<PAGE>
Conformed copy with exhibits
Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1997
-----------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ------ EXCHANGE ACT OF 1934
For the transition period from to
------------------- -----------------
Commission File Number 0-17754
CONSILIUM, INC.
---------------
(Exact name of registrant as specified in its charter)
Delaware 94-2523965
-------- ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
485 Clyde Avenue, Mountain View, California 94043
- ------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (650) 691-6100
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed under 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 the number of shares outstanding of each of the issuer's classes of
common stock as of September 5, 1997:
<TABLE>
<S> <C>
Common Stock, $0.01 par value 8,214,594
- ----------------------------- -----------------------
Class Number of Shares
</TABLE>
1
<PAGE>
CONSILIUM, INC.
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets -
July 31, 1997 and October 31, 1996..................... 3
Condensed Consolidated Statements of Operations -
Three and Nine months ended July 31, 1997 and 1996..... 4
Condensed Consolidated Statements of Cash Flows -
Nine months ended July 31, 1997 and 1996............... 5
Notes to Condensed Consolidated Financial Statements... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................ 9
Item 3. Quantitative and Qualitative Disclosures About Market
Risks...................................................... 16
<CAPTION>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.......................................... 17
Item 2. Changes in Securities...................................... 17
Item 3. Defaults upon Senior Securities............................ 18
Item 4. Submission of Matters to a Vote of Security Holders........ 18
Item 5. Other Information.......................................... 18
Item 6. Exhibits and Reports on Form 8-K........................... 18
Signatures................................................. 22
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
CONSILIUM, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
July 31, 1997 October 31, 1996
------------- ----------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,474 $ 8,094
Short term investments - 1,000
Accounts receivable, net 14,360 9,139
Other current assets 1,124 1,114
------------- -------------
Total current assets 20,958 19,347
Property and equipment, net 4,510 4,827
Software development costs, net 2,383 3,094
Goodwill, net 1,402 1,345
Other assets 406 380
------------- -------------
Total assets $ 29,659 $ 28,993
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit / Note payable $ 3,051 $ 1,792
Accounts payable 4,257 4,114
Other current liabilities and
accrued expenses 6,643 4,015
Deferred revenue 8,573 5,694
------------- -------------
Total current liabilities 22,524 15,615
Long-term liabilities 32 41
------------- -------------
Total liabilities 22,556 15,656
------------- -------------
Stockholders' equity 7,103 13,337
------------- -------------
Total liabilities and
stockholders' equity $ 29,659 $ 28,993
============= =============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE>
CONSILIUM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
July 31, July 31,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES:
Product $ 4,420 $ 5,773 $ 11,234 $ 13,965
Services 6,405 4,429 18,826 12,312
Development 84 513 514 1,376
-------- -------- -------- --------
Total revenues 10,909 10,715 30,574 27,653
-------- -------- -------- --------
COST OF REVENUES:
Product 778 1,720 2,483 3,211
Services 3,593 1,888 11,475 4,888
Development -- 395 369 1,070
-------- -------- -------- --------
Total cost of revenues 4,371 4,003 14,327 9,169
-------- -------- -------- --------
GROSS MARGIN 6,538 6,712 16,247 18,484
-------- -------- -------- --------
OPERATING EXPENSES:
Research and development 3,015 2,727 9,250 8,008
Selling and marketing 3,483 3,408 10,094 9,751
General and administrative 1,006 954 2,809 3,010
-------- -------- -------- --------
Total operating expenses 7,504 7,089 22,153 20,769
-------- -------- -------- --------
Loss from operations (966) (377) (5,906) (2,285)
Interest income 34 93 98 319
Interest expense (102) (42) (173) (42)
-------- -------- -------- --------
LOSS BEFORE
INCOME TAX PROVISION (1,034) (326) (5,981) (2,008)
PROVISION FOR INCOME TAXES 147 207 262 579
-------- -------- -------- --------
NET LOSS $ (1,181) $ (533) $ (6,243) $ (2,587)
======== ======== ======== ========
NET LOSS PER SHARE $ (0.15) $ (0.07) $ (0.78) $ (0.33)
======== ======== ======== ========
SHARES USED IN PER SHARE
CALCULATIONS 8,018 7,838 7,974 7,773
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
CONSILIUM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
July 31,
1997 1996
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (6,243) $ (2,587)
------------- -------------
Adjustments to reconcile net loss to
net cash used for operating activities:
Depreciation and amortization 2,694 2,345
Provision for doubtful accounts - 180
Change in assets and liabilities:
Accounts receivable (5,221) (1,619)
Other assets (213) (1,053)
Accounts payable 143 2,642
Deferred revenue 2,870 (1,360)
Other liabilities and accrued expenses 2,628 (487)
------------- -------------
Net cash used for operating activities (3,342) (1,939)
------------- -------------
Cash flows from investing activities:
Capital expenditures (912) (2,973)
Capitalized software development costs (525) (670)
Sales of short-term investments 1,000 1,478
------------- -------------
Net cash used for investing activities (437) (2,165)
------------- -------------
Cash flows from financing activities:
Proceeds from issuance of common stock and exercise of options 288 966
Repayment on note payable (1,792) (83)
Borrowing from line of credit / note payable 3,051 2,000
------------- -------------
Net cash provided by financing activities 1,547 2,883
------------- -------------
Effect of exchange rate changes on cash (388) -
------------- -------------
Net decrease in cash and cash equivalents (2,620) (1,221)
------------- -------------
Cash and cash equivalents at beginning of period 8,094 10,686
------------- -------------
Cash and cash equivalents at end of period $ 5,474 $ 9,465
============= =============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE>
CONSILIUM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. INTERIM FINANCIAL DATA
The interim condensed consolidated financial statements of Consilium, Inc.
and its subsidiaries ("the Company") are unaudited but reflect, in the
opinion of management, all normal recurring adjustments necessary to
present fairly the financial information set forth therein. These interim
condensed consolidated financial statements should be read in conjunction
with the audited financial statements and notes thereto included in the
Company's annual report on Form 10-K for the year ended October 31, 1996.
The Company believes the results of operations for the three and nine
months ended July 31, 1997 and the cash flows for the nine months ended
July 31, 1997 are subject to fluctuation and are not necessarily indicative
of results of operations and cash flows for any future period.
2. NET LOSS PER SHARE
Net loss per share is based on the weighted average number of common shares
outstanding during the period. Common equivalent shares have not been
included in the calculation of loss per share as their inclusion would be
antidilutive.
3. LINE OF CREDIT
In April 1997, the Company entered into a revolving line of credit
agreement (the "Line of Credit Agreement") under which it can borrow up to
$5,000,000, based on eligible accounts receivable. The revolving line of
credit is secured by substantially all of the Company's assets, bears
interest at the bank's prime rate per annum (8.5% at July 31, 1997) and
expires on March 15, 1998. At July 31, 1997, $3,051,000 was outstanding
under the revolving line of credit. The Line of Credit Agreement requires
the Company to maintain certain financial covenants. At July 31, 1997, the
Company was not in compliance with certain of these financial covenants.
Following the end of the quarter, the financial covenants were
retroactively modified by the bank and the Company was in compliance with
all financial covenants, as modified. In connection with this line of
credit, the Company granted the bank warrants to purchase 70,000 shares of
the Company's Common Stock at an exercise price of $3.98 per share. Such
warrants are fully exercisable and expire in April 2002. The warrant
holder has certain registration rights with respect to the underlying
Common Stock.
4. NEW ACCOUNTING PRONOUNCEMENTS
Effective November 1, 1996, the Company adopted the disclosure
only provisions of SFAS No. 123, "Accounting for Stock-Based Compensation".
The effect on the Company's financial position and results of operations,
upon adoption, was not significant.
6
<PAGE>
Also effective November 1, 1996, the Company adopted the provisions of SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived
Assets to be Disposed of." The adoption of this new pronouncement did not
have any effect on the Company's financial position or results of
operations.
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share". SFAS No. 128 will become effective in the first
quarter of the Company's fiscal year ending October 31, 1998. Upon
adoption, all prior-period earnings per share data presented will be
restated to conform with SFAS No. 128. 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. Pro
forma net losses per share assuming SFAS No. 128 had been adopted at the
beginning of fiscal 1996 would not be different from the net losses per
share as reported in the Company's interim financial statement for the
three and nine months ended July 31, 1997.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures About Segments of an Enterprise and Related Information,"
which establishes standards for disclosure of segment information. SFAS
No. 131 will become effective for the Company's fiscal year ending October
31, 1999. The Company anticipates additional disclosure requirements on
segment information upon adoption of SFAS No. 131.
5. RECLASSIFICATIONS
Certain reclassifications were made to prior year amounts to conform to the
fiscal 1997 presentation. These reclassifications did not change the
previously reported net loss, total assets or total cash flows of the
Company for prior year.
6. SUBSEQUENT EVENTS
On August 1, 1997, the Company acquired certain assets of Fast Associates
Pte. Ltd. ("FAST"), a Singapore corporation specializing in semiconductor
factory automation. The Company purchased two existing semiconductor
factory automation contracts, certain tangible and intangible assets and
assumed certain liabilities of FAST. The acquisition was accounted for as
a purchase. The purchase price consists of an initial payment of 120,000
shares of the Company's common stock valued at $476,000 and future
performance-based payments equal to specified percentages of systems
integration and related services net operating margin, and net product
license and maintenance revenue recognized by the Company in certain
countries in Asia for a period of three years ending on August 1, 2000, as
follows: 45% of systems integration/services net operating margin, 10% of
product license net revenue, and 2.5% of product maintenance net revenue.
Such payments may be made in cash or the Company's common stock, at the
option of the Company. $1,500,000 of the performance payments are
guaranteed, subject to adjustment in future performance payments if
estimated revenue levels are not met. Of these guaranteed amounts, a
portion was paid in August 1997 by issuance of 75,586 shares of the
Company's common stock valued at $300,000. Four additional payments of
cash or common stock valued nominally at $300,000 each will be paid at
intervals of ninety days, beginning
7
<PAGE>
November 1, 1997. Shares issued in connection with this transaction have
certain registration rights.
Also, in August 1997, the Company entered into 8% Convertible Preferred
Stock Subscription Agreements with three private institutional investors
(collectively the "Purchasers'), pursuant to which the Company sold to the
Purchasers on August 19, 1997 (the "Closing Date") an aggregate of 3,000
newly issued shares of Series A Preferred Stock of the Company (the
"Preferred Shares") at a price of $1,000 per share and an aggregate gross
proceeds to the Company of $3,000,000, before deducting expenses. Each
share of Preferred Stock is convertible, without the payment of any further
consideration, into shares of Common Stock of the Company, as follows:
A. Six months after the Closing Date, provided that the closing bid
price of the Common Stock of the Company as reported on the Nasdaq
National Stock Market ("Nasdaq") on the date of conversion (the
"Closing Bid Price") is $5.00 or greater, each Purchaser may convert
each of its Preferred Shares into a number of shares of Common Stock
of the Company equal to (a) $1,000 divided by (b) the average closing
bid price of the Common Stock of the Company as reported on Nasdaq for
the five consecutive trading days prior to the date of conversion,
discounted by 15%, but in any case no less than $1.95 and no greater
than (i) the difference between the Closing Bid Price and $1.95, plus
(ii) the Closing Bid Price; provided, however, that the Company shall
not be obligated, at any time prior to nine months after the Closing
Date, to convert, in the aggregate, more than 25% of the total
Preferred Shares.
B. Nine months after the Closing Date, provided that the Closing Bid
Price is $5.00 or greater, each Purchaser may convert each of its
Preferred Shares into a number of shares of Common Stock of the
Company equal to (a) $1,000 divided by (b) the average closing bid
price of the Common Stock of the Company as reported on Nasdaq for the
five consecutive trading days prior to the date of conversion,
discounted by 17%, but in any case no less than $1.95 and no greater
than (i) the difference between the Closing Bid Price and $1.95 plus
(ii) the Closing Bid Price; provided, however, that the Company shall
not be obligated, at any time prior to one year after the Closing
Date, to convert, in the aggregate, more than 50% of the total
Preferred Shares.
C. One year after the Closing Date, each Purchaser may convert each of
its Preferred Shares into a number of shares of Common Stock of the
Company equal to (a) $1,000 divided by (b) the average closing bid
price of the Common Stock of the Company as reported on Nasdaq for the
five consecutive trading days prior to the date of conversion,
discounted by 18%; but in any case no less than $1.95 and no greater
than (i) the difference between the Closing Bid Price and $1.95 plus
(ii) the Closing Bid Price.
The Preferred Stock has the right to cumulative dividends at 8% per annum
through conversion. The Preferred Stock cannot be converted for six months
following the Closing Date and will automatically convert, if not earlier
converted by the holders, no later than 24 months following the Closing
Date. The Preferred Stock has no voting
8
<PAGE>
rights. The holders of Series A Preferred Stock have certain registration
rights with respect to the underlying Common Stock.
In connection with the issuance of Series A Convertible Preferred Stock,
the Company granted the placement agents warrants to purchase an aggregate
of 150,000 shares of the Company's Common Stock at an exercise price equal
to 125% of the average closing bid price of the Common Stock of the Company
as reported on Nasdaq for the five consecutive trading days prior to August
19, 1997. The warrants are fully exercisable and expire in August, 2002.
The warrants holders have certain registration rights with respect to the
underlying Common Stock.
Each of the Purchasers and warrants holders are accredited investors who
purchased such shares for investment purposes, as transactions not
involving a public offering pursuant to the exemption from registration
provisions of Section 4(2) of the Securities Act of 1933, as amended, and
Rule 506 of Regulation D thereunder.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
This discussion contains, in addition to historical information, forward-looking
statements that involve risks and uncertainties, including but not limited to,
statements regarding expected fluctuations in the timing and size of orders for
FlowStream product from the healthcare products and process industries and
expected development revenues. The Company's actual results could differ
significantly from the results discussed in the forward-looking statements in
the section entitled "Potential Fluctuations in Quarterly Results". Factors that
could cause or contribute to such differences include, among others, those
discussed below as well as those discussed in the Company's Annual Report on
Form 10-K for the year ended October 31, 1996. The following discussion should
be read in conjunction with the consolidated financial statements and notes
thereto.
RESULTS OF OPERATIONS
- ---------------------
REVENUES. Total revenues for the third quarter of fiscal 1997 increased 2% to
- --------
$10,909,000, compared with $10,715,000 in the third quarter of fiscal 1996.
Revenues for the first nine months of fiscal 1997 increased 11% to $30,574,000,
compared with $27,653,000 in the same period of fiscal 1996. For the three and
nine months ended July 31, 1997, the increases in total revenues over the same
periods of the previous fiscal year were primarily due to a higher level of
services revenues in the Asia/Pacific region, partially offset by a lower level
of overall product and development revenues.
Percentage of total revenues for the three and nine months ended July 31,
1997 and 1996 by geographic region were as follows:
9
<PAGE>
<TABLE>
<CAPTION>
Three months ended Nine months ended
July 31, July 31,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
North America 55% 61% 48% 57%
Europe 21% 17% 19% 17%
Asia/Pacific 24% 22% 33% 26%
</TABLE>
The proportional decreases in sales to North America for the three and
nine months ended July 31, 1997 were due to lower product license sales in the
North America region. The proportional increases in sales to Asia/Pacific for
the three and nine months ended July 31, 1997 were primarily due to services
revenue associated with the Company's new systems integration services business
in the Asia/Pacific region.
Percentage of total revenues for the three and nine months ended July 31,
1997 and 1996 by business unit were as follows:
<TABLE>
<CAPTION>
Three months ended Nine months ended
July 31, July 31,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Semiconductor and Electronics
Business Unit
(WorkStream DFS(TM)) 81% 71% 86% 80%
Healthcare Products and Process
Industries Business Unit
(FlowStream(R)) 19% 29% 14% 20%
</TABLE>
The Company's Semiconductor and Electronics Business Unit markets and sells
WorkStream DFS products to manufacturers who produce their products in discrete
lots or batches, particularly those in the semiconductor and electronics
industries. The Company's Healthcare Products and Process Industries Business
Unit markets and sells FlowStream products to regulated or complex industries
that employ batch process manufacturing, particularly those in the healthcare
products (pharmaceutical, medical devices and biotechnology), chemical and other
process industries.
Product Revenues. Product revenues for the three and nine months ended July
- ----------------
31, 1997 decreased 23% and 20% over the same periods of the previous fiscal
year. The decreases were primarily due to lower product revenue levels from the
Company's WorkStream DFS and FlowStream product lines during the periods, as
described below:
Product revenues attributable to products in the Company's Workstream DFS
product line decreased 8% to $3,307,000 during the three months ended July 31,
1997, as compared with $3,592,000 for the same period in fiscal 1996. For the
nine months ended July 31, 1997, product revenues from the WorkStream DFS
product line decreased 15% to $9,763,000, as compared with $11,540,000 in the
previous fiscal year. The period over period decreases were primarily due to
fluctuations in timing of new orders for WorkStream(R) products from new
semiconductor fabrications and the recent slowdown in the semiconductor
industry.
