... $ 963,391 $ 714,208 $ 509,716
Europe/Middle East/Africa operations.. 165,919 113,956 86,477
Asia Pacific operations............... 125,811 81,844 49,851
Other Americas operations............. 44,664 45,814 3,677
---------- ---------- ----------
Consolidated........................ $1,299,785 $ 955,822 $ 649,721
========== ========== ==========
Identifiable Assets:
Domestic operations................... $2,894,912 $1,976,487 $1,451,720
Europe/Middle East/Africa operations.. 1,131,723 942,816 667,765
Asia Pacific operations............... 445,930 336,640 230,694
Other Americas operations............. 151,750 101,300 74,338
---------- ---------- ----------
Consolidated........................ $4,624,315 $3,357,243 $2,424,517
========== ========== ==========
</TABLE>
9. LITIGATION
The Company is subject to various legal proceedings and claims, either asserted
or unasserted, which arise in the ordinary course of business. While the
outcome of these claims cannot be predicted with certainty, management does not
believe that the outcome of any of these legal matters will have a material
adverse effect on the Company's consolidated results of operations or
consolidated financial position.
47
<PAGE>
SCHEDULE II
ORACLE CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS BALANCE AT
BEGINNING OF CHARGED TO TRANSLATION END OF
CLASSIFICATION PERIOD OPERATIONS WRITE-OFFS ADJUSTMENT PERIOD
-------------- ------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful
Accounts
Year Ended:
May 31, 1995.......... $ 39,777,000 $53,784,000 $(28,011,000) $ 2,178,000 $ 67,728,000
============ =========== ============ =========== ============
May 31, 1996.......... $ 67,728,000 $64,412,000 $(23,229,000) $(3,200,000) $105,711,000
============ =========== ============ =========== ============
May 31, 1997.......... $105,711,000 $92,635,000 $(68,804,000) $(1,702,000) $127,840,000
============ =========== ============ =========== ============
</TABLE>
48
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on August 13, 1997.
ORACLE CORPORATION
Lawrence J. Ellison
By: _________________________________
Lawrence J. Ellison, Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
Lawrence J. Ellison Chief Executive Officer and August 13, 1997
____________________________________ Chairman of the Board of
Lawrence J. Ellison Directors
Raymond J. Lane President, Chief Operating August 13, 1997
____________________________________ Officer and Director
Raymond J. Lane
Jeffrey O. Henley Executive Vice President, August 13, 1997
____________________________________ Chief Financial Officer and
Jeffrey O. Henley Director
Thomas A. Williams Vice President and Corporate August 13, 1997
____________________________________ Controller
Thomas A. Williams
Jeffrey Berg Director August 13, 1997
____________________________________
Jeffrey Berg
Michael J. Boskin Director August 13, 1997
____________________________________
Michael J. Boskin
Jack Kemp Director August 13, 1997
____________________________________
Jack Kemp
Donald L. Lucas Director August 13, 1997
____________________________________
Donald L. Lucas
Richard A. McGinn Director August 13, 1997
____________________________________
Richard A. McGinn
</TABLE>
<PAGE>
LOGO
RECYCLED PAPER
<PAGE>
ORACLE CORPORATION
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT # EXHIBIT TITLES
- --------- --------------
<S> <C>
4.2 Warrant Purchase Agreement between Oracle Corporation and
Morgan Stanley & Co. Incorporated, as agent for Morgan Stanley
& Co. International Limited dated May 7, 1997.
4.3 Warrant Agreement between Oracle Corporation and BankBoston,
N.A. dated May 12, 1997.
4.4 Warrant Certificate dated May 12, 1997.
4.5 Warrant Purchase Agreement between Oracle Corporation and
Goldman, Sachs & Co. Dated May 14, 1997.
4.6 Warrant Agreement between Oracle Corporation and BankBoston,
N.A. dated May 19, 1997.
4.7 Warrant Certificate dated May 19, 1997.
10.25 Amendment No 1 to 1991 Long-Term Equity Incentive Plan dated
December 9, 1996.
21.01 Subsidiaries of the Registrant.
23.01 Consent of Arthur Andersen LLP.
27.1 Financial Data Schedule.
</TABLE>
50
<PAGE>
EXHIBIT 4.2
EXECUTION COPY
WARRANT PURCHASE AGREEMENT dated as of May 7, 1997 between ORACLE
CORPORATION, a Delaware corporation (the "Company"), and MORGAN STANLEY & CO.
INCORPORATED, a Delaware corporation ("Morgan Stanley"), as agent for MORGAN
STANLEY & CO. INTERNATIONAL LIMITED ("MSIL").
WHEREAS, the Company proposes to enter into a Warrant Agreement (the
"Warrant Agreement"), substantially in the form of Exhibit I hereto, between the
Company and BankBoston, N.A., a national banking association, as Warrant Agent,
pursuant to which the Company proposes to issue up to 8,000,000 Equity Call
Warrants in one or more series (collectively, the "Warrants" or, individually a
"Warrant"), each representing the right to purchase, subject to the terms and
conditions set forth therein, one share of the common stock, par value $0.01 per
share (the "Common Stock"), of the Company;
WHEREAS, in connection with the purchase of the Warrants pursuant to
the terms hereof and one or more Pricing Agreements (as defined herein), the
Company proposes to repurchase on the Closing Date up to 3,500,000 shares of
Common Stock pursuant to one or more Repurchase Contracts to be entered into
between the Company, MSIL and Morgan Stanley, as agent for MSIL (the "Repurchase
Contracts"); and
WHEREAS, capitalized terms not defined herein are used as defined in
the Warrant Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements and other considerations set forth herein, the parties hereto agree
as follows:
1. Representations and Warranties. (a) The Company hereby
------------------------------
represents and warrants to Morgan Stanley, as agent for MSIL, as of the date
hereof, as of each Pricing Date (as defined herein) and as of each Closing Date
as follows:
(i) The Company has been duly incorporated, and is validly existing as a
corporation in good standing under the laws of the State of Delaware.
(ii) The Company has the corporate power and authority to own its property
and conduct its business, and is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification, except to the
extent that the failure to be so qualified or be in good standing would not
have a material adverse effect on the Company and its subsidiaries, taken as a
whole.
(iii) Each subsidiary of the Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the jurisdiction
of its incorporation, has the corporate power and authority to own its
property and to conduct its business and is duly qualified to transact
business and is in good standing in each jurisdiction in which the conduct of
its business or its ownership or leasing of property requires such
qualification,
1
<PAGE>
except to the extent that the failure to be so qualified or be in good
standing would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
(iv) The shares of Common Stock outstanding prior to the issuance of the
Warrants have been duly authorized and are validly issued, fully paid and non-
assessable.
(v) The Company has all requisite power and authority (corporate and
other), and has taken all necessary corporate action, to authorize, execute,
deliver, and perform this Warrant Purchase Agreement, the Warrant Agreement,
each Pricing Agreement (as defined herein) and each Repurchase Contract; to
execute, issue, sell, and deliver the Warrants and a certificate or
certificates evidencing the Warrants; to authorize and reserve for issuance
and, upon payment from time to time of the Purchase Price, to issue, sell, and
deliver the shares of Underlying Common Stock issuable upon exercise of the
Warrants; and to perform all of its obligations under this Warrant Purchase
Agreement, the Warrant Agreement, each Pricing Agreement, the Warrants and
each Repurchase Contract.
(vi) Each of this Warrant Purchase Agreement, the Warrant Agreement, each
Pricing Agreement and each Repurchase Contract has been duly authorized by the
Company and this Warrant Purchase Agreement has been duly executed and
delivered by the Company. The Warrant Agreement, each Repurchase Contract and
each Pricing Agreement, when duly executed and delivered by the Company, will
be legal, valid and binding agreements of the Company enforceable in
accordance with their respective terms except as (i) the enforceability
thereof may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and (ii) the availability of equitable remedies
may be limited by equitable principles of general applicability.
(vii) The Warrants have been duly authorized and, when duly executed and
countersigned in accordance with the provisions of the Warrant Agreement, will
be legal, valid and binding obligations of the Company, enforceable in
accordance with their respective terms except as (i) the enforceability
thereof may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and (ii) the availability of equitable remedies
may be limited by equitable principles of general applicability.
(viii) The shares of Underlying Common Stock, when issued and delivered in
accordance with the terms of the Warrant Agreement and the Warrants, will be
validly issued, fully paid and non-assessable, and the issuance of such shares
will not be subject to any preemptive or similar rights.
(ix) Assuming the accuracy of the representations of Morgan Stanley made
in the letter referred to in Section 3(d), the execution and delivery by the
Company of, and the performance by the Company of its obligations under, this
Warrant Purchase Agreement, the Warrant Agreement, each Pricing Agreement, the
Warrants and each Repurchase Contract will not contravene any provision of
applicable law.
(x) The execution and delivery by the Company of, and the performance by
the Company of its obligations under, this Warrant Purchase Agreement, the
Warrant Agreement, each Pricing Agreement, the Warrants and each Repurchase
Contract will not contravene the certificate of incorporation or by-laws of
the Company or any agreement or
2
<PAGE>
other instrument binding upon the Company or any of its subsidiaries that is
material to the Company and its subsidiaries, taken as a whole, or any
judgment, order or decree of any governmental body, agency or court having
jurisdiction over the Company or any subsidiary, and no consent, approval,
authorization or order of or qualification with any governmental body or
agency is required for the performance by the Company of its obligations under
this Warrant Purchase Agreement, the Warrant Agreement, each Pricing
Agreement, the Warrants or each Repurchase Contract, except such as may be
required by the Securities Act, the securities or Blue Sky laws of the various
states, the rules of the National Association of Securities Dealers, Inc. (the
"NASD") or the rules and regulations applicable to the listing of securities
on the Nasdaq National Market in connection with the reoffer and resale of the
shares of Underlying Common Stock by Morgan Stanley or the issuance of shares
of Underlying Common Stock to any person other than Morgan Stanley.
(xi) The Company is not an "investment company" or an entity "controlled"
by an "investment company," as such terms are defined in the Investment
Company Act of 1940, as amended.
(xii) The Company's Annual Report on Form 10-K for the fiscal year ended
May 31, 1996, as amended, and its Quarterly Reports on Form 10-Q for the
periods ended August 31, 1996, November 30, 1996 and February 28, 1997 (the
"1934 Act Reports") (as previously furnished to Morgan Stanley), at the time
they were filed did not, and, giving effect as of the date hereof and as of
each of the Closing Dates to the transactions contemplated hereby and by the
Warrant Agreement and each Pricing Agreement do not, contain any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(xiii) There has not occurred any material adverse change in the financial
condition, earnings, business or operations of the Company and its
subsidiaries, taken as a whole, from that set forth in the 1934 Act Reports.
(xiv) Neither the Company nor any affiliate (as defined in Rule 501(b) of
Regulation D under the Securities Act ("Regulation D")) of the Company has
directly, or through any agent, sold, offered for sale, solicited offers to
buy or otherwise negotiated in respect of any security (as defined in the
Securities Act) that is or will be integrated with the sale of any Warrants in
a manner that would require the registration under the Securities Act of the
offering contemplated by this Agreement and the Warrant Agreement. The Company
also agrees not to sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in the Securities Act) that
would be integrated with the sale of any Warrants in a manner that would
require the registration under the Securities Act of the offering contemplated
by this Agreement and the Warrant Agreement.
(xv) No form of general solicitation or general advertising (as those
terms are defined in Regulation D under the Securities Act) was used by the
Company or any of its representatives in connection with the offer and sale of
any Warrants.
(xvi) There are no material legal or governmental proceedings pending or
threatened to
3
<PAGE>
which the Company or any of its subsidiaries is a party or to which any of the
properties of the Company or any of its subsidiaries is subject that would be
required to be described by Item 103 of Regulation S-K under the Securities
Act were such Item applicable to the 1934 Act Reports and are not described as
required in the 1934 Act Reports.
(xvii) The Company acknowledges and agrees that it is not relying, and has
not relied, upon Morgan Stanley or MSIL with respect to the legal, accounting,
tax or other implications of this Agreement and the Warrant Agreement and the
transactions contemplated hereby and thereby and that it has conducted its own
analysis of such transactions. The Company further acknowledges and agrees
that neither Morgan Stanley nor MSIL has acted as its advisor in any capacity
in connection with this Agreement or the Warrant Agreement or the transactions
contemplated hereby or thereby. The Company understands and acknowledges that
Morgan Stanley and MSIL and their Affiliates may from time to time effect
transactions, and hold positions, for their own accounts or the accounts of
customers, in securities or options on securities of the Company and that
Morgan Stanley and MSIL and their Affiliates may continue to conduct such
transactions during the term of any Warrant.
(b) Each of Morgan Stanley and MSIL agrees that it will not sell any
Warrants or any Underlying Common Stock except in compliance with the
registration requirements of Section 5 of the Securities Act or in a transaction
that is exempt from such registration.
Each of Morgan Stanley and MSIL acknowledges that the Company and,
for purposes of the opinions to be delivered to Morgan Stanley and the Company
pursuant to Section 3 hereof, counsel to the Company and counsel to Morgan
Stanley, will rely upon the accuracy and truth of the foregoing agreement and
hereby consents to such reliance.
2. Purchase and Sale of Warrants. (a) The Company and Morgan
-----------------------------
Stanley, as agent for MSIL, propose to enter into one or more Pricing Agreements
(each a "Pricing Agreement") substantially in the form of Exhibit II hereto,
with such additions and deletions as the parties thereto may determine and
subject to the terms and conditions set forth herein, therein, and in the
Warrant Agreement, pursuant to which the Company will agree (i) to sell to
Morgan Stanley, as agent for MSIL, and Morgan Stanley, as agent for MSIL, will
agree to purchase from the Company, up to an aggregate of 8,000,000 Warrants to
purchase, subject to the terms and conditions set forth in the Warrant
Agreement, up to an aggregate of 8,000,000 shares of Underlying Common Stock and
(ii) to repurchase shares of Common Stock (the "Repurchased Shares") pursuant
to, and subject to the terms and conditions set forth in, one or more Repurchase
Contracts. The terms and conditions of each particular sale of Warrants shall
be as specified in the Pricing Agreement relating thereto and in or pursuant to
this Warrant Purchase Agreement and the Warrant Agreement. This Warrant
Purchase Agreement shall not be construed as an obligation of the Company to
sell any of the Warrants or as an obligation of Morgan Stanley or MSIL to
purchase any of the Warrants. The obligation of the Company to issue and sell
any of the Warrants and the obligation of Morgan Stanley, as agent for MSIL, to
purchase any of the Warrants shall be evidenced by the Pricing Agreement with
respect to the Warrants specified therein. Each Pricing Agreement shall specify
the number of Warrants of each series being purchased and the purchase price per
Warrant of each series. The date of each Pricing Agreement is hereinafter
referred to as a "Pricing Date." A Pricing Agreement shall be in the form of an
executed writing (which may be in counterparts), and may be evidenced by an
exchange of
4
<PAGE>
telegraphic communications or any other rapid transmission device designed to
produce a written record of communications transmitted.
(b) Payment by Morgan Stanley, as agent for MSIL, for each series of
Warrants sold to Morgan Stanley, as agent for MSIL, pursuant to the applicable
Pricing Agreement and payment by the Company to repurchase the Repurchased
Shares pursuant to the applicable Repurchase Contract shall be made in Federal
or other funds immediately available at the time and on the date as shall be
specified on the applicable Pricing Agreement and Repurchase Contract,
respectively, (or as may be otherwise agreed to by the parties thereto). The
payment obligations of Morgan Stanley, as agent for MSIL, with respect to the
Warrants of any series may be netted against the payment obligations of the
Company with respect to the Repurchased Shares specified in the related
Repurchase Contract. The time and date of each such payment is hereinafter
referred to as a Closing Date.
3. Conditions to Parties' Obligations. The obligations of the
----------------------------------
Company and Morgan Stanley, as agent for MSIL, hereunder and under each Pricing
Agreement are subject to the following conditions:
(a) Morgan Stanley, as agent for MSIL, shall have received on each
Closing Date an opinion of Venture Law Group, counsel for the Company, dated
such Closing Date, to the effect that:
(i) The Company has been duly incorporated, and is validly existing as a
corporation in good standing under the laws of the State of Delaware.
(ii) The Company has the corporate power and authority to own its
property and conduct its business.
(iii) The Company has all requisite corporate power and authority, and
has taken all necessary corporate action, to authorize, execute, deliver, and
perform this Warrant Purchase Agreement, each Pricing Agreement, the Warrant
Agreement and each Repurchase Contract; to execute, issue, sell, and deliver
the Warrants and a certificate or certificates evidencing the Warrants; to
authorize and reserve for issuance and, upon payment from time to time of the
Purchase Price, to issue, sell, and deliver the shares of Underlying Common
Stock issuable upon exercise of the Warrants; and to perform all of its
obligations under the Warrant Purchase Agreement, each Pricing Agreement, the
Warrant Agreement, the Warrants and each Repurchase Contract.
(iv) Each of this Warrant Purchase Agreement, the Warrant Agreement, each
Pricing Agreement and each Repurchase Contract has been duly authorized by the
Company and each of this Warrant Purchase Agreement has been duly executed and
delivered by the Company; the Warrant Agreement, each Repurchase Contract and
each Pricing Agreement have been duly executed and delivered by the Company
and are legal, valid and binding agreements of the Company enforceable in
accordance with their terms except as (i) the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) the availability of equitable remedies may be limited by
equitable principles of general applicability.
(v) The Warrants have been duly authorized, executed and countersigned
in
5
<PAGE>
accordance with the provisions of the Warrant Agreement and are legal, valid
and binding obligations of the Company, enforceable in accordance with their
respective terms except as (i) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights generally
and (ii) the availability of equitable remedies may be limited by equitable
principles of general applicability.
(vi) The shares of Underlying Common Stock, when issued and delivered in
accordance with the terms of the Warrant Agreement and the Warrants, will be
validly issued, fully paid and non-assessable, and the issuance of such shares
will not be subject to any preemptive or similar rights set forth in the
Company's certificate of incorporation.
(vii) The execution and delivery by the Company of, and the performance by
the Company of its obligations under, this Warrant Purchase Agreement, each
Pricing Agreement, the Warrant Agreement, the Warrants and each Repurchase
Contract do not contravene any provision of applicable California or Delaware
General Corporate Law or federal law or the certificate of incorporation or
by-laws of the Company or, to the best of such counsel's knowledge, any
agreement or other instrument binding upon the Company or any of its
subsidiaries that is set forth as an exhibit to the 1934 Act Reports or, to
the best of such counsel's knowledge, any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the Company or any
subsidiary, and no consent, approval, authorization or order of or
qualification with any California or federal governmental body or agency is
required for the performance by the Company of its obligations under this
Warrant Purchase Agreement, each Pricing Agreement, the Warrant Agreement, the
Warrants or each Repurchase Contract, except such as may be required by the
Securities Act, securities or Blue Sky laws of the various states, the rules
of the NASD or the rules and regulations applicable to the listing of
securities on the Nasdaq National Market in connection with the reoffer and
resale of the shares of Underlying Common Stock by Morgan Stanley, as agent
for MSIL, or the issuance of shares of Underlying Common Stock to any person
other than Morgan Stanley or MSIL.
(viii) The Company is not an "investment company" or an entity "controlled"
by an "investment company" as such terms are defined in the Investment Company
Act of 1940, as amended.
(ix) Such counsel does not know of any material legal or governmental
proceeding pending or threatened as of such Closing Date to which the Company
or any of its subsidiaries is a party or to which any of the properties of the
Company or any of its subsidiaries is subject that would be required to be
described by Item 103 of Regulation S-K under the Securities Act were such
Item applicable as of such Closing Date and are not described as required in
the 1934 Act Reports.
(x) Such counsel believes that (except for financial statements and
schedules as to which such counsel need express no belief) the 1934 Act
Reports, as of the date of this Warrant Purchase Agreement, did not, and,
giving effect as of the date hereof and as of each of the Closing Dates to the
transactions contemplated hereby and by the Warrant Agreement and each Pricing
Agreement, as of such Closing Date do not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
6
<PAGE>
made, not misleading.
(xi) The sale by the Company of the Warrants to Morgan Stanley, as agent
for MSIL, in the manner contemplated by this Warrant Purchase Agreement and
the repurchase by the Company of the Repurchased Shares in the manner
contemplated by each Repurchase Contract and this Warrant Agreement do not
require registration under the Securities Act.
(b) Each of Morgan Stanley and the Company shall have received on
each Closing Date an opinion of Davis Polk & Wardwell (who may rely as to all
matters of California law upon the opinion referred to in paragraph (a) above),
counsel for Morgan Stanley, dated such Closing Date, covering the matters
referred to in subparagraphs (iv), (v), (vi) and (xi) of paragraph (a) above.
(c) Morgan Stanley, as agent for MSIL, shall have received on each
Closing Date a certificate dated such Closing Date and signed by an executive
officer of the Company, to the effect that the representations and warranties of
the Company contained in this Warrant Purchase Agreement are true and correct as
of such Closing Date and that the Company has complied in all material respects
with all of the agreements and satisfied all of the conditions on its part to be
performed or satisfied hereunder, under the Warrant Agreement and under each
Pricing Agreement on or before such Closing Date and such other certificates and
documents as it may reasonably request.
(d) Counsel for the Company shall have received on each Closing Date
a letter dated such Closing Date and signed by an officer of Morgan Stanley,
substantially in the form of Exhibit III hereto.
(e) The Company shall have made available to Morgan Stanley, and
counsel, accountants or other professionals retained by Morgan Stanley, such
financial and other information, books, records and properties of the Company
and its subsidiaries, and caused the officers, directors, employees, counsel and
independent certified public accountants of the Company and its subsidiaries to
respond to such inquiries and supply all information, as is reasonably
necessary, in the judgment of Morgan Stanley and its counsel, to conduct a
reasonable investigation.
(f) On or prior to each Closing Date, the Company shall have
purchased from Morgan Stanley, as agent for MSIL, all the Repurchased Shares to
be purchased pursuant to the related Repurchase Contract.
4. Shelf Registration. (a) Subject to the terms hereof, the
------------------
Company agrees that it shall file under the Securities Act a "shelf"
registration statement (the "Shelf Registration") providing for the registration
of the sale on a continuous or delayed basis by MSIL of all Underlying Common
Stock issuable upon exercise of all of the Warrants pursuant to Rule 415 under
the Securities Act and/or any similar rule that may be adopted by the SEC. The
Company agrees to use its best efforts (i) to cause the Shelf Registration to
become or be declared effective on or prior to the earliest First Exercise Date
of all Warrants issued under the Warrant Agreement and sold pursuant to this
Agreement and each Pricing Agreement and (ii) to keep such Shelf Registration
continuously effective for a period ending 90 days after the Final Expiration
Date, subject to Section 4(d) (such period being referred to as the "Effective
Period"). Notwithstanding
7
<PAGE>
the first two sentences of this Section 4(a), the Company may elect, in its sole
discretion, not to file such Shelf Registration, provided that if the Company so
elects or in the event that the Shelf Registration is not declared effective on
or prior to such First Exercise Date, the Company will exercise, with respect to
all Warrants issued under the Warrant Agreement and sold pursuant to this
Agreement and each Pricing Agreement, its right pursuant to Section 4(d) of the
Warrant Agreement to effect either a Cash Settlement or Net Share Settlement of
each exercise of such Warrants.
(b) The Company further agrees, if necessary, to supplement or make
amendments to the Shelf Registration, if required by the rules, regulations or
instructions applicable to the registration form used by the Company for such
Shelf Registration or by the Securities Act or rules and regulations thereunder,
and the Company agrees to furnish to Morgan Stanley copies of any such
supplement or amendment prior to its being used and/or filed with the SEC and
that it will not file any such supplement or amendment to which Morgan Stanley
reasonably objects. In connection with such registration of the Underlying
Common Stock, the Company will, upon the request of Morgan Stanley, as agent for
MSIL, use all reasonable efforts to obtain a listing of the Underlying Common
Stock on the Nasdaq National Market or such national securities exchange or
other quotation system on which the Common Stock of the Company may at such time
be listed. Morgan Stanley shall notify (any such notice, a "Notice of Sale") the
Company not less than five Business Days prior to the date on which MSIL intends
to commence any sales of Underlying Common Stock pursuant to the Shelf
Registration (the "Resale Commencement Date").
(c) The Company's obligation to supplement or amend the Shelf
Registration pursuant to Section 4(b) hereof shall be subject to the terms
hereof (including Sections 4(d) and 4(e)) and the following limitations:
(i) in no event shall the Company be required to effect any such
supplement or amendment during the period beginning 14 Business Days prior
to the end of any fiscal quarter of the Company and ending two Business
Days after such time as the Company publicly releases its results of
operations for such fiscal quarter;
(ii) subject to the provisions of subparagraph (iii) and Section
4(e) below, the Company may on one or more occasions by notice to Morgan
Stanley, as agent for MSIL, given in accordance with Section 13(c) hereof,
suspend its obligation to supplement or amend the Shelf Registration for a
period of time to be specified in such notice, it being understood that the
Company shall not indicate to Morgan Stanley the reasons for such
suspension; and
(iii) if Morgan Stanley shall deliver to the Company a Notice of
Sale, then the Company may not (x) commence a suspension of its obligations
to supplement or amend the Shelf Registration pursuant to Section 4(c)(ii)
hereof or (y) commence a suspension of the right to exercise Warrants
pursuant to Section 4(f) of the Warrant Agreement at any time during the
period commencing at 5:00 P.M., New York City time, on the Business Day
immediately preceding the Resale Commencement Date and ending at 5:00 P.M.,
New York City time, on the tenth Business Day following the Resale
Commencement Date (the "Final Resale Date").
Morgan Stanley agrees that during the periods specified in Section 4(c)(i)
hereof and in any notice
8
<PAGE>
from the Company delivered pursuant to Section 4(c)(ii) hereof, Morgan Stanley
shall not dispose of Underlying Common Stock pursuant to a registration
statement applicable to such Underlying Common Stock. The Company agrees to
provide Morgan Stanley with at least one Business Day's notice of the expiration
of any period of suspension under clause (ii) of paragraph (c) of this Section
2.
(d) The Company may on no more than one occasion by notice to Morgan
Stanley given subsequent to the Final Expiration Date (after having given effect
to any and all extensions of the Expiration Date of any of the Warrants) extend
the Effective Period for a period of up to 90 days.
(e) Notwithstanding anything to the contrary in this Agreement or the
Warrant Agreement, the Company may not suspend its obligation to supplement and
amend the Shelf Registration or suspend Holders' rights to exercise any
outstanding Warrants unless during a period of no less than 10 consecutive
Business Days occurring after the sixtieth day following the Final Expiration
Date such obligations and rights are in full force and effect and free from any
such suspension.
5. Redemption Price. In the case of any redemption of Warrants made
----------------
pursuant to Section 5 of the Warrant Agreement at a time when such Warrants are
owned by MSIL or by any affiliate of MSIL, the Redemption Price applicable to
such Warrants will also include a reasonable estimate by MSIL of its cost for
liquidating its hedge for the Warrants that the Company wishes to redeem.
Morgan Stanley, as agent for MSIL, will advise the Company verbally and by
facsimile transmission of such cost to be included in the calculation of the
Redemption Price.
6. Registration Procedures. (a) In connection with the Company's
-----------------------
obligations to register the reoffer and resale of the shares of Underlying
Common Stock by Morgan Stanley on behalf of MSIL, the Company shall use all
reasonable efforts to effect or cause the applicable registration statement or
registration statements to permit the sale of the Underlying Common Stock by
Morgan Stanley in accordance with the intended method or methods of distribution
thereof described in the Shelf Registration, provided that the Company shall
have no such obligation during any suspension of the Company's obligation to
supplement or amend the Shelf Registration Statement under Section 4(c)(i) or
4(c)(ii). In connection therewith, the Company shall:
(i) comply with the provisions of the Securities Act with respect
to the disposition of all of the Underlying Common Stock covered by the
Shelf Registration in accordance with the intended methods of disposition
by Morgan Stanley or MSIL set forth therein;
(ii) provide Morgan Stanley, and up to one other underwriter (as
shall be reasonably acceptable to the Company) participating in such sale
and any attorney, accountant or other professional retained by Morgan
Stanley or MSIL (collectively, the "Participants") the opportunity to
participate in the preparation of the Shelf Registration, each prospectus
included therein or filed with the SEC and each amendment or supplement
thereto;
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<PAGE>
(iii) in connection with each sale of Underlying Common Stock to be
registered pursuant to Section 4(a) hereof, make available for inspection
by Morgan Stanley and any other Participant such financial and other
information, books, records and properties of the Company, and cause the
officers, directors, employees, counsel and independent certified public
accountants of the Company to respond to such inquiries and supply all
information, as shall be reasonably necessary, in the judgment of Morgan
Stanley and its counsel or any underwriter participating in such sale, to
conduct a reasonable investigation within the meaning of Section 11 of the
Securities Act; provided, however, that each such person shall be required
to maintain in confidence and not to disclose to any other person any
information or records reasonably designated by the Company in writing as
being confidential, until such time as (A) such information becomes a
matter of public record (whether by virtue of its inclusion in the Shelf
Registration or otherwise), or (B) such person shall be required so to
disclose such information pursuant to the subpoena or order of any court or
other governmental agency or body having jurisdiction over the matter
(subject to the requirements of such order, and only after such person
shall have given the Company prompt prior written notice of such
requirement), or (C) such information is required to be set forth in the
Shelf Registration or each prospectus included therein or in any amendment
to the Shelf Registration or any amendment or supplement to such prospectus
in order that the Shelf Registration or such prospectus, amendment or
supplement, as the case may be, does not contain an untrue statement of a
material fact or omit to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading;
provided, further, that if the Company's obligation to effect and maintain
a registration statement is suspended pursuant to Section 4(c) hereof after
Morgan Stanley has conducted an investigation contemplated by this Section
6(a)(iii) and prior to the time when Morgan Stanley or MSIL has sold such
Underlying Common Stock, then Morgan Stanley shall have the right, after
the time such suspension ends, to supplement its investigation with such
additional inspection of financial and other information, books, records
and properties and such additional inquiries as shall be reasonably
necessary, in the judgment of Morgan Stanley and its counsel, to conduct a
reasonable investigation within the meaning of Section 11 of the Securities
Act;
(iv) promptly notify Morgan Stanley, and confirm such advice in
writing, (A) when the Shelf Registration or prospectus included therein or
any amendment or supplement thereto has been filed, and, with respect to
the Shelf Registration or any amendment, when the same has become
effective, (B) of any comments of the SEC and of the Blue Sky or securities
commissioner or regulator of any state with respect thereto or any request
by the SEC for amendments or supplements to the Shelf Registration or
prospectus or for additional information, (C) of the issuance by the SEC of
any stop order suspending the effectiveness of the Shelf Registration or
the initiation or threatening of any proceedings for that purpose, (D) if
at any time the representations and warranties of the Company contemplated
by Section 1 or Section 6(a)(xiii) hereof cease to be true and correct in
all material respects, (E) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Underlying Common Stock for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, (F) at any time when a
prospectus is required to be delivered under the Securities Act, of the
occurrence and the nature of any event requiring the preparation of an
amendment to the Shelf Registration or a supplement to the prospectus
included therein so that, as thereafter delivered as required under the
Securities Act, the Shelf Registration, prospectus,
10
<PAGE>
amendment or supplement or any document incorporated by reference in any of
the foregoing, will not contain an untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein not misleading;
(v) use all reasonable efforts to prevent entry of any order
suspending the effectiveness of the Shelf Registration or any post-
effective amendment thereto or obtain at the earliest practicable date the
withdrawal of any such order if entered;
(vi) if requested by Morgan Stanley, promptly incorporate in an
amendment to the Shelf Registration or in a supplement to the prospectus
included therein such information as is required by the applicable rules
and regulations of the SEC and as Morgan Stanley specifies relating to the
sale of such Underlying Common Stock and promptly make all required filings
of such amendment or supplement, as the case may be;
(vii) promptly furnish to Morgan Stanley an executed copy of the
Shelf Registration, and any amendment thereto (in each case including all
exhibits thereto and documents incorporated by reference therein) and such
number of copies of the Shelf Registration (excluding exhibits thereto and
documents incorporated by reference therein unless specifically so
requested by Morgan Stanley), any amendment thereto, the prospectus
included in the Shelf Registration (including each preliminary prospectus
and any summary prospectus), any supplement thereto, and such other
documents as Morgan Stanley may reasonably request in order to facilitate
the offering and disposition of the Underlying Common Stock owned by Morgan
Stanley, and to permit Morgan Stanley to satisfy the prospectus delivery
requirements of the Securities Act; and the Company hereby consents to the
use of such prospectus (including such preliminary and summary prospectus)
and any supplement thereto by Morgan Stanley and by any agent or
underwriter, in each case in the form most recently provided to such party
by the Company, in connection with the offering and sale of the Securities
covered by such prospectus (including such preliminary and summary
prospectus) or supplement thereto;
(viii) use all reasonable efforts to (A) promptly register or qualify
the Underlying Common Stock to be included in the Shelf Registration under
such securities laws or Blue Sky laws of such United States jurisdictions
as Morgan Stanley and each placement or sales agent, if any, therefor and
underwriter, if any, thereof shall reasonably request, (B) keep such
registrations or qualifications in effect and comply with such laws so as
to permit the continuance of offers, sales and dealings therein in such
jurisdictions during the periods the Shelf Registration is required to
remain effective under Section 4 above, and for so long as may be necessary
to enable Morgan Stanley, MSIL or any agent or underwriter to complete its
disposition of Underlying Common Stock pursuant to such Shelf Registration
and (C) take any and all other actions as may be reasonably necessary or
advisable to enable Morgan Stanley, MSIL, any agent, and any underwriter,
to consummate the disposition in such jurisdictions of such Underlying
Common Stock; provided, however, that the Company shall not be required for
any such purpose to (I) qualify as a foreign corporation in any
jurisdiction wherein it would not otherwise be required to qualify but for
the requirements of this Section 6(a)(viii) or (II) consent to general
service of process in any such jurisdiction;
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<PAGE>
(ix) use its best efforts to obtain the consent or approval of each
governmental agency or authority, whether United States federal, state or
local, which may be required to make the Shelf Registration effective or to
effect the offering or sale in connection therewith or to enable Morgan
Stanley or MSIL to offer, or to consummate the disposition of, the
Underlying Common Stock;
(x) cooperate with Morgan Stanley to facilitate the timely
preparation and delivery of certificates representing Underlying Common
Stock to be sold, which certificates shall be printed, lithographed or
engraved, or produced by any combination of such methods, and, in the case
of an underwritten offering, enable such Underlying Common Stock to be in
such denominations and registered in such names as Morgan Stanley may
request at least 1 Business Day prior to any sale of the Underlying Common
Stock;
(xi) enter into one or more underwriting agreements, engagement
letters, agency agreements, "best efforts" underwriting agreements or
similar agreements, as appropriate, including (without limitation)
customary provisions relating to indemnification and contribution, and take
such other actions in connection therewith as Morgan Stanley shall request
in order to expedite or facilitate the disposition of the Underlying Common
Stock;
(xii) whether or not an agreement of the type referred to in Section
(6)(a)(xi) hereof is entered into and whether or not any portion of the
offering contemplated by the Shelf Registration is an underwritten offering
or is made through a placement or sales agent or any other entity, (A) make
such representations and warranties to Morgan Stanley and MSIL in form,
substance and scope as are customarily made in connection with an offering
of equity securities pursuant to any appropriate agreement and/or to a
registration statement filed on the form applicable to the Shelf
Registration (including, without limitation, representations to the effect
that (i) as of the date of such agreement or registration statement and as
of the date of the closing of the offering, there has not occurred any
material adverse change, or any development involving a prospective
material adverse change, in the condition, financial or otherwise, or in
the earnings, business or operations of the Company and its subsidiaries,
taken as a whole, from that set forth in the applicable disclosure document
and (ii) the outstanding Common Stock is fully paid and non-assessable);
(B) obtain an opinion of outside counsel to the Company of recognized
standing in customary form and covering such matters of the type
customarily covered by such an opinion, as Morgan Stanley may reasonably
request, addressed to Morgan Stanley, as agent for MSIL, and MSIL dated the
closing date of such offering (and if such Shelf Registration contemplates
an underwritten offering of a part or all of the Underlying Common Stock,
dated the date of the underwriting agreement relating thereto and addressed
to the underwriters) (it being agreed that the matters to be covered by
such opinion shall include, without limitation, the due incorporation and
good standing of the Company; the qualification of the Company to transact
business as a foreign corporation; the due authorization, execution and
delivery of this Agreement, each Pricing Agreement, the Warrant Agreement
and of any agreement of the type referred to in Section 6(a)(xi) hereof;
the conformity as to legal matters of the authorized capital stock of the
Company to the description thereof contained in the prospectus included in
the Shelf Registration, as then amended or supplemented; the due
authorization and issuance, and
12
<PAGE>
status as fully paid and non-assessable, of the Underlying Common Stock;
the absence of material legal or governmental proceedings involving the
Company; the non-contravention (of law or organizational documents of the
Company) of the execution and delivery by the Company and performance by
the Company of its obligations under any agreement of the type referred to
in Section 6(a)(xi); the absence of governmental approvals required to be
obtained in connection with the Shelf Registration, the offering and sale
of the Underlying Common Stock, this Agreement, each Pricing Agreement, the
Warrant Agreement or any agreement of the type referred to in Section
6(a)(xi) hereof; the fair presentation in the Shelf Registration and the
prospectus included therein, as then amended or supplemented, of such legal
matters, documents and proceedings described therein as shall be specified;
the Company not being an "investment company" or an entity "controlled" by
an "investment company" as such terms are defined under the Investment
Company Act of 1940; the compliance as to form of the Shelf Registration,
the prospectus included therein, as then amended or supplemented, and any
documents incorporated by reference therein with the Securities Act and the
applicable rules and regulations of the SEC thereunder; and, as of the date
of the opinion and of the Shelf Registration or most recent post-effective
amendments thereto and the date of effectiveness thereof, as the case may
be, the absence from the Shelf Registration and each prospectus included
therein, as then amended or supplemented, and from the documents
incorporated by reference therein of any untrue statement of a material
fact or the omission to state therein a material fact necessary in order to
make the statements therein not misleading (in the case of each such
prospectus, in the light of the circumstances under which the statements
therein were made)); (C) obtain a "cold comfort" letter or letters from the
independent certified public accountants of the Company addressed to Morgan
Stanley, as agent for MSIL, MSIL and any underwriter or agent and in form
and substance satisfactory to them, dated (I) as of the date of the
agreement to sell Securities and (II) the closing date of any sale of
Underlying Common Stock pursuant to any prospectus supplement to the
prospectus included in the Shelf Registration or post-effective amendment
to the Shelf Registration, such letter or letters to be in customary form
and covering such matters of the type customarily covered by letters of
such type; (D) deliver such documents and certificates, including officers'
certificates, as may be reasonably requested by Morgan Stanley to evidence
the accuracy of the representations and warranties made pursuant to clause
(A) above and the compliance with or satisfaction of any agreements or
conditions contained in the underwriting agreement or other agreement
entered into by the Company; and (E) undertake such obligations relating to
expense reimbursement, indemnification and contribution as are provided in
Sections 8, 9, 10 and 11 hereof;
(xiii) in the event that any broker-dealer registered under the
Exchange Act shall underwrite any Underlying Common Stock or participate as
a member of an underwriting syndicate or selling group or "participate in
the distribution" (within the meaning of Section 2720 of the Conduct Rules
of the NASD) thereof, whether as an underwriter, a placement or sales agent
or a broker or dealer in respect thereof, or otherwise, assist such broker-
dealer in complying with the requirements of such Conduct Rules, including,
without limitation, by providing such information to such broker-dealer as
may be required in order for such broker-dealer to comply with the
requirements of the Conduct Rules of the NASD; and
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<PAGE>
(xiv) comply in all material respects with all applicable rules and
regulations of the SEC and make generally available to its security holders
as soon as practicable, an earnings statement of the Company and its
subsidiaries covering a period of 12 months, beginning within three months
after the effective date of the Shelf Registration, complying with Section
11(a) of the Securities Act (including, at the option of the Company, Rule
158 thereunder).