10
<PAGE>
Product revenues attributable to FlowStream for the three months ended July
31, 1997 were $1,113,000, as compared to $2,181,000 for the same period in
fiscal 1996. For the nine months ended July 31, 1997, FlowStream revenues were
$1,471,000, as compared to $2,424,000 for the same period in the previous fiscal
year. The period over period decreases were attributable to fluctuations in the
size and timing of orders for FlowStream product from the healthcare products
and process industries, which included recognition of a $2 million sales
transaction from a customer in July 1996. The Company expects to continue to
see such fluctuations in FlowStream product revenues until there is a higher
level of acceptance of the FlowStream products.
Services Revenues. Services revenues for the three months ended July 31, 1997
- -----------------
increased 45% to $6,405,000, compared with $4,429,000 for the same period of
fiscal 1996. For the nine months ended July 31, 1997, services revenues
increased 53% to $18,826,000, compared with $12,312,000 for the same period of
fiscal 1996. Services revenues are primarily from annual software maintenance
fees, systems integration services relating to the Workstream DFS(TM) product
line, specialized programming services, resident and application consulting
services and customer training. The increases in services revenues for the three
and nine months ended July 31, 1997 were primarily due to increased revenues
derived from the Company's new systems integration business and higher
maintenance revenue levels from the Company's WorkStream product lines. Services
revenues normally are subject to fluctuations primarily due to the timing of new
contracts and the completion of existing projects.
Development Revenues. Development revenues for the three months ended July
- --------------------
31, 1997 decreased 84% to $84,000, compared with $513,000 for the same period of
fiscal 1996. For the nine months ended July 31, 1997, development revenues
decreased 63% to $514,000, compared with $1,376,000 for the same period of
fiscal 1996. Development revenues include work associated with porting
agreements and development contract work for third parties. Under these
contracts and agreements, the Company earns development and porting revenues,
with participating third parties having the right to license and use the
software, often sooner than otherwise would have occurred. Development revenues
can vary significantly from period to period, depending upon the number of
contracts which have been entered into and the state of completion of such
projects. The decreases in development revenues during the three and nine months
ended July 31, 1997 were primarily due to the completion of most existing funded
development projects. Based on current internal development resource
allocations and projects planned, the Company expects that development revenues
in fiscal 1997 will continue to decrease significantly from prior year levels,
although the Company may take on additional development projects in the future
if business and strategic objectives of the Company are met by such projects.
COSTS AND EXPENSES
- ------------------
Cost of Product Revenues. Cost of product revenues for the three months ended
- ------------------------
July 31, 1997 decreased 55% to $778,000, compared with $1,720,000 for the same
period of the previous fiscal year. The absolute dollar and percentage
decreases in cost of product revenues for the three months ended July 31, 1997
were primarily due to the mix of lower product license sales and lower third
party software product costs, compared with the same period of fiscal 1996. For
the nine months ended July 31, 1997, cost of product revenues decreased 23% to
$2,483,000, compared with $3,211,000 for the same period of fiscal 1996. The
absolute dollar and percentage decreases in cost of product revenues for the
nine months ended July 31, 1997 were
11
<PAGE>
primarily due to lower product license sales during the period. Cost of product
revenues includes amortization of capitalized software development costs,
royalties, and purchased software which is resold to the end customer, typically
along with the Company's own software. Depending on the mix of sales of
proprietary software (and the variance in associated third party royalties) and
additional third party software relating to specific orders, the associated
costs of product revenue can vary significantly. Product costs as a percentage
of product revenues for the three and nine months ended July 31, 1997 were 18%
and 22%, respectively, compared with 30% and 23% for the same periods of the
previous year. The decrease in cost of product revenues for the three months
ended July 31, 1997 as a percentage of product revenues was attributable to
lower third party product costs and lower royalties associated with the product
revenues during the period.
Cost of Services Revenues. Cost of services revenues increased 90% to
- -------------------------
$3,593,000 for the three months ended July 31, 1997, compared with $1,888,000
for the same period of the previous fiscal year. For the nine months ended July
31, 1997, cost of services revenues increased 135% to $11,475,000, compared with
$4,888,000 for the same period of the previous fiscal year. The increases in
absolute dollars and percentage of cost of services revenues were primarily due
to the hiring of additional services personnel, both permanent and sub-
contracted, to add to the Company's ability to support the new systems
integration services business and to enhance the Company's ability to meet
customer requirements for customer support and consulting services. Cost of
services revenues was 56% and 61% of total services revenues for the three and
nine months ended July 31, 1997, respectively, compared with 43% and 40% in the
comparable periods of fiscal 1996. The increase in cost of services revenues as
a percentage of services revenues was primarily due to the Company's investment
in its new systems integration services business in fiscal 1997.
Cost of Development Revenues. Cost of development revenues decreased 100% to $0
- ----------------------------
for the three months ended July 31, 1997, compared with $395,000 for the same
period of the previous fiscal year. The absolute dollar decrease in cost of
development revenues for the three months ended July 31, 1997 was primarily due
to no development costs associated with the existing development project during
the period. For the nine months ended July 31, 1997, cost of development
revenues decreased 66% to $369,000, as compared to $1,070,000 for the same
period of fiscal 1996. The absolute dollar decrease in cost of development
revenues for the nine months ended July 31, 1997 was primarily due to lower
development revenue levels during the period. Cost of development revenues was
0% and 72% of total development revenues for the three and nine months ended
July 31, 1997, compared with 77% and 78% in the comparable periods of fiscal
1996. The significant decrease in cost of development revenues as a percentage
of development revenues for the three months ended July 31, 1997 was primarily
due to the existing development project having no associated costs during the
period. Development costs, which may vary significantly from project to
project, include direct labor costs associated with development contracts and
porting projects as well as third party consulting expenses.
Research and Development Expenses. Research and development expenses
- ---------------------------------
represented 28% and 30% of total revenues for the three and nine month periods
ended July 31, 1997, respectively, compared with 25% and 29% for the same
periods of the previous fiscal year. The increase in the percentage of research
and development expenses as a percentage of total revenues in the recent three
month period compared with the same quarter last year was due to the higher
level of overall research and development activity. Expenses were $3,015,000 and
$9,250,000 for the three and nine months ended July 31, 1997, respectively, as
compared to
12
<PAGE>
$2,727,000 and $8,008,000 for the same periods of the previous fiscal year. The
increases in the absolute dollar amount of research and development expenses for
the three and nine months ended July 31, 1997 were primarily due to the hiring
of additional research and development personnel, permanent and sub-contracted,
primarily to add computing platform options and functional enhancements for the
Company's products. Included in research and development expenses are costs
associated with the development of new products and the costs of enhancing and
maintaining existing products.
Software development expenditures of $287,000 and $180,000 were capitalized
for the three months ended July 31, 1997 and 1996, respectively. The amounts
represent approximately 9% and 6% of total research and development expenditures
during such periods. The absolute dollar and percentage increases were due to an
increase in the amount of software development costs eligible for capitalization
during the quarter ended July 31, 1997. In accordance with SFAS No. 86, the
amount of research and development expenditures capitalized in a given time
period depends upon the amount of development work performed subsequent to the
establishment of technological feasibility for a product. Accordingly, amounts
capitalized may vary from period to period.
Selling and Marketing Expenses. Selling and marketing expenses represented 32%
- ------------------------------
and 33% of total revenues for the three and nine months ended July 31, 1997,
respectively, as compared with 32% and 35% for the same periods of fiscal 1996.
The decrease in sales and marketing expenses as a percentage of total revenues
during the nine months ended July 31, 1997 was due to a higher level of sales
activities, offset by a relatively slight increase in selling and marketing
expenses during the period. Selling and marketing expenses were $3,483,000 and
$10,094,000 for the three and nine months ended July 31, 1997, respectively,
compared with $3,408,000 and $9,751,000 for the same periods of the previous
year. The increases in the absolute dollar amount of selling and marketing
expenses for the three and nine months ended July 31, 1997, compared with the
same periods in fiscal 1996, were primarily due to an overall increase in
headcount and related travel expenses during the first and third quarter of
fiscal 1997.
General and Administrative Expenses. General and administrative expenses
- -----------------------------------
include the costs of the finance, accounting, legal and administrative
operations of the Company and represented 9% and 9% of total revenues for the
three and nine month periods ended July 31, 1997, respectively, as compared with
9% and 11% for the same periods of the previous fiscal year. The proportional
decrease in general and administrative expenses as a percentage of total
revenues for the nine months ended July 31, 1997 was due to a higher level of
revenues and overall reduction in expenses. General and administrative expenses
were $1,006,000 and $2,809,000 for the three and nine months ended July 31,
1997, compared to $954,000 and $3,010,000 for the same periods in fiscal 1996.
The increase in absolute dollars for the three months ended July 31, 1997 was
primarily due to higher travel expenses during the recent quarter compared to
the same period of the previous year. The decrease in absolute dollars for the
nine months ended July 31, 1997 was primarily due to a decrease in legal
fees compared to the same period of the previous year, and the non-
recurring costs of the Company's move to its new facilities in the second
quarter of fiscal 1996.
Interest Income and Expense. Interest income was $34,000 and $98,000 for the
- ---------------------------
three and nine months ended July 31, 1997, respectively, compared to $93,000 and
$319,000 for the same periods in the previous fiscal year. Lower invested cash
balances and slightly lower interest rate levels accounted for the decrease in
interest income. Interest expense was $102,000 and
13
<PAGE>
$173,000 for the three and nine months ended July 31, 1997, respectively,
compared to $42,000 and $42,000 for the same periods in fiscal 1996. The
increase in interest expense was primarily due to higher outstanding short term
borrowings during the periods.
Provision for Income Taxes. The income tax provision for the nine months ended
- --------------------------
July 31, 1997 represents taxes on earnings of certain foreign subsidiaries,
which are profitable, and taxes paid in certain foreign jurisdictions. The
Company has established a valuation allowance against its deferred tax asset and
reviews this allowance on a periodic basis. At such time that the Company
believes that it is more likely than not that a portion of the deferred tax
asset will be realized, the valuation allowance will be reduced.
POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS. The Company's results of
- -------------------------------------------
operations historically have fluctuated on a quarterly basis due to numerous
factors. These factors may include: the relatively high average selling price
of the Company's products; a relatively small number of transactions; the size
and timing of new orders; market acceptance of the Company's products;
introduction of competitive product offerings and subsequent deferrals in sales
orders as competitive products are evaluated by prospective customers; the
timing of co-development projects with customers; expense levels; pricing
changes; gain or loss of significant customers or distributors; and the general
economic conditions in the Company's primary markets. Results have been
negatively affected as the semiconductor industry slowed its expansion and will
continue to be negatively impacted if the slowdown continues, or if the
healthcare products and process industries, which have not yet adopted computer
automated manufacturing on a wide scale, do not develop into a strong market for
the Company's FlowStream product line, or if the Company is unsuccessful in
managing systems integration projects profitably. Any unfavorable change in
these or other factors could have a material adverse effect on the Company's
operating results for a particular quarter. The operating results in any
quarter are not necessarily indicative of results for future financial periods.
LIQUIDITY AND CAPITAL RESOURCES. As of July 31, 1997, the Company had
- --------------------------------
$5,474,000 in cash and cash equivalents, as compared with $9,094,000 in cash and
cash equivalents and short term investments at October 31, 1996. The Company
used $3,451,000 for operating activities during the nine months ended July 31,
1997, compared with $1,939,000 used for operating activities in the same period
of the previous fiscal year. Net cash used for operating activities for the
nine months ended July 31, 1997 primarily resulted from the net loss from the
period and an increase in accounts receivable related to the longer collection
cycles for certain systems integration projects, offset by an increase in
deferred revenue, other liabilities and accrued expenses.
Net cash used for investing activities was $437,000 during the first nine
months of fiscal 1997, as compared with $2,165,000 of net cash used for
investing activities for the same period in fiscal 1996. The $437,000 net cash
used for investing activities during the nine months ended July 31, 1997
represented capital expenditures and capitalized software development costs of
$912,000 and $525,000, respectively, offset by sales of short-term investments
of $1,000,000.
Net cash provided by financing activities was $1,656,000 during the first
nine months of fiscal 1997, which represented proceeds from borrowings on the
new revolving line of credit of $3,051,000, proceeds from issuance of common
stock of $397,000 less debt repayments of $1,792,000.
14
<PAGE>
Under the asset purchase agreement to purchase the Taiwan operations of
Systematic Designs International, Inc., the Company may be required to make
additional annual performance-based payments (in cash or stock) over a two year
period ending on July 8, 1998. Such performance-based payments will be based
upon a specified percentage, ranging from 17.5% to 50.0%, of certain revenues,
as defined in the purchase agreement.
In April 1997, the Company entered into a revolving line of credit
agreement (the "Line of Credit Agreement") under which it can borrow up to
$5,000,000, based on eligible accounts receivable. The revolving line of credit
is secured by substantially all of the Company's assets, bears interest at the
bank's prime rate per annum (8.5% at July 31, 1997) and expires on March 15,
1998. At July 31, 1997, $3,051,000 was outstanding under the revolving line of
credit. The Line of Credit Agreement requires the Company to maintain certain
financial covenants. At July 31, 1997, the Company was not in compliance with
certain of these financial covenants. Following the end of the quarter, the
financial covenants were retroactively modified by the bank and the Company was
in compliance with all financial covenants, as modified. In connection with
this line of credit, the Company granted the bank warrants to purchase 70,000
shares of the Company's Common Stock at an exercise price of $3.98 per share.
Such warrants are fully exercisable and expire in April 2002. The warrant
holder has certain registration rights with respect to the underlying Common
Stock.
Under the asset purchase agreement to purchase certain tangible and
intangible assets from FAST Associates, Pte. Ltd., the Company may be required
to make additional annual performance-based payments (in cash or stock) over a
three year period ending on August 1, 2000. Such performance-based payments
will be based upon specified percentages of certain systems integration and
related services net operating margin, and certain net product license and
maintenance revenues, as defined in the purchase agreement.
In August 1997, the Company entered into 8% Convertible Preferred Stock
Subscription Agreements with three private institutional investors (collectively
the "Purchasers'), pursuant to which the Company sold to the Purchasers on
August 19, 1997 an aggregate of 3,000 newly issued shares of Series A Preferred
Stock of the Company at a price of $1,000 per share and an aggregate gross
proceeds to the Company of $3,000,000, before deducting expenses. See Note 6 of
Notes to Condensed Consolidated Financial Statements for a description of the
conversion rights of the holders. The Preferred Stock has the right to
cumulative dividends at 8% per annum through conversion. The Preferred Stock
cannot be converted for six months following the closing and will automatically
convert, if not earlier converted by the holders, no later than 24 months
following the closing. The holders of Series A Preferred Stock have certain
registration rights with respect to the underlying Common Stock.
Management believes the existing cash and cash equivalents including cash
raised from the Preferred Stock Subscription, combined with its borrowing
capacity and cash generated from operations will be sufficient to meet the
Company's working capital and capital expenditure requirements for the next
twelve months.
15
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
-----------------------------------------------------------
Not applicable
16
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
None
Item 2. Changes in Securities
---------------------
In August 1997, the Company entered into 8% Convertible Preferred
Stock Subscription Agreements with three private institutional
investors (collectively the "Purchasers'), pursuant to which the
Company sold to the Purchasers on August 19, 1997 (the "Closing Date")
an aggregate of 3,000 newly issued shares of Series A Preferred Stock
of the Company (the "Preferred Shares") at a price of $1,000 per
share. Each share of Preferred Stock is convertible, without the
payment of any further consideration, into shares of Common Stock of
the Company, as follows:
A. Six months after the Closing Date, provided that the closing bid
price of the Common Stock of the Company as reported on the Nasdaq
National Stock Market ("Nasdaq") on the date of conversion (the
"Closing Bid Price") is $5.00 or greater, each Purchaser may
convert each of its Preferred Shares into a number of shares of
Common Stock of the Company equal to (a) $1,000 divided by (b) the
average closing bid price of the Common Stock of the Company as
reported on Nasdaq for the five consecutive trading days prior to
the date of conversion, discounted by 15%, but in any case no less
than $1.95 and no greater than (i) the difference between the
Closing Bid Price and $1.95, plus (ii) the Closing Bid Price;
provided, however, that the Company shall not be obligated, at any
time prior to nine months after the Closing Date, to convert, in
the aggregate, more than 25% of the total Preferred Shares.
B. Nine months after the Closing Date, provided that the Closing Bid
Price is $5.00 or greater, each Purchaser may convert each of its
Preferred Shares into a number of shares of Common Stock of the
Company equal to (a) $1,000 divided by (b) the average closing bid
price of the Common Stock of the Company as reported on Nasdaq for
the five consecutive trading days prior to the date of conversion,
discounted by 17%, but in any case no less than $1.95 and no
greater than (i) the difference between the Closing Bid Price and
$1.95 plus (ii) the Closing Bid Price; provided, however, that the
Company shall not be obligated, at any time prior to one year after
the Closing Date, to convert, in the aggregate, more than 50% of
the total Preferred Shares.
C. One year after the Closing Date, each Purchaser may convert each
of its Preferred Shares into a number of shares of Common Stock of
the Company equal to (a) $1,000 divided by (b) the average closing
bid price of the Common Stock of the Company as reported on Nasdaq
for the five consecutive trading days prior to the date of
conversion, discounted by 18%; but in any case no less than $1.95
and no greater than (i) the difference between the Closing Bid
Price and $1.95 plus (ii) the Closing Bid Price.
17
<PAGE>
The Preferred Stock has the right to cumulative dividends at 8% per
annum through conversion. The Preferred Stock cannot be converted for
six months following the Closing Date and will automatically convert,
if not earlier converted by the holders, no later than 24 months
following the Closing Date. The Preferred Stock has no voting rights.
The holders of Series A Preferred Stock have certain registration
rights with respect to the underlying Common Stock.
Each of the Purchasers are accredited investors who purchased such
shares for investment purposes, as transactions not involving a public
offering pursuant to the exemption from registration provisions of
Section 4(2) of the Securities Act of 1933, as amended, and Rule 506
of Regulation D thereunder.
Item 3. Defaults upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 5. Other Information
------------------
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a). List of Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Title
------ -------------
<S> <C>
2.1 Asset Purchase Agreement for the acquisition of FAST Associates,
Pte. Dated July 31, 1997. /12/
3.1 Certificate of Incorporation of the Company. /3/
3.2 By-Laws of the Company. /3/
3.3 Certificate of Designation of Series A Convertible Preferred
Stock.
4.1 Form of Warrant Agreement dated April 1, 1997 between the Company
and Imperial Bank.
4.2 Form of 8% Convertible Preferred Stock Subscription Agreement for
the Sale of an Aggregate $3 million worth of Preferred Shares to
certain private institutional investors dated August 19, 1997.
4.3 Form of Warrant Agreement dated August 19, 1997 between the
Company and certain placement agents.
</TABLE>
18
<PAGE>
<TABLE>
<S> <C>
10.1 Lease agreement dated November 28, 1988, among the Company and
John Arrillaga, Trustee of the John Arrillaga Separate Trust and
Richard T. Peery, Trustee of the Richard T. Peery Separate
Property Trust./ 1/
10.2 Master Lease Agreement, dated December 2, 1988, between the
Company and General Electric Capital Corporation, with
schedules./ 1/
10.3 Letter Agreement, dated July 22, 1987, with respect to the
employment of Thomas Tomasetti. /1,6/
10.4 Lease Agreement paperwork for the 630 Clyde Court facility, dated
March 6, 1990, among the Company and Santa Clara Property
Associates. /2/
10.5 Agreement between the Company and Honeywell, Inc., Industrial
Automation and Control, dated April 1, 1993. /3,5/
10.6 Form of Director and Officer Indemnity Agreement. /4/
10.7 Amended and Restated 1983 Stock Option Plan. /6,7/
10.8 Forms of Stock Option Agreement used in conjunction with the 1983
Stock Option Plan. /6,7/
10.9 1990 Outside Director's Stock Option Plan. /6,7/
10.10 Forms of Outside Directors Stock Option Agreement used in
conjunction with the 1990 Outside Director's Stock Option Plan.
/6,7/
10.11 Lease agreement for the Company's principal facility, dated
August 2, 1995, among the Company and The Prudential Insurance
Company of America. /7/
10.12 Letter Agreement, dated August 5, 1994, with respect to the
employment of Edward Norton. /6,7/
10.13 Letter Agreement, dated September 28, 1994, with respect to the
employment of Richard Van Hoesen. /6,7/
10.14 Letter Agreement, dated July 12, 1996 , with respect to the
resignation of Thomas Tomasetti. /6.,8/
10.15 Letter Agreement dated June 3, 1996, with respect to the
employment of Laurence R. Hootnick. /6,8/
10.16 Asset Purchase Agreement for the acquisition of the Taiwan
operations of Systematic Designs International, Inc. dated
July 2, 1996. /10/
</TABLE>
19
<PAGE>
<TABLE>
<S> <C>
10.17 Letter Agreement dated August 6, 1996, with respect to the
employment of Wynn Bowman./6,9/
10.18 Letter Agreement dated August 6, 1996, with respect to the
employment of Michael J. Field./6,9/
10.19 Change of Control Agreement with Laurence R. Hootnick./11,6/
10.20 Change of Control Agreement with Jonathan J. Golovin./11,6/
10.21 Form of Change of Control Agreement for Executive Officers./11,6/
10.22 1996 Stock Option Plan and Forms of Stock Option Agreement./11,6/
10.23 Security and Loan Agreement dated April 1, 1997 between the
Company and Imperial Bank.
27 Financial Data Schedule (available in EDGAR format only).
</TABLE>
/1/ Incorporated by reference from exhibits of the same number in
Registrant's Registration Statement on Form S-1 (File No. 33-27947),
effective May 9, 1989.
/2/ Incorporated by reference from exhibit 10.3 to Registrant's Annual
Report on Form 10-K for the Year ended October 31, 1990.
/3/ Incorporated by reference from exhibits 3.1, 3.2 and 10.19,
respectively, to Registrant's Quarterly Report on Form 10-Q for the
Quarter ended April 30, 1993.
/4/ Incorporated by reference from exhibit 10.6 to Registrant's
Quarterly Report on Form 10-Q for the Quarter ended July 31, 1994.
/5/ The Securities and Exchange Commission has granted confidential
treatment for portions of this document.
/6/ Compensatory or employment arrangement.
/7/ Incorporated by reference from exhibits of the same number to
Registrant's Annual Report on Form 10-K for the Year ended
October 31, 1995.
/8/ Incorporated by reference from exhibits of the same number in
Registrant's Quarterly Report on Form 10-Q for the Quarter ended
July 31, 1996.
/9/ Incorporated by reference from exhibits of the same number to
Registrant's Annual Report on Form 10-K for the Year ended
October 31, 1996.
/10/ Incorporated by reference from exhibit 2.1 to Registrant's Report
on Form 8-K filed on July 26, 1996 for the acquisition of the Taiwan
operations of Systematic Designs International, Inc.
20
<PAGE>
/11/ Incorporated by reference from exhibits of the same number in
Registrant's Quarterly Report on Form 10-Q for the Quarter ended
January 31, 1997.
/12/ Incorporated by reference from exhibit 2.1 to Registrant's Report
on Form 8-K/A filed on September 9, 1997 for the acquisition of FAST
Associates, Pte. Ltd. This agreement is subject to a confidential
treatment report which has been filed by the Registrant.
(b). Reports on Form 8-K
Report filed on August 15, 1997 on Acquisition of FAST
Associates, Pte. Ltd.
Report filed on September 9, 1997 on Acquisition of FAST
Associates, Pte. Ltd.
21
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, a duly authorized officer and the chief financial officer of the
registrant.
CONSILIUM, INC.
-------------------------------------
(Registrant)
Date September 12, 1997 by: /s/ Clifton Wong
----------------------------- ----------------------------------
Clifton Wong
Vice President, Finance and
Chief Financial Officer
22
<PAGE>
Exhibit 3.3
CERTIFICATE OF DESIGNATION
of
SERIES A CONVERTIBLE PREFERRED STOCK
of
CONSILIUM, INC.
(Pursuant to Section 151 of the Delaware General Corporation Law)
Consilium, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "Corporation"), hereby certifies
that the following resolutions were adopted by the Board of Directors of the
Corporation as required by Section 151 of the General Corporation Law by
unanimous written consent of the Board of Directors dated August 15, 1997:
RESOLVED, that pursuant to the authority granted to and vested in the Board
of Directors of this Corporation (the "Board") in accordance with the provisions
of the Certificate of Incorporation, the Board hereby creates a series of
preferred stock of the Corporation, par value $.01 per share (the "Preferred
Stock"), and hereby states the designation and number of shares, and fixes the
relative rights, preferences, and limitations thereof as follows:
Section 1. Designation and Amount. The shares of such series shall be
----------------------
designated as "Series A Convertible Preferred Stock" (the "Series A Preferred
Stock") and the number of shares constituting the Series A Preferred Stock shall
be three thousand (3,000). Such number of shares may be increased or decreased
by resolution of the Board; provided, however, no decrease shall reduce the
number of shares of Series A Preferred Stock to a number less than the number of
shares then outstanding plus the number of shares reserved for issuance upon the
exercise of outstanding options, rights, or warrants for, or upon the conversion
of any outstanding securities issued by the Corporation convertible into Series
A Preferred Stock.
Section 2. Dividends.
---------
a. Subject to the limitations set forth below, the holders of
the Series A Preferred Stock shall be entitled to receive, from funds of the
Corporation legally available therefor pursuant to the General Corporation Law
of the State of Delaware (the "Legally Available Funds"), a cumulative dividend
of $80 per annum on each share of Series A Preferred Stock ratably for the
period that such share of the Series A Preferred Stock is outstanding (the
"Period").
b. Subject to the limitations set forth herein and by applicable
state law, dividends on each share of Series A Preferred Stock shall be due and
payable on or before the fifth business day following the Conversion Date (as
defined below) with respect to such share
<PAGE>
or the Anniversary Date (as defined below), whichever is applicable, and shall
paid to the holder of record of such share as such holder appears on the stock
register of the Corporation on the Conversion Date or the Anniversary Date,
whichever is applicable.
c. Dividends on shares of Series A Preferred Stock shall be
fully cumulative and shall accrue without regard to whether or not such
dividends have been declared and whether or not there are any Legally Available
Funds available for the payment of dividends.
d. Dividends on the shares of Series A Preferred Stock shall be
payable in cash, common stock of the Corporation, $0.01 par value per share (the
"Common Stock"), or any combination thereof, as determined by the Board. Any
Common Stock so issued as a dividend shall be deemed to have a value equal to
the average of the closing bid prices of the Common Stock as reported on the
National Association of Securities Dealers Automated Quotation System ("NASDAQ")
(or on the principal national securities exchange on which the Common Stock is
admitted to trading or listed or, if not listed or admitted to trading on NASDAQ
or a national securities exchange, as reported by the National Quotation Bureau,
Inc. or other similar organization ("Other Exchanges") ) for the five (5)
trading days immediately prior to the date such dividend is payable.
e. No share of Series A Preferred Stock shall be entitled to
participate with respect to any dividend (in any form) declared, accrued, or
paid on any other class, or series thereof, of the capital stock of the
Corporation.
Section 3. Conversion.
----------
a. The holder of any share or shares of Series A Preferred Stock
shall have the right, without the payment of any additional consideration, to
convert any share of Series A Preferred Stock held by such holder into that
number of fully paid and non-assessable shares of Common Stock as is determined
by dividing $1,000 by the Conversion Price using the following Conversion
Schedule:
Six (6) months from the Closing Date holders shall have the right
to convert twenty five (25%) percent of their total outstanding position, only
if the Closing Price reported on NASDAQ or Other Exchanges is five ($5.00)
dollars or above, at a fifteen (15%) percent discount from the Average Bid Price
of the five (5) trading days prior to the Conversion Date; provided, however,
the Company shall not be obligated to convert an aggregate number of Shares of
Series A Preferred Stock greater than twenty-five (25%) percent of the number of
designated shares of Series A Preferred Stock.
Nine (9) months from the Closing Date holders shall have the right
to convert an additional twenty-five (25%) percent of its total outstanding
position, only if the Closing Price reported on NASDAQ or Other Exchange is five
($5.00) dollars or above, at a seventeen (17%) percent discount from the Average
Bid Price of the five (5) trading days prior to the Conversion Date; provided,
however, the Company shall not be obligated to convert an aggregate number of
2
<PAGE>
Shares of Series A Preferred Stock greater than fifty (50%) percent of the
number of designated shares of Series A Preferred Stock.
One (1) year from the Closing Date the holder shall have right to
convert any unconverted Preferred Stock at an eighteen (18%) percent discount
from the five (5) day Average Bid Price prior to the Conversion Date.
As used herein, the Conversion Price shall mean a price equal to
the above discount from the Average Bid Price (as hereinafter defined),
provided, however, in no event shall the Conversion Price be less than $1.95
(the "Floor Price") or more than the difference between the Closing Bid Price
and the Floor Price added to the Closing Bid Price (the "Ceiling Price"). The
formula for such calculation shall be stated as follows:
Ceiling Price = Closing Bid Price - $1.95 + Closing Bid Price
The holder shall exercise its right to convert the Preferred Stock
by telecopying an executed and completed Notice of Conversion (Exhibit A annexed
hereto) to the Company and delivering the original Notice of Conversion and the
certificate representing the Preferred Stock to the Company by express courier.
Each business date on which a Notice of Conversion is telecopied to and received
by the Company in accordance with the provisions hereof shall be deemed a
conversion date. The Company will use its best efforts to transmit the
certificates representing shares of Common Stock issuable upon conversion of any
Preferred Stock (together with the certificates representing the Preferred Stock
not so converted) to the holder via express courier, by electronic transfer or
otherwise within three business days after the conversion date if the Company
has received the original Notice of Conversion and Preferred Stock certificate
being so converted by such date. In addition to any other remedies which may be
available to the holder, in the event that the Company fails to use its best
efforts to effect delivery of such shares of Common Stock within such three
business day period, the holder will be entitled to revoke the relevant Notice
of Conversion by delivering a notice to such effect to the Company whereupon the
Company and the holder shall each be restored to their respective positions
immediately prior to delivery of such Notice of Conversion.
In the event that the Common Stock issuable upon conversion of the
Preferred Stock is not delivered, as a direct result of the negligence or action
or inaction of the Company only, within ten (10) business days of receipt by the
Company of a valid Conversion Notice and the Preferred Stock to be converted
(such date of receipt referred to as the "Conversion Date"), and (i) the closing
price of the Common Stock of the Company on the Nasdaq National Market on the
date the Common Stock issuable upon conversion of the Preferred Stock is
delivered to the Purchaser (the "Delivery Date") is lower than the Conversion
Price, or (ii) the Delivery Date is not within fifteen (15) business days of the
Conversion Date, the Company shall pay to the Purchaser, in immediately
available funds, upon demand, as liquidated damages for such failure and not as
a penalty, for each $100,000 of Preferred Stock sought to be converted, $500 for
each of the first ten (10) days and $1,000 per day thereafter that the
Conversion Shares are not delivered, which liquidated damages shall run from the
tenth or fifteenth business day after the Conversion Date. Any and all payments
required pursuant to this paragraph shall be payable
3
<PAGE>
only in shares of Common Stock and not in cash. The number of such shares shall
be determined by dividing the total sum payable by the Conversion Price.
b. Any shares of Series A Preferred Stock outstanding on the second
anniversary of the date on which the Series A Preferred Stock was first issued
by the Corporation (the "Anniversary Date") automatically shall be converted
into Common Stock on the same basis as the holder of such shares of Series A
Preferred Stock may convert such shares pursuant to Section 3a above. The
Corporation shall not be obligated to deliver the certificate(s) evidencing such
shares of Common Stock unless the certificate(s) evidencing the Series A
Preferred Stock so converted are delivered to the Corporation.
c. (1) If the Corporation shall, at any time or from time to time,
declare and pay to the holders of Common Stock a dividend in shares of Common
Stock, or the Corporation shall subdivide the outstanding shares of Common Stock
into a greater number of shares of Common Stock, or combine the outstanding
shares of Common Stock into a smaller number of shares of Common Stock then the
Floor Price, each shall be adjusted so that the same shall equal the price
determined by multiplying the Floor Price by a fraction, the numerator of which
shall be the number of shares of Common Stock issued and outstanding immediately
prior to the happening of such even and the denominator of which shall be the
number of shares of Common Stock issued and outstanding immediately after the
happening of such event. Such adjustment shall become effective immediately
after the opening of business of the day following the record date, in the event
of a stock dividend or the day upon which the subdivision or combination becomes
effective, as the case may be.
(2) If the Corporation shall, at any time or from time to time
after the date on which the Series A Preferred Stock was first issued by the
Corporation, make or issue, or fix a record date for the determination of
holders of shares of Common Stock entitled to receive a dividend or other
distribution payable in securities of the Corporation, including a distribution
of evidence of indebtedness of the Corporation, other than shares of Common
Stock, then, and in each such event, provision shall be made by the Corporation
so that the holders of shares of Series A Preferred Stock shall receive upon
conversion thereof, in a addition to the number of shares of Common Stock
receivable thereupon, the amount of those securities of the Corporation that
such holders would have received had their shares of Series A Preferred Stock
been converted on the date of such even and had they thereafter, during the
period from the date of such event to and including the date of conversion,
retained such securities receivable by them as aforesaid during such period.
(3) If the shares of Common Stock issuable upon the conversion
of shares of Series A Preferred Stock shall be changed into the same or any
different number of shares of any class or any series of any class of capital
stock, whether by capital reorganization, reclassification or otherwise (other
than a subdivision or combination of shares or a stock dividend provided for
above, or a reorganization, merger, consolidation or sale of assets provided for
in section 7 hereof), then, and in each such event, the holder of shares of
Series A Preferred Stock shall have the right thereafter to convert such shares
of Series A Preferred Stock into the kind and amount of shares of stock and
other securities and property receivable upon such
4
<PAGE>
reorganization, reclassification or other change by holders of the number of
shares of Common Stock into which such shares of Series A Preferred Stock might
have been converted immediately prior to such reorganization, reclassification
or change.
e. At all times, the Corporation shall reserve and keep
available out of its authorized but unissued Common Stock solely for issuance
upon the conversion of shares of the Series A Preferred Stock as herein
provided, such number of shares of Common Stock as, from time to time, shall be
issuable upon the conversion of all the shares of the Series A Preferred Stock
at the time outstanding.
f. No fractional shares of Common Stock shall be issued. In lieu
of the issuance of any fractional share of Common Stock that would, but for the
foregoing, be issued to a holder of Series A Preferred Stock on the conversion
thereof, the Corporation shall pay to such holder, in cash, the value of such
fractional share which value shall be based upon the closing sale price of the
Common Stock as reported on NASDAQ (or on the principal national securities
exchange on which the Common Stock is admitted to trading or listed or, if not
listed or admitted to trading on NASDAQ or a national securities exchange, as
reported by the National Quotation Bureau, Inc. or other similar organization)
for the trading day immediately preceding the effective date of such conversion.