(b) In the event that the Company would be required, pursuant to
Section 6(a)(iv)(F) above, to notify Morgan Stanley, the Company shall (subject
to its right to suspend its obligations pursuant to Sections 4(c)(i) or
4(c)(ii)) without delay prepare and furnish to Morgan Stanley a reasonable
number of copies of a prospectus supplemented or amended in form and substance
reasonably satisfactory to it, so that, as thereafter delivered to purchasers of
Underlying Common Stock, such prospectus shall not contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading. Morgan
Stanley agrees that upon receipt by Morgan Stanley of any notice from the
Company pursuant to Section 6(a)(iv)(F) hereof, Morgan Stanley shall forthwith
discontinue the disposition of Underlying Common Stock pursuant to the
registration statement applicable to such Securities until Morgan Stanley shall
have received copies of such amended or supplemented prospectus, and if so
directed by the Company, Morgan Stanley shall deliver to the Company (at the
Company's expense) all copies, other than permanent file copies, then in Morgan
Stanley's possession of the prospectus covering such Underlying Common Stock at
the time of receipt of such notice.
(c) The Company may require Morgan Stanley to furnish to the Company
such information regarding Morgan Stanley or MSIL and Morgan Stanley's or MSIL's
intended method of resale of the Underlying Common Stock as the Company may from
time to time reasonably request in writing, but only to the extent that such
information is required in order to comply with the Securities Act. Morgan
Stanley agrees to notify the Company as promptly as practicable of any
inaccuracy or change in information previously furnished by Morgan Stanley to
the Company or of the occurrence of any event in either case as a result of
which any prospectus relating to the Shelf Registration contains or would
contain an untrue statement of a material fact regarding Morgan Stanley, MSIL or
Morgan Stanley's or MSIL's intended method of distribution of such Underlying
Common Stock or omits to state any material fact regarding Morgan Stanley, MSIL
or Morgan Stanley's or MSIL's intended method of distribution of such Underlying
Common Stock required to be stated therein or necessary to make the statements
therein not misleading, and promptly to furnish to the Company any additional
information required to correct and update any previously furnished information
so that such prospectus shall not contain, with respect to Morgan Stanley or
MSIL or the distribution of such Underlying Common Stock 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.
7. Registration Expenses. (a) The Company agrees to bear and to
---------------------
pay or cause to be paid promptly upon request being made therefor all expenses
incident to filing and causing effectiveness of the Shelf Registration,
including, without limitation, (i) all SEC, stock exchange, Nasdaq National
Market or NASD registration and filing fees and expenses, (ii) all fees and
expenses (if any) in connection with the qualification of the Underlying Common
Stock for reoffering and resale under the state securities and Blue Sky laws
referred to in Section 6(a)(viii) hereof, including reasonable fees and
disbursements of counsel for Morgan Stanley in connection
14
<PAGE>
with such qualifications, (iii) all expenses relating to the preparation, word
processing, printing, distribution and reproduction of the Shelf Registration
(including the preliminary prospectus included therein) and each amendment to
the foregoing, (iv) internal expenses (including, without limitation, all
salaries and expenses of the Company's officers and employees performing legal
or accounting duties), and (v) fees, disbursements and expenses of counsel and
independent certified public accountants of the Company. Notwithstanding the
foregoing, Morgan Stanley, as agent for MSIL, shall pay all agency fees and
commissions and underwriting discounts and commissions attributable to the sale
of the Underlying Common Stock and the fees and disbursements of any counsel or
other advisors or experts retained by Morgan Stanley.
(b) Notwithstanding the terms of Section 7(a) hereof, Morgan Stanley,
as agent for MSIL, agrees to bear and to pay or cause to be paid promptly upon
request being made therefor all reasonable expenses incident to the takedown of
Underlying Common Stock off the Shelf Registration, including, without
limitation, (i) all expenses relating to the preparation, printing, distribution
and reproduction of each supplement to the preliminary prospectus included in
the Shelf Registration, and (ii) fees, disbursements and expenses of counsel and
independent certified public accountants of the Company.
8. Indemnification by the Company. The Company agrees to indemnify
------------------------------
and hold harmless Morgan Stanley, MSIL, their officers, directors, agents,
employees, and each person, if any, who controls Morgan Stanley or MSIL within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act from and against any and all losses, claims, damages and liabilities
(including, without limitation, any legal or other expenses reasonably incurred
in connection with defending or investigating any such action or claim) caused
by any untrue statement or alleged untrue statement of a material fact contained
in the 1934 Act Reports or any registration statement or prospectus relating to
the Underlying Common Stock (as amended or supplemented if the Company shall
have furnished any amendments or supplements thereto) or any preliminary
prospectus, or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon information relating to Morgan Stanley
or MSIL furnished in writing to the Company by Morgan Stanley or MSIL or on
Morgan Stanley's or MSIL's behalf expressly for use therein. The Company also
agrees to indemnify any underwriters of the Underlying Common Stock, their
officers and directors and each person who controls such underwriters on
substantially the same basis as that of the indemnification of Morgan Stanley
provided in this Section 8.
9. Indemnification by MSIL. MSIL agrees to indemnify and hold
-----------------------
harmless the Company, its officers, directors, employees and agents and each
person, if any, who controls the Company within the meaning of either Section 15
of the Securities Act or Section 20 of the Exchange Act to the same extent as
the foregoing indemnity from the Company to Morgan Stanley and MSIL, but only
with reference to information related to Morgan Stanley or MSIL furnished in
writing by Morgan Stanley or MSIL or on Morgan Stanley's or MSIL's behalf
expressly for use in any registration statement or prospectus relating to
Underlying Common Stock, or any amendment or supplement thereto, or any
preliminary prospectus.
10. Conduct of Indemnification Proceedings. In case any proceeding
--------------------------------------
(including any governmental investigation) shall be instituted involving any
person in respect of which
15
<PAGE>
indemnity may be sought pursuant to Section 8 or 9, such person (the
"Indemnified Party") shall promptly notify the person against whom such
indemnity may be sought (the "Indemnifying Party") in writing and the
Indemnifying Party, upon request of the Indemnified Party, shall retain counsel
reasonably satisfactory to the Indemnified Party to represent the Indemnified
Party and any others the Indemnifying Party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any Indemnified Party 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 Party unless (i) the Indemnifying Party and the Indemnified
Party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the Indemnified Party and the Indemnifying Party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the Indemnifying Party
shall not, in respect of the legal expenses of any Indemnified Party in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm (in addition
to any local counsel) at any time for the Indemnified Party, and that all such
fees and expenses shall be reimbursed as they are incurred. In the case of any
such separate firm for the Indemnified Party, such firm shall be designated in
writing by the Indemnified Party. The Indemnifying Party shall not be liable for
any settlement of any proceeding effected without its written consent, but if
settled with such consent, or if there be a final judgment for the plaintiff,
the Indemnifying Party agrees to indemnify the Indemnified Party from and
against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an Indemnified Party
shall have requested an Indemnifying Party to reimburse the Indemnified Party
for fees and expenses of counsel as contemplated by the second and third
sentences of this Section 10, the Indemnifying Party agrees that it shall be
liable for any settlement of any proceeding effected without its written consent
if (i) such settlement is entered into more than 30 Business Days after receipt
by such Indemnifying Party of the aforesaid request and (ii) such Indemnifying
Party shall not have reimbursed the Indemnified Party in accordance with such
request prior to the date of such settlement. No Indemnifying Party shall,
without the prior written consent of the Indemnified Party, effect any
settlement of any pending or threatened proceeding in respect of which any
Indemnified Party 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 Party from all liability on claims
that are the subject matter of such proceeding.
11. Contribution. To the extent the indemnification provided for in
------------
Sections 8, 9 and 10 of this Warrant Purchase Agreement is
unavailable to an Indemnified Party or insufficient in respect of
any losses, claims, damages or liabilities referred to therein,
then each such Indemnifying Party under such Section, in lieu of
indemnifying such Indemnified Party thereunder, shall contribute
to the amount paid or payable by such Indemnified Party as a
result of such losses, claims, damages or liabilities in such
proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and the Indemnified Party on
the other hand in connection with the statements or omissions that
resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative
fault of the Company on the one hand and of Morgan Stanley and
MSIL on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission
16
<PAGE>
to state a material fact relates to information supplied by the
Company or by Morgan Stanley or MSIL and the parties' relative
intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The Company and Morgan Stanley and MSIL agree that it would not be just or
equitable if contribution pursuant to this Section 11 were determined by pro
---
rata allocation or by any other method of allocation which does not take account
- ----
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an Indemnified Party as a result of
the losses, claims, damages or liabilities referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such Indemnified
Party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 11, Morgan Stanley and MSIL shall
not be required to contribute any amount in excess of the amount by which the
proceeds to MSIL of a sale of Underlying Common Stock exceed the amount of any
damages which Morgan Stanley and MSIL have otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
12. Rule 144. The Company covenants that it will file any reports
--------
required to be filed by it under the Securities Act and the Exchange Act to the
extent required from time to time to enable Morgan Stanley or MSIL to sell
Underlying Common Stock without registration under the Securities Act within the
limitation of the exemptions provided by (a) Rule 144 under the Securities Act,
as such Rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the SEC (as so amended and along with any such
similar rule or regulation, "Rule 144"). Upon the request of Morgan Stanley,
the Company will deliver to Morgan Stanley a written statement as to whether it
has complied with such requirements.
13. Miscellaneous. (a) No Inconsistent Agreements. The Company
------------- --------------------------
will not hereafter enter into any agreement with respect to its securities which
is inconsistent with the rights granted to Morgan Stanley or MSIL in this
Warrant Purchase Agreement.
(b) Amendments and Waivers. Except as otherwise provided herein, the
----------------------
provisions of this Warrant Purchase Agreement may not be amended, modified or
supplemented, and waivers to or departures from the provisions hereof may not be
given unless consented to in writing by each party.
(c) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made by hand delivery, telex, telecopy, overnight
courier or registered first-class mail as follows:
(i) if to Morgan Stanley: Morgan Stanley & Co. Incorporated, 1585
Broadway, New York, New York 10036, attention: Mark Colman, with a copy to
the General Counsel;
(ii) if to MSIL: Morgan Stanley & Co. International Limited c/o
Morgan Stanley & Co. Incorporated, 1585 Broadway, New York, New York 10036,
attention: Jamie Greenwald;
17
<PAGE>
(iii) if to the Company: Oracle Corporation, 500 Oracle Parkway,
Redwood City, California 94065, attention: General Counsel.
All such notices and communications shall be deemed to have been duly
given: when delivered, if by hand, overnight courier or mail; when the
appropriate answer back is received, if by telex; when transmitted, if by
telecopy.
(d) Successors and Assigns; Transfer of Registration Rights. This
-------------------------------------------------------
Warrant Purchase Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties. The registration rights set forth
in this Warrant Purchase Agreement may be transferred in whole or in part from
time to time to any holder of Warrants.
(e) Counterparts. This Warrant Purchase Agreement may be executed in
------------
any number of counterparts and by the parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
(f) Headings. The headings to this Warrant Purchase Agreement are
--------
for convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(g) Governing Law. This Warrant Purchase Agreement shall be governed
-------------
by and construed in accordance with the laws of the State of California.
(h) Severability. In the event that any one or more of the
------------
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in any way
impaired thereby.
(i) Survival. The indemnity and contribution provisions contained in
--------
Sections 8, 9, 10 and 11 and the representations and warranties of the Company
contained in this Agreement and in each Pricing Agreement shall remain operative
and in full force and effect regardless of (i) any termination of this
Agreement, (ii) any investigation made by or on behalf of Morgan Stanley or MSIL
or any person controlling Morgan Stanley or MSIL, or the Company, its officers
or directors or any person controlling the Company and (iii) acceptance of and
payment for any of the Warrants.
(j) Matters Related to Morgan Stanley, as Agent. As a broker-dealer
-------------------------------------------
registered with the SEC, Morgan Stanley, in its capacity as agent, will be
responsible for: (i) effecting the transactions between the Company and MSIL
contemplated in this Agreement, including all payments and deliveries of
Warrants, (ii) issuing all required notices, confirmations and statements to the
Company and MSIL and (iii) maintaining books and records relating to this
Agreement.
Morgan Stanley is acting in connection with this Agreement solely
as Agent for both MSIL and the Company and pursuant to instructions from them.
Morgan Stanley shall have no responsibility or personal liability to MSIL or the
Company arising from any failure by MSIL or the Company to pay or perform any
obligation hereunder or to monitor or to enforce
18
<PAGE>
compliance by MSIL or the Company with any obligation hereunder. Each of MSIL
and the Company agrees to proceed solely against the other to collect or recover
any securities or money owing to it in connection with or as a result of this
Agreement. Morgan Stanley shall otherwise have no liability in respect of this
Agreement, except for its gross negligence or willful misconduct in performing
its duties as agent hereunder.
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IN WITNESS WHEREOF, the parties have executed this Warrant Purchase
Agreement as of the date first written above.
ORACLE CORPORATION
By:/s/ Bruce M. Lange
------------------------------------
Name: Bruce M. Lange
Title: Vice President and Treasurer
MORGAN STANLEY & CO.
INCORPORATED, as agent
for MSIL
By:/s/ Mark A. Neuberger
------------------------------------
Name: Mark A. Neuberger
Title: Managing Director
MORGAN STANLEY & CO.
INTERNATIONAL LIMITED
By:/s/ Jamie Greenwald
------------------------------------
Name: Jamie Greenwald
Title: Managing Director
20
<PAGE>
EXHIBIT II
PRICING AGREEMENT
-----------------
Morgan Stanley & Co. International Limited
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
May __, 1997
Dear Sirs/Mesdames:
Oracle Corporation, a Delaware corporation (the "Company"), proposes
to issue and sell to Morgan Stanley & Co. Incorporated ("Morgan Stanley"), as
agent for you ("MSIL"), subject to the terms and conditions stated herein, in
the Warrant Agreement (the "Warrant Agreement"), to be entered into between the
Company and First BankBoston, N.A., as Warrant Agent, and in the Warrant
Purchase Agreement (the "Warrant Purchase Agreement"), dated as of May 7, 1997,
among the Company, Morgan Stanley, as your agent, and you, __________ Series _
Equity Call Warrants at a purchase price of $__ per Warrant.
Each provision of the Warrant Purchase Agreement is incorporated
herein by reference in its entirety, and shall be deemed to be a part of this
Agreement to the same extent as if such provisions had been set forth in full
herein; and each of the representations and warranties set forth therein shall
be deemed to have been made at and as of the date of this Pricing Agreement.
Unless otherwise defined herein, terms used herein and defined in the Warrant
Purchase Agreement are used herein as therein defined.
Subject to the terms and conditions set forth herein and in the
Warrant Purchase Agreement incorporated herein by reference, the Company agrees
to issue and sell to you, and you agree to purchase from the Company on the
third business day following the date hereof, at the time and place set forth in
the Warrant Purchase Agreement (or at such other time and place as may be agreed
to by the parties) and at the purchase price to you set forth above, __________
Series _ Equity Call Warrants.
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The effectiveness of this Pricing Agreement is subject to the condition
that on or prior to the date hereof, the Company shall have entered into a
Repurchase Contract with respect to _______ shares of common stock of the
Company substantially in the form of Annex I hereto.
Very truly yours,
ORACLE CORPORATION
By:___________________________
Name:
Title:
Accepted as of the date hereof:
MORGAN STANLEY & CO. INTERNATIONAL
LIMITED
By:___________________________
Name:
Title:
MORGAN STANLEY & CO. INCORPORATED,
as agent for MSIL
By:___________________________
Name:
Title:
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EXHIBIT III
LETTER OF REPRESENTATION
------------------------
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Venture Law Group
2800 Sand Hill Road
Menlo Park, CA 94025
In connection with (x) the sale (the "Sale") to, and the purchase by,
Morgan Stanley & Co. International Limited ("MSIL," "we" or "us"), for whom
Morgan Stanley & Co. Incorporated ("Morgan Stanley") is acting as agent, of
________ Series ___ Equity Call Warrants, (collectively, the "Warrants" or,
individually a "Warrant"), each representing the right to purchase one share of
the common stock, par value $___ per share (the "Common Stock"), of Oracle
Corporation (the "Company"), pursuant to the Warrant Purchase Agreement (the
"Warrant Purchase Agreement") dated as of May 7, 1997, and the Pricing Agreement
(the "Pricing Agreement") dated as of May __, 1997, in each case among the
Company, MSIL and Morgan Stanley, as agent for MSIL, and (y) the repurchase by
the Company from MSIL of ________ shares of Common Stock pursuant to, and
subject to the terms and conditions of, the Warrant Purchase Agreement and the
Repurchase Contract dated May __, 1997, among the Company, MSIL and Morgan
Stanley, as agent for MSIL, we hereby represent as follows:
1. We are aware that we must bear the risk of an investment in the
Warrants for an indefinite period of time, and we are able to bear such risk.
As of the time of the Sale, however, we have hedged our position in the Warrants
through the short sale of Common Stock pursuant to the Repurchase Contract[s]
referred to above. Under current market conditions, we do not expect to engage
in the short sale of shares of Common Stock in addition to the sales made
pursuant to the Repurchase Contract in order to hedge our position in the
Warrants. To the extent we or any affiliate of ours engage in short sales
("Short Sales") of shares of Common Stock to any person other than the Company
to hedge our position in the Warrants, (i) neither we nor any such affiliate
will engage in any special selling efforts or selling methods in connection with
any Short Sales and, (ii) to the extent required by applicable law, we and any
such affiliate (A) will not cover any Short Sales or repay any borrowing of
shares of Common Stock used to settle any Short Sales with any shares of Common
Stock issued on exercise of the Warrants ("Warrant Shares") and (B) will take
all reasonable steps so as not to (I) knowingly sell any Warrant Shares to any
person from whom we or any such affiliate purchase any shares of Common Stock
used to cover any Short Sales or (II) knowingly purchase any shares of Common
Stock to be used to settle any Short Sales or to repay any borrowing of shares
of Common Stock used to settle any Short Sales from: (x) any person to whom we
or any such affiliate has sold any Warrant Shares or (y) any person that we or
any such affiliate has reason to believe indirectly acquired Warrant Shares.
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2. We have such knowledge and experience in financial and business
matters that we are capable of evaluating the merits and risks of purchasing the
Warrants.
3. We are purchasing the Warrants for our own account. We are not
acquiring the Warrants with a view to distribution thereof, or with any present
intention of offering or selling the Warrants, subject, nevertheless, to the
disposition of our property being at all times within our control.
4. On the basis of the applicable Purchase Price, and other terms of
each series of Warrants, the historical volatility of the Common Stock and such
other factors as we have deemed advisable for the purposes of this letter, we
believe that with respect to each Warrant purchased pursuant to the Warrant
Purchase Agreement there exists at least a 50% probability that such Warrant
will expire worthless.
5. We are an "accredited investor" within the meaning of
subparagraph (a)(1) of Rule 501 under the Securities Act.
We acknowledge that for purposes of the opinion to be delivered to
Morgan Stanley, as our agent, pursuant to Section 3(b) of the Warrant Purchase
Agreement, you will rely upon the accuracy and truth of the foregoing
representations and we hereby consent to such reliance.
Terms used herein but not otherwise defined herein are used herein as
defined in the Warrant Agreement dated as of May 7, 1997 between the Company and
BankBoston, N.A., as Warrant Agent.
Date: May __, 1997
MORGAN STANLEY & CO. INTERNATIONAL
LIMITED
By:_________________________________
Name:
Title:
MORGAN STANLEY & CO. INCORPORATED,
as agent for MSIL
By:_________________________________
Name:
Title:
2
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EXHIBIT 4.3
EXECUTION COPY
WARRANT AGREEMENT, dated as of May 12, 1997, between ORACLE CORPORATION, a
Delaware corporation (the "Company"), and BANKBOSTON, N.A., a national banking
association, as warrant agent (the "Warrant Agent").
WHEREAS, the Company proposes to issue and deliver its warrant certificates
(the "Warrant Certificates") evidencing Equity Call Warrants in the series and
with the terms indicated on Schedule I hereto (as such Schedule may be amended
or modified from time to time) (collectively, the "Warrants" or individually, a
"Warrant"), each representing the right to purchase, subject to adjustment and
to the other terms and conditions set forth herein, one share of its Common
Stock (as defined below);
WHEREAS, each Warrant shall entitle the registered holder thereof (subject
to the Company's rights to suspend exercises of Warrants or to elect Cash
Settlement or Net Share Settlement of such exercises) to acquire from the
Company one share of Common Stock, subject to adjustment; and
WHEREAS, the Warrant Agent, at the request of the Company, has agreed to
act as the Agent of the Company in connection with the issuance, registration,
transfer, exchange and exercise of the Warrants;
NOW, THEREFORE, in consideration of the foregoing and for the purpose of
defining the terms and provisions of the Warrants and the respective rights and
obligations thereunder of the Company, the Warrant Agent and the registered
holders from time to time of the Warrants, the Company and the Warrant Agent
hereby agree as follows:
1 DEFINITIONS. (a) Certain Definitions. As used in this Warrant
Agreement, the following terms shall have the following respective meanings:
"AFFILIATE" of any person means any other person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such person. For purposes of this definition, "control", when used with respect
to any person, means the power to direct the management and policies of such
person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
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"BUSINESS DAY" means any day, other than Saturday, Sunday or a day on
which either the New York Stock Exchange or the American Stock Exchange is not
open for securities trading or commercial banks in The City of New York are
required or authorized by law or executive order to close.
"CASH SETTLEMENT VALUE" in respect of any exercised Warrant means an amount
equal to the excess, if any, of the arithmetic average of (i) the Market Value
of the Underlying Common Stock for the period commencing on the fourth and
ending on and including the thirteenth Business Day immediately following the
date on which such Warrant is exercised, subject to adjustment pursuant to
Section 6 hereof, the provisions of which shall be applied for this purpose
through such thirteenth Business Day, over (ii) the Purchase Price relating to
such Warrant as adjusted pursuant to Section 6 hereof through such thirteenth
Business Day.
"COMMON STOCK" means the common stock, par value $0.01 per share, of the
Company together with any other securities that may be issued by the Company in
substitution therefor.
"COMPANY" has the meaning set forth in the preamble to this Warrant
Agreement and its successors and assigns.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXPIRATION DATE" means for any series of Warrants, the date indicated by
the entry opposite the designation of such series on Schedule I hereto or such
later date as shall be determined in accordance with Section 4(f), in a written
statement to the Warrant Agent and with notice to registered holders of Warrants
in the manner provided for in Section 19 hereof.
"FINAL EXPIRATION DATE" means the latest Expiration Date of all Warrants
issued hereunder.
"FIRST EXERCISE DATE" means, with respect to any series of Warrants, the
first exercise date indicated by the entry opposite the designation of such
series on Schedule I hereto.
"HOLDERS" means, at any time, the registered holders of the Warrants
outstanding at such time.
"MAJOR DEALER" means a securities broker/dealer registered with the SEC
having net capital of $200 million or more and which is active as a dealer or
market-maker in warrants similar to the Warrants.
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"MARKET VALUE" of Underlying Common Stock on any date of determination
means the closing sale price (or, if no closing price is reported, the last
reported sale price) of such Underlying Common Stock on the New York Stock
Exchange (the "NYSE") on such date or, if such Underlying Common Stock is not
listed for trading on the NYSE on any such date, as reported in the composite
transactions for the principal United States securities exchange on which such
Underlying Common Stock is so listed, or if such Underlying Common Stock is not
so listed on a United States national or regional securities exchange, the
average of the last quoted bid and offer price for such Underlying Common Stock
as reported by Nasdaq National Market, or, if such Underlying Common Stock is
not so reported, the average of the last quoted bid and offer price for such
Underlying Common Stock in the over-the-counter market as reported by the
National Quotation Bureau or similar organization, or, if such bid price is not
available, the market value of such Underlying Common Stock on such date as
determined by a nationally recognized independent banking firm retained for this
purpose by the Company.
The "NET SHARE SETTLEMENT NUMBER" in respect of any exercised Warrant shall
be a number of shares of Underlying Common Stock equal to the Cash Settlement
Value in respect of such Warrant divided by the Valuation Stock Price in respect
of such Warrant.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"PURCHASE PRICE" means for any series of Warrants, the purchase price per
share of Underlying Common Stock to be paid upon the exercise of each Warrant of
such series in accordance with the terms hereof, which price shall initially be
the purchase price indicated by the entry opposite the designation of such
series on Schedule I hereto, subject to adjustment from time to time pursuant to
Section 6 hereof.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"UNDERLYING COMMON STOCK" means the shares of Common Stock and any other
securities, cash or other property issuable or issued upon the exercise of the
Warrants.
The "VALUATION STOCK PRICE" in respect of any exercised Warrant shall equal
the arithmetic average of the Market Value of the Underlying Common Stock on the
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thirteenth through seventeenth Business Days immediately following the date on
which such Warrant is exercised, subject to adjustment pursuant to Section 6
hereof, the provisions of which shall be applied for this purpose through such
seventeenth Business Day.
"WARRANT AGENT" has the meaning set forth in the preamble to this Warrant
Agreement or the successor or successors of such Warrant Agent appointed in
accordance with the terms hereof.
(b) CERTAIN OTHER DEFINED TERMS:
<TABLE>
<CAPTION>
Term Defined in Section
---- ------------------
<S> <C>
"Cash Settlement".............................. 4(d)
"Current Market Price Per Common Share"........ 6(f)
"Exercise Date"................................ 4(b)
"Net Share Settlement"......................... 4(d)
"Notice of Exercise"........................... 4(b)
"Resale Restriction Termination Date".......... In the legend contained in
Exhibit A hereto.
"Warrant Agent's Office"....................... 4(b)
"Warrant Certificates"......................... Preamble
"Warrants"..................................... Preamble
</TABLE>
2 INITIAL ISSUANCE AND FORM OF WARRANT CERTIFICATES. Subject to the
provisions of this Agreement, Warrants (in the series identified on Schedule I
hereto) to acquire initially an aggregate of no more than 8,000,000 shares of
Common Stock, subject to adjustment, may be issued and delivered by the Company
hereunder. The Warrant Certificates for each series of Warrants shall be issued
in registered form only and substantially in the form attached hereto as Exhibit
B, shall be dated the date of issuance thereof (whether upon initial issuance,
registration of transfer, exchange or replacement) and shall bear the legend set
forth in Exhibit B together with such other legends and endorsements typed,
stamped, printed, lithographed or engraved thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Agreement,
or as may be required to comply with any law or with any rule or
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<PAGE>
regulation pursuant thereto or with any rule or regulation of any securities
exchange or market on which the Warrants may be listed, or to conform to
customary usage.
Pending the preparation of definitive Warrant Certificates, temporary
Warrant Certificates may be issued, which may be printed, lithographed,
typewritten, mimeographed or otherwise produced, and which will be substantially
of the tenor of the definitive Warrant Certificates in lieu of which they are
issued.
If temporary Warrant Certificates are issued, the Company will cause
definitive Warrant Certificates to be prepared without unreasonable delay.
After the preparation of definitive Warrant Certificates, the temporary Warrant
Certificates shall be exchangeable for definitive Warrant Certificates upon
surrender of the temporary Warrant Certificates to the Warrant Agent, without
charge to the Holder. Until so exchanged the temporary Warrant Certificates
shall in all respects be entitled to the same benefits under this Agreement as
definitive Warrant Certificates.
3 EXECUTION AND DELIVERY OF WARRANT CERTIFICATES. Warrant
Certificates evidencing Warrants to purchase initially an aggregate of up to
8,000,000 shares of Common Stock shall be executed, on or after the date of this
Warrant Agreement, by the Company and delivered to the Warrant Agent for
countersignature, and the Warrant Agent shall thereupon countersign and deliver
such Warrant Certificates upon the order and at the direction of the Company to
the purchasers thereof on the date of issuance. The Warrant Agent is hereby
authorized to countersign and deliver Warrant Certificates as required by this
Section 3 or by Section 4(c), Section 6, Section 10 or Section 18 hereof. The
Warrant Certificates shall be executed on behalf of the Company by its Chairman
of the Board, Chief Executive Officer or President or by any of its Vice
Presidents and attested by its Secretary or Assistant Secretary, in each case,
either manually or by facsimile signature printed thereon. The Warrant
Certificates shall be manually countersigned by the Warrant Agent and shall not
be valid for any purpose unless so countersigned. In case any officer of the
Company whose signature shall have been placed upon any of the Warrant
Certificates shall cease to be the Chairman, Chief Executive Officer, President
or a Vice President, Secretary or Assistant Secretary of the Company before
countersignature by the Warrant Agent and issue and delivery thereof, such
Warrant Certificates may, nevertheless, be countersigned by the Warrant Agent
and issued and delivered with the same force and effect as though such person
had not ceased to be such officer of the Company.
The Company and the Warrant Agent may deem and treat the registered
Holder of a Warrant Certificate as the absolute owner thereof (notwithstanding
any notation of ownership or other writing thereon made by anyone), for the
purpose of any exercise thereof or any distribution to the Holder thereof and
for all other
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purposes, and neither the Company nor the Warrant Agent shall be affected by any
notice to the contrary.
4 DURATION AND EXERCISE OF WARRANTS. (a) Duration. Subject to the
terms and conditions set forth herein (including those set forth in Section 4(f)
hereof), Warrants of any series shall be exercisable no sooner than the First
Exercise Date of such series (or if such day is not a Business Day, the next
succeeding Business Day) and on or prior to 5:00 P.M., New York City time (the
"Close of Business"), on the Expiration Date for such series. Subject to
Section 4(f), the term of any Warrant may be extended in the sole discretion of
the Company beyond its Expiration Date upon written notice to the Warrant Agent
and to the Holder of such Warrant (given in accordance with Section 19) at least
20 days prior to the date on which such Warrant was to have expired absent such
an extension to a date determined by the Company, which date shall thereupon
become the Expiration Date referred to above for such Warrant unless and until
another date is substituted in accordance with this Section. Subject to
paragraph (f) of this Section 4, such Warrant shall remain exercisable on any
Business Day on or after the relevant First Exercise Date and ending at the
Close of Business on its new Expiration Date. The Warrants shall terminate and
become void as of the Close of Business on the Expiration Date.
(b) Right to Exercise. Subject to the provisions of this Warrant
Agreement, including Section 4(d), each Warrant shall entitle the Holder thereof
to purchase from the Company (and shall obligate the Company to issue and sell
to such Holder) one fully paid and non-assessable share of Underlying Common
Stock at the Purchase Price (in each case, subject to adjustment and subject to
the Company's right to effect Cash Settlement or Net Share Settlement) upon
surrender to the Warrant Agent, at its office maintained for that purpose in
Boston, Massachusetts or New York, New York (the "Warrant Agent's Office") of
Notice of Exercise, substantially in the form set forth in Exhibit C (the
"Notice of Exercise"), duly completed and signed by the Holder thereof or by the
duly appointed legal representative thereof or by a duly authorized attorney,
provided that any such Notice of Exercise delivered after 5:00 P.M., New York
City time, on a Business Day, or on a day that is not a Business Day, shall be
deemed to have been delivered at the opening of business on the next succeeding
Business Day. The date on which the Notice of Exercise with respect to any
Warrant is delivered is hereinafter referred to as the Exercise Date. Except as
expressly provided to the contrary in Section 6 hereof, no adjustments shall be
made for any cash dividends or other cash distributions on shares of Common
Stock issuable upon the exercise of a Warrant.
Any Warrant not exercised prior to its Expiration Date will
automatically be deemed to have been exercised for all purposes hereunder, and a
duly completed Notice of Exercise will be deemed to have been delivered to the
Company
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on such Expiration Date, if on such Expiration Date the Market Price of the
Underlying Common Stock exceeds the Purchase Price of such Warrant by $0.25 or
more.
(c) Payment of Purchase Price; Issuance of Shares of Underlying
Common Stock. Settlement for the purchase of Underlying Common Stock referred
to in Section 4(b) shall take place on the sixth Business Day following the
Exercise Date upon surrender to the Warrant Agent at the Warrant Agent's Office
of the Warrant Certificate evidencing such Warrant, with the form of election to
exercise on the reverse thereof duly completed and signed by the Holder thereof
or by the duly appointed legal representative thereof or by a duly authorized
attorney and upon payment of the Purchase Price of such Warrant. Upon such
surrender of a Warrant Certificate and payment of the Purchase Price of such
Warrant, the Company shall (subject to the other provisions of this Section 4)
cause to be issued and delivered to the Holder thereof, or upon the written
order of the Holder of such Warrant Certificate in such name or names as such
Holder may designate, a certificate for the shares (or other evidence of
ownership) of the Underlying Common Stock issuable upon the exercise of the
Warrant or Warrants evidenced by such Warrant Certificate. Such certificate (or
other evidence of ownership) shall be deemed to have been issued and any person
so designated to be named therein shall be deemed to have become the holder of
record of such shares (or other property) as of the date of the surrender of
such Warrant Certificate and payment of the Purchase Price. Payment of the
Purchase Price may be made by Federal or other immediately available funds
payable to the order of the Company. All funds received upon the tender of
Warrants shall be deposited by the Warrant Agent for the account of the Company
in an account designated by the Company at such financial institution as is
designated in writing by the Company, unless otherwise instructed by the
Company.