Section 4. Voting Rights. Except as required by applicable law, the
-------------
holders of shares of Series A Preferred Stock shall not have the right or power
to vote on any question or in any proceeding or to be represented at, or to
receive notice of, any meeting of the Corporation's stockholders.
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
-----------------
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized by unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
Certificate of Incorporation, or in any other Certificate of Designation
creating a series of Preferred Stock or any similar stock or as otherwise
required by law.
Section 6. Liquidation, Dissolution or Winding Up. In the event of any
--------------------------------------
liquidation, dissolution, or winding up of the Corporation, the holders of
shares of the Series A Preferred Stock are entitled to receive out of assets of
the Corporation available for distribution to stockholders, after satisfaction
of indebtedness, but before any distribution of assets is made to holders of
Common Stock or to holders of any other class of stock of the Corporation
ranking junior to the Series A Preferred Stock upon liquidation, liquidating
distributions on each share of Series A Preferred Stock held by such holder in
the per share amount of $1,000 plus all dividends accrued and unpaid, if any, on
each such share pursuant to Section 2 hereof (the "Liquidation Preference").
If, upon any liquidation, dissolution or winding up of the Corporation, the
amounts payable with respect too the Series A Preferred Stock or any other
shares of stock of the Corporation ranking as to any such distribution on a
parity with the Series A Preferred Stock are not paid in full, the holders of
the Series A Preferred and of such other shares will share ratably
5
<PAGE>
in any such distribution of assets of the Corporation in proportion to the full
distributable amounts to which they are entitled. After payment of the full
amount of the liquidating distribution to which they are entitled, the holders
of shares of the Series A Preferred Stock will not be entitled to any further
participation in any distribution of assets by the Corporation.
Section 7. Consolidation, Merger, etc. If the Corporation shall enter
--------------------------
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then, in any such case, the
Corporation, as a condition precedent to such transaction, shall cause effective
provisions to be made so that each holder of Series A Preferred Stock then
outstanding shall have the right, by converting such share(s) of Series A
Preferred Stock to acquire the kind and amount of shares of stock, securities,
cash and/or other property receivable upon such consolidation, merger,
combination or other transaction by a holder of the number of shares of Common
stock which might have been acquired upon conversion of such Series A Preferred
Stock immediately prior to such consolidation, merger, combination, or other
transaction.
Section 8. No Redemption. The shares of Series A Preferred Stock shall
-------------
not be redeemable.
Section 9. Amendment. This Certificate of Designation shall not be
---------
amended in any manner which should materially alter or change the powers,
preferences, or special rights of the Series A Preferred Stock so as to affect
them adversely without the affirmative vote of the holders of at least two-
thirds of the outstanding shares of Series A Preferred Stock, voting together as
a single class.
RESOLVED, FURTHER, that the appropriate officers of the Corporation hereby
are authorized to execute and acknowledge a certificate setting forth these
resolution and to cause such certificate to be filed and recorded, all in
accordance with the requirements of Section 151 of the General Corporation Law
of the State of Delaware.
IN WITNESS WHEREOF, this Certificate of Designation is executed on behalf
of the Corporation by its President and Chief Executive Officer this ___ day of
August, 1997.
-------------------------------------
Laurence R. Hootnick
President and Chief Executive Officer
6
<PAGE>
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the
8% Convertible Preferred Stock)
The undersigned hereby irrevocably elects to convert the Preferred Stock
Certificate No. _________ into Shares of Common Stock of CONSILIUM, INC. (the
"Company") according to the conditions hereof, as of the date written below.
The undersigned represents and warrants that:
(i) that all offers and sales by the undersigned of the shares of
Common Stock issuable to the undersigned upon conversion of the
Preferred Stock shall be made pursuant to an exemption from
registration under the Act, or pursuant to registration of the
Common Stock under the Securities Act of 1933, as amended (the
"Act"), subject to any restrictions on sale or transfer set forth
in the Subscription Agreement between the Company and the original
holder of the Preferred Stock submitted herewith for conversion;
(ii) the undersigned has not engaged in any transaction or series of
transaction that is a part of or a plan or scheme to evade the
registration requirements of the Act; and
(iii) upon conversion pursuant to this Notice of Conversion, the
undersigned will not own or deemed to beneficially own (within the
meaning of the 1934 Act) 4.9% or more of the then issued and
outstanding shares of the Company.
-------------------------------- ----------------------------------
Date of Conversion Applicable Conversion Price
-------------------------------- ----------------------------------
Number of Common Shares upon $ Amount of Conversion
Conversion
-------------------------------- ----------------------------------
Signature Name
Address: Delivery of Shares to:
* This original Preferred Stock and Notice of Conversion must be received by
the Company by the third business day following the Date of Conversion.
<PAGE>
EXHIBIT 4.1
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE STOCK
Corporation: Consilium, Inc., a Delaware Corporation
Number of Shares: 70,000
Class of Stock: Common
Initial Exercise Price: $3.98 per share
Issue Date: April 1, 1997
Expiration Date: April 1, 2002 (Subject to Article 4.1)
THIS WARRANT CERTIFIES THAT, in consideration of the payment of $1.00 and for
other good and valuable consideration, IMPERIAL BANCORP ("Holder") is entitled
to purchase the number of fully paid and nonassessable shares of the class of
securities (the "Shares") of the corporation (the "Company") at the initial
exercise price per Share (the "Warrant Price") all as set forth above and as
adjusted pursuant to Article 2 of this Warrant, subject to the provisions and
upon the terms and conditions set forth of this Warrant.
ARTICLE 1. EXERCISE
--------
1.1 Method of Exercise. Holder may exercise this Warrant by delivering this
------------------
Warrant and a duly executed Notice of Exercise in substantially the form
attached as Appendix 1 to the principal office of the Company. Unless Holder is
exercising the conversion right set forth in Section 1.2, Holder shall also
deliver to the Company a check for the aggregate Warrant Price for the Shares
being purchased.
1.2 Conversion Right. In lieu of exercising this Warrant as specified in
----------------
Section 1.1, Holder may from time to time convert this Warrant, in whole or in
part, into a number of Shares determined by dividing (a) the aggregate fair
market value of the Shares or other securities otherwise issuable upon exercise
of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair
market value of one Share. The fair market value of the Shares shall be
determined pursuant to Section 1.5.
1.5 Fair Market Value. If the Shares are traded regularly in a public
-----------------
market, the fair market value of the Shares shall be the closing price of the
Shares (or the closing price of the Company's stock into which the Shares are
convertible) reported for the business day immediately before Holder delivers
its Notice of Exercise to the Company. If the Shares are not regularly traded
in a public market, the
<PAGE>
Board of Directors of the Company shall determine fair market value in its
reasonable good faith judgment. The foregoing notwithstanding, if Holder advises
the Board of Directors in writing that Holder disagrees with such determination,
then the Company and Holder shall promptly agree upon a reputable investment
banking firm to undertake such valuation. If the valuation of such investment
banking firm is greater than that determined by the Board of Directors, then all
fees and expenses of such investment banking firm shall be paid by the Company.
In all other circumstances, such fees and expenses shall be paid by Holder.
1.6 Delivery of Certificate and New Warrant. Promptly after Holder exercises
---------------------------------------
or converts this Warrant, the Company shall deliver to Holder certificates for
the Shares acquired and, if this Warrant has not been fully exercised or
converted and has not expired, a new Warrant representing the Shares not so
acquired.
1.7 Replacement of Warrants. On receipt of evidence reasonably satisfactory
-----------------------
to the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of loss, theft or destruction, on delivery of an indemnity
agreement reasonably satisfactory in form and amount to the Company or, in the
case of mutilation, or surrender and cancellation of this Warrant, the Company
at its expense shall execute and deliver, in lieu of this Warrant, a new warrant
of like tenor.
1.8 Repurchase on Sale, Merger, or Consolidation of the Company.
-----------------------------------------------------------
1.8.1. "Acquisition". For the purpose of this Warrant, "Acquisition"
-----------
means any sale, license, or other disposition of all or substantially all of the
assets (including intellectual property) of the Company, or any reorganization,
consolidation, or merger of the Company where the holders of the Company's
securities before the transaction beneficially own less than 50% of the
outstanding voting securities of the surviving entity after the transaction.
1.8.2. Assumption of Warrant. If upon the closing of any Acquisition the
---------------------
successor entity assumes the obligations of this Warrant, then this Warrant
shall be exercisable for the same securities, cash, and property as would be
payable for the Shares issuable upon exercise of the unexercised portion of this
Warrant as if such Shares were outstanding on the record date for the
Acquisition and subsequent closing. The Warrant Price shall be adjusted
accordingly. The Company shall use reasonable efforts to cause the surviving
corporation to assume the obligations of this Warrant.
1.8.3. Nonassumption. If upon the closing of any Acquisition the
-------------
successor entity does not assume the obligations of this Warrant and Holder has
not otherwise exercised this Warrant in full, then the unexercised portion of
this Warrant shall be deemed to have been automatically converted pursuant to
Section 1.2 and thereafter Holder shall participate in the Acquisition on the
same terms as other holders of the same class of securities of the Company.
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
-------------------------
2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a dividend
----------------------------
on its common stock payable in common stock, or other securities, subdivides the
outstanding common stock into a
2
<PAGE>
greater amount of common stock, then upon exercise of this Warrant, for each
Share acquired, Holder shall receive, without cost to Holder, the total number
and kind of securities to which Holder would have been entitled had Holder owned
the Shares of record as of the date the dividend or subdivision occurred.
2.2 Reclassification, Exchange or Substitution. Upon any reclassification,
------------------------------------------
exchange, substitution, or other event that results in a change of the number
and/or class of the securities issuable upon exercise or conversion of this
Warrant, Holder shall be entitled to receive, upon exercise or conversion of
this Warrant, the number and kind of securities and property that Holder would
have received for the Shares if this Warrant had been exercised immediately
before such reclassification, exchange, substitution, or other event. Such an
event shall include any automatic conversion of the outstanding or issuable
securities of the Company of the same class or series as the Shares to common
stock pursuant to the terms of the Company's Articles of Incorporation upon the
closing of a registered public offering of the Company's common stock. The
Company or its successor shall promptly issue to Holder a new Warrant for such
new securities or other property. The new Warrant shall provide for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Article 2 including, without limitation, adjustments to the
Warrant Price and to the number of securities or property issuable upon exercise
of the new Warrant. The provisions of this Section 2.2 shall similarly apply to
successive reclassifications, exchanges, substitutions, or other events.
2.3 Adjustments for Combinations, Etc. If the outstanding Shares are
---------------------------------
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Warrant Price shall be proportionately increased.
2.4 Adjustments for Diluting Issuances. The Warrant Price and the number of
----------------------------------
Shares issuable upon exercise of this Warrant shall be subject to adjustment,
from time to time, in the manner set forth on Exhibit A, if attached, in the
event of Diluting Issuances (as defined on Exhibit A).
2.5 No Impairment. The Company shall not, by amendment of its Articles of
-------------
Incorporation or through a reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed under this Warrant by the Company, but shall at all times
in good faith assist in carrying out all the provisions of this Article 2 and in
taking all such action as may be necessary or appropriate to protect Holder's
rights under this Article against impairment. If the Company takes any action
affecting the Shares or its common stock other than as described above that
adversely affects Holder's rights under this Warrant, the Warrant Price shall be
adjusted downward and the number of Shares issuable upon exercise of this
Warrant shall be adjusted upward in such a manner that the aggregate Warrant
Price of this Warrant is unchanged.
2.6 Certificate as to Adjustments. Upon each adjustment of the Warrant
-----------------------------
Price, the Company at its expense shall promptly compute such adjustment, and
furnish Holder with a certificate of its Chief Financial Officer setting forth
such adjustment and the facts upon which such adjustment is based. The Company
shall, upon written request, furnish Holder a certificate setting forth the
Warrant Price in effect upon the date thereof and the series of adjustments
leading to such Warrant Price.
3
<PAGE>
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
--------------------------------------------
3.1 Representations and Warranties. The Company hereby represents and
------------------------------
warrants to the Holder that all securities, if any, issuable upon conversion of
the Shares, shall, upon issuance, be duly authorized, validly issued, fully paid
and nonassessable, and free of any liens and encumbrances except for
restrictions on transfer provided for herein or under applicable federal and
state securities laws.
3.2 Notice of Certain Events. If the Company proposes at any time (a) to
------------------------
declare any dividend or distribution upon its common stock, whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to offer for subscription pro rata to the holders of any class or series of
its stock any additional shares of stock of any class or series or other rights;
(c) to effect any reclassification or recapitalization of common stock; (d) to
merge or consolidate with or into any other corporation, or sell, lease,
license, or convey all or substantially all of its assets, or to liquidate,
dissolve or wind up; or (e) offer holders of registration rights the opportunity
to participate in an underwritten public offering of the company's securities
for cash, then, in connection with each such event, the Company shall give
Holder (1) at least 20 days prior written notice of the date on which a record
will be taken for such dividend, distribution, or subscription rights (and
specifying the date on which the holders of common stock will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (c) and (d) above; (2) in the case of the matters referred to in
(c) and (d) above at least 20 days prior written notice of the date when the
same will take place (and specifying the date on which the holders of common
stock will be entitled to exchange their common stock for securities or other
property deliverable upon the occurrence of such event); and (3) in the case of
the matter referred to in (e) above, the same notice as is given to the holders
of such registration rights.
3.3 Information Rights. So long as the Holder holds this Warrant ad/or any
------------------
of the Shares, the Company shall deliver to the Holder (a) promptly after
mailing, copies of all communiques to the shareholders of the Company, (b)
within ninety (90) days after the end of each fiscal year of the Company, the
annual audited financial statements of the Company certified by independent
public accountants of recognized standing and (c) within forty-five (45) days
after the end of each of the first three quarters of each fiscal year, the
Company's quarterly, unaudited financial statements.
3.4 Registration Under Securities Act of 1933, as amended. The Company agrees
-----------------------------------------------------
that the Shares shall be subject to piggy back rights.
ARTICLE 4. MISCELLANEOUS.
-------------
4.1 Term: Notice of Expiration. This Warrant is exercisable, in whole or in
--------------------------
part, at any time and from time to time on or before the Expiration Date set
forth above. The Company shall give Holder written notice of Holder's right to
exercise this Warrant in the form attached as Appendix 2 not more than 90 days
and not less than 30 days before the Expiration Date. If the notice is not so
given, the Expiration Date shall automatically be extended until 30 days after
the date the Company delivers the notice to Holder.
4
<PAGE>
4.2 Legends. This Warrant and the Shares (and the securities issuable,
-------
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS
COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
4.3 Compliance with Securities Laws on Transfer. This Warrant and the Shares
-------------------------------------------
issuable upon exercise this Warrant (and the securities issuable, directly or
indirectly, upon conversion of the Shares, if any) may not be transferred or
assigned in whole or in part without compliance with applicable federal and
state securities laws by the transferor and the transferee (including, without
limitation, the delivery of investment representation letters and legal opinions
reasonably satisfactory to the Company). The Company shall not require Holder
to provide an opinion of counsel if the transfer is to an affiliate of Holder or
if there is no material question as to the availability of current information
as referenced in Rule 144(c), Holder represents that it has complied with Rule
144(d) and (e) in reasonable detail, the selling broker represents that it has
complied with Rule 144(f), and the Company is provided with a copy of Holder's
notice of proposed sale.
4.4 Transfer Procedure. Subject to the provisions of Section 4.2, Holder may
------------------
transfer all or part of this Warrant or the Shares issuable upon exercise of
this Warrant (or the securities issuable, directly or indirectly, upon
conversion of the Shares, if any) by giving the Company notice of the portion of
the Warrant being transferred setting forth the name, address and taxpayer
identification number of the transferee and surrendering this Warrant to the
Company for reissuance to the transferee(s) (and Holder, if applicable). Unless
the Company is filing financial information with the SEC pursuant to the
Securities Exchange Act of 1934, the Company shall have the right to refuse to
transfer any portion of this Warrant to any person who directly competes with
the Company.
4.5 Notices. All notices and other communications from the Company to the
-------
Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such Holder from time
to time.
4.6 Waiver. This Warrant and any term hereof may be changed, waived,
------
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
4.7 Attorneys' Fees. In the event of any dispute between the parties
---------------
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
5
<PAGE>
4.8 Governing Law. This Warrant shall be governed by and construed in
-------------
accordance with the
laws of the State of California, without giving effect to its principles
regarding conflicts of law.
Consilium, Inc.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
6
<PAGE>
APPENDIX 1
NOTICE OF EXERCISE
------------------
1. The undersigned hereby elects to purchase shares of the
------------------
Common Stock of Consilium, Inc. pursuant to the terms of the attached Warrant,
and tenders herewith payment of the purchase price of such shares in full.
1. The undersigned hereby elects to convert the attached Warrant into
Shares/cash [strike one] in the manner specified in the Warrant. This
conversion is exercised with respect to of the Shares covered
--------------------
by the Warrant.
[Strike paragraph that does not apply.]