The Warrants evidenced by a Warrant Certificate shall be exercisable,
at the election of the Holder thereof, either as an entirety or from time to
time for part only of the number of Warrants specified in the Warrant
Certificate. In the event that less than all of the Warrants evidenced by a
Warrant Certificate are exercised at any time prior to the applicable Expiration
Date, a new Warrant Certificate or Certificates of the same tenor shall be
issued for the remaining number of Warrants evidenced by the Warrant Certificate
so surrendered, and the Warrant Agent is hereby irrevocably authorized to
countersign and to deliver the required new Warrant Certificate or Certificates
pursuant to the provisions of this Section 4, and the Company, whenever required
by the Warrant Agent, shall supply the Warrant Agent with Warrant Certificates
duly executed on behalf of the Company for such purpose.
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(d) Cash Settlement; Net Share Settlement. Notwithstanding
paragraphs (a), (b) and (c) of this Section 4, the Company shall at its sole
discretion have the right to elect (i) to settle any exercise of a Warrant (in
whole, but not in part) in cash (a "Cash Settlement") or (ii) to settle any
exercise of a Warrant by delivering the Net Share Settlement Number of shares of
Underlying Common Stock (a "Net Share Settlement"). Any such election shall be
effected by delivering notice to the exercising Holder in the form set forth in
Exhibit D, in the case of a Cash Settlement, or Exhibit E, in the case of a Net
Share Settlement, by facsimile transmission to the numbers set forth for such
purpose in the Notice of Exercise, confirmed telephonically, not later than
12:00 Noon, New York City time, on the third Business Day following the Exercise
Date.
In the case of any such election to effect a Cash Settlement of a Warrant,
on the fifteenth Business Day following the Exercise Date of such Warrant, the
Company shall deliver to the Warrant Agent Federal or other immediately
available funds in an aggregate amount equal to the Cash Settlement Value of
such Warrant, and the Warrant Agent shall deliver such funds to the exercising
Holder, or its designee, against surrender to the Warrant Agent at the Warrant
Agent's Office of the Warrant Certificate evidencing such Warrants, with the
form of election to exercise on the reverse thereof duly completed and signed by
the Holder thereof or by the duly appointed legal representative thereof or by a
duly authorized attorney.
In the case of any such election to effect a Net Share Settlement of a
Warrant, on the eighteenth Business Day following the Exercise Date of such
Warrant the Company shall deliver to the Warrant Agent the Net Share Settlement
Number of fully paid and non-assessable shares of Underlying Common Stock, and
the Warrant Agent shall deliver such shares to the exercising Holder, or its
designee, against surrender to the Warrant Agent at the Warrant Agent's Office
of the Warrant Certificate evidencing such Warrants, with the form of election
to exercise on the reverse thereof duly completed and signed by the Holder
thereof or by the duly appointed legal representative thereof or by a duly
authorized attorney.
(e) Cancellation of Warrant Certificate. All Warrant Certificates
surrendered for exchange, substitution, transfer or exercise in whole or in part
shall be canceled by the Warrant Agent. If the Company shall purchase or
otherwise acquire Warrants, the Warrant Certificates representing such Warrants
shall thereupon be delivered to the Warrant Agent and be canceled by it. Such
canceled Warrant Certificates shall then be disposed of by such Warrant Agent in
a manner satisfactory to the Company.
(f) Black-Out. The Company may by notice to the Warrant Agent and
to the Holders of Warrants in the form set forth in Exhibit F (given in
accordance with
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Section 19), suspend the right to exercise all outstanding Warrants for a period
of up to 90 days. The Company may suspend the right to exercise Warrants of a
particular series on no more than one occasion. Notwithstanding Section 4(a), if
any such period of suspension includes or extends beyond the Expiration Date of
any Warrants, then the term of such Warrants automatically shall be extended to
the Business Day following the last day of such suspension, which Business Day
shall thereupon become the Expiration Date in respect of such Warrants.
Upon receipt of a Notice of Exercise, the Company may cancel such exercise
by delivering notices of suspension to the Warrant Agent and to the Holders of
the Warrants (and delivering a copy thereof to the exercising Holder, by
facsimile transmission to the number set forth for such purpose in the Notice of
Exercise), not later than 5:00 P.M., New York City time, on the third Business
Day after delivery to the Company of such Notice of Exercise, in which case such
Notice of Exercise shall be deemed never to have been given.
(g) Optional Reduction of Purchase Price. The Company shall have the
right, at any time or from time to time, voluntarily to reduce the then current
Purchase Price applicable to a series of Warrants to such amount (the "Reduced
Purchase Price") and for such period or periods of time, which may be through
the Close of Business on the Expiration Date of such series (the "Reduced
Purchase Price Period") as may be deemed appropriate by the Company. Notice of
any such Reduced Purchase Price and Reduced Purchase Price Period shall be given
to registered Holders of the relevant Warrants in the manner provided in Section
19. After the termination of the Reduced Purchase Price Period, the Purchase
Price of the relevant Warrants shall be such Purchase Price that would have been
in effect, as adjusted pursuant to the provisions of Section 6, had there been
no reduction in the Purchase Price pursuant to the provisions of this paragraph
(g). No reduction of the then current Purchase Price pursuant to the provisions
of this paragraph (g) shall be deemed for the purposes of Section 6 hereof to
alter or adjust the Purchase Price.
5 WARRANT REDEMPTION. The Company shall have the right to redeem the
Warrants. The procedure for redemption shall be as follows:
(a) The Company will notify the Holders in writing of its election to
redeem Warrants specifying the series, number, Expiration Dates and Purchase
Prices of the Warrants to be redeemed, and specifying a valuation date (the
"Valuation Date"). The "Redemption Price" of each Warrant to be redeemed shall
be equal to the theoretical value of the Warrant determined by a nationally
recognized firm of independent public accountants retained by the Company using
a conventional Black-Scholes or other commercially reasonable option valuation
model selected by such firm and reasonably acceptable to the Company, such
Redemption Price being
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determined on the basis of the following factors (the "Redemption Valuation
Factors"): (i) the number of days from but excluding the Valuation Date to and
including the relevant Expiration Date, (ii) the Current Market Price Per Common
Share as of the Valuation Date, (iii) the average of the 21-day volatility of
the Common Stock for each Business Day during the 90 days prior to the Valuation
Date, (iv) the estimated dividend yield of the Common Stock calculated using
dividend amounts payable on regular dividend payment dates during the period
from but excluding the Valuation Date to and including the relevant Expiration
Date and (v) a weighted LIBOR interest rate interpolated for the period from but
excluding the Valuation Date to and including the relevant Expiration Date.
If the Company believes that the Redemption Price so determined by
such firm of independent public accountants does not fairly reflect the value of
the Warrants to be redeemed, the Company may, in its sole discretion, select
three Major Dealers and the Redemption Price shall be the average of the
indicated mid-market premiums for the relevant Warrants determined on the basis
of the Redemption Valuation Factors quoted by the three Major Dealers so
selected as of the Valuation Date.
(b) Closing of the redemption by the Company of the Warrants shall
take place on the third Business Day following the later of (i) the Valuation
Date or (ii) the date the Redemption Price is determined under the second
paragraph of Section 5(a) above, by delivery of the Warrants being redeemed to
the Warrant Agent and simultaneous payment by the Company to the Holders of such
Warrants of the Redemption Price in Federal or other immediately available
funds.
6 ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES OF COMMON STOCK. The
number and kind of shares purchasable upon the exercise of Warrants and the
Purchase Price shall be subject to adjustment from time to time as follows:
(a) Stock Dividends, Stock-Splits, Combinations, etc. In case
the Company shall at any time after the date hereof (i) declare a dividend
or make a distribution on Common Stock payable in Common Stock, (ii)
subdivide or split the outstanding Common Stock, (iii) combine or
reclassify the outstanding Common Stock into a smaller number of shares, or
(iv) issue any shares of its capital stock in a reclassification of Common
Stock (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing
corporation), the Purchase Price in effect at the time of the record date
for such dividend or distribution or of the effective date of such
subdivision, split, combination or reclassification shall be
proportionately adjusted so that, giving effect to paragraph (6)(i) hereof,
the exercise of any outstanding Warrant after such time shall entitle the
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Holder of such Warrant to receive the aggregate number of shares of Common
Stock or other securities of the Company (or shares of any security into
which such shares of Common Stock have been reclassified pursuant to clause
(iii) or (iv) above) which, if such Warrant had been exercised immediately
prior to such time, such Holder would have owned upon such exercise and
been entitled to receive by virtue of such dividend, distribution,
subdivision, split, combination or reclassification. Such adjustment shall
be made successively whenever any event listed above shall occur. An
adjustment made pursuant to this paragraph shall become effective
immediately after the effective date of such event retroactive to the
record date, if any, for such event.
(b) Setting Record Date for Issuance of Certain Rights, Options
or Warrants. In case the Company shall fix a record date for the issuance
of rights, options or warrants to the holders of its Common Stock or other
securities entitling such holders to subscribe for or purchase for a period
expiring within 60 days of such record date shares of Common Stock (or
securities convertible into shares of Common Stock) at a price per share of
Common Stock (or having a conversion price per share of Common Stock, if a
security convertible into shares of Common Stock) less than the Current
Market Price Per Common Share on such record date, the maximum number of
shares of Common Stock issuable upon exercise of such rights, options or
warrants (or conversion of such convertible securities) shall be deemed to
have been issued and outstanding as of such record date and the Purchase
Price to be in effect after the Company fixes such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to
such deemed issuance by a fraction, the numerator of which shall be the sum
of (x) the number of shares of Common Stock outstanding immediately prior
to the time of such deemed issuance multiplied by the Current Market Price
Per Common Share immediately prior to such deemed issuance and (y) the
aggregate consideration, if any, that would be received by the Company upon
issuance of all shares of Common Stock underlying such rights, options,
warrants or other securities, and the denominator of which shall be the
product of the aggregate number of shares of Common Stock that would be
outstanding immediately after such deemed issuance if such deemed issuance
had actually occurred and the Current Market Price Per Common Share
immediately prior to such deemed issuance. In case any portion of the
consideration to be received by the Company shall be in a form other than
cash, the fair market value of such noncash consideration shall be utilized
in the foregoing computation. Such fair market value shall be determined
in good faith by the Board of Directors of the Company, whose determination
shall be conclusive and shall be evidenced by a resolution filed with the
Warrant Agent. The holders of all then-outstanding Warrants shall be
notified
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promptly of any consideration other than cash to be received by the Company
and furnished with a description of the consideration and the fair market
value thereof, as determined by the Board of Directors. Such adjustment
shall be made successively whenever such record date is fixed; and in the
event that such rights, options or warrants are not so issued or expire
unexercised, or in the event of a change in the number of shares of Common
Stock to which the holders of such rights, options or warrants are entitled
(other than pursuant to adjustment provisions therein comparable to those
contained in this paragraph (6)), the Purchase Price shall again be
adjusted to be the Purchase Price which would then be in effect if such
record date had not been fixed, in the former event, or the Purchase Price
which would then be in effect if such holders had initially been entitled
to such changed number of shares of Common Stock, in the latter event.
(c) Certain Distributions. In case the Company shall fix a
record date for the making of a distribution to holders of Common Stock
(including any such distribution made in connection with a consolidation or
merger in which the Company is the continuing corporation, but not with
respect to the Company's existing rights plan) of evidences of its
indebtedness, assets or other property (other than cash dividends or
distributions and dividends payable in Common Stock or rights, options or
warrants referred to in, and for which an adjustment is made pursuant to,
paragraph (6)(b) hereof), the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the Current Market Price Per Common Share on such record date,
less the fair market value (determined as set forth in paragraph (6)(b)
hereof) of the portion of the assets, other property or evidence of
indebtedness so to be distributed which is applicable to one share of
Common Stock, and the denominator of which shall be such Current Market
Price Per Common Share. Such adjustments shall be made successively
whenever such a record date is fixed; and in the event that such
distribution is not so made, the Purchase Price shall again be adjusted to
be the Purchase Price which would then be in effect if such record date had
not been fixed.
(d) Extraordinary Dividends. In case in any fiscal quarter (i)
the Company shall distribute to all holders of shares of Common Stock any
cash dividend or distribution or (ii) the Company or any of its
subsidiaries shall purchase Common Stock pursuant to a tender offer for a
purchase price per share greater than the Current Market Price Per Common
Share on the date of purchase, and during such fiscal quarter the sum of
(x) all such cash dividends or distributions, plus (y) the aggregate amount
by which the fair market value
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(determined as set forth in paragraph 6(b) hereof) of the consideration
paid in purchasing all such shares of Common Stock exceeds the Current
Market Price Per Common Share on the date of such purchase multiplied by
the number of shares of Common Stock so purchased, shall exceed 10%, on an
annualized basis, of the Current Market Price Per Common Share multiplied
by the number of shares of Common Stock outstanding at the earlier of the
record date for the latest such cash dividend or distribution or tender
offer or the date at which the Company shall have publicly announced such
dividend or distribution or tender offer, then the Purchase Price shall be
adjusted on the date of such dividend or distribution, or the termination
of such tender offer, to a price determined by multiplying the Purchase
Price in effect immediately prior to the earlier of such dates by a
fraction, of which the numerator shall be the Current Market Price Per
Common Share on the earlier of such dates less the fair market value
(determined as set forth in paragraph 6(b) hereof) of the portion of such
distribution or excess amount which is applicable to one share of Common
Stock and of which the denominator shall be such Current Market Price Per
Common Share on the earlier of such dates.
(e) Current Market Price Per Common Share. For the purpose of
any computation under Section 9 or paragraph (6)(b), (c) or (d) hereof, on
any determination date, the "Current Market Price Per Common Share" shall
mean the average (weighted by daily trading volume) of the Closing Prices
per share of the Underlying Common Stock for the 10 consecutive Business
Days immediately prior to such date.
(f) Deferral of Certain Adjustments. No adjustment in the
Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least one percent in such price; provided that
--------
any adjustments which by reason of this paragraph (6)(f) are not required
to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this paragraph (f) shall be
made to the nearest one tenth of a cent or to the nearest hundredth of a
share, as the case may be.
(g) Other Adjustments. In the event that, at any time as a
result of the provisions of this Section 6, a Holder of a Warrant upon
subsequent exercise shall become entitled to receive any shares of capital
stock of the Company other than Common Stock, the number of such other
shares so receivable upon exercise of this Warrant shall thereafter be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions contained herein.
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(h) Shares Receivable Upon Exercise. Upon each adjustment of
the Purchase Price as a result of the calculations made in paragraphs
(6)(a), (b), (c), (d) or (j) hereof, the number of shares for which any
Warrant is exercisable immediately prior to the making of such adjustment
shall thereafter evidence the right to purchase, at the adjusted Purchase
Price, that number of shares of Common Stock obtained by (i) multiplying
the number of shares covered by such Warrant immediately prior to such
adjustment of the number of shares by the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price and (ii)
dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
(i) Consolidation, Merger, or Sale of Assets. Subject to the
provisions of Section 6(j) hereof, in case of any consolidation of the
Company with, or merger of the Company into, any other person, any merger
of another person into the Company (other than a merger which does not
result in any reclassification, conversion, exchange or cancellation of
outstanding shares of Common Stock) or any sale or transfer of all or
substantially all of the assets of the Company or of the person formed by
such consolidation or resulting from such merger or which acquires such
assets, as the case may be, then, as a condition of such consolidation,
merger, sale or transfer, the Company or such person, as the case may be,
shall forthwith make lawful and adequate provision whereby the holder of
each Warrant then outstanding shall have the right thereafter to exercise
such Warrant for the kind and amount of securities, cash and other property
receivable upon such consolidation, merger, sale or transfer by a holder of
the number of shares of Common Stock for which such Warrant may have been
exercised immediately prior to such consolidation, merger, sale or
transfer, assuming (i) such holder of Common Stock is not a person with
which the Company consolidated or into which the Company merged or which
merged into the Company or to which such sale or transfer was made, as the
case may be ("constituent person"), or an Affiliate of a constituent person
and (ii) in the case of a consolidation, merger, sale or transfer which
includes an election as to the consideration to be received by the holders,
such holder of Common Stock failed to exercise its rights of election, as
to the kind or amount of securities, cash and other property receivable
upon such consolidation, merger, sale or transfer (provided that if the
kind or amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer is not the same for each share of
Common Stock held immediately prior to such consolidation, merger, sale or
transfer by other than a constituent person or an Affiliate thereof and in
respect of which such rights of election shall not have been exercised
("non-electing share"), then for the purpose of this paragraph (i) the kind
and
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amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer by each non-electing share shall be
deemed to be the kind and amount so receivable per share by a plurality of
the non-electing shares). Adjustments for events subsequent to the
effective date of such a consolidation, merger and sale of assets shall be
as nearly equivalent as may be practicable to the adjustments provided for
in this Warrant Agreement. In any such event, effective provisions shall be
made in the certificate or articles of incorporation of the resulting or
surviving corporation, in any contract of sale, conveyance, lease or
transfer, or otherwise so that the provisions set forth herein for the
protection of the rights of the Holders shall thereafter continue to be
applicable; and any such resulting or surviving corporation shall expressly
assume the obligation to deliver, upon exercise, such shares of stock,
other securities, cash and property. The provisions of this paragraph (i)
shall similarly apply to successive consolidations, mergers, sales, leases
or transfers.
(j) Qualified Tender Offers; Cash-Out Tender Offers and Mergers.
(i) Subject to the provisions of paragraph (ii) of this Section 6(j), in
case of any Qualified Tender Offer (as defined below) made by a person
other than the Company or any subsidiary of the Company and in which, as of
the Expiration Time (as defined below), the board of directors of the
Company is not recommending rejection of the offer, the Purchase Price
shall be reduced so that the same shall equal the price determined by
multiplying the Purchase Price in effect immediately prior to the
Expiration Time by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding (including any tendered or exchanged
shares) at the Expiration Time multiplied by the Market Price of the Common
Stock on the trading day next succeeding the Expiration Time and the
denominator shall be the sum of (x) the fair market value (determined as
aforesaid) of the aggregate consideration payable to shareholders based on
the acceptance (up to any maximum specified in the terms of the tender or
exchange offer) of all shares validly tendered or exchanged and not
withdrawn as of the Expiration Time (the share deemed so accepted, up to
any such maximum, being referred to as the "Purchased Shares") and (y) the
product of the number of shares of Common Stock outstanding (less any
Purchased Shares) at the Expiration Time and the Market Price of the Common
Stock on the trading day next succeeding the Expiration Time, such
reduction to become effective immediately prior to the opening of business
on the Business Day following the Expiration Time. In the event that such
person is obligated to purchase shares pursuant to any such Qualified
Tender Offer, but such person is permanently prevented by applicable law
from effecting any such purchases or all such purchases are rescinded, the
Purchase Price shall again be adjusted to be the Purchase Price
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which would then be in effect if such Qualified Tender Offer had not been
made. Notwithstanding the foregoing, the adjustment described in this
paragraph (j) shall not be made if, as of the Expiration Time, the offering
documents with respect to such Qualified Tender Offer disclose a plan or
intention to cause the Company to engage in any transaction described in
Section 6(j) hereof.
A "Qualified Tender Offer" means any tender offer or exchange
offer for an amount which increases the offeror's ownership of Common Stock
to more than 25% of the Common Stock outstanding and which involves the
payment by such person of consideration per share of Common Stock having a
fair market value (as determined as set forth in paragraph 6(b) hereof) at
the last time (the "Expiration Time") tenders or exchanges may be made
pursuant to such tender or exchange offer (as it shall have been amended)
that exceeds the Closing Price of the Common Stock on the trading day next
succeeding the Expiration Time.
(ii) In case (A) of a cash tender offer for substantially all of
the outstanding Common Stock or (B) of any consolidation of the Company
with, or merger of the Company into, any other person in a transaction in
which the Common Stock is exchanged for cash or cash equivalents, then as
of the closing date of such tender offer or the effective date of such
consolidation or merger, each such Warrant shall only entitle the holder
thereof to receive, within 3 Business Days of surrender to the Company or
to the Warrant Agent, at the Warrant Agent's Office, of the Warrant
Certificate evidencing such Warrant, a cash payment from the Company equal
to the Cash-Out Value (as defined below). The "Cash-Out Value" means the
theoretical value of the Warrant determined by a nationally recognized firm
of independent public accountants retained by the Company using a
conventional Black-Scholes or other commercially reasonable option
valuation model selected by such firm and reasonably acceptable to the
Company, such Cash-Out Value being determined on the basis of the following
factors (the "Cash-Out Valuation Factors"): (i) the number of days from
but excluding the date of the first public announcement of a firm intention
to make such an offer or to so merge or consolidate (the "Announcement
Date") to and including the applicable Expiration Date, (ii) the Current
Market Price Per Common Share as of the Announcement Date, (iii) the
average of the 21-day volatility of the Common Stock for each Business Day
during the 90 days prior to the Announcement Date, (iv) the estimated
dividend yield of the Common Stock calculated using dividend amounts
payable on regular dividend payment dates during the period from but
excluding the Announcement Date to and including the Expiration Date and
(v) a weighted LIBOR interest rate interpolated for the
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period from but excluding the Announcement Date to and including the
Expiration Date.
If the Company believes that the Cash-Out Value so determined by
such firm of independent public accountants does not fairly reflect the
value of the Warrants subject to such tender offer, the Company may, in its
sole discretion, select three Major Dealers and the Cash-Out Value shall be
the average of the indicated mid-market premiums for such Warrants
determined on the basis of the Cash-Out Valuation Factors quoted by the
three Major Dealers so selected as of the Announcement Date.
Upon receipt by the Holder of such cash payment in respect of a
Warrant, such Warrant shall expire and be of no further effect.
7 NOTICE OF ADJUSTMENT. Whenever the number of shares of Common Stock or
other stock or property issuable upon the exercise of each Warrant or the
Purchase Price is adjusted, as herein provided, the Company shall cause the
Warrant Agent promptly to mail by first class mail, postage prepaid, to each
Holder notice of such adjustment or adjustments and shall deliver to the Warrant
Agent a certificate of a firm of independent certified public accountants
selected by the board of directors of the Company (who may be the regular
accountants employed by the Company) setting forth the number of shares of
Common Stock or other stock or property issuable upon the exercise of each
Warrant or the Purchase Price after such adjustment, setting forth a brief
statement of the facts requiring such adjustment and setting forth the
computation by which such adjustment was made. The Warrant Agent shall be
entitled to rely on such certificate and shall be under no duty or
responsibility with respect to any such certificate, except to exhibit the same
from time to time to any Holder desiring an inspection thereof during reasonable
business hours. The Warrant Agent shall not at any time be under any duty or
responsibility to any Holders to determine whether any facts exist that may
require any adjustment of the number of shares of Common Stock or other stock or
property issuable on exercise of the Warrants or the Purchase Price, or with
respect to the nature or extent of any such adjustment when made, or with
respect to the method employed in making such adjustment or the validity or
value (of the kind or amount) of any shares of Common Stock or other stock or
property which may be issuable on exercise of the Warrants. The Warrant Agent
shall not be responsible for any failure of the Company to make any cash payment
or to issue, transfer or deliver any shares of Common Stock or stock
certificates or other securities or property upon the exercise of any Warrant.
8 STATEMENT ON WARRANTS. Irrespective of any adjustment in the number or
kind of shares issuable upon the exercise of the Warrants or the Purchase Price,
Warrants theretofore or thereafter issued may continue to express the same
number
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and kind of shares as are stated in the Warrants initially issuable pursuant to
this Warrant Agreement.
9 FRACTIONAL INTEREST. Notwithstanding any adjustment pursuant to
Section 6 hereof in the number of shares of Underlying Common Stock, the Company
shall not be required to issue fractional shares of Underlying Common Stock on
the exercise of Warrants. If more than one Warrant shall be presented for
exercise in full at the same time by the same Holder, the number of full shares
of Underlying Common Stock which shall be issuable upon such exercise shall be
computed on the basis of the aggregate number of shares of Underlying Common
Stock acquirable on exercise of the Warrants so presented. If any fraction of a
share of Underlying Common Stock would, except for the provisions of this
Section 9, be issuable on the exercise of any Warrant (or specified portion
thereof), the Company shall pay an amount in cash calculated by it to be equal
to (A) in the case of settlement of such Warrant pursuant to Section 4(c), the
Current Market Price Per Common Share on the date of such exercise or (B) in the
case of a Net Share Settlement of such Warrant pursuant to Section 4(d), the
Market Value of the Underlying Common Stock for the period commencing on the
fourth and ending on the thirteenth Business Day immediately following the date
on which such Warrant was exercised, in each case multiplied by such fraction
computed to the nearest whole cent. The Holders, by their acceptance of the
Warrant Certificates, expressly waive any and all rights to receive any fraction
of a share of Common Stock or a stock certificate representing a fraction of a
share of Underlying Common Stock.
10 WARRANT TRANSFER BOOKS. The Warrant Certificates shall be issued
in registered form only. The Company shall cause to be kept at the office of
the Warrant Agent a register in which, subject to such reasonable regulations as
it may prescribe, the Company shall provide for the registration of Warrant
Certificates and of transfers or exchanges of Warrant Certificates by the
Warrant Agent as herein provided.
At the option of the Holder thereof, Warrant Certificates may be
exchanged at such office upon payment of the charges hereinafter provided.
Whenever any Warrant Certificates are so surrendered for exchange, the Company
shall execute, and the Warrant Agent shall countersign and deliver, the Warrant
Certificates that the Holder making the exchange is entitled to receive.
All Warrant Certificates issued upon any registration of transfer or
exchange of Warrant Certificates shall be the valid obligations of the Company,
evidencing the same obligations, and entitled to the same benefits under this
Agreement, as the Warrant Certificates surrendered for such registration of
transfer or exchange.
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Every Warrant Certificate surrendered for registration of transfer or
exchange shall (if so required by the Company or the Warrant Agent) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Warrant Agent, duly executed by the Holder
thereof or his attorney duly authorized in writing.
No service charge shall be required of a Holder for any registration
of transfer or exchange of Warrant Certificates. The Company may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection with any registration of transfer or exchange of
Warrant Certificates.
Any Warrant Certificate when duly endorsed in blank shall be deemed
negotiable. The holder of any Warrant Certificate duly endorsed in blank may be
treated by the Company, the Warrant Agent and all other persons dealing
therewith as the absolute owner thereof for any purpose and as the person
entitled to exercise the rights represented thereby, or to the transfer thereof
on the register of the Company maintained by the Warrant Agent, any notice to
the contrary notwithstanding; but until such transfer on such register, the
Company and the Warrant Agent may treat the Holder thereof as the owner for all
purposes.
11 TRANSFER RESTRICTIONS. (a) Neither the Warrants nor any of the
Underlying Common Stock, nor any interest in either, may be sold, assigned,
pledged, hypothecated, encumbered or in any other manner transferred or disposed
of, in whole or in part, except in compliance with applicable United States
federal and state securities laws and the terms and conditions hereof and
thereof.
(b) Until the earlier of the sale of the Underlying Common Stock
pursuant to a registration statement which has been declared effective under the
Securities Act and the Resale Restriction Termination Date, any certificate
evidencing Underlying Common Stock (and all securities issued in exchange or
substitution therefor) shall bear a legend set forth in Exhibit A, and shall be
subject to the restrictions contained therein, unless otherwise agreed by the
Company (with written notice thereof to the registrar for the Common Stock).
(c) Until the Expiration Date of each Warrant or any earlier exercise
thereof, each Warrant shall be subject to the restrictions on transfer contained
in the legend set forth in Exhibit B.
12 WARRANT HOLDERS. (a) No Voting Rights. Prior to the exercise of
the Warrants, no Holder of a Warrant Certificate, as such, shall be entitled to
any rights of a stockholder of the Company, including, without limitation, the
right to receive dividends or subscription rights, the right to vote, to
consent, to exercise any
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preemptive right, to receive any notice of meetings of stockholders for the
election of directors of the Company or any other matter or to receive any
notice of any proceedings of the Company, except as may be specifically provided
for herein.
(b) Right of Action. All rights of action in respect of this Warrant
Agreement are vested in the Holders of the Warrants, and any Holder of any
Warrant, without the consent of the Warrant Agent or the Holder of any other
Warrant, may, on such Holder's own behalf and for such Holder's own benefit,
enforce, and may institute and maintain any suit, action or proceeding against
the Company suitable to enforce, or otherwise in respect of, such Holder's
rights hereunder, including the right to exercise, exchange or surrender for
purchase such Holder's Warrants in the manner provided in this Warrant
Agreement.
13 WARRANT AGENT. (a) Nature of Duties and Responsibilities Assumed. The
Company hereby appoints BankBoston, N.A. as Warrant Agent of the Company in
respect of the Warrants upon the terms and subject to the conditions set forth
herein; and BankBoston, N.A. hereby accepts such appointment. The Warrant Agent
shall have the powers and authority granted to and conferred upon it in this
Agreement and such further powers and authority to act on behalf of the Company
as the Company may hereafter grant to or confer upon it with its consent. All of
the terms and provisions with respect to such powers and authority contained in
any Warrant Certificate are subject to and governed by the terms and provisions
hereof.
(b) Conditions of Warrant Agent's Obligations. The Warrant Agent
accepts its obligations herein set forth upon the terms and conditions hereof,
including the following, to all of which the Company agrees and to all of which
the rights hereunder of the Holders from time to time of the Warrants shall be
subject:
(i) The Company agrees promptly to pay the Warrant Agent the
compensation to be agreed upon with the Company for all services rendered
by the Warrant Agent and to reimburse the Warrant Agent for its reasonable
out-of-pocket expenses (including attorneys' fees and expenses) incurred by
the Warrant Agent without gross negligence, bad faith or breach of this
Agreement on its part in connection with the services rendered by it
hereunder. The Company also agrees to indemnify the Warrant Agent for, and
to hold it harmless against, any loss, liability or expense (including
reasonable attorneys' fees and expenses) incurred without gross negligence,
bad faith, willful misconduct or breach of this Agreement on the part of
the Warrant Agent, arising out of or in connection with its acting as such
Warrant Agent hereunder, as well as the reasonable costs and expenses of
defending against any claim of liability in the premises. The obligations
of the Company under this Section 13(b)(i) shall survive the termination of
this Agreement.
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(ii) In acting under this Agreement, the Warrant Agent is
acting solely as agent of the Company and does not assume any obligation or
relationship of agency or trust for or with any of the owners or Holders of
the Warrants.
(iii) The Warrant Agent may consult with counsel satisfactory to
it (including counsel to the Company), and the opinion of such counsel
shall be full and complete authorization and protection in respect of any
action taken, suffered or omitted by it hereunder in good faith and in
accordance with the opinion of such counsel.
(iv) The Warrant Agent shall be protected and shall incur no
liability for or in respect of any action taken or thing suffered by it in
reliance upon any notice, direction, consent, certificate, affidavit,
statement or other paper or document reasonably believed by it to be
genuine and to have been presented or signed by the proper parties.
(v) The Warrant Agent shall be liable hereunder only for its
own gross negligence, bad faith or willful misconduct.
(vi) The Warrant Agent, and its officers, directors and
employees, may become the owner of, or acquire any interest in, any
Warrants or other obligations of the Company, with the same rights that it
or they would have if it were not the Warrant Agent hereunder and, to the
extent permitted by applicable law, it or they may engage or be interested
in any financial or other transaction with the Company and may act on
behalf of, or as depository, trustee or agent for, any committee or body of
owners or Holders of Warrants or other obligations of the Company as freely
as if it were not the Warrant Agent hereunder.
(vii) The Warrant Agent shall not be under any liability for
interest on any monies at any time received by it pursuant to any of the
provisions of this Agreement nor shall it be obligated to segregate such
monies from other monies held by it, except as required by law. The Warrant
Agent shall not be responsible for advancing funds on behalf of the
Company.
(viii) The Warrant Agent shall not be under any
responsibility with respect to the validity or sufficiency of this
Agreement or the execution and delivery hereof (except the due
authorization, execution and delivery hereof by the Warrant Agent) or with
respect to the validity or execution of the Warrant Certificates (except
its countersignature thereof).
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(ix) The recitals contained herein and in the Warrant
Certificates (except as to the Warrant Agent's countersignature thereon)
shall be taken as the statements of the Company, and the Warrant Agent
assumes no responsibility for the correctness of the same.
(x) The Warrant Agent shall be obligated to perform such
duties as are herein specifically set forth, and no implied duties or
obligations shall be read into this Agreement against the Warrant Agent.
The Warrant Agent shall not be under any obligation to take any action
hereunder likely to involve it in any expense or liability, the payment of
which is not, in its reasonable opinion, assured to it. The Warrant Agent
shall not be accountable or under any duty or responsibility for the
application by the Company of any proceeds. The Warrant Agent shall have no
duty or responsibility in case of any default by the Company in the
performance of its covenants or agreements contained in this Agreement or
in any Warrant Certificate or in the case of the receipt of any written
demand from a Holder of a Warrant with respect to such default, including,
without limiting the generality of the foregoing, any duty or
responsibility to initiate or attempt to initiate any proceedings at law or
otherwise or, except as provided in Section 19(a) hereof, to make any
demand upon the Company.
(c) Resignation and Appointment of Successor. The Company agrees, for
the benefit of the Holders from time to time of the Warrants, that there shall
at all times be a Warrant Agent hereunder until all the Warrants are no longer
outstanding.
The Warrant Agent may at any time resign as such agent by giving
written notice to the Company of such intention on its part, specifying the date
on which its desired resignation shall become effective, subject to the
appointment of a successor Warrant Agent and acceptance of such appointment by
such successor Warrant Agent as hereinafter provided. The Warrant Agent
hereunder may be removed at any time by the filing with it of an instrument in
writing signed by or on behalf of the Company and specifying such removal and
the date when it shall become effective. Such resignation or removal shall take
effect upon the appointment by the Company, as hereinafter provided, of a
successor Warrant Agent (which shall be a banking institution organized under
the laws of the United States of America or one of the states thereof, have a
combined capital and surplus of at least $100,000,000 (as set forth in its most
recent reports of condition published pursuant to law or to the requirements of
any United States federal or state regulatory or supervisory authority) and
having an office in the Borough of Manhattan, The City of New York) and the
acceptance of such appointment by such successor Warrant Agent. In the event a
successor Warrant Agent has not been appointed and accepted its duties within 90
days of the Warrant Agent's notice of resignation, the Warrant Agent may apply
to any
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court of competent jurisdiction for the designation of a successor Warrant
Agent. The obligation of the Company under Section 13(b)(i) hereof shall
continue to the extent set forth therein notwithstanding the resignation or
removal of the Warrant Agent.
In case at any time the Warrant Agent shall give notice of its intent
to resign, or shall be removed, or shall become incapable of acting, or shall be
adjudged a bankrupt or insolvent, or make an assignment for the benefit of its
creditors, or consent to the appointment of a receiver or custodian of all or
any substantial part of its property, or shall admit in writing its inability to
pay or meet its debts as they mature, or if a receiver or custodian of it or of
all or any substantial part of its property shall be appointed, or if any public
officer shall have taken charge or control of the Warrant Agent or of its
property or affairs, for the purpose of rehabilitation, conservation or
liquidation, a successor Warrant Agent, qualified as aforesaid, shall be
promptly appointed by the Company by an instrument in writing, filed with the
successor Warrant Agent. Upon the appointment as aforesaid of a successor
Warrant Agent and acceptance by the latter of such appointment, the Warrant
Agent so superseded shall cease to be Warrant Agent hereunder.
Any successor Warrant Agent appointed hereunder shall execute,
acknowledge and deliver to its predecessor and to the Company an instrument
accepting such appointment hereunder, and thereupon such successor Warrant
Agent, without any further act, deed or conveyance, shall become vested with all
the authority, rights, powers, trusts, immunities, duties and obligations of
such predecessor with like effect as if originally named as Warrant Agent
hereunder, and such predecessor, upon payment of its charges and disbursements
then unpaid, shall thereupon become obligated to transfer, deliver and pay over,
and such successor Warrant Agent shall be entitled to receive, all monies,
securities and other property on deposit with or held by such predecessor
(including, without limitation, the Warrant Register), as Warrant Agent
hereunder.