2. Please issue a certificate or certificates representing said shares in the
name of the undersigned or in such other name as is specified below:
Mr. Robert Franko
Chief Financial Officer
Controllers Department
Imperial Bancorp
P.O. Box 92991
Los Angeles, CA 90009
3. The undersigned represents it is acquiring the shares solely for its own
account and not as a nominee for any other party and not with a view toward the
resale or distribution thereof except in compliance with applicable securities
laws.
IMPERIAL BANCORP
- ---------------------------------------------
(Signature)
- ----------------------
(Date)
7
<PAGE>
APPENDIX 2
NOTICE THAT WARRANT IS ABOUT TO EXPIRE
--------------------------------------
,
------------------ -----
Mr. Robert Franko
Chief Financial Officer
Controllers Department
Imperial Bancorp
P.O. Box 92991
Los Angeles, CA 90009
Dear Bob:
This is to advise you that the Warrant issued to you described below will
expire on April 1, 2002.
Issuer:
Issue Date: April 1, 1997
Class of Security Issuable: Common
Exercise Price Per Share: $3.98
Number of Shares Issuable: 70,000
Procedure for Exercise:
Please contact [name of contact person at (phone number)] with any
questions you may have concerning exercise of the Warrant. This is your
only notice of pending expiration.
Consilium, Inc.
By:
-------------------------------
Its:
------------------------------
8
<PAGE>
EXHIBIT A
---------
IMPERIAL BANK
ANTIDILUTION AGREEMENT
----------------------
This Antidilution Agreement is entered into as of April 1, 1997, by and
between Imperial Bank ("Purchaser") and Consilium, Inc. ("the Company").
RECITALS
--------
A. Concurrently with the execution of this Antidilution Agreement, the
Purchaser is purchasing from the Company a Warrant to Purchase Stock (the
"Warrant") pursuant to which Purchaser has the right to acquire from the Company
the Shares (as defined in the Warrant).
B. By this Antidilution Agreement, the Purchaser and the Company desire to
set forth the adjustment in the number of Shares issuable upon exercise of the
Warrant as a result of a Diluting Issuance
C. Capitalized terms used herein shall have the same meaning as set forth
in the Warrant.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions hereinafter set forth, the parties hereto mutually agree as follows:
1. Definitions. As used in this Antidilution
Agreement, the following terms have the following respective meanings:
(a) "Option" means any right, option or warrant to subscribe for, purchase
or otherwise acquire common stock or Convertible Securities.
(b) "Convertible Securities" means any evidences of indebtedness, shares of
stock or other securities directly or indirectly convertible into or
exchangeable for common stock.
(c) "Issue" means to grant, issue, sell, assume or fix a record date for
determining persons entitled to receive any security (including Options),
whichever of the foregoing is the first to occur.
(d) "Diluting Issuance" shall have the meaning set forth in Section 3.1
(e) "Additional Common Shares" means all common stock (including reissued
shares) Issued (or deemed to be issued pursuant to Section 2) after the date of
the Warrant. Additional Common Shares does not include, however, any common
stock or options Issued in a transaction described in Sections 2.1 and 2.2 of
the Warrant; any common stock Issued upon conversion of preferred stock
outstanding on the date of the Warrant; the Shares; or common stock and/or
options
9
<PAGE>
Issued as incentive or in a nonfinancing transaction to employees, officers,
directors or consultants to the Company; or Employee Stock Purchase Plans.
(f) The shares of common stock ultimately Issuable upon exercise of an
Option (including the shares of common stock ultimately Issuable upon conversion
or exercise of a Convertible Security Issuable pursuant to an Option) are deemed
to be Issued when the Option is Issued. The shares of common stock ultimately
Issuable upon conversion or exercise of a Convertible Security (other than a
Convertible Security Issued pursuant to an Option) shall be deemed Issued upon
Issuance of the Convertible Security.
2. Deemed Issuance of Additional Common Shares. The shares of common
-------------------------------------------
stock ultimately Issuable upon exercise of an Option (including the shares of
common stock ultimately Issuable upon conversion or exercise of a Convertible
Security Issuable pursuant to an Option) are deemed to be Issued when the Option
is Issued. The shares of common stock ultimately Issuable upon conversion or
exercise of a Convertible Security (other than a Convertible Security Issued
pursuant to an Option) shall be deemed Issued upon Issuance of the Convertible
Security. The maximum amount of common stock Issuable is determined without
regard to any future adjustments permitted under the instrument creating the
Options or Convertible Securities.
3. Adjustment of Warrant Price for Diluting Issuances.
--------------------------------------------------
3.1 Weighted Average Adjustment. If the Company issues Additional
---------------------------
Common Shares after the date of the Warrant and the consideration per Additional
Common Share (determined pursuant to Section 9) is less than the Warrant Price
in effect immediately before such Issue ("Diluting Issuance"), the Warrant Price
in effect immediately before such Issue shall be reduced, concurrently with such
Issue, to a price (calculated to the nearest hundredth of a cent) determined by
multiplying the Warrant Price by a fraction:
(a) the numerator of which is the amount of common stock outstanding
immediately before such Issue plus the amount of common stock that the aggregate
consideration received by Company for the Additional Common Shares would
purchase at the Warrant Price in effect immediately before such Issue, and
(b) the denominator of which is the amount of common stock outstanding
immediately before such Issue plus the number of such Additional Shares.
3.2 Adjustment of Number of Shares. Upon each adjustment of the
------------------------------
Warrant Price, the number of Shares Issuable upon exercise of the Warrant shall
be increased to equal the quotient obtained by dividing (a) the product
resulting from multiplying (i) the number of Shares Issuable upon exercise of
the Warrant and (ii) the Warrant Price, in each case as in effect immediately
before such adjustment, by (b) the adjusted Warrant Price.
3.3 Securities Deemed Outstanding. For the purpose of this Section
-----------------------------
3, all securities Issuable upon exercise of any outstanding Convertible
Securities or Options, Warrants, or other rights to acquire securities of the
Company shall be deemed to be outstanding.
10
<PAGE>
4. No Adjustment for Issuances Following Deemed Issuances. No adjustment to
------------------------------------------------------
the Warrant Price shall be made upon the exercise of Options or conversion of
Convertible Securities.
5. Adjustment Following Changes in Terms of Options or Convertible
---------------------------------------------------------------
Securities. If the consideration payable to, or the amount of common stock
- ----------
Issuable by, the Company increases or decreases, respectively, pursuant to the
terms of any outstanding Options or Convertible Securities, the Warrant Price
shall be recomputed to reflect such increase or decrease. The recomputation
shall be made as of the time of the Issuance of the Options or Convertible
Securities. Any changes in the Warrant Price that occurred after such Issuance
because other Additional Common Shares were Issued or deemed Issued shall also
be recomputed.
6. Recomputation Upon Expiration of Options or Convertible Securities. The
------------------------------------------------------------------
Warrant Price computed upon the original Issue of any Options or Convertible
Securities, and any subsequent adjustments based thereon, shall be recomputed
when any Options or rights of conversion under Convertible Securities expire
without having been exercised. In the case of Convertible Securities or Options
for common stock, the Warrant Price shall be recomputed as if the only
Additional Common Shares Issued were the shares of common stock actually Issued
upon the exercise of such securities, if any, and as if the only consideration
received therefor was the consideration actually received upon the Issue,
exercise or conversion of the Options or Convertible Securities. In the case of
Options for Convertible Securities, the Warrant Price shall be recomputed as if
the only Convertible Securities Issued were the Convertible Securities actually
Issued upon the exercise thereof, if any, and as if the only consideration
received therefor was the consideration actually received by the Company
(determined pursuant to Section 9), if any, upon the Issue of the Options for
the Convertible Securities.
7. Limit on Readjustments. No readjustment of the Warrant Price pursuant
----------------------
to Sections 5 or 6 shall increase the Warrant Price more than the amount of any
decrease made in respect of the Issue of any Options or Convertible Securities.
In no event shall the number of shares issued under this Warrant exceed 100,000,
nor shall the price be less than $3.00 per share.
8. 30 Day Options. In the case of any Options that expire by their terms
--------------
not more than 30 days after the date of Issue thereof, no adjustment of the
Warrant Price shall be made until the expiration or exercise of all such
Options.
9. Computation of Consideration. The consideration received by the
----------------------------
Company for the Issue of any Additional Common Shares shall be computed as
follows:
(a) Cash shall be valued at the amount of cash received by the Corporation,
----
excluding amounts paid or payable for accrued interest or accrued dividends.
(b) Property. Property, other than cash, shall be computed at the fair
--------
market value thereof at the time of the Issue as determined in good faith by the
Board of Directors of the Company.
(c) Mixed Consideration. The consideration for Additional Common Shares
-------------------
Issued together with other property of the Company for consideration that covers
both shall be determined in good faith by the Board of Directors.
11
<PAGE>
(d) Options and Convertible Securities. The consideration per Additional
----------------------------------
Common Share for Options and Convertible Securities shall be determined by
dividing:
(i) the total amount, if any, received or receivable by the Company for
the Issue of the Options or Convertible Securities, plus the minimum amount of
additional consideration (as set forth in the instruments relating thereto,
without regard to any provision contained therein for a subsequent adjustment of
such consideration) payable to the Company upon exercise of the Options or
conversion of the Convertible Securities, by
(ii) the maximum amount of common stock (as set forth in the instruments
relating thereto, without regard to any provision contained therein for a
subsequent adjustment of such number) ultimately Issuable upon the exercise of
such Options or the conversion of such Convertible Securities.
10. General.
-------
10.1 Governing Law. This Antidilution Agreement shall be governed in
-------------
all respects by the laws of the State of California as such laws are applied to
agreements between California residents entered into and to be performed
entirely within California.
10.2 Successors and Assigns. Except as otherwise expressly provided
----------------------
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
10.3 Entire Agreement. Except as set forth below, this Antidilution
----------------
Agreement and the other documents delivered pursuant hereto constitute the full
and entire understanding and agreement between the parties with regard to the
subjects hereof and thereof.
10.4 Notices, etc. All notices and other communications required or
------------
permitted hereunder shall be in writing and shall be mailed by first class mail,
postage prepaid, certified or registered mail, return receipt requested,
addressed (a) if to Purchaser at Purchaser's address as set forth below, or at
such other address as Purchaser shall have furnished to the Company in writing,
or (b) if to the Company, at the Company's address set forth below, or at such
other address as the Company shall have furnished to the Purchaser in writing.
10.5 Severability. In case any provision of this Antidilution
------------
Agreement shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions of this Antidilution Agreement shall
not in any way be affected or impaired thereby.
10.6 Titles and Subtitles. The titles of the sections and subsections
--------------------
of this Agreement are for convenience of reference only and are not to be
considered in construing this Antidilution Agreement.
10.7 Counterparts. This Antidilution Agreement may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
12
<PAGE>
PURCHASER ISSUER
IMPERIAL BANK Consilium, Inc.
By: By:
-------------------------------- -----------------------------
Name: Name:
Title: Title:
Address: Address:
13
<PAGE>
Exhibit 4.2
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"). THIS SUBSCRIPTION AGREEMENT SHALL NOT
CONSTI-TUTE AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE
SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE
UNLAWFUL. THE SECURITIES ARE "RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED
EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM.
8% CONVERTIBLE PREFERRED STOCK
SUBSCRIPTION AGREEMENT
CONSILIUM, INC.
THIS AGREEMENT is executed in reliance upon the transaction exemption
afforded by Regulation D as promulgated by the Securities and Exchange
Commission ("SEC"), under the Securities Act of 1933, as amended (the "Act").
This Agreement has been executed by the undersigned in connection with
the private placement of the Convertible Preferred Stock Series A (hereinafter
referred to as the "Preferred Stock") of CONSILIUM, INC. (NASDAQ National Market
System symbol "CSIM"), located at 485 Clyde Avenue, Mountain View, CA 94043, a
corporation organized under the laws of Delaware, USA (hereinafter referred to
as the "Company"). The terms on which the Preferred Stock may be converted into
Common Stock and the other terms of the Preferred Stock are set forth in the
Certificate of Designation of the Convertible Preferred Stock Series A (Exhibit
A annexed hereto). This Subscription and, if accepted by the Company, the offer
and sale of the Preferred Stock and the underlying Common Stock (collectively
the "Securities"), are being made in reliance upon the provisions of Regulation
D under the Act.
The undersigned, ______________________________, located at
____________ __________________________, a corporation (limited liability
company) organized under the laws of _______ (hereinafter referred to as
"Subscriber"), hereby represents and warrants to, and agrees with the Company as
follows:
1. Agreement to Subscribe; Purchase Price.
--------------------------------------
(a) The Company will sell and the Subscriber will buy ___________
(___) shares of Preferred Stock for an aggregate purchase price of
____________________ ($_______) (U.S.) Dollars based on U.S.$1,000 per share.
The shares shall pay an eight (8%) percent cumulative dividend, payable in cash
or Common Stock (based on the average closing bid price for the five (5) trading
days prior to the record date) at the discretion of the Company at the time of
each conversion.
<PAGE>
(b) Form of Payment. Subscriber shall pay the Purchase Price by
---------------
delivering good funds in United States Dollars by wire transfer to Sheldon E.
Goldstein, P.C., Escrow Agent, in accordance with a separate Escrow Agreement
(Attachment I), against delivery of the original Preferred Stock.
(c) Wire Instructions. Wire instructions for Sheldon E. Goldstein,
-----------------
P.C. are as follows:
Chase Manhattan Bank, N.A.
ABA No. 021000021
For the Account of:
United States Trust Company of New York
Account No. 920-1-073195
In favor of:
Sheldon E. Goldstein, P.C. Attorney Trust Account
Account No. 59-02347
2. Representation and Warranties of the Subscriber. Subscriber
-----------------------------------------------
acknowledges, represents, warrants and agrees as follows:
(a) Organization and Authorization. Subscriber is duly incorporated
------------------------------
or organized and validly existing in the country of its incorporation or
organization and has all requisite power and authority to purchase and hold the
Securities. The decision to invest and the execution and delivery of this
Agreement by the Subscriber, the performance by the Subscriber of its
obligations hereunder and the consummation by the Subscriber of the transactions
contemplated hereby have been duly authorized and requires no other proceedings
on the part of the Subscriber. The Undersigned's signatory has all right, power
and authority to execute and deliver this Agreement on behalf of the Subscriber.
This Agreement has been duly executed and delivered by the Subscriber and,
assuming the execution and delivery hereof and acceptance thereof by the
Company, will constitute the legal, valid and binding obligations of the
Subscriber, enforceable against the Subscriber in accordance with its terms and
the Subscriber can afford the complete loss of Subscriber's investment.
(b) Evaluation of Risks. Subscriber has such knowledge and experience
-------------------
in financial and business matters as to be capable of evaluating the merits and
risks of, and bearing the economic risks entailed by, an investment in the
Company and of protecting its interests in connection with this transaction. It
recognizes that its investment in the Company involves a high degree of risk and
the Subscriber can afford the complete loss of Subscriber's investment.
(c) Independent Counsel. Subscriber acknowledges that it has been
-------------------
advised to consult with its own attorney regarding legal matters concerning the
Company and to consult with its tax advisor regarding the tax consequences of
acquiring the Securities.
2
<PAGE>
(d) Disclosure Documentation. Subscriber has received and reviewed
------------------------
copies of the Company's reports filed under the Securities Exchange Act of 1934,
as amended (the "1934 Act"), including its December 31, 1996 Form 10-K and its
January 31, 1997 and April 30, 1997 Form 10-Q's (collectively, the "SEC
Filings"). Subscriber acknowledges that the Company has offered to make
available any additional public information that the Subscriber may reasonably
request, including technical information, and other material information about
the Company and Subscriber has been offered Company's full and unconditional
cooperation in making such information available to Subscriber and acknowledges
that the Company has recommended that the Subscriber request and review such
information prior to making an investment decision. No oral or written
representations have been made, or oral or written information furnished to the
undersigned or its advisors, if any, in connection with the offering of the
Securities which were or are in any way inconsistent with the SEC Filings.
(e) Opportunity to Ask Questions. Subscriber has had a reasonable
----------------------------
opportunity to ask questions of and receive answers from the Company concerning
the Company and the offering, and all such questions, if any, have been answered
to the full satisfaction of Subscriber.
(f) SEC Filings Constitute Sole Representations. Except as set forth
-------------------------------------------
in the SEC Filings, no representations or warranties have been made to
Subscriber by (a) the Company or any agent, employee or affiliate of the Company
or (b) any other person, and in entering into this transaction Subscriber is not
relying upon any information, other than that contained in the SEC Filings and
the results of independent investigation by Subscriber.
(g) Subscriber is Accredited Investor. The undersigned is an
---------------------------------
"Accredited Investor" as defined below who represents and warrants it is
included within one or more of the following categories of "Accredited
Investors."
(i) Any bank as defined in Section 3(a)(2) of the Act, or any
savings and loan associated or other institution as defined in Section
3(a)(5)A of the Act whether acting in it individual or fiduciary capacity;
any broker or dealer registered pursuant to Section 15 of the 1934 Act; any
insurance company as defined in Section 2(13) of the Act; any investment
company registered under the Investment Company Act of 1940 or a business
development company as defined in Section 2(a)(48) of that Act; any Small
Business Investment Company licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small Business Act of
1958; any plan established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or its political
subdivision, for the benefits of its employees if such plan has total
assets in excess of $5,000,000; and employee benefit plan within the
meaning of Title I of the Employee Retirement Income Security Act of 1974
if the investment decision is made by a plan fiduciary, as defined in
Section 3(21) of such Act, which is either a bank, savings and loan
association, insurance company, or registered investment advisor, or if the
employee benefit plan has total assets in excess of $5,000,000 or, if a
self-directed plan, with investment decisions made solely by persons that
are accredited investors;
3
<PAGE>
(ii) Any private business development company as defined in
Section 202(a)(22) of the Investment Advisers Act of 1940;
(iii) Any organization described in Section 501(c)(3) of the
Internal Revenue Code, corporation, Massachusetts or similar business
trust, or partnership, not formed for the specific purpose of acquiring the
securities offered, with total assets in excess of $5,000,000;
(iv) Any director, executive officer, or general partner of
the issuer of the securities being offered or sold, or any director,
executive officer, or general partner of a general partner of that issuer;
(v) Any natural person whose individual net worth, or joint
net worth with that person's spouse, at the time of his purchase exceeds
$1,000,000;
(vi) Any natural person who had an individual income in excess
of $200,000 in each of the two (2) most recent years or joint income with
that person's spouse in excess of $300,000 in each of those years and has a
reasonable expectation of reaching that same income level in the current
year;
(vii) Any trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities offered, whose
purchase is directed by a sophisticated person as described in Section
230.506(b)(2)(ii);
(viii) Any entity in which all of the equity owners are
accredited investors; and
(ix) Any self-directed employee benefit plan with investment
decisions made solely by persons that are accredited investors within the
meaning of Rule 501 of Regulation D promulgated under the Act.
(h) No Registration, Review or Approval. Subscriber acknowledges and
-----------------------------------
understands that the limited private offering and sale of Securities pursuant to
this Agreement has not been reviewed or approved by the SEC or by any state
securities commission, authority or agency, and is not registered under the Act
or under the securities or "blue sky" laws, rules or regulations of any state.
Subscriber acknowledges, understands and agrees that the Securities are being
offered and sold hereunder pursuant to (i) a private placement exemption to the
registration provisions of the Act pursuant to Section 3(b) or Section 4(2) of
such Act and Regulation D promulgated under such Act, and (ii) a similar
exemption to the registration provisions of applicable state securities laws.
Subscriber understands that the Company is relying upon the truth and accuracy
of the representations, warranties, agreements, acknowledgments and
understandings of Subscriber set forth herein in order to determine the
applicability of such exemptions and the suitability of Subscriber to acquire
the Securities.
4
<PAGE>
(i) Investment Intent. Without limiting its ability to resell the
-----------------
Securities pursuant to an effective registration statement, Subscriber is
acquiring the Securities solely for its own account and not with a view to the
distribution, assignment or resale to others. Subscriber understands and agrees
that it may bear the economic risk of its investment in the Securities for an
indefinite period of time.
(j) Transfer Restrictions/Conversion Holding Period/Conversion Price.
----------------------------------------------------------------
Refer to Certificate of Designation (Exhibit A).
(k) Registration Rights. The parties have entered into a Registration
-------------------
Rights Agreement (Attachment II).
(l) No Advertisements. The Subscriber is not subscribing for
-----------------
Securities as a result of or subsequent to any advertisement, article, notice or
other communication published in any newspaper, magazine, or similar media or
broadcast over television or radio, or presented at any seminar or meeting.
(m) Capitalization. The authorized capital stock of the Company
--------------
consists of 25,000,000 Shares of Common Stock, $.01 par value, of which
8,018,291 shares of Common Stock have been issued as of April 30, 1997, and
4,000,000 Shares of Preferred Stock, $.01 par value, of which 3,000 Shares have
been designated Series A Non-Voting Convertible Preferred Stock, $.01 par value.
All issued and outstanding shares of Common Stock have been duly authorized and
validly issued and are fully paid and nonassessable. The Company has reserved
from its authorized but unissued shares of Common Stock a sufficient number of
shares of Common Stock to permit the conversion in full of the outstanding
Shares. As of the Closing Date, the Company has reserved sufficient shares of
Common Stock for issuance upon exercise of the Shares which are convertible, at
Purchaser's option, at the Conversion Price, as per the Certificate of
Designation.
3. Representations and Warranties of the Company. For so long as any
---------------------------------------------
Securities held by Subscriber remains outstanding, the Company acknowledges,
represents, warrants and agrees as follows:
(a) Organization and Authorization. The Company is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own and operate
its properties and assets and to carry on its business as currently conducted.
The Company is not in default or violation of any material term or provision of
its Certificate of Incorporation, as amended, or By-laws nor will the
consummation of the transactions contemplated by this Agreement cause any such
default or violation. The Company has all requisite corporate power and
authority to enter into this Agreement, to sell the Securities hereunder and to
carry out and perform its obligations under the terms of this Agreement. This
Agreement is a valid and binding obligation of the Company, enforceable in
accordance with its terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
effecting the rights of creditors generally and available equitable remedies.
5
<PAGE>
(b) Reporting Issuer Company Status. The Company is in full
-------------------------------
compliance, to the extent applicable, with all reporting obligations under
either Section 12(b), 12(g) or 15(d) of the 1934, and shall use its best efforts
to maintain such status on a timely basis. The Company has registered its
Common Stock pursuant to Section 12 of the 1934 Act and the Common Stock trades
on the NASDAQ National Market System.
The Company has filed all material required to be filed pursuant to
all reporting obligations, under either Section 13(a) or 15(d) of the Exchange
Act for a period of at least twelve (12) months immediately preceding the offer
to sell the Shares (or for such shorter period that the Company has been
required to file such material).
(c) Further Representations and Warranties of the Company. For so
-----------------------------------------------------
long as any Securities held by the Subscriber remain outstanding, the Company
acknowledges, represents, warrants and agrees as follows:
(i) It will reserve from its authorized but unissued shares of
Common Stock a sufficient number of shares of Common Stock to permit the
conversion in full of the outstanding Securities.
(ii) It will use its best efforts to maintain the listing of its
Common Stock on the NASDAQ National Market System.
(iii) It will permit the Subscriber to exercise its right to
convert the Preferred Stock by telecopying an executed and completed Notice
of Conversion (Exhibit B annexed hereto) to the Company and delivering the
original Notice of Conversion and the certificate representing the
Preferred Stock to the Company by express courier. Each business date on
which a Notice of Conversion is telecopied to and received by the Company
in accordance with the provisions hereof shall be deemed a conversion date.
The Company will use its best efforts to transmit the certificates
representing shares of Common Stock issuable upon conversion of any
Preferred Stock (together with the certificates representing the Preferred
Stock not so converted) to the Subscriber via express courier, by
electronic transfer or otherwise within three business days after the
conversion date if the Company has received the original Notice of
Conversion and Preferred Stock certificate being so converted by such date.
In addition to any other remedies which may be available to the Subscriber,
in the event that the Company fails to use its best efforts to effect
delivery of such shares of Common Stock within such three business day
period, the Subscriber will be entitled to revoke the relevant Notice of
Conversion by delivering a notice to such effect to the Company whereupon
the Company and the Subscriber shall each be restored to their respective
positions immediately prior to delivery of such Notice of Conversion. The
Notice of Conversion and Preferred Stock representing the portion of the
Shares converted shall be delivered as follows:
6
<PAGE>
To the Company:
Consilium, Inc.
485 Clyde Avenue
Mountain View, CA 94043
Attn: Michael Field, Esq.
Fax: (415) 691-6150
In the event that the Common Stock issuable upon conversion of the
Preferred Stock is not delivered, as a direct result of the negligence or action
or inaction of the Company only, within ten (10) business days of receipt by the
Company of a valid Conversion Notice and the Preferred Stock to be converted
(such date of receipt referred to as the "Conversion Date"), and (i) the closing
price of the Common Stock of the Company on the NASDAQ National Market on the
date the Common Stock issuable upon conversion of the Preferred Stock is
delivered to the Purchaser (the "Delivery Date") is lower than the Conversion
Price, or (ii) the Delivery Date is not within fifteen (15) business days of the
Conversion Date, the Company shall pay to the Purchaser, in immediately
available funds, upon demand, as liquidated damages for such failure and not as
a penalty, for each $100,000 of Preferred Stock sought to be converted, $500 for
each of the first ten (10) days and $1,000 per day thereafter that the
Conversion Shares are not delivered, which liquidated damages shall run from the
tenth of fifteenth business day after the Conversion Date. Any and all payments
required pursuant to this paragraph shall be payable only in shares of Common
Stock based on the average closing bid price for the five (5) trading days prior
to the Conversion Date and not in cash. The number of such shares shall be
determined by dividing the total sum payable by the Conversion Price.
(d) SEC Filings. None of the Company's filings with the Securities
-----------
and Exchange Commission since December 31, 1996 contains any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statement therein in light of the circumstances under
which they were made, not misleading. To the best of its knowledge, the Company
has since December 31, 1996 timely filed all requisite forms, reports and
exhibits thereto with the Securities and Exchange Commission, except for the
timely filing of Forms 3, 4 and 5 under Section 16 of the Securities and
Exchange Act.
(e) Full Disclosure. There is no fact known to the Company (other
---------------
than general economic conditions known to the public generally) that has not
been disclosed in writing to the Subscriber that (i) could reasonably be
expected to have a material adverse effect on the condition (financial or
otherwise) or in the earnings, business affairs, business prospects, properties
or assets of the Company, or (ii) could reasonably be expected to materially and
adversely affect the ability of the Company to perform its obligations pursuant
to this Agreement.
(f) Opinion of Counsel. The Company shall have their counsel, or the
------------------
Company's general counsel, as applicable, provide, at the Company's expense, an
opinion of counsel acceptable to the transfer agent (if required) upon
conversion of the Convertible Preferred Stock, upon receipt of Notice of
Conversion from each Subscriber.
7
<PAGE>
Subscriber shall, upon the Closing, receive an opinion letter from
counsel to the Company to the effect that:
(i) The Company is duly incorporated and validly existing and
in good standing under the laws and jurisdiction of its incorporation.
(ii) Except as set forth in the SEC Filings, to Counsels'
knowledge during the time he has served as counsel to the Company, without
an independent investigation, there is no litigation filed against the
Company currently pending.
(iii) Except as set forth in the SEC Filings and Annual Report,
to Counsels' knowledge, without an independent investigation, the Company
is not a party to or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality.
(iv) To Counsels' knowledge, without an independent
investigation, there is no litigation filed by the Company currently
pending.
(v) The Subscription Agreement, the issuance of the Preferred
Stock and the issuance of Common Stock, upon conversion of the Preferred
Stock, have been duly approved by all required corporate action and that
all such securities, upon delivery, in accordance with the terms of this
Agreement shall be validly issued and outstanding, fully paid and
nonassessable.
(vi) To Counsel's knowledge, without an independent
investigation, the execution and delivery of the Subscription Agreement,
the issuance of the Preferred Stock and the issuance of Common Stock upon
conversion of the Preferred Stock, do not and will not conflict with or
result in a material breach by the Company of any of the terms or
provisions of, or constitute a material default under the articles of
incorporation or by-laws of the Company, or any of the contracts filed as
Exhibits 10.1 through 10.22 to the Company's most recently filed Report on
Form 10-Q.
(g) That it will obtain for the Subscriber, at the Company's expense,
any and all opinions of counsel which may be reasonably required in order to
convert the Preferred Stock.
(h) Outstanding Debt or Equity Securities. Except as described in
-------------------------------------
the Company's SEC Filings for the 1991-1996 fiscal years, and in press releases
issued and Form 8-Ks filed by the Company since the end of the 1996 fiscal year,
and options and warrants to purchase Common Stock of the Company, there are no
other material outstanding debt or equity securities presently convertible into
shares of Common Stock. Except as described in the Company's SEC Filings, the
Company has no outstanding restricted shares of Common Stock, or
8
<PAGE>
shares of Common Stock sold under Regulation S or Regulation D under
the Act or outstanding under any other exemption from registration, which are
available for sale as unrestricted free trading stock.
(i) Rule 144 Reporting. With a view to making available the benefits
------------------
of certain rules and regulations of the SEC which may at any time permit the
sale of the Securities to the public without registration, the Company agrees to
use its best efforts to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Act, at all times after the
effective date on which the Company becomes subject to the reporting
requirements of the Act or the Exchange Act;
(b) use its best efforts to file with the SEC in a timely manner
all reports and other documents required of the Company under the Act and the
1934 Act;
(c) to furnish to Purchaser forthwith upon request a written
statement by the Company as to its compliance with the reporting requirements of
said Rule 144, and of the Act and the 1934 Act, a copy of the most recent annual
or quarterly report of the Company, and such other reports and documents of the
Company and other information in the possession of or reasonably obtainable by
the Company as Purchaser may reasonably request in availing itself of any rule
or regulation of the SEC allowing Purchaser to sell any such Securities without
registration.
(j) No Conflict. The execution and delivery of this Agreement do not,
-----------
and the consummation of the transactions contemplated hereby will not, conflict
with, or result in any violation of, or default (with or without notice or lapse
of time, or both), or give rise to a right of termination, cancellation or
acceleration of any obligation or to a loss of a material benefit, under, any
provision of the Articles of Incorporation, and any amendments thereto, Bylaws,
Stockholders Agreements and any amendments thereto of the Company or any
material mortgage, indenture, lease or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company, its properties or
assets.
(k) Use of Proceeds. The Company represents that the net proceeds
---------------
from this offer will be used for working capital.
(l) Dilution. The Company is aware and acknowledges that conversion
--------
of the Preferred Stock could cause dilution to existing shareholders and could
significantly increase the outstanding number of shares of Common Stock, up to a
maximum of 1,595,639 shares.
(m) Stock Issuance. The Preferred Stock which shall be issued at the
--------------
closing is properly issued under the Company's state of incorporation and all
issued and outstanding shares of Common Stock have been duly authorized and
validly issued and are fully paid and nonassessable.
9
<PAGE>
4. Representations and Warranties of the Company and Subscriber.
------------------------------------------------------------
Each of Subscriber and the Company represent to the other the following with
respect to itself:
(a) Subscription Agreement. The Subscription Agreement has been duly
----------------------
authorized, validly executed and delivered on behalf of the Company and
Subscriber and is a valid and binding agreement in accordance with its terms,
subject to general principles of equity and to bankruptcy or other laws
affecting the enforcement of creditors' rights generally.
(b) Approvals. Neither the Company nor Subscriber is aware of any
---------
authorization, approval or consent of any governmental body which is legally
required for the issuance and sale of the Securities.
(c) Indemnification. Each of the Company and the Subscriber agrees to
---------------
indemnify the other and to hold the other harmless from and against any and all
losses, damages, liabilities, costs and expenses (including reasonable
attorneys' fees) which the other may sustain or incur in connection with the
breach by the indemnifying party of any representation, warranty or covenant
made by it in this Agreement.
5. Restrictions on Conversion of Preferred Stock. The Subscriber or
---------------------------------------------
any subsequent holder of the Preferred Stock (the "Holder") shall be prohibited
from converting any portion of the Preferred Stock which would result in the
Subscriber or the Holder being deemed the beneficial owner, in accordance with
the provisions of Rule 13d-3 of the 1934 Act, as amended, of 4.99% or more of
the then issued and outstanding Common Stock of the Company, and notwithstanding
any other provisions in this Agreement, the Holder's Securities, when aggregated
with all securities issued and sold by the Company in connection herewith shall
in no event be convertible into more than 1,595,639 shares of Common Stock.
6. Registration or Exemption Requirements. Subscriber acknowledges
--------------------------------------
and understands that the Securities may not be resold or otherwise transferred
except in a transaction registered under the Act and any applicable state
securities laws or unless an exemption from such registration is available.
Subscriber understands that the Securities will be imprinted with a legend that
prohibits the transfer of the Securities unless (i) they are registered or such
registration is not required, and (ii) if the transfer is pursuant to an
exemption from registration other than Rule 144 under the Act and, if the
Company shall so request in writing, an opinion of counsel reasonably
satisfactory to the Company is obtained to the effect that the transaction is so
exempt.
7. Legend. The certificates representing the Securities shall be
------
subject to a legend restricting transfer under the Act, such legend to be
substantially as follows:
"THESE SECURITIES HAS BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). SUCH
SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT WHICH, EXCEPT IN THE
CASE
10
<PAGE>
OF AN EXEMPTION PURSUANT TO RULE 144 UNDER SAID ACT, IS CONFIRMED IN A
LEGAL OPINION SATISFACTORY TO THE COMPANY."
The Securities shall also include any legends required by any applicable state
securities laws.
The legend(s) shall be removed and the Company shall issue replacement
certificates without such legend to the holder of such certificates if such
holder provides to the Company an opinion of counsel reasonably acceptable to
the Company, to the effect that a public sale, transfer or assignment of such
Securities may be made without registration.
8. Stock Delivery Instructions. The Preferred Stock Certificate
---------------------------
shall be delivered to Subscriber on a delivery versus payment basis as set forth
in the Escrow Agreement.
9. Closing Date. The date of the issuance of the Preferred Stock
------------
(the "Closing Date") shall be mutually agreed upon as to time and place.