14 RESERVATION OF COMMON STOCK FOR ISSUANCE ON EXERCISE OF WARRANTS;
LISTING. The Company covenants that it will at all times reserve and keep
available, free from preemptive rights, out of its authorized but unissued
Common Stock, solely for the purpose of issuance upon exercise of Warrants as
herein provided, the full number of shares of Common Stock as shall then be
issuable upon the exercise of all outstanding Warrants.
The Company covenants that all shares of Common Stock which shall be so
issuable shall, upon such issuance, be duly and validly issued and fully paid
and nonassessable, and that upon issuance such shares shall be accepted for
quotation on the Nasdaq National Market or listed on each national securities
exchange, if any, on which any other shares of outstanding Common Stock of the
Company are then listed.
23
<PAGE>
15 MONEY AND OTHER PROPERTY DEPOSITED WITH THE WARRANT AGENT. Any moneys,
securities or other property which at any time shall be deposited by the Company
or on its behalf with the Warrant Agent pursuant to this Agreement shall be and
are hereby assigned, transferred and set over to the Warrant Agent in trust for
the purpose for which such moneys, securities or other property shall have been
deposited; but such moneys, securities or other property need not be segregated
from other funds, securities or other property except to the extent required by
law. The Warrant Agent shall distribute any money deposited with it for payment
and distribution to the Holders by mailing by first-class mail a check in such
amount as is appropriate, to each such Holder at the address shown on the
Warrant register maintained pursuant to Section 10, or as it may be otherwise
directed in writing by such Holder, upon surrender of such Holder's Warrants.
Any money or other property deposited with the Warrant Agent for payment and
distribution to the Holders that remains unclaimed for two years, less one day,
after the date the money was deposited with the Warrant Agent shall be paid to
the Company upon its request therefor.
16 PAYMENT OF TAXES. The Company will pay any documentary stamp taxes
attributable to the initial issuance of the Warrants or shares of Underlying
Common Stock upon the exercise of Warrants; provided, however, that the Company
shall not be required to pay any tax or taxes which may be payable in respect of
any transfer of any Warrant Certificates or the issuance of any certificates for
shares of Underlying Common Stock in a name other than that of the Holder of a
Warrant Certificate surrendered upon the exercise of a Warrant.
17 SURRENDER OF CERTIFICATES. Any Warrant Certificate surrendered for
exercise or purchased or otherwise acquired by the Company shall, if surrendered
to the Company, be delivered to the Warrant Agent, and all Warrant Certificates
surrendered or so delivered to the Warrant Agent shall promptly be canceled by
such Warrant Agent and shall not be reissued by the Company. The Warrant Agent
shall destroy such canceled Warrant Certificates and deliver its certificate of
destruction to the Company unless the Company shall otherwise direct.
18 MUTILATED, DESTROYED, LOST AND STOLEN WARRANT CERTIFICATES. If (a) any
mutilated Warrant Certificate is surrendered to the Warrant Agent or (b) the
Company and the Warrant Agent receive evidence to their satisfaction of the
destruction, loss or theft of any Warrant Certificate, and there is delivered to
the Company and the Warrant Agent such security or indemnity as may be
reasonably required by them to save each of them harmless, then, in the absence
of notice to the Company or the Warrant Agent that such Warrant Certificate has
been acquired by a bona fide purchaser, the Company shall execute and upon its
written request the Warrant Agent shall countersign and deliver, in exchange for
any such mutilated Warrant Certificate or in lieu of any such destroyed, lost or
stolen Warrant Certificate, a new Warrant
24
<PAGE>
Certificate of like tenor and for a like aggregate number of Warrants.
Upon the issuance of any new Warrant Certificate under this Section 18, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and other expenses
(including the reasonable fees and expenses of the Warrant Agent and of counsel
to the Company) in connection therewith.
Every new Warrant Certificate executed and delivered pursuant to this
Section 18 in lieu of any destroyed, lost or stolen Warrant Certificate shall
constitute an original contractual obligation of the Company, whether or not the
destroyed, lost or stolen Warrant Certificate shall be at any time enforceable
by anyone, and shall be entitled to the benefits of this Warrant Agreement
equally and proportionately with any and all other Warrant Certificates duly
executed and delivered hereunder.
The provisions of this Section 18 are exclusive and shall preclude (to the
extent lawful) all other rights or remedies with respect to the replacement of
mutilated, destroyed, lost or stolen Warrant Certificates.
19 NOTICES. (a) Except as otherwise provided in this Agreement, any notice,
demand or delivery authorized by this Warrant Agreement shall be sufficiently
given or made when mailed if sent by first-class mail, postage prepaid,
addressed to any Holder of a Warrant at such Holder's address shown on the
register maintained by the Warrant Agent pursuant to Section 9 and to the
parties as follows:
If to the Company:
Oracle Corporation
500 Oracle Parkway
Redwood City, California 94065
Attention: General Counsel
If to the Warrant Agent:
BankBoston, N.A.
c/o Boston Equiserve Limited Partnership
150 Royall Street
Canton, Massachusetts 02021
Attention: Reorganization Department
or such other address as shall have been furnished to the party giving or making
such notice, demand or delivery.
25
<PAGE>
(b) Any notice required to be given by the Company to the Holders
shall be made by mailing by registered mail, return receipt requested, to the
Holders at their respective addresses shown on the register of the Company
maintained by the Warrant Agent. The Company hereby irrevocably authorizes the
Warrant Agent, in the name and at the expense of the Company, to mail any such
notice upon receipt thereof from the Company. Any notice that is mailed in the
manner herein provided shall be presumed to have been duly given when mailed.
20 PERSONS BENEFITTING. This Warrant Agreement shall be binding upon and
inure to the benefit of the Company and the Warrant Agent, and their respective
successors, assigns, beneficiaries, executors and administrators, and the
Holders of the Warrants. Nothing in this Warrant Agreement is intended or shall
be construed to confer upon any person, other than the Company, the Warrant
Agent and the Holders of the Warrants, any right, remedy or claim under or by
reason of this Warrant Agreement or any part hereof.
21 COUNTERPARTS. This Warrant Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together constitute one and the same instrument.
22 AMENDMENTS. (a) The Company may, without the consent of the Holders of
the Warrants, by supplemental agreement or otherwise, make any changes or
corrections in this Warrant Agreement that it shall have been advised by counsel
(a) are required to cure any ambiguity or to correct or supplement any provision
herein which may be defective or inconsistent with any other provision herein or
(b) add to the covenants and agreements of the Company for the benefit of the
Holders, or surrender any rights or power reserved to or conferred upon the
Company in this Warrant Agreement or (c) supplement Schedule I hereto to
identify additional series of Warrants issued hereunder; provided that, in the
case of (a) or (b), such changes or corrections shall not adversely affect the
interests of the Holders in any material respect. The Warrant Agent shall at the
request of the Company and without need of independent inquiry as to whether
such supplemental agreement is permitted by the terms of this Section 22 join
with the Company in the execution and delivery of any such supplemental
agreements unless it affects the Warrant Agent's own rights, duties or
immunities hereunder in which case such party may, but shall not be required to,
join in such execution and delivery.
(b) The Company and the Warrant Agent may modify or amend this Agreement
(by means of an agreement supplemental hereto or otherwise) with the consent of
Holders holding not less than a majority in number of the then outstanding
Warrants for any purpose; provided, however, that no such modification or
amendment that changes the Purchase Price of the Warrants, shortens the period
of
26
<PAGE>
time during which the Warrants may be exercised, or otherwise materially and
adversely affects the exercise rights of the Holders or reduces the percentage
of the number of outstanding Warrants the consent of whose Holders is required
for modification or amendment of this Agreement, may be made without the consent
of each Holder affected thereby.
23 TERMINATION. This Warrant Agreement shall terminate and be of no
further force and effect on the Final Expiration Date.
24 APPLICABLE LAW. This Warrant Agreement and each Warrant issued
hereunder and all rights arising hereunder shall be governed by the law of the
State of California applicable to contracts and instruments executed and to be
performed entirely in such State.
25 HEADINGS. The descriptive headings of the several Sections of this
Warrant Agreement are inserted for convenience and shall not control or affect
the meaning or construction of any of the provisions hereof.
27
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be duly executed, as of the day and year first above written.
ORACLE CORPORATION
By:/s/ Bruce M. Lange
-----------------------------
Name: Bruce M. Lange
Title: Vice President and Treasurer
BANKBOSTON, N.A.
as Warrant Agent
By:/s/ Laura A. Welch
----------------------------
Name: Laura A. Welch
Title: Administration Manager
28
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
SERIES AND TERMS OF EQUITY CALL WARRANTS
TO BE ISSUED UNDER WARRANT AGREEMENT
------ -------- ------------- --------------- --------------
Series Quantity First Expiration Date Purchase Price
Exercise Date
<S> <C> <C> <C> <C>
A 3,000,000 April 17, 2000 May 15, 2000 $77.00
</TABLE>
29
<PAGE>
EXHIBIT A
[FORM OF LEGEND FOR UNDERLYING COMMON STOCK]
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS. NEITHER THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR ANY INTEREST OR PARTICIPATION THEREIN OR HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE
HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY PRIOR TO THE
DATE (THE "RESALE RESTRICTION TERMINATION DATE"), ON WHICH THE SECURITIES
EVIDENCED HEREBY MAY BE SOLD WITHOUT REGISTRATION PURSUANT TO RULE 144(k) UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY SUCCESSOR
TO SUCH RULE, ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT
WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) PURSUANT TO
OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN
THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (D) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR," WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3) OR
(7) OF RULE 501 UNDER THE SECURITIES ACT ACQUIRING THIS SECURITY FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION
WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (E) PURSUANT TO
ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENT OF THE
SECURITIES ACT, SUBJECT TO THE COMPANY'S AND/OR THE REGISTRAR'S RIGHT PRIOR TO
ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSES (C), (D) OR (E) TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii) PURSUANT TO EACH OF THE
FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING
ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR
TO THE REGISTRAR. UNTIL THE EXPIRATION OF THE RESALE RESTRICTION TERMINATION
DATE, ANY PERSON ACQUIRING THIS SECURITY PURSUANT TO CLAUSE (C) AGREES THAT ANY
OFFER, SALE OR OTHER TRANSFER TO A U.S. PERSON OR FOR THE ACCOUNT OR BENEFIT OF
A U.S. PERSON SHALL BE MADE BY IT ONLY PURSUANT TO CLAUSES (A), (B) OR (E).
A-1
<PAGE>
EXHIBIT B
[FORM OF FACE OF WARRANT CERTIFICATE]
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS. NEITHER THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR ANY INTEREST OR PARTICIPATION THEREIN OR HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF
THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE
TRANSFER SUCH SECURITY ONLY PURSUANT TO (A) REGISTRATION PURSUANT TO THE
SECURITIES ACT OR (B) AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT, SUBJECT, IN THE CASE OF (B), TO THE COMPANY'S AND THE
WARRANT AGENT'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM, AND, IN THE CASE OF EITHER (A) OR (B) TO REQUIRE
THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS
SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE WARRANT AGENT. THE
HOLDER OF EACH SECURITY BY ITS ACCEPTANCE HEREOF FURTHER AGREES THAT IT SHALL
OFFER, SELL OR OTHERWISE TRANSFER THE WARRANTS REPRESENTED BY THIS CERTIFICATE
ONLY TO QUALIFIED INSTITUTIONAL BUYERS (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) AND IN TRANSACTIONS INVOLVING THE SALE OF NO LESS THAN 1 MILLION
WARRANTS SUBJECT TO THE COMPANY'S AND THE WARRANT AGENT'S RIGHT TO REQUIRE THE
DELIVERY OF CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM.
B-1
<PAGE>
No. W-1 Certificate for 3,000,000 Warrants
SERIES A EQUITY CALL WARRANTS
TO ACQUIRE COMMON STOCK OF
ORACLE CORPORATION
This Warrant Certificate certifies that Morgan Stanley & Co. International
Limited, or registered assigns, is the registered holder of 3,000,000 Warrants
(the "Warrants") to purchase Common Stock, par value $0.01 per share (the
"Common Stock"), of Oracle Corporation, a Delaware corporation (the "Company").
Each Warrant entitles the holder, subject to the terms and conditions set forth
herein and in the Warrant Agreement, to purchase from the Company one fully paid
and non-assessable share of Common Stock of the Company at the purchase price
per share of Common Stock (the "Purchase Price"), which price shall initially be
$77.00 per share, subject to adjustment from time to time in accordance with the
Warrant Agreement. Settlement for such purchase shall take place on the sixth
Business Day after delivery of such Notice of Exercise, upon surrender to the
Warrant Agent, at its office maintained for that purpose in Boston,
Massachusetts or New York, New York, of this Warrant Certificate with the form
of election to purchase on the reverse hereof duly completed and signed by the
registered holder or holders hereof or by the duly appointed legal
representative thereof or by a duly authorized attorney, and upon payment of the
Purchase Price, but only subject to the conditions set forth herein and in the
Warrant Agreement. Payment of the Purchase Price may be made by Federal or
other immediately available funds to the Company.
The Company shall have the right to settle any exercise of a Warrant (i) in
cash, in which case on the fifteenth Business Day after the Exercise Date the
Company shall deliver to the exercising Holder, against surrender to the Warrant
Agent at its office maintained for that purpose in Boston, Massachusetts of the
Warrant Certificate evidencing the exercised Warrants, Federal or other
immediately available funds payable to the order of such Holder in an amount
equal to the Cash Settlement Value (as defined in the Warrant Agreement); or
(ii) by delivering the Net Share Settlement Number (as defined in the Warrant
Agreement) of shares of Underlying Common Stock, in which case on the eighteenth
Business Day after the Exercise Date the Company shall deliver to the exercising
Holder, against surrender to the Warrant Agent at its office maintained for that
purpose in Boston, Massachusetts of the Warrant Certificate evidencing the
exercised Warrants, such number of fully paid and non-assessable shares.
No Warrant may be exercised or exchanged after 5:00 P.M., New York City
time, on the Expiration Date. All Warrants evidenced hereby shall thereafter be
void.
Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse hereof and such further provisions shall
for all purposes have the same effect as though fully set forth in this place.
B-1
<PAGE>
This Warrant Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Warrant Agent.
IN WITNESS WHEREOF, Oracle Corporation has caused this instrument to be
duly executed.
ORACLE CORPORATION
By:____________________________
Name:
Title:
(SEAL)
Attest:_________________________________
Secretary
DATED:
Countersigned as of the date above written:
BANKBOSTON, N.A.,
as Warrant Agent
By:______________________________
Authorized Officer
B-2
<PAGE>
[FORM OF WARRANT CERTIFICATE]
[REVERSE]
This Warrant Certificate is issued under and in accordance with a Warrant
Agreement dated as of May 12, 1997 (the "Warrant Agreement"), between the
Company and BankBoston, N.A., as warrant agent (the "Warrant Agent," which term
includes any successor Warrant Agent under the Warrant Agreement), and is
subject to the terms and provisions contained in the Warrant Agreement, to all
of which terms and provisions the Holder of this Warrant Certificate consents by
acceptance hereof. The Warrant Agreement is hereby incorporated herein by
reference and made a part hereof. Reference is hereby made to the Warrant
Agreement for a full statement of the respective rights, limitations of rights,
duties and obligations of the Company, the Warrant Agent and the Holders of the
Warrants. Capitalized terms not defined herein have the meanings ascribed
thereto in the Warrant Agreement. A copy of the Warrant Agreement may be
obtained for inspection by the Holder hereof upon written request to BankBoston,
N.A., c/o Boston Esquiserve Limited Partnership, 150 Royall Street, Canton,
Massachusetts 02021, Attention: Reorganization Department.
The Warrants evidenced by this Warrant Certificate shall be exercisable, at
the election of the Holder hereof, either as an entirety or from time to time
for part only of the number of Warrants specified herein. In the event that less
than all of the Warrants evidenced by this Warrant Certificate are exercised at
any time prior to the Expiration Date, a new Warrant Certificate or Certificates
of the same tenor shall be issued for the remaining number of Warrants evidenced
by this Warrant Certificate.
The Company may, by notice to the Warrant Agent and to the Holder hereof,
suspend the right to exercise Warrants evidenced hereby for a period of up to 90
days. The Company may suspend the right to exercise these Warrants on no more
than one occasion. If any such period of suspension (as it may be extended by
successive further notices) includes or extends beyond the Expiration Date, then
the term of these Warrants shall be automatically extended to the Business Day
following the last day of such suspension, which Business Day shall thereupon
become the Expiration Date.
Upon receipt of a Notice of Exercise, the Company may cancel such exercise
by delivering notices of suspension to the Warrant Agent and to the Holders of
the Warrants (and delivering a copy thereof to the exercising Holder, by
facsimile transmission to the number set forth for such purpose in the Notice of
Exercise), not later than 5:00 P.M., New York City time, on the third Business
Day after delivery to the Company of such Notice of Exercise, in which case such
Notice of Exercise shall be deemed never to have been given.
At the option of the Holder hereof, Warrant Certificates may be exchanged
at such office upon payment of the charges provided in the Warrant Agreement.
Whenever any Warrant Certificates are so surrendered for exchange, the Company
shall execute, and the Warrant Agent shall countersign and deliver, the Warrant
Certificates that the Holder making the exchange is entitled to receive. All
Warrant Certificates issued upon any registration of transfer or exchange of
Warrant Certificates shall be the valid obligations of the Company, evidencing
the same obligations, and entitled to the same benefits under the Warrant
Agreement, as the Warrant Certificates surrendered for such registration of
transfer or
B-4
<PAGE>
exchange. Every Warrant Certificate surrendered for registration of transfer or
exchange shall (if so required by the Company or the Warrant Agent) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Warrant Agent, duly executed by the Holder
thereof or his attorney duly authorized in writing.
No service charge shall be required of a Holder for any registration of
transfer or exchange of Warrant Certificates. The Company may require payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of Warrant
Certificates.
The Company and the Warrant Agent may deem and treat the registered Holder
of this Warrant Certificate as the absolute owner hereof (notwithstanding any
notation of ownership or other writing thereon made by anyone), for the purpose
of any exercise hereof or any distribution to the Holder hereof and for all
other purposes, and neither the Company nor the Warrant Agent shall be affected
by any notice to the contrary.
The Warrant Agreement also provides that upon the occurrence of certain
events, the Purchase Price set forth on the face hereof may, subject to certain
conditions, be adjusted. If such Purchase Price is adjusted, the Warrant
Agreement provides that in certain instances, the number of shares of Common
Stock of the Company purchasable upon the exercise of each Warrant shall be
adjusted. In the case of certain extraordinary transactions, the Warrants may
become exercisable for the consideration received by Holders of Common Stock
therein, or in certain cases, may become exchangeable solely for a cash payment,
all as provided in the Warrant Agreement.
This Warrant Certificate and the Warrant Agreement are subject to amendment
as provided in the Warrant Agreement.
B-4
<PAGE>
[FORM OF ELECTION TO EXERCISE]
[TO BE EXECUTED UPON PURCHASE OF WARRANT]
The undersigned hereby irrevocably exercises ofSeries Equity
Call Warrants for the acquisition of [ ] share(s) of Underlying Common
Stock (as defined herein), represented by this Warrant Certificate, on the terms
and conditions specified in this Warrant Certificate and the Warrant Agreement
herein referred to, surrenders this Warrant Certificate and all right, title and
interest therein Oracle Corporation (the "Company") and has tendered payment for
such shares in the amount of $________, all in accordance with the terms hereof,
directs that the shares of Common Stock deliverable upon the exercise of such
Warrants be registered or placed in the name and at the address specified below
and delivered thereto.
Dated: ______________________, _____
/1/
---------------------------------------
(Signature of Owner)
---------------------------------------
(Street Address)
---------------------------------------
(City) (State) (Zip Code)
---------------------------------------
Facsimile Number/2/
Signature Guaranteed by:
---------------------------------------
- --------------------------
/1/ The signature must correspond with the name as written upon the face of
the within Warrant Certificate in every particular, without alteration or
enlargement or any change whatsoever, and must be guaranteed by a national
bank or trust company or by a member firm of any national securities exchange
or by another eligible guarantor institution as defined in Rule 17Ad-15 under
the Securities Exchange Act of 1934.
/2/ A facsimile number must be provided for the purpose of receiving any
notice of the Company's election, if any, to settle this exercise of
Warrant(s) in cash or of suspension of the holder's right to exercise this
Warrant.
B-5
<PAGE>
[FORM OF ASSIGNMENT]
FOR VALUE RECEIVED, the undersigned Holder of this Warrant Certificate
hereby sells, assigns, and transfers unto the Assignee(s) named below (including
the undersigned with respect to any Warrants constituting a part of the Warrants
evidenced by this Warrant Certificate not being assigned hereby) all of the
right of the undersigned under this Warrant Certificate, with respect to the
number of Warrants set forth below:
=========================================================
Social Security
or other
identifying
number of
Names of assignee(s) Number of
Assignee(s) Address --------------- Warrants
----------- ------- ---------
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
=========================================================
and does hereby irrevocably constitute and appoint __________, the undersigned's
attorney, to make such transfer on the register maintained by the Warrant Agent
for that purpose, with full power of substitution in the premises.
Dated: ________________, ____
---------------------------------------
(Signature of Owner)/3/
---------------------------------------
(Street Address)
---------------------------------------
(City) (State) (Zip Code)
---------------------------------------
Signature Guaranteed by:
---------------------------------------
- -----------------------
/3/ The signature must correspond with the name as written upon the face of
the within Warrant Certificate in every particular, without alteration or
enlargement or any change whatsoever, and must be guaranteed by a national
bank or trust company or by a member firm of any national securities exchange
or by another eligible guarantor institution as defined in Rule 17Ad-15 under
the Securities Exchange Act of 1934.
B-6
<PAGE>
EXHIBIT C
FORM OF NOTICE OF EXERCISE
The undersigned hereby irrevocably elects to exercise the right,
represented by Warrant Certificate No[s]. W-____________ to purchase
_________________ shares of Common Stock of Oracle Corporation and undertakes to
surrender such Warrant Certificate[s] to the Warrant Agent, at its office
maintained for that purpose in ________, ________, with the form of election to
exercise on the reverse thereof duly completed and signed, together with payment
of the applicable Purchase Price, on the day six Business Days after the date
hereof. The undersigned requests that a certificate for such shares be
registered in the name of __________________ whose address is________________
____________________________________ and that such Certificate (or any payment
in lieu thereof) be delivered to ____________________ whose address
is_____________________.
Notice of the Company's election, if any, to (i) settle this exercise of
Warrants in cash or by net share settlement or (ii) suspend the exercise of
Warrants should be addressed to the attention of__________________________
___________________________________, sent by facsimile transmission to the
following number: __________________________ (confirmation telephone number:
_____________________).
Capitalized terms not otherwise defined herein shall have the meanings
specified in the Warrant Agreement dated May __, 1997 between Oracle Corporation
and the BankBoston, N.A., as Warrant Agent.
Dated:_____________________ _______________________________
(Signature must conform in all respects to
name of holder as specified on the face of the
Warrant Certificate.)
C-1
<PAGE>
EXHIBIT D
[FORM OF NOTICE OF CASH SETTLEMENT]
Oracle Corporation hereby irrevocably elects to settle in cash the exercise
of Warrant No[s]. W-_______________ to purchase ____________ shares of its
Common Stock.
Capitalized terms not otherwise defined herein shall have the meanings
specified in the Warrant Agreement dated May __, 1997 between Oracle Corporation
and the BankBoston, N.A., as Warrant Agent.
Dated:
------------------------------
ORACLE CORPORATION
By: Name:
--------------------------------------
Title
D-1
<PAGE>
EXHIBIT E
[FORM OF NOTICE OF NET SHARE SETTLEMENT]
Oracle Corporation (the "Company") hereby irrevocably elects to settle by
delivery of the Net Share Settlement Number of shares of its Common Stock the
exercise of Warrant No[s] W-_______________ to purchase ___________ shares of
its Common Stock.
Capitalized terms not defined herein have the meaning given such terms in
the Warrant Agreement dated May __, 1997, between the Company and the
BankBoston, N.A., as Warrant Agent.
ORACLE CORPORATION
By:
----------------------------------
Name:
Title:
E-1
<PAGE>
EXHIBIT F
[NOTICE OF SUSPENSION OF EXERCISE]
[Warrant Holder Name]
[Warrant Holder Address]
In accordance with Section 4(f) of the Warrant Agreement (the "Warrant
Agreement") dated as of May ___, 1997 between Oracle Corporation (the "Company")
and _______________, as Warrant Agent, relating to the Company's Equity Call
Warrants (the"Warrants"), the Company hereby gives notice that your right to
exercise your Warrants has been suspended until ______.
Therefore, the Notice of Exercise delivered by you has been canceled, has
been deemed to have never been delivered and is returned herewith to you.
_____________________________,
as Warrant Agent
By:__________________________________
Authorized Signature
F-1
<PAGE>
EXHIBIT 4.4
[FACE OF WARRANT CERTIFICATE]
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS. NEITHER THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR ANY INTEREST OR PARTICIPATION THEREIN OR HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF
THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE
TRANSFER SUCH SECURITY ONLY PURSUANT TO (A) REGISTRATION PURSUANT TO THE
SECURITIES ACT OR (B) AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT, SUBJECT, IN THE CASE OF (B), TO THE COMPANY'S AND THE
WARRANT AGENT'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM, AND, IN THE CASE OF EITHER (A) OR (B) TO REQUIRE
THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS
SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE WARRANT AGENT. THE
HOLDER OF EACH SECURITY BY ITS ACCEPTANCE HEREOF FURTHER AGREES THAT IT SHALL
OFFER, SELL OR OTHERWISE TRANSFER THE WARRANTS REPRESENTED BY THIS CERTIFICATE
ONLY TO QUALIFIED INSTITUTIONAL BUYERS (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) AND IN TRANSACTIONS INVOLVING THE SALE OF NO LESS THAN 1 MILLION
WARRANTS SUBJECT TO THE COMPANY'S AND THE WARRANT AGENT'S RIGHT TO REQUIRE THE
DELIVERY OF CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM.
<PAGE>
No. W-1 Certificate for 3,000,000 Warrants
CUSIP No. 683894-11-1
SERIES A EQUITY CALL WARRANTS
TO ACQUIRE COMMON STOCK OF
ORACLE CORPORATION
This Warrant Certificate certifies that Morgan Stanley & Co. International
Limited, or registered assigns, is the registered holder of 3,000,000 Warrants
(the "Warrants") to purchase Common Stock, par value $0.01 per share (the
"Common Stock"), of Oracle Corporation, a Delaware corporation (the "Company").
Each Warrant entitles the holder, subject to the terms and conditions set forth
herein and in the Warrant Agreement, to purchase from the Company one fully paid
and non-assessable share of Common Stock of the Company at the purchase price
per share of Common Stock (the "Purchase Price"), which price shall initially be
$77.00 per share, subject to adjustment from time to time in accordance with the
Warrant Agreement. Settlement for such purchase shall take place on the sixth
Business Day after delivery of such Notice of Exercise, upon surrender to the
Warrant Agent, at its office maintained for that purpose in Boston,
Massachusetts or New York, New York, of this Warrant Certificate with the form
of election to purchase on the reverse hereof duly completed and signed by the
registered holder or holders hereof or by the duly appointed legal
representative thereof or by a duly authorized attorney, and upon payment of the
Purchase Price, but only subject to the conditions set forth herein and in the
Warrant Agreement. Payment of the Purchase Price may be made by Federal or
other immediately available funds to the Company.
The Company shall have the right to settle any exercise of a Warrant (i) in
cash, in which case on the fifteenth Business Day after the Exercise Date the
Company shall deliver to the exercising Holder, against surrender to the Warrant
Agent at its office maintained for that purpose in Boston, Massachusetts of the
Warrant Certificate evidencing the exercised Warrants, Federal or other
immediately available funds payable to the order of such Holder in an amount
equal to the Cash Settlement Value (as defined in the Warrant Agreement); or
(ii) by delivering the Net Share Settlement Number (as defined in the Warrant
Agreement) of shares of Underlying Common Stock, in which case on the eighteenth
Business Day after the Exercise Date the Company shall deliver to the exercising
Holder, against surrender to the Warrant Agent at its office maintained for that
purpose in Boston, Massachusetts of the Warrant Certificate evidencing the
exercised Warrants, such number of fully paid and non-assessable shares.
No Warrant may be exercised or exchanged after 5:00 P.M., New York City
time, on the Expiration Date. All Warrants evidenced hereby shall thereafter be
void.
Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse hereof and such further provisions shall
for all purposes have the same effect as though fully set forth in this place.
<PAGE>
This Warrant Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Warrant Agent.
IN WITNESS WHEREOF, Oracle Corporation has caused this instrument to be
duly executed.
ORACLE CORPORATION
By: /s/ Bruce M. Lange
------------------
Name: Bruce M. Lange
Title: Vice President and Treasurer
Attest: /s/ L. Patricia Moncada
-----------------------
Assistant Secretary
DATED: May 12, 1997
Countersigned as of the date above written:
BANKBOSTON, N.A.
as Warrant Agent
By: /s/ Dennis E. Roy
-----------------
Authorized Officer
<PAGE>
[REVERSE OF WARRANT CERTIFICATE]
This Warrant Certificate is issued under and in accordance with a Warrant
Agreement dated as of May 12, 1997 (the "Warrant Agreement"), between the
Company and BankBoston, N.A., as warrant agent (the "Warrant Agent," which term
includes any successor Warrant Agent under the Warrant Agreement), and is
subject to the terms and provisions contained in the Warrant Agreement, to all
of which terms and provisions the Holder of this Warrant Certificate consents by
acceptance hereof. The Warrant Agreement is hereby incorporated herein by
reference and made a part hereof. Reference is hereby made to the Warrant
Agreement for a full statement of the respective rights, limitations of rights,
duties and obligations of the Company, the Warrant Agent and the Holders of the
Warrants. Capitalized terms not defined herein have the meanings ascribed
thereto in the Warrant Agreement. A copy of the Warrant Agreement may be
obtained for inspection by the Holder hereof upon written request to BankBoston,
N.A., 150 Royall Street, Canton, Massachusetts 02021, Attention: Reorganization
Department.
The Warrants evidenced by this Warrant Certificate shall be exercisable, at
the election of the Holder hereof, either as an entirety or from time to time
for part only of the number of Warrants specified herein. In the event that less
than all of the Warrants evidenced by this Warrant Certificate are exercised at
any time prior to the Expiration Date, a new Warrant Certificate or Certificates
of the same tenor shall be issued for the remaining number of Warrants evidenced
by this Warrant Certificate.
The Company may, by notice to the Warrant Agent and to the Holder hereof,
suspend the right to exercise Warrants evidenced hereby for a period of up to 90
days. The Company may suspend the right to exercise these Warrants on no more
than one occasion. If any such period of suspension (as it may be extended by
successive further notices) includes or extends beyond the Expiration Date, then
the term of these Warrants shall be automatically extended to the Business Day
following the last day of such suspension, which Business Day shall thereupon
become the Expiration Date.
Upon receipt of a Notice of Exercise, the Company may cancel such exercise
by delivering notices of suspension to the Warrant Agent and to the Holders of
the Warrants (and delivering a copy thereof to the exercising Holder, by
facsimile transmission to the number set forth for such purpose in the Notice of
Exercise), not later than 5:00 P.M., New York City time, on the third Business
Day after delivery to the Company of such Notice of Exercise, in which case such
Notice of Exercise shall be deemed never to have been given.
<PAGE>
At the option of the Holder hereof, Warrant Certificates may be exchanged
at such office upon payment of the charges provided in the Warrant Agreement.
Whenever any Warrant Certificates are so surrendered for exchange, the Company
shall execute, and the Warrant Agent shall countersign and deliver, the Warrant
Certificates that the Holder making the exchange is entitled to receive. All
Warrant Certificates issued upon any registration of transfer or exchange of
Warrant Certificates shall be the valid obligations of the Company, evidencing
the same obligations, and entitled to the same benefits under the Warrant
Agreement, as the Warrant Certificates surrendered for such registration of
transfer or exchange. Every Warrant Certificate surrendered for registration of
transfer or exchange shall (if so required by the Company or the Warrant Agent)
be duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Warrant Agent, duly executed by the Holder
thereof or his attorney duly authorized in writing.
No service charge shall be required of a Holder for any registration of
transfer or exchange of Warrant Certificates. The Company may require payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of Warrant
Certificates.
The Company and the Warrant Agent may deem and treat the registered Holder
of this Warrant Certificate as the absolute owner hereof (notwithstanding any
notation of ownership or other writing thereon made by anyone), for the purpose
of any exercise hereof or any distribution to the Holder hereof and for all
other purposes, and neither the Company nor the Warrant Agent shall be affected
by any notice to the contrary.
The Warrant Agreement also provides that upon the occurrence of certain
events, the Purchase Price set forth on the face hereof may, subject to certain
conditions, be adjusted. If such Purchase Price is adjusted, the Warrant
Agreement provides that in certain instances, the number of shares of Common
Stock of the Company purchasable upon the exercise of each Warrant shall be
adjusted. In the case of certain extraordinary transactions, the Warrants may
become exercisable for the consideration received by Holders of Common Stock
therein, or in certain cases, may become exchangeable solely for a cash payment,
all as provided in the Warrant Agreement.
This Warrant Certificate and the Warrant Agreement are subject to amendment
as provided in the Warrant Agreement.
<PAGE>
[FORM OF ELECTION TO EXERCISE]
[TO BE EXECUTED UPON PURCHASE OF UNDERLYING COMMON STOCK]
The undersigned hereby irrevocably exercises of Series Equity Call
Warrants for the acquisition of [ ] share(s) of Underlying Common Stock (as
defined herein), represented by this Warrant Certificate, on the terms and
conditions specified in this Warrant Certificate and the Warrant Agreement
herein referred to, surrenders this Warrant Certificate and all right,
title and interest therein Oracle Corporation (the "Company") and has
tendered payment for such shares in the amount of $________, all in
accordance with the terms hereof, directs that the shares of Common Stock
deliverable upon the exercise of such Warrants be registered or placed in
the name and at the address specified below and delivered thereto.
Dated: ________________________, _____________
/1/
----------------------------------------
(Signature of Owner)
----------------------------------------
(Street Address)
----------------------------------------
(City) (State) (Zip Code)
----------------------------------------
Facsimile Number/2/
Signature Guaranteed by:
----------------------------------------
- ------------------------------
/1/ The signature must correspond with the name as written upon the face
of the within Warrant Certificate in every particular, without alteration or
enlargement or any change whatsoever, and must be guaranteed by a national bank
or trust company or by a member firm of any national securities exchange or by
another eligible guarantor institution as defined in Rule 17Ad-15 under the
Securities Exchange Act of 1934.
/2/ A facsimile number must be provided for the purpose of receiving any
notice of the Company's election, if any, to settle this exercise of Warrant(s)
in cash or of suspension of the holder's right to exercise this Warrant.
<PAGE>
[FORM OF ASSIGNMENT]
FOR VALUE RECEIVED, the undersigned Holder of this Warrant Certificate
hereby sells, assigns, and transfers unto the Assignee(s) named below (including
the undersigned with respect to any Warrants constituting a part of the Warrants
evidenced by this Warrant Certificate not being assigned hereby) all of the
right of the undersigned under this Warrant Certificate, with respect to the
number of Warrants set forth below:
<TABLE>
<CAPTION>
===============================================================================
Social Security
or other
identifying
Names of number of Number of
Assignee(s) Address assignee(s) Warrants
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
</TABLE>
and does hereby irrevocably constitute and appoint __________, the undersigned's
attorney, to make such transfer on the register maintained by the Warrant Agent
for that purpose, with full power of substitution in the premises.
Dated: ______________, ____
-------------------------------------
(Signature of Owner)/3/
-------------------------------------
(Street Address)
-------------------------------------
(City) (State) (Zip Code)
Signature Guaranteed by:
-------------------------------------
- ----------------------------
/3/ The signature must correspond with the name as written upon the face
of the within Warrant Certificate in every particular, without alteration or
enlargement or any change whatsoever, and must be guaranteed by a national bank
or trust company or by a member firm of any national securities exchange or by
another eligible guarantor institution as defined in Rule 17Ad-15 under the
Securities Exchange Act of 1934.