10. Conditions to the Company's Obligation to Sell. Subscriber
----------------------------------------------
understands that the Company's obligation to sell the Convertible Preferred
Stock are conditioned upon:
(a) The receipt and acceptance by the Company of this Subscription
Agreement for all of the Convertible Preferred Stock as evidenced by execution
of this Subscription Agreement by the President or any Vice President of the
Company; and
(b) Delivery into escrow by Subscriber of good cleared funds as
payment in full for the purchase of the Preferred Stock, and written
notification to the Company by the Escrow Agent of receipt of payment in full
for the Convertible Preferred Stock;
(c) All representations and warranties of the Subscriber shall remain
true and correct as of the Closing Date; and
(d) The Company receives a minimum investment of $2 million on the
sale of Preferred Stock.
11. Conditions to Subscriber's Obligation to Purchase. The Company
-------------------------------------------------
understands that Subscriber's obligation to purchase the Convertible Preferred
Stock is conditioned upon:
(a) Acceptance by Subscriber of a satisfactory Subscription
Agreement, including Exhibits and Attachments, for the sale of the Convertible
Preferred Stock;
(b) Delivery of the Convertible Preferred Stock;
(c) All representations and warranties of the Company shall remain
true and correct as of the Closing Date;
11
<PAGE>
(d) Receipt of opinion of counsel and filed Certificate of
Designation.
12. Miscellaneous.
-------------
(a) Governing Law/Jurisdiction. This Agreement will be construed and
--------------------------
enforced in accordance with and governed by the laws of the State of New York,
except for matters arising under the Act, without reference to principles of
conflicts of law. Each of the parties consents to the jurisdiction of the
federal courts whose districts encompass any part of the State of New York or
the state courts of the State of New York in connection with any dispute arising
under this Agreement and hereby waives, to the maximum extent permitted by law,
any objection, including any objection based on forum non conveniens, to the
----- --- ----------
bringing of any such proceeding in such jurisdictions. Each party hereby agrees
that if another party to this Agreement obtains a judgment against it in such a
proceeding, the party which obtained such judgment may enforce same by summary
judgment in the courts of any country having jurisdiction over the party against
whom such judgment was obtained, and each party hereby waives any defenses
available to it under local law and agrees to the enforcement of such a
judgment. Each party to this Agreement irrevocably consents to the service of
process in any such proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to such party at its address set forth herein.
Nothing herein shall affect the right of any party to serve process in any other
manner permitted by law.
(b) Confidentiality. If for any reason the transactions contemplated
---------------
by this Agreement are not consummated, each of the parties hereto shall keep
confidential any information obtained from any other party (except information
publicly available or in such party's domain prior to the date hereof, and
except as required by court order) and shall promptly return to the other
parties all schedules, documents, instruments, work papers or other written
information, without retaining copies thereof, previously furnished by it as a
result of this Agreement or in connection herewith.
(c) Facsimile/Counterparts/Entire Agreement. In lieu of the original,
---------------------------------------
a facsimile transmission or copy of the original shall be as effective and
enforceable as the original. This Agreement may be executed in counterparts
which shall be considered an original document and which together shall be
considered a complete document. This Agreement and Exhibits hereto constitute
the entire agreement between the Subscriber and the Company with respect to the
subject matter hereof. This Agreement may be amended only by a writing executed
by both of them.
(d) Severability. In the event that any provision of this Agreement
------------
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
(e) Fees. The Company acknowledges that the Purchasers shall have no
----
responsibility for the payment of any of the Company's fees in connection with
this offering.
12
<PAGE>
IN WITNESS WHEREOF, this Subscription Agreement was duly executed on
the date first written below.
PURCHASER:
--------------------------------------
By
------------------------------------
Officer:
Title:
Executed this ____ day of August, 1997
Agreed to and Accepted on
this ____ day of August 1997
CONSILIUM, INC.
By
--------------------------------
Title:
13
<PAGE>
FULL NAME AND ADDRESS OF SUBSCRIBER FOR REGISTRATION PURPOSES:
NAME:
ADDRESS:
TEL NO:
FAX NO:
CONTACT
NAME:
DELIVERY INSTRUCTIONS (IF DIFFERENT FROM REGISTRATION NAME):
NAME:
ADDRESS:
TEL NO:
FAX NO:
CONTACT
NAME:
SPECIAL
INSTRUCTIONS:
-----------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
14
<PAGE>
EXHIBIT A
CERTIFICATE OF DESIGNATION
of
SERIES A CONVERTIBLE PREFERRED STOCK
of
CONSILIUM, INC.
(Pursuant to Section 151 of the Delaware General Corporation Law)
CONSILIUM, INC., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), hereby
certifies that the following resolutions were adopted by the Board of Directors
of the Corporation as required by Section 151 of the General Corporation Law by
unanimous written consent of the Board of Directors dated August 15, 1997:
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of this Corporation (the "Board") in accordance with the
provisions of the Certificate of Incorporation, the Board hereby creates a
series of preferred stock of the Corporation, par value $.01 per share (the
"Preferred Stock"), and hereby states the designation and number of shares, and
fixes the relative rights, preferences, and limitations thereof as follows:
Section 1. Designation and Amount. The shares of such series shall
----------------------
be designated as "Series A Convertible Preferred Stock" (the "Series A Preferred
Stock") and the number of shares constituting the Series A Preferred Stock shall
be three thousand (3,000). Such number of shares may be increased or decreased
by resolution of the Board; provided, however, no decrease shall reduce the
number of shares of Series A Preferred Stock to a number less than the number of
shares then outstanding plus the number of shares reserved for issuance upon the
exercise of outstanding options, rights, or warrants for, or upon the conversion
of any outstanding securities issued by the Corporation convertible into Series
A Preferred Stock.
Section 2. Dividends.
---------
a. Subject to the limitations set forth below, the holders of the
Series A Preferred Stock shall be entitled to receive, from funds of the
Corporation legally available therefor pursuant to the General Corporation Law
of the State of Delaware (the "Legally Available Funds"), a cumulative dividend
of $80 per annum on each share of Series A Preferred Stock ratably for the
period that such share of the Series A Preferred Stock is outstanding (the
"Period").
<PAGE>
b. Subject to the limitations set forth herein and by applicable
state law, dividends on each share of Series A Preferred Stock shall be due and
payable on or before the fifth business day following the Conversion Date (as
defined below) with respect to such share or the Anniversary Date (as defined
below), whichever is applicable, and shall paid to the holder of record of such
share as such holder appears on the stock register of the Corporation on the
Conversion Date or the Anniversary Date, whichever is applicable.
c. Dividends on shares of Series A Preferred Stock shall be fully
cumulative and shall accrue without regard to whether or not such dividends have
been declared and whether or not there are any Legally Available Funds available
for the payment of dividends.
d. Dividends on the shares of Series A Preferred Stock shall be
payable in cash, common stock of the Corporation, $0.01 par value per share (the
"Common Stock"), or any combination thereof, as determined by the Board. Any
Common Stock so issued as a dividend shall be deemed to have a value equal to
the average of the closing bid prices of the Common Stock as reported on the
National Association of Securities Dealers Automated Quotation System ("NASDAQ")
(or on the principal national securities exchange on which the Common Stock is
admitted to trading or listed or, if not listed or admitted to trading on NASDAQ
or a national securities exchange, as reported by the National Quotation Bureau,
Inc. or other similar organization ("Other Exchanges") ) for the five (5)
trading days immediately prior to the date such dividend is payable.
e. No share of Series A Preferred Stock shall be entitled to
participate with respect to any dividend (in any form) declared, accrued, or
paid on any other class, or series thereof, of the capital stock of the
Corporation.
Section 3. Conversion.
----------
a. The holder of any share or shares of Series A Preferred Stock
shall have the right, without the payment of any additional consideration, to
convert any share of Series A Preferred Stock held by such holder into that
number of fully paid and non-assessable shares of Common Stock as is determined
by dividing $1,000 by the Conversion Price using the following Conversion
Schedule:
Six (6) months from the Closing Date holders shall have the right to
convert twenty five (25%) percent of their total outstanding position, only if
the Closing Price reported on NASDAQ or Other Exchanges is five ($5.00) dollars
or above, at a fifteen (15%) percent discount from the Average Bid Price of the
five (5) trading days prior to the Conversion Date; provided, however, the
Company shall not be obligated to convert an aggregate number of Shares of
Series A Preferred Stock greater than twenty-five (25%) percent of the number of
designated shares of Series A Preferred Stock.
Nine (9) months from the Closing Date holders shall have the right to
convert an additional twenty-five (25%) percent of its total outstanding
position, only if the Closing Price reported on NASDAQ or Other Exchange is five
($5.00) dollars or above, at a seventeen (17%)
2
<PAGE>
percent discount from the Average Bid Price of the five (5) trading days prior
to the Conversion Date; provided, however, the Company shall not be obligated to
convert an aggregate number of Shares of Series A Preferred Stock greater than
fifty (50%) percent of the number of designated shares of Series A Preferred
Stock.
One (1) year from the Closing Date the holder shall have right to
convert any unconverted Preferred Stock at an eighteen (18%) percent discount
from the five (5) day Average Bid Price prior to the Conversion Date.
As used herein, the Conversion Price shall mean a price equal to the
above discount from the Average Bid Price (as hereinafter defined), provided,
however, in no event shall the Conversion Price be less than $1.95 (the "Floor
Price") or more than the difference between the Closing Bid Price and the Floor
Price added to the Closing Bid Price (the "Ceiling Price"). The formula for
such calculation shall be stated as follows:
Ceiling Price = Closing Bid Price - $1.95 + Closing Bid Price
The holder shall exercise its right to convert the Preferred Stock by
telecopying an executed and completed Notice of Conversion (Exhibit A annexed
hereto) to the Company and delivering the original Notice of Conversion and the
certificate representing the Preferred Stock to the Company by express courier.
Each business date on which a Notice of Conversion is telecopied to and received
by the Company in accordance with the provisions hereof shall be deemed a
conversion date. The Company will use its best efforts to transmit the
certificates representing shares of Common Stock issuable upon conversion of any
Preferred Stock (together with the certificates representing the Preferred Stock
not so converted) to the holder via express courier, by electronic transfer or
otherwise within three business days after the conversion date if the Company
has received the original Notice of Conversion and Preferred Stock certificate
being so converted by such date. In addition to any other remedies which may be
available to the holder, in the event that the Company fails to use its best
efforts to effect delivery of such shares of Common Stock within such three
business day period, the holder will be entitled to revoke the relevant Notice
of Conversion by delivering a notice to such effect to the Company whereupon the
Company and the holder shall each be restored to their respective positions
immediately prior to delivery of such Notice of Conversion.
In the event that the Common Stock issuable upon conversion of the
Preferred Stock is not delivered, as a direct result of the negligence or action
or inaction of the Company only, within ten (10) business days of receipt by the
Company of a valid Conversion Notice and the Preferred Stock to be converted
(such date of receipt referred to as the "Conversion Date"), and (i) the closing
price of the Common Stock of the Company on the Nasdaq National Market on the
date the Common Stock issuable upon conversion of the Preferred Stock is
delivered to the Purchaser (the "Delivery Date") is lower than the Conversion
Price, or (ii) the Delivery Date is not within fifteen (15) business days of the
Conversion Date, the Company shall pay to the Purchaser, in immediately
available funds, upon demand, as liquidated damages for such failure and not as
a penalty, for each $100,000 of Preferred Stock sought to be converted, $500 for
each of the first ten (10) days and $1,000 per day thereafter that the
Conversion Shares are not
3
<PAGE>
delivered, which liquidated damages shall run from the tenth or fifteenth
business day after the Conversion Date. Any and all payments required pursuant
to this paragraph shall be payable only in shares of Common Stock and not in
cash. The number of such shares shall be determined by dividing the total sum
payable by the Conversion Price.
b. Any shares of Series A Preferred Stock outstanding on the second
anniversary of the date on which the Series A Preferred Stock was first issued
by the Corporation (the "Anniversary Date") automatically shall be converted
into Common Stock on the same basis as the holder of such shares of Series A
Preferred Stock may convert such shares pursuant to Section 3a above. The
Corporation shall not be obligated to deliver the certificate(s) evidencing such
shares of Common Stock unless the certificate(s) evidencing the Series A
Preferred Stock so converted are delivered to the Corporation.
c. (1) If the Corporation shall, at any time or from time to time,
declare and pay to the holders of Common Stock a dividend in shares of Common
Stock, or the Corporation shall subdivide the outstanding shares of Common Stock
into a greater number of shares of Common Stock, or combine the outstanding
shares of Common Stock into a smaller number of shares of Common Stock then the
Floor Price, each shall be adjusted so that the same shall equal the price
determined by multiplying the Floor Price by a fraction, the numerator of which
shall be the number of shares of Common Stock issued and outstanding immediately
prior to the happening of such even and the denominator of which shall be the
number of shares of Common Stock issued and outstanding immediately after the
happening of such event. Such adjustment shall become effective immediately
after the opening of business of the day following the record date, in the event
of a stock dividend or the day upon which the subdivision or combination becomes
effective, as the case may be.
(2) If the Corporation shall, at any time or from time to time
after the date on which the Series A Preferred Stock was first issued by the
Corporation, make or issue, or fix a record date for the determination of
holders of shares of Common Stock entitled to receive a dividend or other
distribution payable in securities of the Corporation, including a distribution
of evidence of indebtedness of the Corporation, other than shares of Common
Stock, then, and in each such event, provision shall be made by the Corporation
so that the holders of shares of Series A Preferred Stock shall receive upon
conversion thereof, in a addition to the number of shares of Common Stock
receivable thereupon, the amount of those securities of the Corporation that
such holders would have received had their shares of Series A Preferred Stock
been converted on the date of such even and had they thereafter, during the
period from the date of such event to and including the date of conversion,
retained such securities receivable by them as aforesaid during such period.
(3) If the shares of Common Stock issuable upon the conversion of
shares of Series A Preferred Stock shall be changed into the same or any
different number of shares of any class or any series of any class of capital
stock, whether by capital reorganization, reclassification or otherwise (other
than a subdivision or combination of shares or a stock dividend provided for
above, or a reorganization, merger, consolidation or sale of assets provided for
in Section 7 hereof), then, and in each such event, the holder of shares of
Series A Preferred
4
<PAGE>
Stock shall have the right thereafter to convert such shares of Series A
Preferred Stock into the kind and amount of shares of stock and other securities
and property receivable upon such reorganization, reclassification or other
change by holders of the number of shares of Common Stock into which such shares
of Series A Preferred Stock might have been converted immediately prior to such
reorganization, reclassification or change.
e. At all times, the Corporation shall reserve and keep available
out of its authorized but unissued Common Stock solely for issuance upon the
conversion of shares of the Series A Preferred Stock as herein provided, such
number of shares of Common Stock as, from time to time, shall be issuable upon
the conversion of all the shares of the Series A Preferred Stock at the time
outstanding.
f. No fractional shares of Common Stock shall be issued. In lieu of
the issuance of any fractional share of Common Stock that would, but for the
foregoing, be issued to a holder of Series A Preferred Stock on the conversion
thereof, the Corporation shall pay to such holder, in cash, the value of such
fractional share which value shall be based upon the closing sale price of the
Common Stock as reported on NASDAQ (or on the principal national securities
exchange on which the Common Stock is admitted to trading or listed or, if not
listed or admitted to trading on NASDAQ or a national securities exchange, as
reported by the National Quotation Bureau, Inc. or other similar organization)
for the trading day immediately preceding the effective date of such conversion.
Section 4. Voting Rights. Except as required by applicable law, the
-------------
holders of shares of Series A Preferred Stock shall not have the right or power
to vote on any question or in any proceeding or to be represented at, or to
receive notice of, any meeting of the Corporation's stockholders.
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
-----------------
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized by unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
Certificate of Incorporation, or in any other Certificate of Designation
creating a series of Preferred Stock or any similar stock or as otherwise
required by law.
Section 6. Liquidation, Dissolution or Winding Up. In the event of
--------------------------------------
any liquidation, dissolution, or winding up of the Corporation, the holders of
shares of the Series A Preferred Stock are entitled to receive out of assets of
the Corporation available for distribution to stockholders, after satisfaction
of indebtedness, but before any distribution of assets is made to holders of
Common Stock or to holders of any other class of stock of the Corporation
ranking junior to the Series A Preferred Stock upon liquidation, liquidating
distributions on each share of Series A Preferred Stock held by such holder in
the per share amount of $1,000 plus all dividends accrued and unpaid, if any, on
each such share pursuant to Section 2 hereof (the "Liquidation Preference").
If, upon any liquidation, dissolution or winding up of the Corporation, the
amounts payable with respect too the Series A Preferred Stock or any other
shares of stock of the
5
<PAGE>
Corporation ranking as to any such distribution on a parity with the Series A
Preferred Stock are not paid in full, the holders of the Series A Preferred and
of such other shares will share ratably in any such distribution of assets of
the Corporation in proportion to the full distributable amounts to which they
are entitled. After payment of the full amount of the liquidating distribution
to which they are entitled, the holders of shares of the Series A Preferred
Stock will not be entitled to any further participation in any distribution of
assets by the Corporation.