<PAGE>
EXHIBIT 4.5
WARRANT PURCHASE AGREEMENT dated as of May 14, 1997 between ORACLE
CORPORATION, a Delaware corporation (the "Company"), and GOLDMAN, SACHS & CO., a
New York partnership ("Goldman Sachs").
WHEREAS, the Company proposes to enter into a Warrant Agreement (the
"Warrant Agreement"), substantially in the form of Exhibit I hereto, between the
Company and BankBoston, N.A., a national banking association, a California
banking corporation, as Warrant Agent, pursuant to which the Company proposes to
issue up to 5,000,000 Equity Call Warrants in one or more series (collectively,
the "Warrants" or, individually a "Warrant"), each representing the right to
purchase, subject to the terms and conditions set forth therein, one share of
the common stock, par value $0.01 per share (the "Common Stock"), of the
Company;
WHEREAS, in connection with the purchase of the Warrants pursuant to
the terms hereof and one or more Pricing Agreements (as defined herein), the
Company proposes to repurchase on the Closing Date up to 3,500,000 shares of
Common Stock pursuant to one or more Repurchase Contracts to be entered into
between the Company and Goldman Sachs (the "Repurchase Contracts"); and
WHEREAS, capitalized terms not defined herein are used as defined in
the Warrant Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements and other considerations set forth herein, the parties hereto agree
as follows:
1. Representations and Warranties. (a) The Company hereby
------------------------------
represents and warrants to Goldman Sachs, as of the date hereof, as of each
Pricing Date (as defined herein) and as of each Closing Date as follows:
(i) The Company has been duly incorporated, and is validly existing as a
corporation in good standing under the laws of the State of Delaware.
(ii) The Company has the corporate power and authority to own its
property and conduct its business, and is duly qualified to transact
business and is in good standing in each jurisdiction in which the conduct
of its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or
be in good standing would not have a material adverse effect on the Company
and its subsidiaries, taken as a whole.
<PAGE>
(iii) Each subsidiary of the Company has been duly incorporated, is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and authority to
own its property and to conduct its business and is duly qualified to
transact business and is in good standing in each jurisdiction in which the
conduct of its business or its ownership or leasing of property requires
such qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse effect
on the Company and its subsidiaries, taken as a whole.
(iv) The shares of Common Stock outstanding prior to the issuance of the
Warrants have been duly authorized and are validly issued, fully paid and
non-assessable.
(v) The Company has all requisite power and authority (corporate and
other), and has taken all necessary corporate action, to authorize,
execute, deliver, and perform this Warrant Purchase Agreement, the Warrant
Agreement, each Pricing Agreement (as defined herein) and each Repurchase
Contract; to execute, issue, sell, and deliver the Warrants and a
certificate or certificates evidencing the Warrants; to authorize and
reserve for issuance and, upon payment from time to time of the Purchase
Price, to issue, sell, and deliver the shares of Underlying Common Stock
issuable upon exercise of the Warrants; and to perform all of its
obligations under this Warrant Purchase Agreement, the Warrant Agreement,
each Pricing Agreement, the Warrants and each Repurchase Contract.
(vi) Each of this Warrant Purchase Agreement, the Warrant Agreement, each
Pricing Agreement and each Repurchase Contract has been duly authorized by
the Company and this Warrant Purchase Agreement has been duly executed and
delivered by the Company. The Warrant Agreement, each Repurchase Contract
and each Pricing Agreement, when duly executed and delivered by the
Company, will be legal, valid and binding agreements of the Company
enforceable in accordance with their respective terms except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally and (ii) the availability of
equitable remedies may be limited by equitable principles of general
applicability.
(vii) The Warrants have been duly authorized and, when duly executed and
countersigned in accordance with the provisions of the Warrant Agreement,
will be legal, valid and binding obligations of the Company, enforceable in
accordance with their respective terms except as (i) the enforceability
thereof may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and (ii) the availability of equitable remedies
may be limited by equitable principles of general applicability.
2
<PAGE>
(viii) The shares of Underlying Common Stock, when issued and delivered
in accordance with the terms of the Warrant Agreement and the Warrants,
will be validly issued, fully paid and non-assessable, and the issuance of
such shares will not be subject to any preemptive or similar rights.
(ix) Assuming the accuracy of the representations of Goldman Sachs made
in the letter referred to in Section 3(d), the execution and delivery by
the Company of, and the performance by the Company of its obligations
under, this Warrant Purchase Agreement, the Warrant Agreement, each Pricing
Agreement, the Warrants and each Repurchase Contract will not contravene
any provision of applicable law.
(x) The execution and delivery by the Company of, and the performance by
the Company of its obligations under, this Warrant Purchase Agreement, the
Warrant Agreement, each Pricing Agreement, the Warrants and each Repurchase
Contract will not contravene the certificate of incorporation or by-laws of
the Company or any agreement or other instrument binding upon the Company
or any of its subsidiaries that is material to the Company and its
subsidiaries, taken as a whole, or any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the Company or
any subsidiary, and no consent, approval, authorization or order of or
qualification with any governmental body or agency is required for the
performance by the Company of its obligations under this Warrant Purchase
Agreement, the Warrant Agreement, each Pricing Agreement, the Warrants or
each Repurchase Contract, except such as may be required by the Securities
Act, the securities or Blue Sky laws of the various states, the rules of
the National Association of Securities Dealers, Inc. (the "NASD") or the
rules and regulations applicable to the listing of securities on the Nasdaq
National Market in connection with the reoffer and resale of the shares of
Underlying Common Stock by Goldman Sachs or the issuance of shares of
Underlying Common Stock to any person other than Goldman Sachs.
(xi) The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in the
Investment Company Act of 1940, as amended.
(xii) The Company's Annual Report on Form 10-K for the fiscal year ended
May 31, 1996, as amended, and its Quarterly Reports on Form 10-Q for the
periods ended August 31, 1996, November 30, 1996 and February 28, 1997 (the
"1934 Act Reports") (as previously furnished to Goldman Sachs), at the time
they were filed did not, and, giving effect as of the date hereof and as of
each of the Closing Dates to the transactions contemplated hereby and by
the Warrant Agreement and each Pricing Agreement do not, contain any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the
3
<PAGE>
statements therein, in the light of the circumstances under which they were
made, not misleading.
(xiii) There has not occurred any material adverse change in the
financial condition, earnings, business or operations of the Company and
its subsidiaries, taken as a whole, from that set forth in the 1934 Act
Reports.
(xiv) Neither the Company nor any affiliate (as defined in Rule 501(b) of
Regulation D under the Securities Act ("Regulation D")) of the Company has
directly, or through any agent, sold, offered for sale, solicited offers to
buy or otherwise negotiated in respect of any security (as defined in the
Securities Act) that is or will be integrated with the sale of any Warrants
in a manner that would require the registration under the Securities Act of
the offering contemplated by this Agreement and the Warrant Agreement. The
Company also agrees not to sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the
Securities Act) that would be integrated with the sale of any Warrants in a
manner that would require the registration under the Securities Act of the
offering contemplated by this Agreement and the Warrant Agreement.
(xv) No form of general solicitation or general advertising (as those
terms are defined in Regulation D under the Securities Act) was used by the
Company or any of its representatives in connection with the offer and sale
of any Warrants.
(xvi) There are no material legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries is a party or to
which any of the properties of the Company or any of its subsidiaries is
subject that would be required to be described by Item 103 of Regulation S-
K under the Securities Act were such Item applicable to the 1934 Act
Reports and are not described as required in the 1934 Act Reports.
(xvii) The Company acknowledges and agrees that it is not relying, and
has not relied, upon Goldman Sachs with respect to the legal, accounting,
tax or other implications of this Agreement and the Warrant Agreement and
the transactions contemplated hereby and thereby and that it has conducted
its own analysis of such transactions. The Company further acknowledges
and agrees that Goldman Sachs has not acted as its advisor in any capacity
in connection with this Agreement or the Warrant Agreement or the
transactions contemplated hereby or thereby. The Company understands and
acknowledges that Goldman Sachs and its Affiliates may from time to time
effect transactions, and hold positions, for their own accounts or the
accounts of customers, in securities or options on securities of the
Company and that Goldman Sachs and its Affiliates may continue to conduct
such transactions during the term of any Warrant.
4
<PAGE>
(b) Goldman Sachs agrees that it will not sell any Warrants or any
Underlying Common Stock except in compliance with the registration requirements
of Section 5 of the Securities Act or in a transaction that is exempt from such
registration.
Goldman Sachs acknowledges that the Company and, for purposes of the
opinions to be delivered to Goldman Sachs and the Company pursuant to Section 3
hereof, counsel to the Company and counsel to Goldman Sachs, will rely upon the
accuracy and truth of the foregoing agreement and hereby consents to such
reliance.
2. Purchase and Sale of Warrants. (a) The Company and Goldman Sachs
-----------------------------
propose to enter into one or more Pricing Agreements (each a "Pricing
Agreement") substantially in the form of Exhibit II hereto, with such additions
and deletions as the parties thereto may determine and subject to the terms and
conditions set forth herein, therein, and in the Warrant Agreement, pursuant to
which the Company will agree (i) to sell to Goldman Sachs and Goldman Sachs will
agree to purchase from the Company, up to an aggregate of 5,000,000 Warrants to
purchase, subject to the terms and conditions set forth in the Warrant
Agreement, up to an aggregate of 5,000,000 shares of Underlying Common Stock and
(ii) to repurchase shares of Common Stock (the "Repurchased Shares") pursuant
to, and subject to the terms and conditions set forth in, one or more Repurchase
Contracts. The terms and conditions of each particular sale of Warrants shall
be as specified in the Pricing Agreement relating thereto and in or pursuant to
this Warrant Purchase Agreement and the Warrant Agreement. This Warrant
Purchase Agreement shall not be construed as an obligation of the Company to
sell any of the Warrants or as an obligation of Goldman Sachs to purchase any of
the Warrants. The obligation of the Company to issue and sell any of the
Warrants and the obligation of Goldman Sachs to purchase any of the Warrants
shall be evidenced by the Pricing Agreement with respect to the Warrants
specified therein. Each Pricing Agreement shall specify the number of Warrants
of each series being purchased and the purchase price per Warrant of each
series. The date of each Pricing Agreement is hereinafter referred to as a
"Pricing Date." A Pricing Agreement shall be in the form of an executed writing
(which may be in counterparts), and may be evidenced by an exchange of
telegraphic communications or any other rapid transmission device designed to
produce a written record of communications transmitted.
(b) Payment by Goldman Sachs for each series of Warrants sold to
Goldman Sachs pursuant to the applicable Pricing Agreement and payment by the
Company to repurchase the Repurchased Shares pursuant to the applicable
Repurchase Contract shall be made in Federal or other funds immediately
available at the time and on the date as shall be specified on the applicable
Pricing Agreement and Repurchase Contract, respectively, (or as may be otherwise
agreed to by the parties thereto). The payment obligations of Goldman Sachs
with respect to the Warrants of any series may be netted against the payment
obligations of the Company with respect to the Repurchased Shares specified in
the related Repurchase Contract. The time and date of each such
5
<PAGE>
payment is hereinafter referred to as a Closing Date.
3. Conditions to Parties' Obligations. The obligations of the
----------------------------------
Company and Goldman Sachs hereunder and under each Pricing Agreement are subject
to the following conditions:
(a) Goldman Sachs shall have received on each Closing Date an opinion
of Venture Law Group, counsel for the Company, dated such Closing Date, to the
effect that:
(i) The Company has been duly incorporated, and is validly existing as a
corporation in good standing under the laws of the State of Delaware.
(ii) The Company has the corporate power and authority to own its
property and conduct its business.
(iii) The Company has all requisite corporate power and authority, and
has taken all necessary corporate action, to authorize, execute, deliver,
and perform this Warrant Purchase Agreement, each Pricing Agreement, the
Warrant Agreement and each Repurchase Contract; to execute, issue, sell,
and deliver the Warrants and a certificate or certificates evidencing the
Warrants; to authorize and reserve for issuance and, upon payment from time
to time of the Purchase Price, to issue, sell, and deliver the shares of
Underlying Common Stock issuable upon exercise of the Warrants; and to
perform all of its obligations under the Warrant Purchase Agreement, each
Pricing Agreement, the Warrant Agreement, the Warrants and each Repurchase
Contract.
(iv) This Warrant Purchase Agreement, the Warrant Agreement, each Pricing
Agreement and each Repurchase Contract has been duly authorized, executed
and delivered by the Company, and the Warrant Agreement, each Repurchase
Contract and each Pricing Agreement are legal, valid and binding agreements
of the Company enforceable in accordance with their terms except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally and (ii) the availability of
equitable remedies may be limited by equitable principles of general
applicability.
(v) The Warrants have been duly authorized, executed and countersigned in
accordance with the provisions of the Warrant Agreement and are legal,
valid and binding obligations of the Company, enforceable in accordance
with their respective terms except as (i) the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting creditors'
rights generally and (ii) the availability of equitable remedies may be
limited by equitable principles of general applicability.
6
<PAGE>
(vi) The shares of Underlying Common Stock, when issued and delivered in
accordance with the terms of the Warrant Agreement and the Warrants, will
be validly issued, fully paid and non-assessable, and the issuance of such
shares will not be subject to any preemptive or similar rights set forth in
the Company's certificate of incorporation.
(vii) The execution and delivery by the Company of, and the performance
by the Company of its obligations under, this Warrant Purchase Agreement,
each Pricing Agreement, the Warrant Agreement, the Warrants and each
Repurchase Contract do not contravene any provision of applicable
California or Delaware General Corporate Law or federal law or the
certificate of incorporation or by-laws of the Company or, to the best of
such counsel's knowledge, any agreement or other instrument binding upon
the Company or any of its subsidiaries that is set forth as an exhibit to
the 1934 Act Reports or, to the best of such counsel's knowledge, any
judgment, order or decree of any governmental body, agency or court having
jurisdiction over the Company or any subsidiary, and no consent, approval,
authorization or order of or qualification with any California or federal
governmental body or agency is required for the performance by the Company
of its obligations under this Warrant Purchase Agreement, each Pricing
Agreement, the Warrant Agreement, the Warrants or each Repurchase Contract,
except such as may be required by the Securities Act, securities or Blue
Sky laws of the various states, the rules of the NASD or the rules and
regulations applicable to the listing of securities on the Nasdaq National
Market in connection with the reoffer and resale of the shares of
Underlying Common Stock by Goldman Sachs or the issuance of shares of
Underlying Common Stock to any person other than Goldman Sachs.
(viii) The Company is not an "investment company" or an entity
"controlled" by an "investment company" as such terms are defined in the
Investment Company Act of 1940, as amended.
(ix) Such counsel does not know of any material legal or governmental
proceeding pending or threatened as of such Closing Date to which the
Company or any of its subsidiaries is a party or to which any of the
properties of the Company or any of its subsidiaries is subject that would
be required to be described by Item 103 of Regulation S-K under the
Securities Act were such Item applicable as of such Closing Date and are
not described as required in the 1934 Act Reports.
(x) Such counsel believes that (except for financial statements and
schedules as to which such counsel need express no belief) the 1934 Act
Reports, as of the date of this Warrant Purchase Agreement, did not, and,
giving effect as of the date
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hereof and as of each of the Closing Dates to the transactions contemplated
hereby and by the Warrant Agreement and each Pricing Agreement, as of such
Closing Date do not contain any untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading.
(xi) The sale by the Company of the Warrants to Goldman Sachs in the
manner contemplated by this Warrant Purchase Agreement and the repurchase
by the Company of the Repurchased Shares in the manner contemplated by each
Repurchase Contract and this Warrant Agreement do not require registration
under the Securities Act.
(b) Each of Goldman Sachs and the Company shall have received on each
Closing Date an opinion of Davis Polk & Wardwell (who may rely as to all matters
of California law upon the opinion referred to in paragraph (a) above), counsel
for Goldman Sachs, dated such Closing Date, covering the matters referred to in
subparagraphs (iv), (v), (vi) and (xi) of paragraph (a) above.
(c) Goldman Sachs shall have received on each Closing Date a
certificate dated such Closing Date and signed by an executive officer of the
Company, to the effect that the representations and warranties of the Company
contained in this Warrant Purchase Agreement are true and correct as of such
Closing Date and that the Company has complied in all material respects with all
of the agreements and satisfied all of the conditions on its part to be
performed or satisfied hereunder, under the Warrant Agreement and under each
Pricing Agreement on or before such Closing Date and such other certificates and
documents as it may reasonably request.
(d) Counsel for the Company shall have received on each Closing Date
a letter dated such Closing Date and signed by an officer of Goldman Sachs,
substantially in the form of Exhibit III hereto.
(e) The Company shall have made available to Goldman Sachs, and
counsel, accountants or other professionals retained by Goldman Sachs, such
financial and other information, books, records and properties of the Company
and its subsidiaries, and caused the officers, directors, employees, counsel and
independent certified public accountants of the Company and its subsidiaries to
respond to such inquiries and supply all information, as is reasonably
necessary, in the judgment of Goldman Sachs and its counsel, to conduct a
reasonable investigation.
(f) On or prior to each Closing Date, the Company shall have purchased
from Goldman Sachs all the Repurchased Shares to be purchased pursuant to the
related Repurchase Contract.
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4. Shelf Registration. (a) Subject to the terms hereof, the Company
------------------
agrees that it shall file under the Securities Act a "shelf" registration
statement (the "Shelf Registration") providing for the registration of the sale
on a continuous or delayed basis by Goldman Sachs of all Underlying Common Stock
issuable upon exercise of all of the Warrants pursuant to Rule 415 under the
Securities Act and/or any similar rule that may be adopted by the SEC. The
Company agrees to use its best efforts (i) to cause the Shelf Registration to
become or be declared effective on or prior to the earliest First Exercise Date
of all Warrants issued under the Warrant Agreement and sold pursuant to this
Agreement and each Pricing Agreement and (ii) to keep such Shelf Registration
continuously effective for a period ending 90 days after the Final Expiration
Date, subject to Section 4(d) (such period being referred to as the "Effective
Period"). Notwithstanding the first two sentences of this Section 4(a), the
Company may elect, in its sole discretion, not to file such Shelf Registration,
provided that if the Company so elects or in the event that the Shelf
Registration is not declared effective on or prior to such First Exercise Date,
the Company will exercise, with respect to all Warrants issued under the Warrant
Agreement and sold pursuant to this Agreement and each Pricing Agreement, its
right pursuant to Section 4(d) of the Warrant Agreement to effect either a Cash
Settlement or Net Share Settlement of each exercise of such Warrants.
(b) The Company further agrees, if necessary, to supplement or make
amendments to the Shelf Registration, if required by the rules, regulations or
instructions applicable to the registration form used by the Company for such
Shelf Registration or by the Securities Act or rules and regulations thereunder,
and the Company agrees to furnish to Goldman Sachs copies of any such supplement
or amendment prior to its being used and/or filed with the SEC and that it will
not file any such supplement or amendment to which Goldman Sachs reasonably
objects. In connection with such registration of the Underlying Common Stock,
the Company will, upon the request of Goldman Sachs use all reasonable efforts
to obtain a listing of the Underlying Common Stock on the Nasdaq National Market
or such national securities exchange or other quotation system on which the
Common Stock of the Company may at such time be listed. Goldman Sachs shall
notify (any such notice, a "Notice of Sale") the Company not less than five
Business Days prior to the date on which Goldman Sachs intends to commence any
sales of Underlying Common Stock pursuant to the Shelf Registration (the "Resale
Commencement Date").
(c) The Company's obligation to supplement or amend the Shelf
Registration pursuant to Section 4(b) hereof shall be subject to the terms
hereof (including Sections 4(d) and 4(e)) and the following limitations:
(i) in no event shall the Company be required to effect any such
supplement or amendment during the period beginning 14 Business Days prior
to the end of any fiscal quarter of the Company and ending two Business
Days after such time as the Company publicly releases its results of
operations for such fiscal quarter;
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(ii) subject to the provisions of subparagraph (iii) and Section 4(e)
below, the Company may on one or more occasions by notice to Goldman Sachs
given in accordance with Section 13(c) hereof, suspend its obligation to
supplement or amend the Shelf Registration for a period of time to be
specified in such notice, it being understood that the Company shall not
indicate to Goldman Sachs the reasons for such suspension; and
(iii) if Goldman Sachs shall deliver to the Company a Notice of Sale,
then the Company may not (x) commence a suspension of its obligations to
supplement or amend the Shelf Registration pursuant to Section 4(c)(ii)
hereof or (y) commence a suspension of the right to exercise Warrants
pursuant to Section 4(f) of the Warrant Agreement at any time during the
period commencing at 5:00 P.M., New York City time, on the Business Day
immediately preceding the Resale Commencement Date and ending at 5:00 P.M.,
New York City time, on the tenth Business Day following the Resale
Commencement Date (the "Final Resale Date").
Goldman Sachs agrees that during the periods specified in Section 4(c)(i) hereof
and in any notice from the Company delivered pursuant to Section 4(c)(ii)
hereof, Goldman Sachs shall not dispose of Underlying Common Stock pursuant to a
registration statement applicable to such Underlying Common Stock. The Company
agrees to provide Goldman Sachs with at least one Business Day's notice of the
expiration of any period of suspension under clause (ii) of paragraph (c) of
this Section 2.
(d) The Company may on no more than one occasion by notice to Goldman
Sachs given subsequent to the Final Expiration Date (after having given effect
to any and all extensions of the Expiration Date of any of the Warrants) extend
the Effective Period for a period of up to 90 days.
(e) Notwithstanding anything to the contrary in this Agreement or the
Warrant Agreement, the Company may not suspend its obligation to supplement and
amend the Shelf Registration or suspend Holders' rights to exercise any
outstanding Warrants unless during a period of no less than 10 consecutive
Business Days occurring after the sixtieth day following the Final Expiration
Date such obligations and rights are in full force and effect and free from any
such suspension.
5. Redemption Price. In the case of any redemption of Warrants made
----------------
pursuant to Section 5 of the Warrant Agreement at a time when such Warrants are
owned by Goldman Sachs or by any affiliate of Goldman Sachs, the Redemption
Price applicable to such Warrants will also include a reasonable estimate by
Goldman Sachs of its cost for liquidating its hedge for the Warrants that the
Company wishes to redeem. Goldman Sachs will advise the Company verbally and by
facsimile transmission of such cost to be
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<PAGE>
included in the calculation of the Redemption Price.
6. Registration Procedures. (a) In connection with the Company's
-----------------------
obligations to register the reoffer and resale of the shares of Underlying
Common Stock by Goldman Sachs the Company shall use all reasonable efforts to
effect or cause the applicable registration statement or registration statements
to permit the sale of the Underlying Common Stock by Goldman Sachs in accordance
with the intended method or methods of distribution thereof described in the
Shelf Registration, provided that the Company shall have no such obligation
during any suspension of the Company's obligation to supplement or amend the
Shelf Registration Statement under Section 4(c)(i) or 4(c)(ii). In connection
therewith, the Company shall:
(i) comply with the provisions of the Securities Act with respect to
the disposition of all of the Underlying Common Stock covered by the Shelf
Registration in accordance with the intended methods of disposition by
Goldman Sachs set forth therein;
(ii) provide Goldman Sachs, and up to one other underwriter (as shall
be reasonably acceptable to the Company) participating in such sale and any
attorney, accountant or other professional retained by Goldman Sachs
(collectively, the "Participants") the opportunity to participate in the
preparation of the Shelf Registration, each prospectus included therein or
filed with the SEC and each amendment or supplement thereto;
(iii) in connection with each sale of Underlying Common Stock to be
registered pursuant to Section 4(a) hereof, make available for inspection
by Goldman Sachs and any other Participant such financial and other
information, books, records and properties of the Company, and cause the
officers, directors, employees, counsel and independent certified public
accountants of the Company to respond to such inquiries and supply all
information, as shall be reasonably necessary, in the judgment of Goldman
Sachs and its counsel or any underwriter participating in such sale, to
conduct a reasonable investigation within the meaning of Section 11 of the
Securities Act; provided, however, that each such person shall be required
to maintain in confidence and not to disclose to any other person any
information or records reasonably designated by the Company in writing as
being confidential, until such time as (A) such information becomes a
matter of public record (whether by virtue of its inclusion in the Shelf
Registration or otherwise), or (B) such person shall be required so to
disclose such information pursuant to the subpoena or order of any court or
other governmental agency or body having jurisdiction over the matter
(subject to the requirements of such order, and only after such person
shall have given the Company prompt prior written notice of such
requirement), or (C) such information is required to be set forth in the
Shelf Registration or each prospectus included therein or in any
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<PAGE>
amendment to the Shelf Registration or any amendment or supplement to such
prospectus in order that the Shelf Registration or such prospectus,
amendment or supplement, as the case may be, does not contain an untrue
statement of a material fact or omit to state therein a material fact
required to be stated therein or necessary to make the statements therein
not misleading; provided, further, that if the Company's obligation to
effect and maintain a registration statement is suspended pursuant to
Section 4(c) hereof after Goldman Sachs has conducted an investigation
contemplated by this Section 6(a)(iii) and prior to the time when Goldman
Sachs has sold such Underlying Common Stock, then Goldman Sachs shall have
the right, after the time such suspension ends, to supplement its
investigation with such additional inspection of financial and other
information, books, records and properties and such additional inquiries as
shall be reasonably necessary, in the judgment of Goldman Sachs and its
counsel, to conduct a reasonable investigation within the meaning of
Section 11 of the Securities Act;
(iv) promptly notify Goldman Sachs, and confirm such advice in
writing, (A) when the Shelf Registration or prospectus included therein or
any amendment or supplement thereto has been filed, and, with respect to
the Shelf Registration or any amendment, when the same has become
effective, (B) of any comments of the SEC and of the Blue Sky or securities
commissioner or regulator of any state with respect thereto or any request
by the SEC for amendments or supplements to the Shelf Registration or
prospectus or for additional information, (C) of the issuance by the SEC of
any stop order suspending the effectiveness of the Shelf Registration or
the initiation or threatening of any proceedings for that purpose, (D) if
at any time the representations and warranties of the Company contemplated
by Section 1 or Section 6(a)(xiii) hereof cease to be true and correct in
all material respects, (E) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Underlying Common Stock for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, (F) at any time when a
prospectus is required to be delivered under the Securities Act, of the
occurrence and the nature of any event requiring the preparation of an
amendment to the Shelf Registration or a supplement to the prospectus
included therein so that, as thereafter delivered as required under the
Securities Act, the Shelf Registration, prospectus, amendment or supplement
or any document incorporated by reference in any of the foregoing, will not
contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading;
(v) use all reasonable efforts to prevent entry of any order
suspending the effectiveness of the Shelf Registration or any post-
effective amendment thereto or obtain at the earliest practicable date the
withdrawal of any such order if entered;
(vi) if requested by Goldman Sachs, promptly incorporate in an
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<PAGE>
amendment to the Shelf Registration or in a supplement to the prospectus
included therein such information as is required by the applicable rules
and regulations of the SEC and as Goldman Sachs specifies relating to the
sale of such Underlying Common Stock and promptly make all required filings
of such amendment or supplement, as the case may be;
(vii) promptly furnish to Goldman Sachs an executed copy of the Shelf
Registration, and any amendment thereto (in each case including all
exhibits thereto and documents incorporated by reference therein) and such
number of copies of the Shelf Registration (excluding exhibits thereto and
documents incorporated by reference therein unless specifically so
requested by Goldman Sachs), any amendment thereto, the prospectus included
in the Shelf Registration (including each preliminary prospectus and any
summary prospectus), any supplement thereto, and such other documents as
Goldman Sachs may reasonably request in order to facilitate the offering
and disposition of the Underlying Common Stock owned by Goldman Sachs, and
to permit Goldman Sachs to satisfy the prospectus delivery requirements of
the Securities Act; and the Company hereby consents to the use of such
prospectus (including such preliminary and summary prospectus) and any
supplement thereto by Goldman Sachs and by any agent or underwriter, in
each case in the form most recently provided to such party by the Company,
in connection with the offering and sale of the Securities covered by such
prospectus (including such preliminary and summary prospectus) or
supplement thereto;
(viii) use all reasonable efforts to (A) promptly register or qualify
the Underlying Common Stock to be included in the Shelf Registration under
such securities laws or Blue Sky laws of such United States jurisdictions
as Goldman Sachs and each placement or sales agent, if any, therefor and
underwriter, if any, thereof shall reasonably request, (B) keep such
registrations or qualifications in effect and comply with such laws so as
to permit the continuance of offers, sales and dealings therein in such
jurisdictions during the periods the Shelf Registration is required to
remain effective under Section 4 above, and for so long as may be necessary
to enable Goldman Sachs or any agent or underwriter to complete its
disposition of Underlying Common Stock pursuant to such Shelf Registration
and (C) take any and all other actions as may be reasonably necessary or
advisable to enable Goldman Sachs any agent, and any underwriter, to
consummate the disposition in such jurisdictions of such Underlying Common
Stock; provided, however, that the Company shall not be required for any
such purpose to (I) qualify as a foreign corporation in any jurisdiction
wherein it would not otherwise be required to qualify but for the
requirements of this Section 6(a)(viii) or (II) consent to general service
of process in any such jurisdiction;
(ix) use its best efforts to obtain the consent or approval of each
13
<PAGE>
governmental agency or authority, whether United States federal, state or
local, which may be required to make the Shelf Registration effective or to
effect the offering or sale in connection therewith or to enable Goldman
Sachs to offer, or to consummate the disposition of, the Underlying Common
Stock;
(x) cooperate with Goldman Sachs to facilitate the timely preparation
and delivery of certificates representing Underlying Common Stock to be
sold, which certificates shall be printed, lithographed or engraved, or
produced by any combination of such methods, and, in the case of an
underwritten offering, enable such Underlying Common Stock to be in such
denominations and registered in such names as Goldman Sachs may request at
least 1 Business Day prior to any sale of the Underlying Common Stock;
(xi) enter into one or more underwriting agreements, engagement
letters, agency agreements, "best efforts" underwriting agreements or
similar agreements, as appropriate, including (without limitation)
customary provisions relating to indemnification and contribution, and take
such other actions in connection therewith as Goldman Sachs shall request
in order to expedite or facilitate the disposition of the Underlying Common
Stock;
(xii) whether or not an agreement of the type referred to in Section
(6)(a)(xi) hereof is entered into and whether or not any portion of the
offering contemplated by the Shelf Registration is an underwritten offering
or is made through a placement or sales agent or any other entity, (A) make
such representations and warranties to Goldman Sachs in form, substance and
scope as are customarily made in connection with an offering of equity
securities pursuant to any appropriate agreement and/or to a registration
statement filed on the form applicable to the Shelf Registration
(including, without limitation, representations to the effect that (i) as
of the date of such agreement or registration statement and as of the date
of the closing of the offering, there has not occurred any material adverse
change, or any development involving a prospective material adverse change,
in the condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, from that
set forth in the applicable disclosure document and (ii) the outstanding
Common Stock is fully paid and non-assessable); (B) obtain an opinion of
outside counsel to the Company of recognized standing in customary form and
covering such matters of the type customarily covered by such an opinion,
as Goldman Sachs may reasonably request, addressed to Goldman Sachs, dated
the closing date of such offering (and if such Shelf Registration
contemplates an underwritten offering of a part or all of the Underlying
Common Stock, dated the date of the underwriting agreement relating thereto
and addressed to the underwriters) (it being agreed that the matters to be
covered by such opinion shall include, without limitation, the due
incorporation and good standing of the Company; the
14
<PAGE>
qualification of the Company to transact business as a foreign corporation;
the due authorization, execution and delivery of this Agreement, each
Pricing Agreement, the Warrant Agreement and of any agreement of the type
referred to in Section 6(a)(xi) hereof; the conformity as to legal matters
of the authorized capital stock of the Company to the description thereof
contained in the prospectus included in the Shelf Registration, as then
amended or supplemented; the due authorization and issuance, and status as
fully paid and non-assessable, of the Underlying Common Stock; the absence
of material legal or governmental proceedings involving the Company; the
non-contravention (of law or organizational documents of the Company) of
the execution and delivery by the Company and performance by the Company of
its obligations under any agreement of the type referred to in Section
6(a)(xi); the absence of governmental approvals required to be obtained in
connection with the Shelf Registration, the offering and sale of the
Underlying Common Stock, this Agreement, each Pricing Agreement, the
Warrant Agreement or any agreement of the type referred to in Section
6(a)(xi) hereof; the fair presentation in the Shelf Registration and the
prospectus included therein, as then amended or supplemented, of such legal
matters, documents and proceedings described therein as shall be specified;
the Company not being an "investment company" or an entity "controlled" by
an "investment company" as such terms are defined under the Investment
Company Act of 1940; the compliance as to form of the Shelf Registration,
the prospectus included therein, as then amended or supplemented, and any
documents incorporated by reference therein with the Securities Act and the
applicable rules and regulations of the SEC thereunder; and, as of the date
of the opinion and of the Shelf Registration or most recent post-effective
amendments thereto and the date of effectiveness thereof, as the case may
be, the absence from the Shelf Registration and each prospectus included
therein, as then amended or supplemented, and from the documents
incorporated by reference therein of any untrue statement of a material
fact or the omission to state therein a material fact necessary in order to
make the statements therein not misleading (in the case of each such
prospectus, in the light of the circumstances under which the statements
therein were made)); (C) obtain a "cold comfort" letter or letters from the
independent certified public accountants of the Company addressed to
Goldman Sachs and any underwriter or agent and in form and substance
satisfactory to them, dated (I) as of the date of the agreement to sell
Securities and (II) the closing date of any sale of Underlying Common Stock
pursuant to any prospectus supplement to the prospectus included in the
Shelf Registration or post-effective amendment to the Shelf Registration,
such letter or letters to be in customary form and covering such matters of
the type customarily covered by letters of such type; (D) deliver such
documents and certificates, including officers' certificates, as may be
reasonably requested by Goldman Sachs to evidence the accuracy of the
representations and warranties made pursuant to clause (A) above and the
compliance with or satisfaction of any agreements or conditions contained
in the underwriting agreement or other agreement entered
15
<PAGE>
into by the Company; and (E) undertake such obligations relating to expense
reimbursement, indemnification and contribution as are provided in Sections
8, 9, 10 and 11 hereof;
(xiii) in the event that any broker-dealer registered under the
Exchange Act shall underwrite any Underlying Common Stock or participate as
a member of an underwriting syndicate or selling group or "participate in
the distribution" (within the meaning of Section 2720 of the Conduct Rules
of the NASD) thereof, whether as an underwriter, a placement or sales agent
or a broker or dealer in respect thereof, or otherwise, assist such broker-
dealer in complying with the requirements of such Conduct Rules, including,
without limitation, by providing such information to such broker-dealer as
may be required in order for such broker-dealer to comply with the
requirements of the Conduct Rules of the NASD; and
(xiv) comply in all material respects with all applicable rules and
regulations of the SEC and make generally available to its security holders
as soon as practicable, an earnings statement of the Company and its
subsidiaries covering a period of 12 months, beginning within three months
after the effective date of the Shelf Registration, complying with Section
11(a) of the Securities Act (including, at the option of the Company, Rule
158 thereunder).
(b) In the event that the Company would be required, pursuant to
Section 6(a)(iv)(F) above, to notify Goldman Sachs, the Company shall (subject
to its right to suspend its obligations pursuant to Sections 4(c)(i) or
4(c)(ii)) without delay prepare and furnish to Goldman Sachs a reasonable number
of copies of a prospectus supplemented or amended in form and substance
reasonably satisfactory to it, so that, as thereafter delivered to purchasers of
Underlying Common Stock, such prospectus shall not contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading. Goldman
Sachs agrees that upon receipt by Goldman Sachs of any notice from the Company
pursuant to Section 6(a)(iv)(F) hereof, Goldman Sachs shall forthwith
discontinue the disposition of Underlying Common Stock pursuant to the
registration statement applicable to such Securities until Goldman Sachs shall
have received copies of such amended or supplemented prospectus, and if so
directed by the Company, Goldman Sachs shall deliver to the Company (at the
Company's expense) all copies, other than permanent file copies, then in Goldman
Sachs's possession of the prospectus covering such Underlying Common Stock at
the time of receipt of such notice.
(c) The Company may require Goldman Sachs to furnish to the Company
such information regarding Goldman Sachs and Goldman Sachs's intended method of
resale of the Underlying Common Stock as the Company may from time to time
reasonably request in writing, but only to the extent that such information is
required in
16
<PAGE>
order to comply with the Securities Act. Goldman Sachs agrees to notify the
Company as promptly as practicable of any inaccuracy or change in information
previously furnished by Goldman Sachs to the Company or of the occurrence of any
event in either case as a result of which any prospectus relating to the Shelf
Registration contains or would contain an untrue statement of a material fact
regarding Goldman Sachs or Goldman Sachs's intended method of distribution of
such Underlying Common Stock or omits to state any material fact regarding
Goldman Sachs or Goldman Sachs's intended method of distribution of such
Underlying Common Stock required to be stated therein or necessary to make the
statements therein not misleading, and promptly to furnish to the Company any
additional information required to correct and update any previously furnished
information so that such prospectus shall not contain, with respect to Goldman
Sachs or the distribution of such Underlying Common Stock 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.
7. Registration Expenses. (a) The Company agrees to bear and to pay
---------------------
or cause to be paid promptly upon request being made therefor all expenses
incident to filing and causing effectiveness of the Shelf Registration,
including, without limitation, (i) all SEC, stock exchange, Nasdaq National
Market or NASD registration and filing fees and expenses, (ii) all fees and
expenses (if any) in connection with the qualification of the Underlying Common
Stock for reoffering and resale under the state securities and Blue Sky laws
referred to in Section 6(a)(viii) hereof, including reasonable fees and
disbursements of counsel for Goldman Sachs in connection with such
qualifications, (iii) all expenses relating to the preparation, word processing,
printing, distribution and reproduction of the Shelf Registration (including the
preliminary prospectus included therein) and each amendment to the foregoing,
(iv) internal expenses (including, without limitation, all salaries and expenses
of the Company's officers and employees performing legal or accounting duties),
and (v) fees, disbursements and expenses of counsel and independent certified
public accountants of the Company. Notwithstanding the foregoing, Goldman Sachs
shall pay all agency fees and commissions and underwriting discounts and
commissions attributable to the sale of the Underlying Common Stock and the fees
and disbursements of any counsel or other advisors or experts retained by
Goldman Sachs.
(b) Notwithstanding the terms of Section 7(a) hereof, Goldman Sachs
agrees to bear and to pay or cause to be paid promptly upon request being made
therefor all reasonable expenses incident to the takedown of Underlying Common
Stock off the Shelf Registration, including, without limitation, (i) all
expenses relating to the preparation, printing, distribution and reproduction of
each supplement to the preliminary prospectus included in the Shelf
Registration, and (ii) fees, disbursements and expenses of counsel and
independent certified public accountants of the Company.
8. Indemnification by the Company. The Company agrees to indemnify
------------------------------
17
<PAGE>
and hold harmless Goldman Sachs its officers, directors, agents, employees, and
each person, if any, who controls Goldman Sachs within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act from and against any and
all losses, claims, damages and liabilities (including, without limitation, any
legal or other expenses reasonably incurred in connection with defending or
investigating any such action or claim) caused by any untrue statement or
alleged untrue statement of a material fact contained in the 1934 Act Reports or
any registration statement or prospectus relating to the Underlying Common Stock
(as amended or supplemented if the Company shall have furnished any amendments
or supplements thereto) or any preliminary prospectus, or caused by any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such losses, claims, damages or liabilities are caused by any such
untrue statement or omission or alleged untrue statement or omission based upon
information relating to Goldman Sachs furnished in writing to the Company by
Goldman Sachs or on Goldman Sachs's behalf expressly for use therein. The
Company also agrees to indemnify any underwriters of the Underlying Common
Stock, their officers and directors and each person who controls such
underwriters on substantially the same basis as that of the indemnification of
Goldman Sachs provided in this Section 8.
9. Indemnification by Goldman Sachs. Goldman Sachs agrees to
--------------------------------
indemnify and hold harmless the Company, its officers, directors, employees and
agents and each person, if any, who controls the Company within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act to the
same extent as the foregoing indemnity from the Company to Goldman Sachs but
only with reference to information related to Goldman Sachs furnished in writing
by Goldman Sachs or on Goldman Sachs's behalf expressly for use in any
registration statement or prospectus relating to Underlying Common Stock, or any
amendment or supplement thereto, or any preliminary prospectus.
10. Conduct of Indemnification Proceedings. In case any proceeding
--------------------------------------
(including any governmental investigation) shall be instituted involving any
person in respect of which indemnity may be sought pursuant to Section 8 or 9,
such person (the "Indemnified Party") shall promptly notify the person against
whom such indemnity may be sought (the "Indemnifying Party") in writing and the
Indemnifying Party, upon request of the Indemnified Party, shall retain counsel
reasonably satisfactory to the Indemnified Party to represent the Indemnified
Party and any others the Indemnifying Party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any Indemnified Party 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 Party unless (i) the Indemnifying Party and the Indemnified
Party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the Indemnified Party and the Indemnifying Party and representation of both
parties by the same counsel
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<PAGE>
would be inappropriate due to actual or potential differing interests between
them. It is understood that the Indemnifying Party shall not, in respect of the
legal expenses of any Indemnified Party in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the fees and
expenses of more than one separate firm (in addition to any local counsel) at
any time for the Indemnified Party, and that all such fees and expenses shall be
reimbursed as they are incurred. In the case of any such separate firm for the
Indemnified Party, such firm shall be designated in writing by the Indemnified
Party. The Indemnifying Party shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such
consent, or if there be a final judgment for the plaintiff, the Indemnifying
Party agrees to indemnify the Indemnified Party from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an Indemnified Party shall have requested an
Indemnifying Party to reimburse the Indemnified Party for fees and expenses of
counsel as contemplated by the second and third sentences of this Section 10,
the Indemnifying Party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 30 Business Days after receipt by such Indemnifying Party
of the aforesaid request and (ii) such Indemnifying Party shall not have
reimbursed the Indemnified Party in accordance with such request prior to the
date of such settlement. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any pending or
threatened proceeding in respect of which any Indemnified Party 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 Party from all liability on claims that are the subject matter of
such proceeding.
11. Contribution. To the extent the indemnification provided for in
------------
Sections 8, 9 and 10 of this Warrant Purchase Agreement is unavailable to an
Indemnified Party or insufficient in respect of any losses, claims, damages or
liabilities referred to therein, then each such Indemnifying Party under such
Section, in lieu of indemnifying such Indemnified Party thereunder, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such losses, claims, damages or liabilities in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party on the one
hand and the Indemnified Party on the other hand in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative fault of the Company on the one hand and of Goldman Sachs on the other
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or by
Goldman Sachs and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
The Company and Goldman Sachs agree that it would not be just or equitable
if
19
<PAGE>
contribution pursuant to this Section 11 were determined by pro rata allocation
--- ----
or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages or liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such Indemnified Party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 11, Goldman Sachs shall not be
required to contribute any amount in excess of the amount by which the proceeds
to Goldman Sachs of a sale of Underlying Common Stock exceed the amount of any
damages which Goldman Sachs have otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
12. Rule 144. The Company covenants that it will file any reports
--------
required to be filed by it under the Securities Act and the Exchange Act to the
extent required from time to time to enable Goldman Sachs to sell Underlying
Common Stock without registration under the Securities Act within the limitation
of the exemptions provided by (a) Rule 144 under the Securities Act, as such
Rule may be amended from time to time, or (b) any similar rule or regulation
hereafter adopted by the SEC (as so amended and along with any such similar rule
or regulation, "Rule 144"). Upon the request of Goldman Sachs, the Company will
deliver to Goldman Sachs a written statement as to whether it has complied with
such requirements.
13. Miscellaneous. (a) No Inconsistent Agreements. The Company
------------- --------------------------
will not hereafter enter into any agreement with respect to its securities which
is inconsistent with the rights granted to Goldman Sachs in this Warrant
Purchase Agreement.
(b) Amendments and Waivers. Except as otherwise provided herein, the
----------------------
provisions of this Warrant Purchase Agreement may not be amended, modified or
supplemented, and waivers to or departures from the provisions hereof may not be
given unless consented to in writing by each party.
(c) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made by hand delivery, telex, telecopy, overnight
courier or registered first-class mail as follows:
(i) if to Goldman Sachs: Goldman, Sachs & Co., 85 Broad Street, New
York, New York 10004, attention: Anthony Leitner, with a copy to the
General Counsel;
(ii) if to the Company: Oracle Corporation, 500 Oracle Parkway,
20
<PAGE>
Redwood City, California 94065, attention: General Counsel.
All such notices and communications shall be deemed to have been duly
given: when delivered, if by hand, overnight courier or mail; when the
appropriate answer back is received, if by telex; when transmitted, if by
telecopy.
(d) Successors and Assigns; Transfer of Registration Rights. This
-------------------------------------------------------
Warrant Purchase Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties. The registration rights set forth
in this Warrant Purchase Agreement may be transferred in whole or in part from
time to time to any holder of Warrants.
(e) Counterparts. This Warrant Purchase Agreement may be executed in
------------
any number of counterparts and by the parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
(f) Headings. The headings to this Warrant Purchase Agreement are for
--------
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(g) Governing Law. This Warrant Purchase Agreement shall be governed
-------------
by and construed in accordance with the laws of the State of California.
(h) Severability. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be in any way impaired
thereby.
(i) Survival. The indemnity and contribution provisions contained in
--------
Sections 8, 9, 10 and 11 and the representations and warranties of the Company
contained in this Agreement and in each Pricing Agreement shall remain operative
and in full force and effect regardless of (i) any termination of this
Agreement, (ii) any investigation made by or on behalf of Goldman Sachs or any
person controlling Goldman Sachs or the Company, its officers or directors or
any person controlling the Company and (iii) acceptance of and payment for any
of the Warrants.
21
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Warrant Purchase
Agreement as of the date first written above.
ORACLE CORPORATION
By:/s/ Bruce M. Lange
---------------------------
Name: Bruce M. Lange
Title: Vice President and Treasurer
GOLDMAN, SACHS & CO.
By:/s/ J. David Rogers
---------------------------
Name: J. David Rogers
Title: Managing Director
<PAGE>
EXHIBIT II
PRICING AGREEMENT
-----------------
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
May __, 1997
Dear Sirs/Mesdames:
Oracle Corporation, a Delaware corporation (the "Company"), proposes
to issue and sell to Goldman, Sachs & Co., a New York partnership ("Goldman
Sachs"), subject to the terms and conditions stated herein, in the Warrant
Agreement (the "Warrant Agreement"), to be dated as of May 19, 1997, between the
Company and BankBoston, N.A., as Warrant Agent, and in the Warrant Purchase
Agreement (the "Warrant Purchase Agreement"), dated as of May 14, 1997, among
the Company and you, __________ Series _ Equity Call Warrants at a purchase
price of $__ per Warrant.
Each provision of the Warrant Purchase Agreement is incorporated
herein by reference in its entirety, and shall be deemed to be a part of this
Agreement to the same extent as if such provisions had been set forth in full
herein; and each of the representations and warranties set forth therein shall
be deemed to have been made at and as of the date of this Pricing Agreement.
Unless otherwise defined herein, terms used herein and defined in the Warrant
Purchase Agreement are used herein as therein defined.
Subject to the terms and conditions set forth herein and in the
Warrant Purchase Agreement incorporated herein by reference, the Company agrees
to issue and sell to you, and you agree to purchase from the Company on the
third business day following the date hereof, at the time and place set forth in
the Warrant Purchase Agreement (or at such other time and place as may be agreed
to by the parties) and at the purchase price to you set forth above, __________
Series _ Equity Call Warrants.
<PAGE>
The effectiveness of this Pricing Agreement is subject to the condition
that on or prior to the date hereof, the Company shall have entered into a
Repurchase Contract with respect to _______ shares of common stock of the
Company substantially in the form of Annex I hereto.
Very truly yours,
ORACLE CORPORATION
By:___________________________
Name:
Title:
Accepted as of the date hereof:
GOLDMAN, SACHS & CO.
By:___________________________
Name:
Title:
2
<PAGE>
EXHIBIT III
LETTER OF REPRESENTATION
------------------------
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Venture Law Group
2800 Sand Hill Road
Menlo Park, CA 94025
In connection with (x) the sale (the "Sale") to, and the purchase by,
Goldman, Sachs & Co. ("Goldman Sachs", "we" or "us") of ________ Series ___
Equity Call Warrants, (collectively, the "Warrants" or, individually a
"Warrant"), each representing the right to purchase one share of the common
stock, par value $___ per share (the "Common Stock"), of Oracle Corporation (the
"Company"), pursuant to the Warrant Purchase Agreement (the "Warrant Purchase
Agreement") dated as of May 14, 1997, and the Pricing Agreement (the "Pricing
Agreement") dated as of May __, 1997, in each case among the Company and Goldman
Sachs and (y) the repurchase by the Company from Goldman Sachs of ________
shares of Common Stock pursuant to, and subject to the terms and conditions of,
the Warrant Purchase Agreement and the Repurchase Contract dated May __, 1997,
among the Company and Goldman Sachs, we hereby represent as follows:
1. We are aware that we must bear the risk of an investment in the
Warrants for an indefinite period of time, and we are able to bear such risk.
As of the time of the Sale, however, we have hedged our position in the Warrants
through the short sale of Common Stock pursuant to the Repurchase Contract[s]
referred to above. Under current market conditions, we do not expect to engage
in the short sale of shares of Common Stock in addition to the sales made
pursuant to the Repurchase Contract in order to hedge our position in the
Warrants. To the extent we or any affiliate of ours engage in short sales
("Short Sales") of shares of Common Stock to any person other than the Company
to hedge our position in the Warrants, (i) neither we nor any such affiliate
will engage in any special selling efforts or selling methods in connection with
any Short Sales and, (ii) to the extent required by applicable law, we and any
such affiliate (A) will not cover any Short Sales or repay any borrowing of
shares of Common Stock used to settle any Short Sales with any shares of Common
Stock issued on exercise of the Warrants ("Warrant Shares") and (B) will take
all reasonable steps so as not to (I) knowingly sell any Warrant Shares to any
person from whom we or any such affiliate
<PAGE>
purchase any shares of Common Stock used to cover any Short Sales or (II)
knowingly purchase any shares of Common Stock to be used to settle any Short
Sales or to repay any borrowing of shares of Common Stock used to settle any
Short Sales from: (x) any person to whom we or any such affiliate has sold any
Warrant Shares or (y) any person that we or any such affiliate has reason to
believe indirectly acquired Warrant Shares.
2. We have such knowledge and experience in financial and business
matters that we are capable of evaluating the merits and risks of purchasing the
Warrants.
3. We are purchasing the Warrants for our own account. We are not
acquiring the Warrants with a view to distribution thereof, or with any present
intention of offering or selling the Warrants, subject, nevertheless, to the
disposition of our property being at all times within our control.
4. On the basis of the applicable Purchase Price, and other terms of
each series of Warrants, the historical volatility of the Common Stock and such
other factors as we have deemed advisable for the purposes of this letter, we
believe that with respect to each Warrant purchased pursuant to the Warrant
Purchase Agreement there exists at least a 50% probability that such Warrant
will expire worthless.
5. We are an "accredited investor" within the meaning of subparagraph
(a)(1) of Rule 501 under the Securities Act.
We acknowledge that for purposes of the opinion to be delivered to
Goldman Sachs, as our agent, pursuant to Section 3(b) of the Warrant Purchase
Agreement, you will rely upon the accuracy and truth of the foregoing
representations and we hereby consent to such reliance.
Terms used herein but not otherwise defined herein are used herein as
defined in the Warrant Agreement dated as of May 19, 1997 between the Company
and BankBoston, N.A., as Warrant Agent.
Date: May __, 1997
GOLDMAN, SACHS & CO.
By:_________________________________
Name:
Title:
2
<PAGE>
EXHIBIT 4.6
WARRANT AGREEMENT, dated as of May 19, 1997, between ORACLE CORPORATION, a
Delaware corporation (the "Company"), and BANKBOSTON, N.A., a national banking
association, as warrant agent (the "Warrant Agent").
WHEREAS, the Company proposes to issue and deliver its warrant certificates
(the "Warrant Certificates") evidencing Equity Call Warrants in the series and
with the terms indicated on Schedule I hereto (as such Schedule may be amended
or modified from time to time) (collectively, the "Warrants" or individually, a
"Warrant"), each representing the right to purchase, subject to adjustment and
to the other terms and conditions set forth herein, one share of its Common
Stock (as defined below);
WHEREAS, each Warrant shall entitle the registered holder thereof (subject
to the Company's rights to suspend exercises of Warrants or to elect Cash
Settlement or Net Share Settlement of such exercises) to acquire from the
Company one share of Common Stock, subject to adjustment; and
WHEREAS, the Warrant Agent, at the request of the Company, has agreed to
act as the Agent of the Company in connection with the issuance, registration,
transfer, exchange and exercise of the Warrants;
NOW, THEREFORE, in consideration of the foregoing and for the purpose of
defining the terms and provisions of the Warrants and the respective rights and
obligations thereunder of the Company, the Warrant Agent and the registered
holders from time to time of the Warrants, the Company and the Warrant Agent
hereby agree as follows:
1 DEFINITIONS. (a) Certain Definitions. As used in this Warrant
Agreement, the following terms shall have the following respective meanings:
"AFFILIATE" of any person means any other person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such person. For purposes of this definition, "control", when used with respect
to any person, means the power to direct the management and policies of such
person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
1
<PAGE>
"BUSINESS DAY" means any day, other than Saturday, Sunday or a day on
which either the New York Stock Exchange or the American Stock Exchange is not
open for securities trading or commercial banks in The City of New York are
required or authorized by law or executive order to close.
"CASH SETTLEMENT VALUE" in respect of any exercised Warrant means an amount
equal to the excess, if any, of the arithmetic average of (i) the Market Value
of the Underlying Common Stock for the period commencing on the fourth and
ending on and including the thirteenth Business Day immediately following the
date on which such Warrant is exercised, subject to adjustment pursuant to
Section 6 hereof, the provisions of which shall be applied for this purpose
through such thirteenth Business Day, over (ii) the Purchase Price relating to
such Warrant as adjusted pursuant to Section 6 hereof through such thirteenth
Business Day.
"COMMON STOCK" means the common stock, par value $0.01 per share, of the
Company together with any other securities that may be issued by the Company in
substitution therefor.
"COMPANY" has the meaning set forth in the preamble to this Warrant
Agreement and its successors and assigns.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXPIRATION DATE" means for any series of Warrants, the date indicated by
the entry opposite the designation of such series on Schedule I hereto or such
later date as shall be determined in accordance with Section 4(f), in a written
statement to the Warrant Agent and with notice to registered holders of Warrants
in the manner provided for in Section 19 hereof.
"FINAL EXPIRATION DATE" means the latest Expiration Date of all Warrants
issued hereunder.
"FIRST EXERCISE DATE" means, with respect to any series of Warrants, the
first exercise date indicated by the entry opposite the designation of such
series on Schedule I hereto.
"HOLDERS" means, at any time, the registered holders of the Warrants
outstanding at such time.
"MAJOR DEALER" means a securities broker/dealer registered with the SEC
having net capital of $200 million or more and which is active as a dealer or
market-maker in warrants similar to the Warrants.
"MARKET VALUE" of Underlying Common Stock on any date of determination
means the closing sale price (or, if no closing price is reported, the last
reported sale
2
<PAGE>
price) of such Underlying Common Stock on the New York Stock Exchange (the
"NYSE") on such date or, if such Underlying Common Stock is not listed for
trading on the NYSE on any such date, as reported in the composite transactions
for the principal United States securities exchange on which such Underlying
Common Stock is so listed, or if such Underlying Common Stock is not so listed
on a United States national or regional securities exchange, the average of the
last quoted bid and offer price for such Underlying Common Stock as reported by
Nasdaq National Market, or, if such Underlying Common Stock is not so reported,
the average of the last quoted bid and offer price for such Underlying Common
Stock in the over-the-counter market as reported by the National Quotation
Bureau or similar organization, or, if such bid price is not available, the
market value of such Underlying Common Stock on such date as determined by a
nationally recognized independent banking firm retained for this purpose by the
Company.
The "NET SHARE SETTLEMENT NUMBER" in respect of any exercised Warrant shall
be a number of shares of Underlying Common Stock equal to the Cash Settlement
Value in respect of such Warrant divided by the Valuation Stock Price in respect
of such Warrant.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"PURCHASE PRICE" means for any series of Warrants, the purchase price per
share of Underlying Common Stock to be paid upon the exercise of each Warrant of
such series in accordance with the terms hereof, which price shall initially be
the purchase price indicated by the entry opposite the designation of such
series on Schedule I hereto, subject to adjustment from time to time pursuant to
Section 6 hereof.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"UNDERLYING COMMON STOCK" means the shares of Common Stock and any other
securities, cash or other property issuable or issued upon the exercise of the
Warrants.
The "VALUATION STOCK PRICE" in respect of any exercised Warrant shall equal
the arithmetic average of the Market Value of the Underlying Common Stock on the
thirteenth through seventeenth Business Days immediately following the date on
which such Warrant is exercised, subject to adjustment pursuant to Section 6
hereof, the provisions of which shall be applied for this purpose through such
seventeenth Business Day.
3
<PAGE>
"WARRANT AGENT" has the meaning set forth in the preamble to this Warrant
Agreement or the successor or successors of such Warrant Agent appointed in
accordance with the terms hereof.
(b) CERTAIN OTHER DEFINED TERMS:
<TABLE>
<CAPTION>
Term Defined in Section
---- ------------------
<S> <C>
"Cash Settlement"................................. 4(d)
"Current Market Price Per Common Share"........... 6(f)
"Exercise Date"................................... 4(b)
"Net Share Settlement"............................ 4(d)
"Notice of Exercise".............................. 4(b)
"Resale Restriction Termination Date"............. In the legend contained in
Exhibit A hereto.
"Warrant Agent's Office".......................... 4(b)
"Warrant Certificates"............................ Preamble
"Warrants"........................................ Preamble
</TABLE>
2 INITIAL ISSUANCE AND FORM OF WARRANT CERTIFICATES. Subject to the
provisions of this Agreement, Warrants (in the series identified on Schedule I
hereto) to acquire initially an aggregate of no more than 5,000,000 shares of
Common Stock, subject to adjustment, may be issued and delivered by the Company
hereunder. The Warrant Certificates for each series of Warrants shall be issued
in registered form only and substantially in the form attached hereto as Exhibit
B, shall be dated the date of issuance thereof (whether upon initial issuance,
registration of transfer, exchange or replacement) and shall bear the legend set
forth in Exhibit B together with such other legends and endorsements typed,
stamped, printed, lithographed or engraved thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Agreement,
or as may be required to comply with any law or with any rule or regulation
pursuant thereto or with any rule or regulation of any securities exchange or
market on which the Warrants may be listed, or to conform to customary usage.
Pending the preparation of definitive Warrant Certificates, temporary
Warrant Certificates may be issued, which may be printed, lithographed,
typewritten, mimeographed or otherwise produced, and which will be substantially
of the tenor of
4
<PAGE>
the definitive Warrant Certificates in lieu of which they are issued.
If temporary Warrant Certificates are issued, the Company will cause
definitive Warrant Certificates to be prepared without unreasonable delay.
After the preparation of definitive Warrant Certificates, the temporary Warrant
Certificates shall be exchangeable for definitive Warrant Certificates upon
surrender of the temporary Warrant Certificates to the Warrant Agent, without
charge to the Holder. Until so exchanged the temporary Warrant Certificates
shall in all respects be entitled to the same benefits under this Agreement as
definitive Warrant Certificates.
3 EXECUTION AND DELIVERY OF WARRANT CERTIFICATES. Warrant Certificates
evidencing Warrants to purchase initially an aggregate of up to 5,000,000 shares
of Common Stock shall be executed, on or after the date of this Warrant
Agreement, by the Company and delivered to the Warrant Agent for
countersignature, and the Warrant Agent shall thereupon countersign and deliver
such Warrant Certificates upon the order and at the direction of the Company to
the purchasers thereof on the date of issuance. The Warrant Agent is hereby
authorized to countersign and deliver Warrant Certificates as required by this
Section 3 or by Section 4(c), Section 6, Section 10 or Section 18 hereof. The
Warrant Certificates shall be executed on behalf of the Company by its Chairman
of the Board, Chief Executive Officer or President or by any of its Vice
Presidents and attested by its Secretary or Assistant Secretary, in each case,
either manually or by facsimile signature printed thereon. The Warrant
Certificates shall be manually countersigned by the Warrant Agent and shall not
be valid for any purpose unless so countersigned. In case any officer of the
Company whose signature shall have been placed upon any of the Warrant
Certificates shall cease to be the Chairman, Chief Executive Officer, President
or a Vice President, Secretary or Assistant Secretary of the Company before
countersignature by the Warrant Agent and issue and delivery thereof, such
Warrant Certificates may, nevertheless, be countersigned by the Warrant Agent
and issued and delivered with the same force and effect as though such person
had not ceased to be such officer of the Company.
The Company and the Warrant Agent may deem and treat the registered Holder
of a Warrant Certificate as the absolute owner thereof (notwithstanding any
notation of ownership or other writing thereon made by anyone), for the purpose
of any exercise thereof or any distribution to the Holder thereof and for all
other purposes, and neither the Company nor the Warrant Agent shall be affected
by any notice to the contrary.
4 DURATION AND EXERCISE OF WARRANTS. (a) Duration. Subject to the
terms and conditions set forth herein (including those set forth in Section 4(f)
hereof), Warrants of any series shall be exercisable no sooner than the First
Exercise Date of such series (or if such day is not a Business Day, the next
succeeding Business Day) and on or prior to 5:00 P.M., New York City time (the
"Close of Business"), on the
5
<PAGE>
Expiration Date for such series. Subject to Section 4(f), the term of any
Warrant may be extended in the sole discretion of the Company beyond its
Expiration Date upon written notice to the Warrant Agent and to the Holder of
such Warrant (given in accordance with Section 19) at least 20 days prior to the
date on which such Warrant was to have expired absent such an extension to a
date determined by the Company, which date shall thereupon become the Expiration
Date referred to above for such Warrant unless and until another date is
substituted in accordance with this Section. Subject to paragraph (f) of this
Section 4, such Warrant shall remain exercisable on any Business Day on or after
the relevant First Exercise Date and ending at the Close of Business on its new
Expiration Date. The Warrants shall terminate and become void as of the Close of
Business on the Expiration Date.
(b) Right to Exercise. Subject to the provisions of this Warrant
Agreement, including Section 4(d), each Warrant shall entitle the Holder thereof
to purchase from the Company (and shall obligate the Company to issue and sell
to such Holder) one fully paid and non-assessable share of Underlying Common
Stock at the Purchase Price (in each case, subject to adjustment and subject to
the Company's right to effect Cash Settlement or Net Share Settlement) upon
surrender to the Warrant Agent, at its office maintained for that purpose in
Boston, Massachusetts or New York, New York (the "Warrant Agent's Office") of
Notice of Exercise, substantially in the form set forth in Exhibit C (the
"Notice of Exercise"), duly completed and signed by the Holder thereof or by the
duly appointed legal representative thereof or by a duly authorized attorney,
provided that any such Notice of Exercise delivered after 5:00 P.M., New York
City time, on a Business Day, or on a day that is not a Business Day, shall be
deemed to have been delivered at the opening of business on the next succeeding
Business Day. The date on which the Notice of Exercise with respect to any
Warrant is delivered is hereinafter referred to as the Exercise Date. Except as
expressly provided to the contrary in Section 6 hereof, no adjustments shall be
made for any cash dividends or other cash distributions on shares of Common
Stock issuable upon the exercise of a Warrant.
Any Warrant not exercised prior to its Expiration Date will
automatically be deemed to have been exercised for all purposes hereunder, and a
duly completed Notice of Exercise will be deemed to have been delivered to the
Company on such Expiration Date, if on such Expiration Date the Market Price of
the Underlying Common Stock exceeds the Purchase Price of such Warrant by $0.25
or more.
(c) Payment of Purchase Price; Issuance of Shares of Underlying Common
Stock. Settlement for the purchase of Underlying Common Stock referred to in
Section 4(b) shall take place on the sixth Business Day following the Exercise
Date upon surrender to the Warrant Agent at the Warrant Agent's Office of the
Warrant Certificate evidencing such Warrant, with the form of election to
exercise on the
6
<PAGE>
reverse thereof duly completed and signed by the Holder thereof or by the duly
appointed legal representative thereof or by a duly authorized attorney and upon
payment of the Purchase Price of such Warrant. Upon such surrender of a Warrant
Certificate and payment of the Purchase Price of such Warrant, the Company shall
(subject to the other provisions of this Section 4) cause to be issued and
delivered to the Holder thereof, or upon the written order of the Holder of such
Warrant Certificate in such name or names as such Holder may designate, a
certificate for the shares (or other evidence of ownership) of the Underlying
Common Stock issuable upon the exercise of the Warrant or Warrants evidenced by
such Warrant Certificate. Such certificate (or other evidence of ownership)
shall be deemed to have been issued and any person so designated to be named
therein shall be deemed to have become the holder of record of such shares (or
other property) as of the date of the surrender of such Warrant Certificate and
payment of the Purchase Price. Payment of the Purchase Price may be made by
Federal or other immediately available funds payable to the order of the
Company. All funds received upon the tender of Warrants shall be deposited by
the Warrant Agent for the account of the Company in an account designated by the
Company at such financial institution as is designated in writing by the
Company, unless otherwise instructed by the Company.
The Warrants evidenced by a Warrant Certificate shall be exercisable, at
the election of the Holder thereof, either as an entirety or from time to time
for part only of the number of Warrants specified in the Warrant Certificate.
In the event that less than all of the Warrants evidenced by a Warrant
Certificate are exercised at any time prior to the applicable Expiration Date, a
new Warrant Certificate or Certificates of the same tenor shall be issued for
the remaining number of Warrants evidenced by the Warrant Certificate so
surrendered, and the Warrant Agent is hereby irrevocably authorized to
countersign and to deliver the required new Warrant Certificate or Certificates
pursuant to the provisions of this Section 4, and the Company, whenever required
by the Warrant Agent, shall supply the Warrant Agent with Warrant Certificates
duly executed on behalf of the Company for such purpose.
(d) Cash Settlement; Net Share Settlement. Notwithstanding
paragraphs (a), (b) and (c) of this Section 4, the Company shall at its sole
discretion have the right to elect (i) to settle any exercise of a Warrant (in
whole, but not in part) in cash (a "Cash Settlement") or (ii) to settle any
exercise of a Warrant by delivering the Net Share Settlement Number of shares of
Underlying Common Stock (a "Net Share Settlement"). Any such election shall be
effected by delivering notice to the exercising Holder in the form set forth in
Exhibit D, in the case of a Cash Settlement, or Exhibit E, in the case of a Net
Share Settlement, by facsimile transmission to the numbers set forth for such
purpose in the Notice of Exercise, confirmed telephonically, not later than
12:00 Noon, New York City time, on the third Business Day following the Exercise
Date.
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In the case of any such election to effect a Cash Settlement of a Warrant,
on the fifteenth Business Day following the Exercise Date of such Warrant, the
Company shall deliver to the Warrant Agent Federal or other immediately
available funds in an aggregate amount equal to the Cash Settlement Value of
such Warrant, and the Warrant Agent shall deliver such funds to the exercising
Holder, or its designee, against surrender to the Warrant Agent at the Warrant
Agent's Office of the Warrant Certificate evidencing such Warrants, with the
form of election to exercise on the reverse thereof duly completed and signed by
the Holder thereof or by the duly appointed legal representative thereof or by a
duly authorized attorney.
In the case of any such election to effect a Net Share Settlement of a
Warrant, on the eighteenth Business Day following the Exercise Date of such
Warrant the Company shall deliver to the Warrant Agent the Net Share Settlement
Number of fully paid and non-assessable shares of Underlying Common Stock, and
the Warrant Agent shall deliver such shares to the exercising Holder, or its
designee, against surrender to the Warrant Agent at the Warrant Agent's Office
of the Warrant Certificate evidencing such Warrants, with the form of election
to exercise on the reverse thereof duly completed and signed by the Holder
thereof or by the duly appointed legal representative thereof or by a duly
authorized attorney.
(e) Cancellation of Warrant Certificate. All Warrant Certificates
surrendered for exchange, substitution, transfer or exercise in whole or in part
shall be canceled by the Warrant Agent. If the Company shall purchase or
otherwise acquire Warrants, the Warrant Certificates representing such Warrants
shall thereupon be delivered to the Warrant Agent and be canceled by it. Such
canceled Warrant Certificates shall then be disposed of by such Warrant Agent in
a manner satisfactory to the Company.
(f) Black-Out. The Company may by notice to the Warrant Agent and to
the Holders of Warrants in the form set forth in Exhibit F (given in accordance
with Section 19), suspend the right to exercise all outstanding Warrants for a
period of up to 90 days. The Company may suspend the right to exercise Warrants
of a particular series on no more than one occasion. Notwithstanding Section
4(a), if any such period of suspension includes or extends beyond the Expiration
Date of any Warrants, then the term of such Warrants automatically shall be
extended to the Business Day following the last day of such suspension, which
Business Day shall thereupon become the Expiration Date in respect of such
Warrants.
Upon receipt of a Notice of Exercise, the Company may cancel such exercise
by delivering notices of suspension to the Warrant Agent and to the Holders of
the Warrants (and delivering a copy thereof to the exercising Holder, by
facsimile transmission to the number set forth for such purpose in the Notice of
Exercise), not later than 5:00 P.M., New York City time, on the third Business
Day after delivery to
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the Company of such Notice of Exercise, in which case such Notice of Exercise
shall be deemed never to have been given.
(g) Optional Reduction of Purchase Price. The Company shall have the
right, at any time or from time to time, voluntarily to reduce the then current
Purchase Price applicable to a series of Warrants to such amount (the "Reduced
Purchase Price") and for such period or periods of time, which may be through
the Close of Business on the Expiration Date of such series (the "Reduced
Purchase Price Period") as may be deemed appropriate by the Company. Notice of
any such Reduced Purchase Price and Reduced Purchase Price Period shall be given
to registered Holders of the relevant Warrants in the manner provided in Section
19. After the termination of the Reduced Purchase Price Period, the Purchase
Price of the relevant Warrants shall be such Purchase Price that would have been
in effect, as adjusted pursuant to the provisions of Section 6, had there been
no reduction in the Purchase Price pursuant to the provisions of this paragraph
(g). No reduction of the then current Purchase Price pursuant to the provisions
of this paragraph (g) shall be deemed for the purposes of Section 6 hereof to
alter or adjust the Purchase Price.
5 WARRANT REDEMPTION. The Company shall have the right to redeem the
Warrants. The procedure for redemption shall be as follows:
(a) The Company will notify the Holders in writing of its election to
redeem Warrants specifying the series, number, Expiration Dates and Purchase
Prices of the Warrants to be redeemed, and specifying a valuation date (the
"Valuation Date"). The "Redemption Price" of each Warrant to be redeemed shall
be equal to the theoretical value of the Warrant determined by a nationally
recognized firm of independent public accountants retained by the Company (and
acceptable to the Holder of such Warrant) using a conventional Black-Scholes or
other commercially reasonable option valuation model selected by such firm and
reasonably acceptable to the Company and the Holder of such Warrant, such
Redemption Price being determined on the basis of the following factors (the
"Redemption Valuation Factors"): (i) the number of days from but excluding the
Valuation Date to and including the relevant Expiration Date, (ii) the Current
Market Price Per Common Share as of the Valuation Date, (iii) the mid-market
volatility of call options, issued by the Options Clearing Corporation and
traded on a nationally recognized options exchange, on Common Stock with a
strike price and expiration comparable to those of the Warrant to be redeemed,
(iv) the estimated dividend yield of the Common Stock calculated using dividend
amounts payable on regular dividend payment dates during the period from but
excluding the Valuation Date to and including the relevant Expiration Date and
(v) a weighted LIBOR interest rate interpolated for the period from but
excluding the Valuation Date to and including the relevant Expiration Date.
If either the Company or the Holder of the Warrant to be redeemed
believes that the Redemption Price so determined by such firm of independent
public
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accountants does not fairly reflect the value of the Warrants to be redeemed,
the Company or such Holder may, in its sole discretion, select three Major
Dealers and the Redemption Price shall be the average of the indicated mid-
market premiums for the relevant Warrants determined on the basis of the
Redemption Valuation Factors quoted by the three Major Dealers so selected as of
the Valuation Date.
(b) Closing of the redemption by the Company of the Warrants shall take
place on the third Business Day following the later of (i) the Valuation Date or
(ii) the date the Redemption Price is determined under the second paragraph of
Section 5(a) above, by delivery of the Warrants being redeemed to the Warrant
Agent and simultaneous payment by the Company to the Holders of such Warrants of
the Redemption Price in Federal or other immediately available funds.
6 ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES OF COMMON STOCK.
The number and kind of shares purchasable upon the exercise of Warrants and the
Purchase Price shall be subject to adjustment from time to time as follows:
(a) Stock Dividends, Stock-Splits, Combinations, etc. In case the
Company shall at any time after the date hereof (i) declare a dividend or
make a distribution on Common Stock payable in Common Stock, (ii) subdivide
or split the outstanding Common Stock, (iii) combine or reclassify the
outstanding Common Stock into a smaller number of shares, or (iv) issue any
shares of its capital stock in a reclassification of Common Stock
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing corporation), the Purchase
Price in effect at the time of the record date for such dividend or
distribution or of the effective date of such subdivision, split,
combination or reclassification shall be proportionately adjusted so that,
giving effect to paragraph (6)(i) hereof, the exercise of any outstanding
Warrant after such time shall entitle the Holder of such Warrant to receive
the aggregate number of shares of Common Stock or other securities of the
Company (or shares of any security into which such shares of Common Stock
have been reclassified pursuant to clause (iii) or (iv) above) which, if
such Warrant had been exercised immediately prior to such time, such Holder
would have owned upon such exercise and been entitled to receive by virtue
of such dividend, distribution, subdivision, split, combination or
reclassification. Such adjustment shall be made successively whenever any
event listed above shall occur. An adjustment made pursuant to this
paragraph shall become effective immediately after the effective date of
such event retroactive to the record date, if any, for such event.
(b) Setting Record Date for Issuance of Certain Rights, Options or
Warrants. In case the Company shall fix a record date for the issuance of
rights, options or warrants to the holders of its Common Stock or other
securities entitling such holders to subscribe for or purchase for a period
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expiring within 60 days of such record date shares of Common Stock (or
securities convertible into shares of Common Stock) at a price per share of
Common Stock (or having a conversion price per share of Common Stock, if a
security convertible into shares of Common Stock) less than the Current
Market Price Per Common Share on such record date, the maximum number of
shares of Common Stock issuable upon exercise of such rights, options or
warrants (or conversion of such convertible securities) shall be deemed to
have been issued and outstanding as of such record date and the Purchase
Price to be in effect after the Company fixes such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to
such deemed issuance by a fraction, the numerator of which shall be the sum
of (x) the number of shares of Common Stock outstanding immediately prior
to the time of such deemed issuance multiplied by the Current Market Price
Per Common Share immediately prior to such deemed issuance and (y) the
aggregate consideration, if any, that would be received by the Company upon
issuance of all shares of Common Stock underlying such rights, options,
warrants or other securities, and the denominator of which shall be the
product of the aggregate number of shares of Common Stock that would be
outstanding immediately after such deemed issuance if such deemed issuance
had actually occurred and the Current Market Price Per Common Share
immediately prior to such deemed issuance. In case any portion of the
consideration to be received by the Company shall be in a form other than
cash, the fair market value of such noncash consideration shall be utilized
in the foregoing computation. Such fair market value shall be determined
in good faith by the Board of Directors of the Company, whose determination
shall be conclusive and shall be evidenced by a resolution filed with the
Warrant Agent. The holders of all then-outstanding Warrants shall be
notified promptly of any consideration other than cash to be received by
the Company and furnished with a description of the consideration and the
fair market value thereof, as determined by the Board of Directors. Such
adjustment shall be made successively whenever such record date is fixed;
and in the event that such rights, options or warrants are not so issued or
expire unexercised, or in the event of a change in the number of shares of
Common Stock to which the holders of such rights, options or warrants are
entitled (other than pursuant to adjustment provisions therein comparable
to those contained in this paragraph (6)), the Purchase Price shall again
be adjusted to be the Purchase Price which would then be in effect if such
record date had not been fixed, in the former event, or the Purchase Price
which would then be in effect if such holders had initially been entitled
to such changed number of shares of Common Stock, in the latter event.
(c) Certain Distributions. In case the Company shall fix a record
date for the making of a distribution to holders of Common Stock (including
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any such distribution made in connection with a consolidation or merger in
which the Company is the continuing corporation, but not with respect to
the Company's existing rights plan) of evidences of its indebtedness,
assets or other property (other than cash dividends or distributions and
dividends payable in Common Stock or rights, options or warrants referred
to in, and for which an adjustment is made pursuant to, paragraph (6)(b)
hereof), the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to
such record date by a fraction, the numerator of which shall be the Current
Market Price Per Common Share on such record date, less the fair market
value (determined as set forth in paragraph (6)(b) hereof) of the portion
of the assets, other property or evidence of indebtedness so to be
distributed which is applicable to one share of Common Stock, and the
denominator of which shall be such Current Market Price Per Common Share.
Such adjustments shall be made successively whenever such a record date is
fixed; and in the event that such distribution is not so made, the Purchase
Price shall again be adjusted to be the Purchase Price which would then be
in effect if such record date had not been fixed.
(d) Extraordinary Dividends. In case in any fiscal quarter (i) the
Company shall distribute to all holders of shares of Common Stock any cash
dividend or distribution or (ii) the Company or any of its subsidiaries
shall purchase Common Stock pursuant to a tender offer for a purchase price
per share greater than the Current Market Price Per Common Share on the
date of purchase, and during such fiscal quarter the sum of (x) all such
cash dividends or distributions, plus (y) the aggregate amount by which the
fair market value (determined as set forth in paragraph 6(b) hereof) of the
consideration paid in purchasing all such shares of Common Stock exceeds
the Current Market Price Per Common Share on the date of such purchase
multiplied by the number of shares of Common Stock so purchased, shall
exceed 10%, on an annualized basis, of the Current Market Price Per Common
Share multiplied by the number of shares of Common Stock outstanding at the
earlier of the record date for the latest such cash dividend or
distribution or tender offer or the date at which the Company shall have
publicly announced such dividend or distribution or tender offer, then the
Purchase Price shall be adjusted on the date of such dividend or
distribution, or the termination of such tender offer, to a price
determined by multiplying the Purchase Price in effect immediately prior to
the earlier of such dates by a fraction, of which the numerator shall be
the Current Market Price Per Common Share on the earlier of such dates less
the fair market value (determined as set forth in paragraph 6(b) hereof) of
the portion of such distribution or excess amount which is applicable to
one share of Common Stock and of which the denominator shall be such
Current Market Price Per Common Share on the earlier of such dates.
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(e) Current Market Price Per Common Share. For the purpose of any
computation under Section 9 or paragraph (6)(b), (c) or (d) hereof, on any
determination date, the "Current Market Price Per Common Share" shall mean
the average (weighted by daily trading volume) of the Closing Prices per
share of the Underlying Common Stock for the 10 consecutive Business Days
immediately prior to such date.
(f) Deferral of Certain Adjustments. No adjustment in the Purchase
Price shall be required unless such adjustment would require an increase or
decrease of at least one percent in such price; provided that any
--------
adjustments which by reason of this paragraph (6)(f) are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this paragraph (f) shall be made to the
nearest one tenth of a cent or to the nearest hundredth of a share, as the
case may be.
(g) Other Adjustments. In the event that, at any time as a result
of the provisions of this Section 6, a Holder of a Warrant upon subsequent
exercise shall become entitled to receive any shares of capital stock of
the Company other than Common Stock, the number of such other shares so
receivable upon exercise of this Warrant shall thereafter be subject to
adjustment from time to time in a manner and on terms as nearly equivalent
as practicable to the provisions contained herein.
(h) Shares Receivable Upon Exercise. Upon each adjustment of the
Purchase Price as a result of the calculations made in paragraphs (6)(a),
(b), (c), (d) or (j) hereof, the number of shares for which any Warrant is
exercisable immediately prior to the making of such adjustment shall
thereafter evidence the right to purchase, at the adjusted Purchase Price,
that number of shares of Common Stock obtained by (i) multiplying the
number of shares covered by such Warrant immediately prior to such
adjustment of the number of shares by the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price and (ii)
dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
(i) Consolidation, Merger, or Sale of Assets. Subject to the
provisions of Section 6(j) hereof, in case of any consolidation of the
Company with, or merger of the Company into, any other person, any merger
of another person into the Company (other than a merger which does not
result in any reclassification, conversion, exchange or cancellation of
outstanding shares of Common Stock) or any sale or transfer of all or
substantially all of the assets of the Company or of the person formed by
such consolidation or resulting
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from such merger or which acquires such assets, as the case may be, then,
as a condition of such consolidation, merger, sale or transfer, the Company
or such person, as the case may be, shall forthwith make lawful and
adequate provision whereby the holder of each Warrant then outstanding
shall have the right thereafter to exercise such Warrant for the kind and
amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer by a holder of the number of shares
of Common Stock for which such Warrant may have been exercised immediately
prior to such consolidation, merger, sale or transfer, assuming (i) such
holder of Common Stock is not a person with which the Company consolidated
or into which the Company merged or which merged into the Company or to
which such sale or transfer was made, as the case may be ("constituent
person"), or an Affiliate of a constituent person and (ii) in the case of a
consolidation, merger, sale or transfer which includes an election as to
the consideration to be received by the holders, such holder of Common
Stock failed to exercise its rights of election, as to the kind or amount
of securities, cash and other property receivable upon such consolidation,
merger, sale or transfer (provided that if the kind or amount of
securities, cash and other property receivable upon such consolidation,
merger, sale or transfer is not the same for each share of Common Stock
held immediately prior to such consolidation, merger, sale or transfer by
other than a constituent person or an Affiliate thereof and in respect of
which such rights of election shall not have been exercised ("non-electing
share"), then for the purpose of this paragraph (i) the kind and amount of
securities, cash and other property receivable upon such consolidation,
merger, sale or transfer by each non-electing share shall be deemed to be
the kind and amount so receivable per share by a plurality of the non-
electing shares). Adjustments for events subsequent to the effective date
of such a consolidation, merger and sale of assets shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Warrant Agreement. In any such event, effective provisions shall be made in
the certificate or articles of incorporation of the resulting or surviving
corporation, in any contract of sale, conveyance, lease or transfer, or
otherwise so that the provisions set forth herein for the protection of the
rights of the Holders shall thereafter continue to be applicable; and any
such resulting or surviving corporation shall expressly assume the
obligation to deliver, upon exercise, such shares of stock, other
securities, cash and property. The provisions of this paragraph (i) shall
similarly apply to successive consolidations, mergers, sales, leases or
transfers.
(j) Qualified Tender Offers; Cash-Out Tender Offers and Mergers.
(i) Subject to the provisions of paragraph (ii) of this Section 6(j), in
case of any Qualified Tender Offer (as defined below) made by a person
other than the Company or any subsidiary of the Company and in which, as of
the
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Expiration Time (as defined below), the board of directors of the Company
is not recommending rejection of the offer, the Purchase Price shall be
reduced so that the same shall equal the price determined by multiplying
the Purchase Price in effect immediately prior to the Expiration Time by a
fraction of which the numerator shall be the number of shares of Common
Stock outstanding (including any tendered or exchanged shares) at the
Expiration Time multiplied by the Market Price of the Common Stock on the
trading day next succeeding the Expiration Time and the denominator shall
be the sum of (x) the fair market value (determined as aforesaid) of the
aggregate consideration payable to shareholders based on the acceptance (up
to any maximum specified in the terms of the tender or exchange offer) of
all shares validly tendered or exchanged and not withdrawn as of the
Expiration Time (the share deemed so accepted, up to any such maximum,
being referred to as the "Purchased Shares") and (y) the product of the
number of shares of Common Stock outstanding (less any Purchased Shares) at
the Expiration Time and the Market Price of the Common Stock on the trading
day next succeeding the Expiration Time, such reduction to become effective
immediately prior to the opening of business on the Business Day following
the Expiration Time. In the event that such person is obligated to purchase
shares pursuant to any such Qualified Tender Offer, but such person is
permanently prevented by applicable law from effecting any such purchases
or all such purchases are rescinded, the Purchase Price shall again be
adjusted to be the Purchase Price which would then be in effect if such
Qualified Tender Offer had not been made. Notwithstanding the foregoing,
the adjustment described in this paragraph (j) shall not be made if, as of
the Expiration Time, the offering documents with respect to such Qualified
Tender Offer disclose a plan or intention to cause the Company to engage in
any transaction described in Section 6(j) hereof.
A "Qualified Tender Offer" means any tender offer or exchange offer
for an amount which increases the offeror's ownership of Common Stock to
more than 25% of the Common Stock outstanding and which involves the
payment by such person of consideration per share of Common Stock having a
fair market value (as determined as set forth in paragraph 6(b) hereof) at
the last time (the "Expiration Time") tenders or exchanges may be made
pursuant to such tender or exchange offer (as it shall have been amended)
that exceeds the Closing Price of the Common Stock on the trading day next
succeeding the Expiration Time.
(ii) In case (A) of a cash tender offer for substantially all of
the outstanding Common Stock or (B) of any consolidation of the Company
with, or merger of the Company into, any other person in a transaction in
which the Common Stock is exchanged for cash or cash equivalents, then as
of the
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closing date of such tender offer or the effective date of such
consolidation or merger, each such Warrant shall only entitle the holder
thereof to receive, within 3 Business Days of surrender to the Company or
to the Warrant Agent, at the Warrant Agent's Office, of the Warrant
Certificate evidencing such Warrant, a cash payment from the Company equal
to the Cash-Out Value (as defined below). The "Cash-Out Value" means the
theoretical value of the Warrant determined by a nationally recognized firm
of independent public accountants retained by the Company (and acceptable
to the Holder of such Warrant) using a conventional Black-Scholes or other
commercially reasonable option valuation model selected by such firm and
reasonably acceptable to the Company, such Cash-Out Value being determined
on the basis of the following factors (the "Cash-Out Valuation Factors"):
(i) the number of days from but excluding the date of the first public
announcement of a firm intention to make such an offer or to so merge or
consolidate (the "Announcement Date") to and including the applicable
Expiration Date, (ii) the Current Market Price Per Common Share as of the
Announcement Date, (iii) the mid-market volatility of call options, issued
by the Options Clearing Corporation and traded on a nationally recognized
options exchange, on Common Stock with a strike price and expiration
comparable to those of such Warrant, (iv) the estimated dividend yield of
the Common Stock calculated using dividend amounts payable on regular
dividend payment dates during the period from but excluding the
Announcement Date to and including the Expiration Date and (v) a weighted
LIBOR interest rate interpolated for the period from but excluding the
Announcement Date to and including the Expiration Date.
If either the Company or the Holder of any Warrant subject to such
tender offer believes that the Cash-Out Value so determined by such firm of
independent public accountants does not fairly reflect the value of the
Warrants subject to such tender offer, the Company or such Holder may, in
its sole discretion, select three Major Dealers and the Cash-Out Value
shall be the average of the indicated mid-market premiums for such Warrants
determined on the basis of the Cash-Out Valuation Factors quoted by the
three Major Dealers so selected as of the Announcement Date.
Upon receipt by the Holder of such cash payment in respect of a
Warrant, such Warrant shall expire and be of no further effect.
7 NOTICE OF ADJUSTMENT. Whenever the number of shares of Common Stock
or other stock or property issuable upon the exercise of each Warrant or the
Purchase Price is adjusted, as herein provided, the Company shall cause the
Warrant Agent promptly to mail by first class mail, postage prepaid, to each
Holder notice of such adjustment or adjustments and shall deliver to the Warrant
Agent a certificate of
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a firm of independent certified public accountants selected by the board of
directors of the Company (who may be the regular accountants employed by the
Company) setting forth the number of shares of Common Stock or other stock or
property issuable upon the exercise of each Warrant or the Purchase Price after
such adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which such adjustment was made.
The Warrant Agent shall be entitled to rely on such certificate and shall be
under no duty or responsibility with respect to any such certificate, except to
exhibit the same from time to time to any Holder desiring an inspection thereof
during reasonable business hours. The Warrant Agent shall not at any time be
under any duty or responsibility to any Holders to determine whether any facts
exist that may require any adjustment of the number of shares of Common Stock or
other stock or property issuable on exercise of the Warrants or the Purchase
Price, or with respect to the nature or extent of any such adjustment when made,
or with respect to the method employed in making such adjustment or the validity
or value (of the kind or amount) of any shares of Common Stock or other stock or
property which may be issuable on exercise of the Warrants. The Warrant Agent
shall not be responsible for any failure of the Company to make any cash payment
or to issue, transfer or deliver any shares of Common Stock or stock
certificates or other securities or property upon the exercise of any Warrant.
8 STATEMENT ON WARRANTS. Irrespective of any adjustment in the number
or kind of shares issuable upon the exercise of the Warrants or the Purchase
Price, Warrants theretofore or thereafter issued may continue to express the
same number and kind of shares as are stated in the Warrants initially issuable
pursuant to this Warrant Agreement.
9 FRACTIONAL INTEREST. Notwithstanding any adjustment pursuant to
Section 6 hereof in the number of shares of Underlying Common Stock, the Company
shall not be required to issue fractional shares of Underlying Common Stock on
the exercise of Warrants. If more than one Warrant shall be presented for
exercise in full at the same time by the same Holder, the number of full shares
of Underlying Common Stock which shall be issuable upon such exercise shall be
computed on the basis of the aggregate number of shares of Underlying Common
Stock acquirable on exercise of the Warrants so presented. If any fraction of a
share of Underlying Common Stock would, except for the provisions of this
Section 9, be issuable on the exercise of any Warrant (or specified portion
thereof), the Company shall pay an amount in cash calculated by it to be equal
to (A) in the case of settlement of such Warrant pursuant to Section 4(c), the
Current Market Price Per Common Share on the date of such exercise or (B) in the
case of a Net Share Settlement of such Warrant pursuant to Section 4(d), the
Market Value of the Underlying Common Stock for the period commencing on the
fourth and ending on the thirteenth Business Day immediately following the date
on which such Warrant was exercised, in each case multiplied by such fraction
computed to the nearest whole cent. The Holders, by their
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acceptance of the Warrant Certificates, expressly waive any and all rights to
receive any fraction of a share of Common Stock or a stock certificate
representing a fraction of a share of Underlying Common Stock.
10 WARRANT TRANSFER BOOKS. The Warrant Certificates shall be issued in
registered form only. The Company shall cause to be kept at the office of the
Warrant Agent a register in which, subject to such reasonable regulations as it
may prescribe, the Company shall provide for the registration of Warrant
Certificates and of transfers or exchanges of Warrant Certificates by the
Warrant Agent as herein provided.
At the option of the Holder thereof, Warrant Certificates may be exchanged
at such office upon payment of the charges hereinafter provided. Whenever any
Warrant Certificates are so surrendered for exchange, the Company shall execute,
and the Warrant Agent shall countersign and deliver, the Warrant Certificates
that the Holder making the exchange is entitled to receive.
All Warrant Certificates issued upon any registration of transfer or
exchange of Warrant Certificates shall be the valid obligations of the Company,
evidencing the same obligations, and entitled to the same benefits under this
Agreement, as the Warrant Certificates surrendered for such registration of
transfer or exchange.
Every Warrant Certificate surrendered for registration of transfer or
exchange shall (if so required by the Company or the Warrant Agent) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Warrant Agent, duly executed by the Holder
thereof or his attorney duly authorized in writing.
No service charge shall be required of a Holder for any registration of
transfer or exchange of Warrant Certificates. The Company may require payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of Warrant
Certificates.
Any Warrant Certificate when duly endorsed in blank shall be deemed
negotiable. The holder of any Warrant Certificate duly endorsed in blank may be
treated by the Company, the Warrant Agent and all other persons dealing
therewith as the absolute owner thereof for any purpose and as the person
entitled to exercise the rights represented thereby, or to the transfer thereof
on the register of the Company maintained by the Warrant Agent, any notice to
the contrary notwithstanding; but until such transfer on such register, the
Company and the Warrant Agent may treat the Holder thereof as the owner for all
purposes.
11 TRANSFER RESTRICTIONS. (a) Neither the Warrants nor any of the
Underlying Common Stock, nor any interest in either, may be sold, assigned,
pledged, hypothecated, encumbered or in any other manner transferred or disposed
of, in whole
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or in part, except in compliance with applicable United States federal and state
securities laws and the terms and conditions hereof and thereof.
(b) Until the earlier of the sale of the Underlying Common Stock
pursuant to a registration statement which has been declared effective under the
Securities Act and the Resale Restriction Termination Date, any certificate
evidencing Underlying Common Stock (and all securities issued in exchange or
substitution therefor) shall bear a legend set forth in Exhibit A, and shall be
subject to the restrictions contained therein, unless otherwise agreed by the
Company (with written notice thereof to the registrar for the Common Stock).
(c) Until the Expiration Date of each Warrant or any earlier exercise
thereof, each Warrant shall be subject to the restrictions on transfer contained
in the legend set forth in Exhibit B.
12 WARRANT HOLDERS. (a) No Voting Rights. Prior to the exercise of the
Warrants, no Holder of a Warrant Certificate, as such, shall be entitled to any
rights of a stockholder of the Company, including, without limitation, the right
to receive dividends or subscription rights, the right to vote, to consent, to
exercise any preemptive right, to receive any notice of meetings of stockholders
for the election of directors of the Company or any other matter or to receive
any notice of any proceedings of the Company, except as may be specifically
provided for herein.
(b) Right of Action. All rights of action in respect of this Warrant
Agreement are vested in the Holders of the Warrants, and any Holder of any
Warrant, without the consent of the Warrant Agent or the Holder of any other
Warrant, may, on such Holder's own behalf and for such Holder's own benefit,
enforce, and may institute and maintain any suit, action or proceeding against
the Company suitable to enforce, or otherwise in respect of, such Holder's
rights hereunder, including the right to exercise, exchange or surrender for
purchase such Holder's Warrants in the manner provided in this Warrant
Agreement.
13 WARRANT AGENT. (a) Nature of Duties and Responsibilities Assumed.
The Company hereby appoints BankBoston, N.A. as Warrant Agent of the Company in
respect of the Warrants upon the terms and subject to the conditions set forth
herein; and BankBoston, N.A. hereby accepts such appointment. The Warrant Agent
shall have the powers and authority granted to and conferred upon it in this
Agreement and such further powers and authority to act on behalf of the Company
as the Company may hereafter grant to or confer upon it with its consent. All
of the terms and provisions with respect to such powers and authority contained
in any Warrant Certificate are subject to and governed by the terms and
provisions hereof.
(b) Conditions of Warrant Agent's Obligations. The Warrant Agent
accepts its obligations herein set forth upon the terms and conditions hereof,
including
19
<PAGE>
the following, to all of which the Company agrees and to all of which the rights
hereunder of the Holders from time to time of the Warrants shall be subject:
(i) The Company agrees promptly to pay the Warrant Agent the
compensation to be agreed upon with the Company for all services rendered
by the Warrant Agent and to reimburse the Warrant Agent for its reasonable
out-of-pocket expenses (including attorneys' fees and expenses) incurred by
the Warrant Agent without gross negligence, bad faith or breach of this
Agreement on its part in connection with the services rendered by it
hereunder. The Company also agrees to indemnify the Warrant Agent for, and
to hold it harmless against, any loss, liability or expense (including
reasonable attorneys' fees and expenses) incurred without gross negligence,
bad faith, willful misconduct or breach of this Agreement on the part of
the Warrant Agent, arising out of or in connection with its acting as such
Warrant Agent hereunder, as well as the reasonable costs and expenses of
defending against any claim of liability in the premises. The obligations
of the Company under this Section 13(b)(i) shall survive the termination of
this Agreement.
(ii) In acting under this Agreement, the Warrant Agent is acting
solely as agent of the Company and does not assume any obligation or
relationship of agency or trust for or with any of the owners or Holders of
the Warrants.
(iii) The Warrant Agent may consult with counsel satisfactory to
it (including counsel to the Company), and the opinion of such counsel
shall be full and complete authorization and protection in respect of any
action taken, suffered or omitted by it hereunder in good faith and in
accordance with the opinion of such counsel.
(iv) The Warrant Agent shall be protected and shall incur no
liability for or in respect of any action taken or thing suffered by it in
reliance upon any notice, direction, consent, certificate, affidavit,
statement or other paper or document reasonably believed by it to be
genuine and to have been presented or signed by the proper parties.
(v) The Warrant Agent shall be liable hereunder only for its own
gross negligence, bad faith or willful misconduct.
(vi) The Warrant Agent, and its officers, directors and employees,
may become the owner of, or acquire any interest in, any Warrants or other
obligations of the Company, with the same rights that it or they would have
if it were not the Warrant Agent hereunder and, to the extent permitted by
applicable law, it or they may engage or be interested in any financial or
other
20
<PAGE>
transaction with the Company and may act on behalf of, or as depository,
trustee or agent for, any committee or body of owners or Holders of
Warrants or other obligations of the Company as freely as if it were not
the Warrant Agent hereunder.
(vii) The Warrant Agent shall not be under any liability for
interest on any monies at any time received by it pursuant to any of the
provisions of this Agreement nor shall it be obligated to segregate such
monies from other monies held by it, except as required by law. The
Warrant Agent shall not be responsible for advancing funds on behalf of the
Company.
(viii) The Warrant Agent shall not be under any responsibility with
respect to the validity or sufficiency of this Agreement or the execution
and delivery hereof (except the due authorization, execution and delivery
hereof by the Warrant Agent) or with respect to the validity or execution
of the Warrant Certificates (except its countersignature thereof).
(ix) The recitals contained herein and in the Warrant Certificates
(except as to the Warrant Agent's countersignature thereon) shall be taken
as the statements of the Company, and the Warrant Agent assumes no
responsibility for the correctness of the same.
(x) The Warrant Agent shall be obligated to perform such duties as
are herein specifically set forth, and no implied duties or obligations
shall be read into this Agreement against the Warrant Agent. The Warrant
Agent shall not be under any obligation to take any action hereunder likely
to involve it in any expense or liability, the payment of which is not, in
its reasonable opinion, assured to it. The Warrant Agent shall not be
accountable or under any duty or responsibility for the application by the
Company of any proceeds. The Warrant Agent shall have no duty or
responsibility in case of any default by the Company in the performance of
its covenants or agreements contained in this Agreement or in any Warrant
Certificate or in the case of the receipt of any written demand from a
Holder of a Warrant with respect to such default, including, without
limiting the generality of the foregoing, any duty or responsibility to
initiate or attempt to initiate any proceedings at law or otherwise or,
except as provided in Section 19(a) hereof, to make any demand upon the
Company.
(c) Resignation and Appointment of Successor. The Company agrees, for
the benefit of the Holders from time to time of the Warrants, that there shall
at all times be a Warrant Agent hereunder until all the Warrants are no longer
outstanding.
The Warrant Agent may at any time resign as such agent by giving written
21
<PAGE>
notice to the Company of such intention on its part, specifying the date on
which its desired resignation shall become effective, subject to the appointment
of a successor Warrant Agent and acceptance of such appointment by such
successor Warrant Agent as hereinafter provided. The Warrant Agent hereunder
may be removed at any time by the filing with it of an instrument in writing
signed by or on behalf of the Company and specifying such removal and the date
when it shall become effective. Such resignation or removal shall take effect
upon the appointment by the Company, as hereinafter provided, of a successor
Warrant Agent (which shall be a banking institution organized under the laws of
the United States of America or one of the states thereof, have a combined
capital and surplus of at least $100,000,000 (as set forth in its most recent
reports of condition published pursuant to law or to the requirements of any
United States federal or state regulatory or supervisory authority) and having
an office in the Borough of Manhattan, The City of New York) and the acceptance
of such appointment by such successor Warrant Agent. In the event a successor
Warrant Agent has not been appointed and accepted its duties within 90 days of
the Warrant Agent's notice of resignation, the Warrant Agent may apply to any
court of competent jurisdiction for the designation of a successor Warrant
Agent. The obligation of the Company under Section 13(b)(i) hereof shall
continue to the extent set forth therein notwithstanding the resignation or
removal of the Warrant Agent.
In case at any time the Warrant Agent shall give notice of its intent to
resign, or shall be removed, or shall become incapable of acting, or shall be
adjudged a bankrupt or insolvent, or make an assignment for the benefit of its
creditors, or consent to the appointment of a receiver or custodian of all or
any substantial part of its property, or shall admit in writing its inability to
pay or meet its debts as they mature, or if a receiver or custodian of it or of
all or any substantial part of its property shall be appointed, or if any public
officer shall have taken charge or control of the Warrant Agent or of its
property or affairs, for the purpose of rehabilitation, conservation or
liquidation, a successor Warrant Agent, qualified as aforesaid, shall be
promptly appointed by the Company by an instrument in writing, filed with the
successor Warrant Agent. Upon the appointment as aforesaid of a successor
Warrant Agent and acceptance by the latter of such appointment, the Warrant
Agent so superseded shall cease to be Warrant Agent hereunder.
Any successor Warrant Agent appointed hereunder shall execute, acknowledge
and deliver to its predecessor and to the Company an instrument accepting such
appointment hereunder, and thereupon such successor Warrant Agent, without any
further act, deed or conveyance, shall become vested with all the authority,
rights, powers, trusts, immunities, duties and obligations of such predecessor
with like effect as if originally named as Warrant Agent hereunder, and such
predecessor, upon payment of its charges and disbursements then unpaid, shall
thereupon become obligated to transfer, deliver and pay over, and such successor
22
<PAGE>
Warrant Agent shall be entitled to receive, all monies, securities and other
property on deposit with or held by such predecessor (including, without
limitation, the Warrant Register), as Warrant Agent hereunder.
14 RESERVATION OF COMMON STOCK FOR ISSUANCE ON EXERCISE OF WARRANTS;
LISTING. The Company covenants that it will at all times reserve and keep
available, free from preemptive rights, out of its authorized but unissued
Common Stock, solely for the purpose of issuance upon exercise of Warrants as
herein provided, the full number of shares of Common Stock as shall then be
issuable upon the exercise of all outstanding Warrants.
The Company covenants that all shares of Common Stock which shall be so
issuable shall, upon such issuance, be duly and validly issued and fully paid
and nonassessable, and that upon issuance such shares shall be accepted for
quotation on the Nasdaq National Market or listed on each national securities
exchange, if any, on which any other shares of outstanding Common Stock of the
Company are then listed.
15 MONEY AND OTHER PROPERTY DEPOSITED WITH THE WARRANT AGENT. Any
moneys, securities or other property which at any time shall be deposited by the
Company or on its behalf with the Warrant Agent pursuant to this Agreement shall
be and are hereby assigned, transferred and set over to the Warrant Agent in
trust for the purpose for which such moneys, securities or other property shall
have been deposited; but such moneys, securities or other property need not be
segregated from other funds, securities or other property except to the extent
required by law. The Warrant Agent shall distribute any money deposited with it
for payment and distribution to the Holders by mailing by first-class mail a
check in such amount as is appropriate, to each such Holder at the address shown
on the Warrant register maintained pursuant to Section 10, or as it may be
otherwise directed in writing by such Holder, upon surrender of such Holder's
Warrants. Any money or other property deposited with the Warrant Agent for
payment and distribution to the Holders that remains unclaimed for two years,
less one day, after the date the money was deposited with the Warrant Agent
shall be paid to the Company upon its request therefor.
16 PAYMENT OF TAXES. The Company will pay any documentary stamp taxes
attributable to the initial issuance of the Warrants or shares of Underlying
Common Stock upon the exercise of Warrants; provided, however, that the Company
shall not be required to pay any tax or taxes which may be payable in respect of
any transfer of any Warrant Certificates or the issuance of any certificates for
shares of Underlying Common Stock in a name other than that of the Holder of a
Warrant Certificate surrendered upon the exercise of a Warrant.
17 SURRENDER OF CERTIFICATES. Any Warrant Certificate surrendered for
exercise or purchased or otherwise acquired by the Company shall, if surrendered
to the Company, be delivered to the Warrant Agent, and all Warrant Certificates
23
<PAGE>
surrendered or so delivered to the Warrant Agent shall promptly be canceled by
such Warrant Agent and shall not be reissued by the Company. The Warrant Agent
shall destroy such canceled Warrant Certificates and deliver its certificate of
destruction to the Company unless the Company shall otherwise direct.
18 MUTILATED, DESTROYED, LOST AND STOLEN WARRANT CERTIFICATES. If (a)
any mutilated Warrant Certificate is surrendered to the Warrant Agent or (b) the
Company and the Warrant Agent receive evidence to their satisfaction of the
destruction, loss or theft of any Warrant Certificate, and there is delivered to
the Company and the Warrant Agent such security or indemnity as may be
reasonably required by them to save each of them harmless, then, in the absence
of notice to the Company or the Warrant Agent that such Warrant Certificate has
been acquired by a bona fide purchaser, the Company shall execute and upon its
written request the Warrant Agent shall countersign and deliver, in exchange for
any such mutilated Warrant Certificate or in lieu of any such destroyed, lost or
stolen Warrant Certificate, a new Warrant Certificate of like tenor and for a
like aggregate number of Warrants.
Upon the issuance of any new Warrant Certificate under this Section 18, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and other expenses
(including the reasonable fees and expenses of the Warrant Agent and of counsel
to the Company) in connection therewith.
Every new Warrant Certificate executed and delivered pursuant to this
Section 18 in lieu of any destroyed, lost or stolen Warrant Certificate shall
constitute an original contractual obligation of the Company, whether or not the
destroyed, lost or stolen Warrant Certificate shall be at any time enforceable
by anyone, and shall be entitled to the benefits of this Warrant Agreement
equally and proportionately with any and all other Warrant Certificates duly
executed and delivered hereunder.
The provisions of this Section 18 are exclusive and shall preclude (to the
extent lawful) all other rights or remedies with respect to the replacement of
mutilated, destroyed, lost or stolen Warrant Certificates.
19 NOTICES. (a) Except as otherwise provided in this Agreement, any
notice, demand or delivery authorized by this Warrant Agreement shall be
sufficiently given or made when mailed if sent by first-class mail, postage
prepaid, addressed to any Holder of a Warrant at such Holder's address shown on
the register maintained by the Warrant Agent pursuant to Section 9 and to the
parties as follows:
24
<PAGE>
If to the Company:
Oracle Corporation
500 Oracle Parkway
Redwood City, California 94065
Attention: General Counsel
If to the Warrant Agent:
BankBoston, N.A.
c/o Boston Equiserve Limited Partnership
150 Royall Street
Canton, Massachusetts 02021
Attention: Reorganization Department
or such other address as shall have been furnished to the party giving or making
such notice, demand or delivery.
(b) Any notice required to be given by the Company to the Holders shall
be made by mailing by registered mail, return receipt requested, to the Holders
at their respective addresses shown on the register of the Company maintained by
the Warrant Agent. The Company hereby irrevocably authorizes the Warrant Agent,
in the name and at the expense of the Company, to mail any such notice upon
receipt thereof from the Company. Any notice that is mailed in the manner
herein provided shall be presumed to have been duly given when mailed.
20 PERSONS BENEFITTING. This Warrant Agreement shall be binding upon
and inure to the benefit of the Company and the Warrant Agent, and their
respective successors, assigns, beneficiaries, executors and administrators, and
the Holders of the Warrants. Nothing in this Warrant Agreement is intended or
shall be construed to confer upon any person, other than the Company, the
Warrant Agent and the Holders of the Warrants, any right, remedy or claim under
or by reason of this Warrant Agreement or any part hereof.
21 COUNTERPARTS. This Warrant Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together constitute one and the same instrument.
22 AMENDMENTS. (a) The Company may, without the consent of the Holders
of the Warrants, by supplemental agreement or otherwise, make any changes or
corrections in this Warrant Agreement that it shall have been advised by counsel
(a) are required to cure any ambiguity or to correct or supplement any provision
herein which may be defective or inconsistent with any other provision herein or
(b) add to
25
<PAGE>
the covenants and agreements of the Company for the benefit of the Holders, or
surrender any rights or power reserved to or conferred upon the Company in this
Warrant Agreement or (c) supplement Schedule I hereto to identify additional
series of Warrants issued hereunder; provided that, in the case of (a) or (b),
such changes or corrections shall not adversely affect the interests of the
Holders in any material respect. The Warrant Agent shall at the request of the
Company and without need of independent inquiry as to whether such supplemental
agreement is permitted by the terms of this Section 22 join with the Company in
the execution and delivery of any such supplemental agreements unless it affects
the Warrant Agent's own rights, duties or immunities hereunder in which case
such party may, but shall not be required to, join in such execution and
delivery.
(b) The Company and the Warrant Agent may modify or amend this Agreement
(by means of an agreement supplemental hereto or otherwise) with the consent of
Holders holding not less than a majority in number of the then outstanding
Warrants for any purpose; provided, however, that no such modification or
amendment that changes the Purchase Price of the Warrants, shortens the period
of time during which the Warrants may be exercised, or otherwise materially and
adversely affects the exercise rights of the Holders or reduces the percentage
of the number of outstanding Warrants the consent of whose Holders is required
for modification or amendment of this Agreement, may be made without the consent
of each Holder affected thereby.
23 TERMINATION. This Warrant Agreement shall terminate and be of no
further force and effect on the Final Expiration Date.
24 APPLICABLE LAW. This Warrant Agreement and each Warrant issued
hereunder and all rights arising hereunder shall be governed by the law of the
State of California applicable to contracts and instruments executed and to be
performed entirely in such State.
25 HEADINGS. The descriptive headings of the several Sections of this
Warrant Agreement are inserted for convenience and shall not control or affect
the meaning or construction of any of the provisions hereof.
26
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be duly executed, as of the day and year first above written.
ORACLE CORPORATION
By: /s/ Bruce M. Lange
--------------------------------------
Name: Bruce M. Lange
Title: Vice President and Treasurer
BANKBOSTON, N.A.
as Warrant Agent
By: /s/ Laura A. Welch
--------------------------------------
Name: Laura A. Welch
Title: Administration Manager
27
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
SERIES AND TERMS OF EQUITY CALL WARRANTS
TO BE ISSUED UNDER WARRANT AGREEMENT
------ -------- ------------- --------------- --------------
Series Quantity First Expiration Date Purchase Price
Exercise Date
<S> <C> <C> <C> <C>
I 3,000,000 April 17, 2000 May 15, 2000 $77.55
</TABLE>
28
<PAGE>
EXHIBIT A
[FORM OF LEGEND FOR UNDERLYING COMMON STOCK]
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS. NEITHER THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR ANY INTEREST OR PARTICIPATION THEREIN OR HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE
HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY PRIOR TO THE
DATE (THE "RESALE RESTRICTION TERMINATION DATE"), ON WHICH THE SECURITIES
EVIDENCED HEREBY MAY BE SOLD WITHOUT REGISTRATION PURSUANT TO RULE 144(k) UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY SUCCESSOR
TO SUCH RULE, ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT
WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) PURSUANT TO
OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN
THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (D) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR," WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3) OR
(7) OF RULE 501 UNDER THE SECURITIES ACT ACQUIRING THIS SECURITY FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION
WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (E) PURSUANT TO
ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENT OF THE
SECURITIES ACT, SUBJECT TO THE COMPANY'S AND/OR THE REGISTRAR'S RIGHT PRIOR TO
ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSES (C), (D) OR (E) TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii) PURSUANT TO EACH OF THE
FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING
ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR
TO THE REGISTRAR. UNTIL THE EXPIRATION OF THE RESALE RESTRICTION
A-1
<PAGE>
TERMINATION DATE, ANY PERSON ACQUIRING THIS SECURITY PURSUANT TO CLAUSE (C)
AGREES THAT ANY OFFER, SALE OR OTHER TRANSFER TO A U.S. PERSON OR FOR THE
ACCOUNT OR BENEFIT OF A U.S. PERSON SHALL BE MADE BY IT ONLY PURSUANT TO CLAUSES
(A), (B) OR (E).
A-2
<PAGE>
EXHIBIT B
[FORM OF FACE OF WARRANT CERTIFICATE]
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS. NEITHER THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR ANY INTEREST OR PARTICIPATION THEREIN OR HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF
THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE
TRANSFER SUCH SECURITY ONLY PURSUANT TO (A) REGISTRATION PURSUANT TO THE
SECURITIES ACT OR (B) AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT, SUBJECT, IN THE CASE OF (B), TO THE COMPANY'S AND THE
WARRANT AGENT'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM, AND, IN THE CASE OF EITHER (A) OR (B) TO REQUIRE
THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS
SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE WARRANT AGENT. THE
HOLDER OF EACH SECURITY BY ITS ACCEPTANCE HEREOF FURTHER AGREES THAT IT SHALL
OFFER, SELL OR OTHERWISE TRANSFER THE WARRANTS REPRESENTED BY THIS CERTIFICATE
ONLY TO QUALIFIED INSTITUTIONAL BUYERS (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) AND IN TRANSACTIONS INVOLVING THE SALE OF NO LESS THAN 1 MILLION
WARRANTS SUBJECT TO THE COMPANY'S AND THE WARRANT AGENT'S RIGHT TO REQUIRE THE
DELIVERY OF CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM.
B-1
<PAGE>
No. W-I-1 Certificate for 3,000,000 Warrants
CUSIP ____________________________
SERIES I EQUITY CALL WARRANTS
TO ACQUIRE COMMON STOCK OF
ORACLE CORPORATION
This Warrant Certificate certifies that Goldman, Sachs & Co. or registered
assigns, is the registered holder of 3,000,000 Warrants (the "Warrants") to
purchase Common Stock, par value $0.01 per share (the "Common Stock"), of Oracle
Corporation, a Delaware corporation (the "Company"). Each Warrant entitles the
holder, subject to the terms and conditions set forth herein and in the Warrant
Agreement, to purchase from the Company one fully paid and non-assessable share
of Common Stock of the Company at the purchase price per share of Common Stock
(the "Purchase Price"), which price shall initially be $77.55 per share, subject
to adjustment from time to time in accordance with the Warrant Agreement.
Settlement for such purchase shall take place on the sixth Business Day after
delivery of such Notice of Exercise, upon surrender to the Warrant Agent, at its
office maintained for that purpose in Boston, Massachusetts or New York, New
York, of this Warrant Certificate with the form of election to purchase on the
reverse hereof duly completed and signed by the registered holder or holders
hereof or by the duly appointed legal representative thereof or by a duly
authorized attorney, and upon payment of the Purchase Price, but only subject to
the conditions set forth herein and in the Warrant Agreement. Payment of the
Purchase Price may be made by Federal or other immediately available funds to
the Company.
The Company shall have the right to settle any exercise of a Warrant (i) in
cash, in which case on the fifteenth Business Day after the Exercise Date the
Company shall deliver to the exercising Holder, against surrender to the Warrant
Agent at its office maintained for that purpose in Boston, Massachusetts of the
Warrant Certificate evidencing the exercised Warrants, Federal or other
immediately available funds payable to the order of such Holder in an amount
equal to the Cash Settlement Value (as defined in the Warrant Agreement); or
(ii) by delivering the Net Share Settlement Number (as defined in the Warrant
Agreement) of shares of Underlying Common Stock, in which case on the eighteenth
Business Day after the Exercise Date the Company shall deliver to the exercising
Holder, against surrender to the Warrant Agent at its office maintained for that
purpose in Boston, Massachusetts of the Warrant Certificate evidencing the
exercised Warrants, such number of fully paid and non-assessable shares.
No Warrant may be exercised or exchanged after 5:00 P.M., New York City
B-2
<PAGE>
time, on the Expiration Date. All Warrants evidenced hereby shall thereafter be
void.
Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse hereof and such further provisions shall
for all purposes have the same effect as though fully set forth in this place.
This Warrant Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Warrant Agent.
IN WITNESS WHEREOF, Oracle Corporation has caused this instrument to be
duly executed.
ORACLE CORPORATION
By:
-------------------------------
Name:
Title:
(SEAL)
Attest:
-----------------------------
Secretary
DATED:
Countersigned as of the date above written:
BANKBOSTON, N.A.,
as Warrant Agent
By:
---------------------------------
Authorized Officer
B-3
<PAGE>
[FORM OF WARRANT CERTIFICATE]
[REVERSE]
This Warrant Certificate is issued under and in accordance with a Warrant
Agreement dated as of May 19, 1997 (the "Warrant Agreement"), between the
Company and BankBoston, N.A., as warrant agent (the "Warrant Agent," which term
includes any successor Warrant Agent under the Warrant Agreement), and is
subject to the terms and provisions contained in the Warrant Agreement, to all
of which terms and provisions the Holder of this Warrant Certificate consents by
acceptance hereof. The Warrant Agreement is hereby incorporated herein by
reference and made a part hereof. Reference is hereby made to the Warrant
Agreement for a full statement of the respective rights, limitations of rights,
duties and obligations of the Company, the Warrant Agent and the Holders of the
Warrants. Capitalized terms not defined herein have the meanings ascribed
thereto in the Warrant Agreement. A copy of the Warrant Agreement may be
obtained for inspection by the Holder hereof upon written request to BankBoston,
N.A., c/o Boston Esquiserve Limited Partnership, 150 Royall Street, Canton,
Massachusetts 02021, Attention: Reorganization Department.
The Warrants evidenced by this Warrant Certificate shall be exercisable, at
the election of the Holder hereof, either as an entirety or from time to time
for part only of the number of Warrants specified herein. In the event that less
than all of the Warrants evidenced by this Warrant Certificate are exercised at
any time prior to the Expiration Date, a new Warrant Certificate or Certificates
of the same tenor shall be issued for the remaining number of Warrants evidenced
by this Warrant Certificate.
The Company may, by notice to the Warrant Agent and to the Holder hereof,
suspend the right to exercise Warrants evidenced hereby for a period of up to 90
days. The Company may suspend the right to exercise these Warrants on no more
than one occasion. If any such period of suspension (as it may be extended by
successive further notices) includes or extends beyond the Expiration Date, then
the term of these Warrants shall be automatically extended to the Business Day
following the last day of such suspension, which Business Day shall thereupon
become the Expiration Date.
Upon receipt of a Notice of Exercise, the Company may cancel such exercise
by delivering notices of suspension to the Warrant Agent and to the Holders of
the Warrants (and delivering a copy thereof to the exercising Holder, by
facsimile transmission to the number set forth for such purpose in the Notice of
Exercise), not later than 5:00 P.M., New York City time, on the third Business
Day after delivery to the Company of such Notice of Exercise, in which case such
Notice of Exercise shall be deemed never to have been given.
At the option of the Holder hereof, Warrant Certificates may be exchanged
at such office upon payment of the charges provided in the Warrant Agreement.
B-4
<PAGE>
Whenever any Warrant Certificates are so surrendered for exchange, the Company
shall execute, and the Warrant Agent shall countersign and deliver, the Warrant
Certificates that the Holder making the exchange is entitled to receive. All
Warrant Certificates issued upon any registration of transfer or exchange of
Warrant Certificates shall be the valid obligations of the Company, evidencing
the same obligations, and entitled to the same benefits under the Warrant
Agreement, as the Warrant Certificates surrendered for such registration of
transfer or exchange. Every Warrant Certificate surrendered for registration of
transfer or exchange shall (if so required by the Company or the Warrant Agent)
be duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Warrant Agent, duly executed by the Holder
thereof or his attorney duly authorized in writing.
No service charge shall be required of a Holder for any registration of
transfer or exchange of Warrant Certificates. The Company may require payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of Warrant
Certificates.
The Company and the Warrant Agent may deem and treat the registered Holder
of this Warrant Certificate as the absolute owner hereof (notwithstanding any
notation of ownership or other writing thereon made by anyone), for the purpose
of any exercise hereof or any distribution to the Holder hereof and for all
other purposes, and neither the Company nor the Warrant Agent shall be affected
by any notice to the contrary.
The Warrant Agreement also provides that upon the occurrence of certain
events, the Purchase Price set forth on the face hereof may, subject to certain
conditions, be adjusted. If such Purchase Price is adjusted, the Warrant
Agreement provides that in certain instances, the number of shares of Common
Stock of the Company purchasable upon the exercise of each Warrant shall be
adjusted. In the case of certain extraordinary transactions, the Warrants may
become exercisable for the consideration received by Holders of Common Stock
therein, or in certain cases, may become exchangeable solely for a cash payment,
all as provided in the Warrant Agreement.
This Warrant Certificate and the Warrant Agreement are subject to amendment
as provided in the Warrant Agreement.
B-5
<PAGE>
[FORM OF ELECTION TO EXERCISE]
[TO BE EXECUTED UPON PURCHASE OF WARRANT]
The undersigned hereby irrevocably exercises of Series
Equity Call Warrants for the acquisition of [ ] share(s) of Underlying Common
Stock (as defined herein), represented by this Warrant Certificate, on the terms
and conditions specified in this Warrant Certificate and the Warrant Agreement
herein referred to, surrenders this Warrant Certificate and all right, title and
interest therein Oracle Corporation (the "Company") and has tendered payment for
such shares in the amount of $________, all in accordance with the terms hereof,
directs that the shares of Common Stock deliverable upon the exercise of such
Warrants be registered or placed in the name and at the address specified below
and delivered thereto.
Dated: __________________________, ______
/1/
--------------------------------------------
(Signature of Owner)
--------------------------------------------
(Street Address)
--------------------------------------------
(City) (State) (Zip Code)
--------------------------------------------
Facsimile Number/2/
Signature Guaranteed by:
--------------------------------------------
- ------------------------
/1/ The signature must correspond with the name as written upon the face
of the within Warrant Certificate in every particular, without alteration or
enlargement or any change whatsoever, and must be guaranteed by a national
bank or trust company or by a member firm of any national securities exchange
or by another eligible guarantor institution as defined in Rule 17Ad-15 under
the Securities Exchange Act of 1934.
/2/ A facsimile number must be provided for the purpose of receiving any
notice of the Company's election, if any, to settle this exercise of
Warrant(s) in cash or of suspension of the holder's right to exercise this
Warrant.
B-6
<PAGE>
[FORM OF ASSIGNMENT]
FOR VALUE RECEIVED, the undersigned Holder of this Warrant Certificate
hereby sells, assigns, and transfers unto the Assignee(s) named below (including
the undersigned with respect to any Warrants constituting a part of the Warrants
evidenced by this Warrant Certificate not being assigned hereby) all of the
right of the undersigned under this Warrant Certificate, with respect to the
number of Warrants set forth below:
=========================================================
Social Security
or other
identifying
number of
Names of assignee(s) Number of
Assignee(s) Address --------------- Warrants
----------- ------- --------
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
=========================================================
and does hereby irrevocably constitute and appoint __________, the undersigned's
attorney, to make such transfer on the register maintained by the Warrant Agent
for that purpose, with full power of substitution in the premises.
Dated: _________________, _____
--------------------------------------
(Signature of Owner)/3/
--------------------------------------
(Street Address)
--------------------------------------
(City) (State) (Zip Code)
--------------------------------------
Signature Guaranteed by:
--------------------------------------
- -----------------------
/3/ The signature must correspond with the name as written upon the face
of the within Warrant Certificate in every particular, without alteration or
enlargement or any change whatsoever, and must be guaranteed by a national
bank or trust company or by a member firm of any national securities exchange
or by another eligible guarantor institution as defined in Rule 17Ad-15 under
the Securities Exchange Act of 1934.
B-7
<PAGE>
EXHIBIT C
FORM OF NOTICE OF EXERCISE
The undersigned hereby irrevocably elects to exercise the right,
represented by Warrant Certificate No[s]. W-____________ to purchase
_________________ shares of Common Stock of Oracle Corporation and undertakes to
surrender such Warrant Certificate[s] to the Warrant Agent, at its office
maintained for that purpose in ________, ________, with the form of election to
exercise on the reverse thereof duly completed and signed, together with payment
of the applicable Purchase Price, on the day six Business Days after the date
hereof. The undersigned requests that a certificate for such shares be
registered in the name of __________________ whose address is
____________________________________ and that such Certificate (or any payment
in lieu thereof) be delivered to ____________________ whose address
is_____________________.
Notice of the Company's election, if any, to (i) settle this exercise of
Warrants in cash or by net share settlement or (ii) suspend the exercise of
Warrants should be addressed to the attention of ___________________________
___________________________________, sent by facsimile transmission to the
following number: __________________________ (confirmation telephone number:
_____________________).
Capitalized terms not otherwise defined herein shall have the meanings
specified in the Warrant Agreement dated as of May 19, 1997 between Oracle
Corporation and the BankBoston, N.A., as Warrant Agent.
Dated:_____________________ _______________________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
C-1
<PAGE>
EXHIBIT D
[FORM OF NOTICE OF CASH SETTLEMENT]
Oracle Corporation hereby irrevocably elects to settle in cash the exercise
of Warrant No[s]. W-_______________ to purchase ____________ shares of its
Common Stock.
Capitalized terms not otherwise defined herein shall have the meanings
specified in the Warrant Agreement dated as of May 19, 1997 between Oracle
Corporation and the BankBoston, N.A., as Warrant Agent.
Dated:________________________
ORACLE CORPORATION
By: Name:
-------------------------------
Title
D-1
<PAGE>
EXHIBIT E
[FORM OF NOTICE OF NET SHARE SETTLEMENT]
Oracle Corporation (the "Company") hereby irrevocably elects to settle by
delivery of the Net Share Settlement Number of shares of its Common Stock the
exercise of Warrant No[s] W-_______________ to purchase ___________ shares of
its Common Stock.
Capitalized terms not defined herein have the meaning given such terms in
the Warrant Agreement dated as of May 19, 1997, between the Company and the
BankBoston, N.A., as Warrant Agent.
ORACLE CORPORATION
By:
------------------------
Name:
Title:
E-1
<PAGE>
EXHIBIT F
[NOTICE OF SUSPENSION OF EXERCISE]
[Warrant Holder Name]
[Warrant Holder Address]
In accordance with Section 4(f) of the Warrant Agreement (the "Warrant
Agreement") dated as of May 19, 1997 between Oracle Corporation (the "Company")
and _______________, as Warrant Agent, relating to the Company's Equity Call
Warrants (the"Warrants"), the Company hereby gives notice that your right to
exercise your Warrants has been suspended until ______.
Therefore, the Notice of Exercise delivered by you has been canceled, has
been deemed to have never been delivered and is returned herewith to you.
_____________________________,
as Warrant Agent
By:
___________________________
Authorized Signature
F-1
<PAGE>
EXHIBIT 4.7
[FACE OF WARRANT CERTIFICATE]
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS. NEITHER THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR ANY INTEREST OR PARTICIPATION THEREIN OR HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF
THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE
TRANSFER SUCH SECURITY ONLY PURSUANT TO (A) REGISTRATION PURSUANT TO THE
SECURITIES ACT OR (B) AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT, SUBJECT, IN THE CASE OF (B), TO THE COMPANY'S AND THE
WARRANT AGENT'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM, AND, IN THE CASE OF EITHER (A) OR (B) TO REQUIRE
THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS
SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE WARRANT AGENT. THE
HOLDER OF EACH SECURITY BY ITS ACCEPTANCE HEREOF FURTHER AGREES THAT IT SHALL
OFFER, SELL OR OTHERWISE TRANSFER THE WARRANTS REPRESENTED BY THIS CERTIFICATE
ONLY TO QUALIFIED INSTITUTIONAL BUYERS (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) AND IN TRANSACTIONS INVOLVING THE SALE OF NO LESS THAN 1 MILLION
WARRANTS SUBJECT TO THE COMPANY'S AND THE WARRANT AGENT'S RIGHT TO REQUIRE THE
DELIVERY OF CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM.
<PAGE>
No. W-I-1 Certificate for 3,000,000 Warrants
CUSIP No. 68389Y-12-9
SERIES I EQUITY CALL WARRANTS
TO ACQUIRE COMMON STOCK OF
ORACLE CORPORATION
This Warrant Certificate certifies that Goldman, Sachs & Co., or registered
assigns, is the registered holder of 3,000,000 Warrants (the "Warrants") to
purchase Common Stock, par value $0.01 per share (the "Common Stock"), of Oracle
Corporation, a Delaware corporation (the "Company"). Each Warrant entitles the
holder, subject to the terms and conditions set forth herein and in the Warrant
Agreement, to purchase from the Company one fully paid and non-assessable share
of Common Stock of the Company at the purchase price per share of Common Stock
(the "Purchase Price"), which price shall initially be $77.55 per share, subject
to adjustment from time to time in accordance with the Warrant Agreement.
Settlement for such purchase shall take place on the sixth Business Day after
delivery of such Notice of Exercise, upon surrender to the Warrant Agent, at its
office maintained for that purpose in Boston, Massachusetts or New York, New
York, of this Warrant Certificate with the form of election to purchase on the
reverse hereof duly completed and signed by the registered holder or holders
hereof or by the duly appointed legal representative thereof or by a duly
authorized attorney, and upon payment of the Purchase Price, but only subject to
the conditions set forth herein and in the Warrant Agreement. Payment of the
Purchase Price may be made by Federal or other immediately available funds to
the Company.
The Company shall have the right to settle any exercise of a Warrant (i) in
cash, in which case on the fifteenth Business Day after the Exercise Date the
Company shall deliver to the exercising Holder, against surrender to the Warrant
Agent at its office maintained for that purpose in Boston, Massachusetts of the
Warrant Certificate evidencing the exercised Warrants, Federal or other
immediately available funds payable to the order of such Holder in an amount
equal to the Cash Settlement Value (as defined in the Warrant Agreement); or
(ii) by delivering the Net Share Settlement Number (as defined in the Warrant
Agreement) of shares of Underlying Common Stock, in which case on the eighteenth
Business Day after the Exercise Date the Company shall deliver to the exercising
Holder, against surrender to the Warrant Agent at its office maintained for that
purpose in Boston, Massachusetts of the Warrant Certificate evidencing the
exercised Warrants, such number of fully paid and non-assessable shares.
No Warrant may be exercised or exchanged after 5:00 P.M., New York City
time, on the Expiration Date. All Warrants evidenced hereby shall thereafter be
void.
<PAGE>
Reference is hereby made to the further provisions of this Warrant Certificate
set forth on the reverse hereof and such further provisions shall for all
purposes have the same effect as though fully set forth in this place.
This Warrant Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Warrant Agent.
IN WITNESS WHEREOF, Oracle Corporation has caused this instrument to be
duly executed.
ORACLE CORPORATION
By: /s/ Bruce M. Lange
--------------------------------------
Name: Bruce M. Lange
Title: Vice President and Treasurer
(SEAL)
Attest: /s/ L. Patricia Moncada
-----------------------------------
Assistant Secretary
DATED: May 19, 1997
Countersigned as of the date above written:
BANKBOSTON, N.A.
as Warrant Agent
By: /s/ Geoffrey D. Anderson
----------------------------------
Authorized Officer
<PAGE>
[REVERSE OF WARRANT CERTIFICATE]
This Warrant Certificate is issued under and in accordance with a Warrant
Agreement dated as of May 19, 1997 (the "Warrant Agreement"), between the
Company and BankBoston, N.A., as warrant agent (the "Warrant Agent," which term
includes any successor Warrant Agent under the Warrant Agreement), and is
subject to the terms and provisions contained in the Warrant Agreement, to all
of which terms and provisions the Holder of this Warrant Certificate consents by
acceptance hereof. The Warrant Agreement is hereby incorporated herein by
reference and made a part hereof. Reference is hereby made to the Warrant
Agreement for a full statement of the respective rights, limitations of rights,
duties and obligations of the Company, the Warrant Agent and the Holders of the
Warrants. Capitalized terms not defined herein have the meanings ascribed
thereto in the Warrant Agreement. A copy of the Warrant Agreement may be
obtained for inspection by the Holder hereof upon written request to BankBoston,
N.A., 150 Royall Street, Canton, Massachusetts 02021, Attention: Reorganization
Department.
The Warrants evidenced by this Warrant Certificate shall be exercisable, at
the election of the Holder hereof, either as an entirety or from time to time
for part only of the number of Warrants specified herein. In the event that less
than all of the Warrants evidenced by this Warrant Certificate are exercised at
any time prior to the Expiration Date, a new Warrant Certificate or Certificates
of the same tenor shall be issued for the remaining number of Warrants evidenced
by this Warrant Certificate.
The Company may, by notice to the Warrant Agent and to the Holder hereof,
suspend the right to exercise Warrants evidenced hereby for a period of up to 90
days. The Company may suspend the right to exercise these Warrants on no more
than one occasion. If any such period of suspension (as it may be extended by
successive further notices) includes or extends beyond the Expiration Date, then
the term of these Warrants shall be automatically extended to the Business Day
following the last day of such suspension, which Business Day shall thereupon
become the Expiration Date.
Upon receipt of a Notice of Exercise, the Company may cancel such exercise
by delivering notices of suspension to the Warrant Agent and to the Holders of
the Warrants (and delivering a copy thereof to the exercising Holder, by
facsimile transmission to the number set forth for such purpose in the Notice of
Exercise), not later than 5:00 P.M., New York City time, on the third Business
Day after delivery to the Company of such Notice of Exercise, in which case such
Notice of Exercise shall be deemed never to have been given.
At the option of the Holder hereof, Warrant Certificates may be exchanged
at such office upon payment of the charges provided in the Warrant Agreement.
Whenever any Warrant Certificates are so surrendered for exchange, the Company
shall execute, and the Warrant Agent shall countersign and deliver, the Warrant
Certificates that the Holder making the exchange is entitled to receive. All
Warrant Certificates issued upon any registration of transfer or exchange of
Warrant Certificates shall be the valid obligations of the Company, evidencing
the same obligations, and entitled to the same benefits under the Warrant
Agreement, as the Warrant Certificates surrendered for such registration of
transfer or exchange. Every Warrant Certificate surrendered for registration of
transfer or exchange shall (if so required by the Company or the
<PAGE>
Warrant Agent) be duly endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to the Company and the Warrant Agent, duly
executed by the Holder thereof or his attorney duly authorized in writing.
No service charge shall be required of a Holder for any registration of
transfer or exchange of Warrant Certificates. The Company may require payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of Warrant
Certificates.
The Company and the Warrant Agent may deem and treat the registered Holder
of this Warrant Certificate as the absolute owner hereof (notwithstanding any
notation of ownership or other writing thereon made by anyone), for the purpose
of any exercise hereof or any distribution to the Holder hereof and for all
other purposes, and neither the Company nor the Warrant Agent shall be affected
by any notice to the contrary.
The Warrant Agreement also provides that upon the occurrence of certain
events, the Purchase Price set forth on the face hereof may, subject to certain
conditions, be adjusted. If such Purchase Price is adjusted, the Warrant
Agreement provides that in certain instances, the number of shares of Common
Stock of the Company purchasable upon the exercise of each Warrant shall be
adjusted. In the case of certain extraordinary transactions, the Warrants may
become exercisable for the consideration received by Holders of Common Stock
therein, or in certain cases, may become exchangeable solely for a cash payment,
all as provided in the Warrant Agreement.
This Warrant Certificate and the Warrant Agreement are subject to amendment
as provided in the Warrant Agreement.
<PAGE>
[FORM OF ELECTION TO EXERCISE]
[TO BE EXECUTED UPON PURCHASE OF UNDERLYING COMMON STOCK]
The undersigned hereby irrevocably exercises of Series I
Equity Call Warrants for the acquisition of [ ] share(s) of Underlying Common
Stock (as defined herein), represented by this Warrant Certificate, on the terms
and conditions specified in this Warrant Certificate and the Warrant Agreement
herein referred to, surrenders this Warrant Certificate and all right, title and
interest therein Oracle Corporation (the "Company") and has tendered payment for
such shares in the amount of $________, all in accordance with the terms hereof,
directs that the shares of Common Stock deliverable upon the exercise of such
Warrants be registered or placed in the name and at the address specified below
and delivered thereto.
Dated: ____________________, ______
/1/
-------------------------------------------
(Signature of Owner)
-------------------------------------------
(Street Address)
-------------------------------------------
(City) (State) (Zip Code)
-------------------------------------------
Facsimile Number/2/
Signature Guaranteed by:
-------------------------------------------
- --------------------
/1/ The signature must correspond with the name as written upon the face of
the within Warrant Certificate in every particular, without alteration or
enlargement or any change whatsoever, and must be guaranteed by a national bank
or trust company or by a member firm of any national securities exchange or by
another eligible guarantor institution as defined in Rule 17Ad-15 under the
Securities Exchange Act of 1934.
/2/ A facsimile number must be provided for the purpose of receiving any
notice of the Company's election, if any, to settle this exercise of Warrant(s)
in cash or of suspension of the holder's right to exercise this Warrant.
<PAGE>
[FORM OF ASSIGNMENT]
FOR VALUE RECEIVED, the undersigned Holder of this Warrant Certificate
hereby sells, assigns, and transfers unto the Assignee(s) named below (including
the undersigned with respect to any Warrants constituting a part of the Warrants
evidenced by this Warrant Certificate not being assigned hereby) all of the
right of the undersigned under this Warrant Certificate, with respect to the
number of Warrants set forth below:
<TABLE>
<CAPTION>
=========================================================
Social Security
or other
identifying
Names of number of Number of
Assignee(s) Address assignee(s) Warrants
- -------------- ------- ------------------ ---------
<S> <C> <C> <C>
=========================================================
</TABLE>
and does hereby irrevocably constitute and appoint __________, the undersigned's
attorney, to make such transfer on the register maintained by the Warrant Agent
for that purpose, with full power of substitution in the premises.
Dated: ______________, ____
-----------------------------------------
(Signature of Owner)/3/
-----------------------------------------
(Street Address)
-----------------------------------------
(City) (State) (Zip Code)
-----------------------------------------
Signature Guaranteed by:
-----------------------------------------
- -----------------------
/3/ The signature must correspond with the name as written upon the face of
the within Warrant Certificate in every particular, without alteration or
enlargement or any change whatsoever, and must be guaranteed by a national bank
or trust company or by a member firm of any national securities exchange or by
another eligible guarantor institution as defined in Rule 17Ad-15 under the
Securities Exchange Act of 1934.
<PAGE>
EXHIBIT 10.25
Amendment No 1 to 1991 Long-Term Equity Incentive Plan dated December 9, 1996
Section 3 of the 1991 Plan shall be amended to add the following sentences at
the end of Section 3:
Notwithstanding the other terms of this Plan, options granted under the
Datalogix International Inc. Amended and Restated 1992 Incentive Stock Plan and
1986 Key Employees' Stock Option Plan (collectively, the "Datalogix Plans")
shall be assumed by the Corporation under this Plan pursuant to the Agreement
and Plan of Merger dated as of September 24, 1996, as amended October 8, 1996,
and, with respect to such assumed options, this Plan shall include the terms and
conditions contained in the Datalogix Plans as applicable only to such options.
To the extent any provision of this Plan could be deemed to provide an
additional benefit to the holders of such options within the meaning of Section
424(a) of the Code, such provision shall not apply to such option holder, and to
the extent any term contained in the applicable Datalogix Plan directly
conflicts with the terms of this Plan, the terms of the applicable Datalogix
Plan shall govern.
<PAGE>
EXHIBIT 21.01
ORACLE CORPORATION
FEDERAL I. D. # 94-2871189
SUBSIDIARIES OF THE REGISTRANT
AS OF MAY 31, 1997
LIST OF ENTITIES:
STATE OR COUNTRY
SUBSIDIARY OF INCORPORATION
- ---------- ----------------
Oracle (Barbados) Foreign Sales Corporation Barbados
Network Computer, Inc. Delaware
Datalogix International, Inc. Delaware
Intercom Global Corporation Delaware
Intercom Software Corporation Delaware
Intercom Network Corporation Delaware
Oracle Credit Corporation California
Oracle China, Inc. California
Oracle Taiwan, Inc. California
Oracle Complex Systems Corporation Delaware
Oracle Japan Holding, Inc. Delaware
RSIB, Inc. Delaware
Oracle Holdings, Inc. Delaware
Oracle GmbH Austria
Oracle Belgium N.V. Belgium
Oracle Software d.o.o. Croatia
Oracle Czech S.R.O. Czech Republic
Oracle Danmark A/S Denmark
Oracle Deutschland GmbH Germany
Oracle Finland OY Finland
Oracle France S.A. France
Oracle Hellas S.A. Greece
Oracle Hungary Kft. Hungary
Oracle Europe Manufacturing Limited Ireland
Oracle Technology Company Ireland
Oracle Italia, S.p.A. Italy
Oracle Holding Antilles NV Netherlands Antilles
Network Computer Incorporated, Nederland B.V. The Netherlands
Oracle Nederland B.V. The Netherlands
Folebo BV The Netherlands
Oracle Norge AS Norway
Oracle Polska, Sp. z.o.o. Poland
Oracle Portugal - Sistemas De Informacao, LDA Portugal
Oracle Slovensko spol. s.l.o. Slovakia
Oracle Slovenia d.o.o. Slovenia
Oracle Iberica S.A. (Spain) Spain
Oracle Svenska AB Sweden
Oracle Software (Switzerland) Ltd. Switzerland
Oracle AG Switzerland
<PAGE>
EXHIBIT 21.01 (CONTINUED)
ORACLE CORPORATION
FEDERAL I. D. # 94-2871189
SUBSIDIARIES OF THE REGISTRANT
AS OF MAY 31, 1997
<TABLE>
<CAPTION>
LIST OF ENTITIES:
STATE OR COUNTRY
SUBSIDIARY OF INCORPORATION
- ---------- ----------------
<S> <C>
Oracle Corporation OLAP, Ltd. UK
Oracle Corporation UK Limited UK
Oracle Resources Ltd. UK
Oracle Corporation Nominees, Ltd. UK
Oracle EMEA Management Ltd. UK
Oracle Systems Limited Cyprus
Oracle Software Systems Israel Limited Israel
Saudi Oracle Limited Saudi Arabia
Oracle (South Africa) (Pty) Limited South Africa
Oracle Biligisayer Sistemleri Limited Sirketi Turkey
Oracle Argentina S.A. Argentina
Oracle do Brazil Sistemas Ltda. Brazil
Oracle Caribbean, Inc. Puerto Rico/United States
Oracle Holding Cayman Cayman Islands
Sistemas Oracle de Chile S.A. Chile
Centro de Capacitacion Oracles Ltda. Chile
Oracle Colombia Limitada Colombia
Oracle Centroamerica S.A. Costa Rica
Oracle Ecuador S.A. Ecuador
Oracle Mexico S.A. de C.V. Mexico
Oracle del Peru, S.A. Peru
Oracle Uruguay, S. A. Uruguay
Oracle de Venezuela C.A. Venezuela
Oracle Corporation Canada, Inc. Canada
La Societe D'Informatique Oracle du Quebec, Inc. Canada
Oracle Corporation Japan Japan
Oracle Systems (Australia) Pty. Ltd. Australia
Beijing Oracle Systems Company Limited China
Oracle Systems China (Hong Kong) Limited Hong Kong
Oracle Systems Hong Kong Limited Hong Kong
PT Oracle Indonesia Ltd. Indonesia
Oracle Systems (Korea) Ltd. Korea
Oracle Systems Malaysia Sdn. Bhd. Malaysia
Oracle New Zealand, Ltd. New Zealand
Oracle Systems (Philippines) Inc. Philippines
Oracle Systems South East Asia (Singapore) Pte. Ltd. Singapore
Oracle Systems (Thailand) Company Limited Thailand
Oracle Vietnam Vietnam
Oracle Software India Ltd. India
</TABLE>
<PAGE>
EXHIBIT 23.01
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report dated June 16, 1997 included in this Form 10-K, into the Company's
previously filed Registration Statement File No.'s 33-3536, 33-16749, 33-44702,
33-53349, 33-53351 and 33-53355 on Form S-8.
ARTHUR ANDERSEN LLP
San Jose, California
August 13, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> MAY-31-1997
<CASH> 890,162
<SECURITIES> 323,028
<RECEIVABLES> 1,668,310
<ALLOWANCES> 127,840
<INVENTORY> 10,829
<CURRENT-ASSETS> 3,271,096
<PP&E> 1,477,274
<DEPRECIATION> 608,326
<TOTAL-ASSETS> 4,624,315
<CURRENT-LIABILITIES> 1,922,139
<BONDS> 0
0
0
<COMMON> 6,520
<OTHER-SE> 2,363,192
<TOTAL-LIABILITY-AND-EQUITY> 4,624,315
<SALES> 0
<TOTAL-REVENUES> 5,684,336
<CGS> 0
<TOTAL-COSTS> 1,550,466
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 37,377
<INTEREST-EXPENSE> 6,806
<INCOME-PRETAX> 1,283,527
<INCOME-TAX> 462,070
<INCOME-CONTINUING> 821,457
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 821,457
<EPS-PRIMARY> 1.22
<EPS-DILUTED> 1.22
</TABLE>