Section 7. Consolidation, Merger, etc. If the Corporation shall
--------------------------
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then, in any such case, the
Corporation, as a condition precedent to such transaction, shall cause effective
provisions to be made so that each holder of Series A Preferred Stock then
outstanding shall have the right, by converting such share(s) of Series A
Preferred Stock to acquire the kind and amount of shares of stock, securities,
cash and/or other property receivable upon such consolidation, merger,
combination or other transaction by a holder of the number of shares of Common
stock which might have been acquired upon conversion of such Series A Preferred
Stock immediately prior to such consolidation, merger, combination, or other
transaction.
Section 8. No Redemption. The shares of Series A Preferred Stock
-------------
shall not be redeemable.
Section 9. Amendment. This Certificate of Designation shall not be
---------
amended in any manner which should materially alter or change the powers,
preferences, or special rights of the Series A Preferred Stock so as to affect
them adversely without the affirmative vote of the holders of at least two-
thirds of the outstanding shares of Series A Preferred Stock, voting together as
a single class.
RESOLVED, FURTHER, that the appropriate officers of the Corporation
hereby are authorized to execute and acknowledge a certificate setting forth
these resolution and to cause such certificate to be filed and recorded, all in
accordance with the requirements of Section 151 of the General Corporation Law
of the State of Delaware.
IN WITNESS WHEREOF, this Certificate of Designation is executed on
behalf of the Corporation by its President and Chief Executive Officer this ___
day of August, 1997.
-------------------------------------
Laurence R. Hootnick
President and Chief Executive Officer
6
<PAGE>
EXHIBIT B
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the
8% Convertible Preferred Stock)
The undersigned hereby irrevocably elects to convert the Preferred Stock
Certificate No. _________ into Shares of Common Stock of CONSILIUM, INC. (the
"Company") according to the conditions hereof, as of the date written below.
The undersigned represents and warrants that:
(i) that all offers and sales by the undersigned of the shares of Common
Stock issuable to the undersigned upon conversion of the Preferred
Stock shall be made pursuant to an exemption from registration under
the Act, or pursuant to registration of the Common Stock under the
Securities Act of 1933, as amended (the "Act"), subject to any
restrictions on sale or transfer set forth in the Subscription
Agreement between the Company and the original holder of the
Preferred Stock submitted herewith for conversion;
(ii) the undersigned has not engaged in any transaction or series of
transaction that is a part of or a plan or scheme to evade the
registration requirements of the Act; and
(iii) upon conversion pursuant to this Notice of Conversion, the
undersigned will not own or deemed to beneficially own (within the
meaning of the 1934 Act) 4.9% or more of the then issued and
outstanding shares of the Company.
---------------------------- ----------------------------------
Date of Conversion Applicable Conversion Price
---------------------------- ----------------------------------
Number of Common Shares upon $ Amount of Conversion
Conversion
---------------------------- ----------------------------------
Signature Name
Address: Delivery of Shares to:
* This original Preferred Stock and Notice of Conversion must be received by the
Company by the third business day following the Date of Conversion
<PAGE>
ATTACHMENT I
ESCROW AGREEMENT
THIS AGREEMENT is made as of the ____ day of August, 1997 by and
between CONSILIUM, INC., with its principal office at 485 Clyde Avenue, Mountain
View, CA 94043 (hereinafter the "Company"), ___________________________,
________________________ _________ (hereinafter "Purchaser") and SHELDON E.
GOLDSTEIN, P.C., 65 Broadway, 10th Fl., New York, NY 10006 (hereinafter the
"Escrow Agent").
W I T N E S S E T H:
WHEREAS, pursuant to the Securities Purchase Agreement dated August
__, 1997 (the "Agreement"), Purchaser will be purchasing shares of the Company
(the "Securities") at a purchase price as set forth in the Securities
Subscription Agreement, signed by the Company and Purchaser; and
WHEREAS, the Company has requested that the Escrow Agent hold the
funds of Purchaser in escrow until the Escrow Agent has received the Securities
and had the opportunity to speak with the Company to confirm their issuance.
The Escrow Agent will then immediately wire transfer or otherwise deliver at the
Company's direction immediately available funds to the Company or the Company's
account and arrange for delivery of the Securities to Purchaser per the
Purchaser's written instructions.
NOW, THEREFORE, in consideration of the covenants and mutual promises
contained herein and other good and valuable consideration, the receipt and
legal sufficiency of which are hereby acknowledged and intending to be legally
bound hereby, the parties agree as follows:
ARTICLE 1
---------
TERMS OF THE ESCROW
-------------------
1.1 The parties hereby agree to establish an escrow account with the
Escrow Agent whereby the Escrow Agent shall hold the funds for the purchase of
the Securities.
1.2 Upon Escrow Agent's receipt of cleared funds into his attorney
trustee account, he shall notify in writing the Company, or the Company's
designated attorney or agent, of the amount of funds he has received into his
account.
1.3 The Company, upon receipt of said notice and acceptance of
Purchaser's Subscription Agreement, as evidenced by the Company's execution
thereof, shall deliver to
<PAGE>
Escrow Agent the Securities being purchased. Escrow Agent shall then communicate
with the Company to confirm the validity of its issuance.
1.4 Once Escrow Agent reasonably confirms the validity of the
issuance of the Securities, he shall immediately wire that amount of funds
necessary to purchase the Securities, per the written instructions of the
Company. The Company will furnish Escrow Agent with a "Net Letter" directing
payment of legal fees incurred by the Purchasers to Sheldon E. Goldstein, P.C.
not to exceed twenty thousand ($20,000) dollars and placement agent fees as
directed by the Company accordingly with the net balance payable to the Company.
Once the funds have been received per the Company's instructions, the Escrow
Agent shall then arrange to have the Securities delivered as per instructions
from the Purchaser.
1.5 This Agreement may be altered or amended only with the consent of
all of the parties hereto. Should the Company attempt to change this Agreement
in a manner which, in the Escrow Agent's discretion, shall be undesirable, the
Escrow Agent may resign as Escrow Agent by notifying the Company and the
Purchaser in writing. In the case of the Escrow Agent's resignation or removal
pursuant to the foregoing, his only duty, until receipt of notice from the
Company and the Purchaser or its agent that a successor escrow agent shall have
been appointed, shall be to hold and preserve the Securities and/or funds. Upon
receipt by the Escrow Agent of said notice from the Company and the Purchaser of
the appointment of a successor escrow agent, the name of a successor escrow
account and a direction to transfer the Securities and/or funds, the Escrow
Agent shall promptly thereafter transfer all of the Securities and/or funds held
in escrow to said successor escrow agent. Immediately after said transfer of
Securities, the Escrow Agent shall furnish the Company and the Purchaser with
proof of such transfer. The Escrow Agent is authorized to disregard any
notices, requests, instructions or demands received by it from the Company or
the Purchaser after notice of resignation or removal shall have been given,
unless the same shall be the aforementioned notice from the Company and the
Purchaser to transfer the Securities and funds to a successor escrow agent or to
return same to the respective parties.
1.6 The Escrow Agent shall be reimbursed by the Company and the
Purchaser for any reasonable expenses incurred in the event there is a conflict
between the parties and the Escrow Agent shall deem it necessary to retain
counsel.
1.7 The Escrow Agent shall not be liable for any action taken or
omitted by him in good faith in accordance with the advice of the Escrow Agent's
counsel; and in no event shall the Escrow Agent be liable or responsible except
for the Escrow Agent's own gross negligence or willful misconduct.
1.8 The Company and the Purchaser warrant to and agree with the
Escrow Agent that, unless otherwise expressly set forth in this Agreement:
(i) there is no security interest in the Securities or any part
thereof;
2
<PAGE>
(ii) no financing statement under the Uniform Commercial Code is on
file in any jurisdiction claiming a security interest or in
describing (whether specifically or generally) the Securities or
any part thereof; and
(iii) the Escrow Agent shall have no responsibility at any time to
ascertain whether or not any security interest exists in the
Securities or any part thereof or to file any financing
statement under the Uniform Commercial Code with respect to the
Securities or any part thereof.
1.9 The Escrow Agent has no liability hereunder to either party
other than to hold the Securities and funds and to deliver them under the terms
hereof. Each party hereto agrees to indemnify and hold harmless the Escrow
Agent from and with respect to any suits, claims, actions or liabilities arising
in any way out of this transaction including the obligation to defend any legal
action brought which in any way arises out of or is related to this Escrow.
ARTICLE 2
---------
MISCELLANEOUS
-------------
2.1 No waiver or any breach of any covenant or provision herein
contained shall be deemed a waiver of any preceding or succeeding breach
thereof, or of any other covenant or provision herein contained. No extension
of time for performance of any obligation or act shall be deemed any extension
of the time for performance of any other obligation or act.
2.2 All notices or other communications required or permitted
hereunder shall be in writing, and shall be sent by fax, overnight courier,
registered or certified mail, postage prepaid, return receipt requested, and
shall be deemed received upon receipt thereof, as follows:
(i) Consilium, Inc.
485 Clyde Avenue
Mountain View, CA 94043
Attn: Michael J. Field, Esq.
Tele: (415) 691-6100
Fax: (415) 691-6150
(ii) Gray, Cary, Ware & Freidenrich
400 Hamilton Avenue
Palo Alto, CA 94301
Attn: Diane Holt Frankle
Tele: (415) 328-6561
Fax: (415) 327-3699
3
<PAGE>
(iii) Sheldon E. Goldstein, P.C.
65 Broadway
New York, NY 10006
Attn: Sheldon E. Goldstein, Esq.
Tele: (212) 809-4220
Fax: (212) 809-4228 (fax)
(iv)
Attn:
Tele:
Fax:
2.3 This Agreement shall be binding upon and shall inure to the
benefit of the permitted successors and assigns of the parties hereto.
2.4 This Agreement is the final expression of, and contains the
entire Agreement between, the parties with respect to the subject matter hereof
and supersedes all prior understandings with respect thereto. This Agreement
may not be modified, changed, supplemented or terminated, nor may any
obligations hereunder be waived, except by written instrument signed by the
parties to be charged or by its agent duly authorized in writing or as otherwise
expressly permitted herein.
2.5 Whenever required by the context of this Agreement, the singular
shall include the plural and masculine shall include the feminine. This
Agreement shall not be construed as if it had been prepared by one of the
parties, but rather as if both parties had prepared the same. Unless otherwise
indicated, all references to Articles are to this Agreement.
2.6 The Company acknowledges and confirms that it is not being
represented in a legal capacity by Sheldon E. Goldstein, P.C. and it has had the
opportunity to consult with its own legal advisors prior to the signing of this
Agreement.
2.7 The parties hereto expressly agree that this Agreement shall be
governed by, interpreted under and construed and enforced in accordance with the
laws of the State of New York. Any action to enforce, existing out of, or
relating in any way to, any provisions of this Agreement shall be brought
through the American Arbitration Association at the designated locale of New
York, New York.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the ____ day of August 1997.
CONSILIUM, INC.
By
----------------------------
Officer
,
----------------------
Purchaser
By
------------------------------
Officer
SHELDON E. GOLDSTEIN, P.C.,
Escrow Agent
By
------------------------------
Sheldon E. Goldstein
5
<PAGE>
ATTACHMENT II
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated the ____ day of August,
1997, between _______________________ (the "Holder" or "Holders") issued
pursuant to a Convertible Preferred Stock Subscription Agreement of even date
herewith, and CONSILIUM, INC., a Delaware corporation, having its principal
place of business at 485 Clyde Avenue, Mountain View, CA 94043 (the "Company").
WHEREAS, simultaneously with the execution and delivery of this
Agreement, the Holders are purchasing from the Company, pursuant to a
Convertible Preferred Stock Subscription Agreement dated the date hereof (the
"Agreement"), an aggregate of up to Three Million ($3,000,000) Dollars of non-
voting Convertible Preferred Stock convertible into Common Stock in accordance
with the terms of a Certificate of Designation filed by the Company in
connection with such sales (hereinafter collectively referred to as the "Stock"
or "Securities" of Consilium, Inc.); and
WHEREAS, the Company desires to grant to the Holders the registration
rights set forth herein with respect to the Securities.
NOW, THEREFORE, the parties hereto mutually agree as follows:
Section 1. Registrable Securities. As used herein the term
----------------------
"Registrable Security" means the Common Stock issuable upon conversion of the
non-voting Convertible Preferred Stock; provided, however, that with respect to
any particular Registrable Security, such security shall cease to be a
Registrable Security when, as of the date of determination, (i) it has been
effectively registered under the Securities Act of 1933, as amended (the "Act")
and disposed of pursuant thereto, (ii) registration under the Act is no longer
required for the immediate public distribution of such security as a result of
the provisions of Rule 144 or Reg S, or (iii) it has ceased to be outstanding.
The term "Registrable Securities" means any and/or all of the securities falling
within the foregoing definition of a "Registrable Security." In the event of any
merger, reorganization, consolidation, recapitalization or other change in
corporate structure affecting the Common Stock, such adjustment shall be made in
the definition of "Registrable Security" as is appropriate in order to prevent
any dilution or enlargement of the rights granted pursuant to this Section 1.
Section 2. Restrictions on Transfer. The Holder acknowledges and
------------------------
understands that prior to the registration of the Securities as provided herein,
the Securities are "restricted securities" as defined in Rule 144 promulgated
under the Act. The Holder understands that no disposition or transfer of the
Securities may be made by Holder in the absence of (i) an opinion of counsel
reasonably satisfactory to the Company that such transfer may be made or (ii) a
registration statement under the Act is then in effect with respect thereto.
<PAGE>
Section 3. Registration Rights.
-------------------
(a) The Company shall prepare and file a Registration Statement with
the Securities and Exchange Commission ("SEC"), on one occasion, at the sole
expense of the Company (except as provided in Section 3(c) hereof), in respect
of all holders of Registrable Securities, so as to permit a non-underwritten
public offering and sale of the Registrable Securities under the Act. The
number of shares to be issued on conversion of the non-voting Convertible
Preferred Stock (the "Conversion Shares") to be registered shall be two hundred
(200%) percent of the number of such shares that would be required, if all of
the Securities were converted on the filing date of the Registration Statement.
(b) The Company will maintain any Registration Statement or post-
effective amendment filed under this Section 3 hereof current under the Act
until the earlier of (i) the date that all of the Registrable Securities have
been sold pursuant to the Registration Statement, (ii) the date the holders
thereof receive an opinion of counsel that the Registrable Securities may be
sold under the provisions of Rule 144, or (iii) the second anniversary of the
effective date of the Registration Statement.
(c) All fees, disbursements and out-of-pocket expenses and costs
incurred by the Company in connection with the preparation and filing of any
Registration Statement under subparagraph 3(a) and in complying with applicable
securities and Blue Sky laws (including, without limitation, all attorneys'
fees) shall be borne by the Company. The Holder shall bear the cost of
underwriting discounts and commissions, if any, applicable to the Registrable
Securities being registered and the fees and expenses of its counsel. The
Company shall use its best efforts to qualify any of the securities for sale in
such states as such Holder reasonably designates and shall furnish
indemnification in the manner provided in Section 9 hereof. However, the
Company shall not be required to qualify in any state which will require an
escrow or other restriction relating to the Company and/or the sellers. The
Company at its expense will supply the Holder with copies of such Registration
Statement and the prospectus or offering circular included therein and other
related documents in such quantities as may be reasonably requested by the
Holder.
(d) The Company shall not be required by this Section 3 to include a
Holder's Registrable Securities in any Registration Statement which is to be
filed if, in the opinion of counsel for both the Holder and the Company (or,
should they not agree, in the opinion of another counsel experienced in
securities law matters acceptable to counsel for the Holder and the Company) the
proposed offering or other transfer as to which such registration is requested
is exempt from applicable federal and state securities laws and would result in
all purchasers or transferees obtaining securities which are not "restricted
securities", as defined in Rule 144 under the Act.
(e) In the event the Registration Statement to be filed by the Company
pursuant to Section 3(a) above is not declared effective by the SEC within one
hundred eighty (180) days from the Closing Date, then the Company will pay
Holder by wire transfer, as liquidated damages for such failure and not as a
penalty, two (2%) percent of the principal
2
<PAGE>
amount of the Securities per month thereafter in cash or stock at the Company's
option (the first month shall be pro rated on a weekly basis) until the Company
procures registration of the Stock. If the Company does not remit the damages to
the Purchaser as set forth above, the Company will pay the Purchaser reasonable
costs of collection, including attorneys fees, in addition to the liquidated
damages. Such payment shall be made to the Purchaser immediately if the
registration of the Securities are not effected; provided, however, that the
payment of such liquidated damages shall not relieve the Company from its
obligations to register the Securities pursuant to this Section.
(f) No provision contained herein shall preclude the Company from
selling securities pursuant to any Registration Statement in which it is
required to include Registrable Securities pursuant to this Section 3.
Section 4. Cooperation with Company. Holders will cooperate with the
------------------------
Company in all respects in connection with this Agreement, including, timely
supplying all information reasonably requested by the Company and executing and
returning all documents reasonably requested in connection with the registration
and sale of the Registrable Securities.
Section 5. Registration Procedures. If and whenever the Company is
-----------------------
required by any of the provisions of this Agreement to effect the registration
of any of the Registrable Securities under the Act, the Company shall (except as
otherwise provided in this Agreement), as expeditiously as possible:
(a) prepare and file with the Commission such amendments and
supplements to such registration statement and the Prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with the provisions of the Act with respect to the sale or other
disposition of all securities covered by such registration statement when the
Holder or Holders of such securities shall desire to sell or otherwise dispose
of the same (including prospectus supplements with respect to the sales of
securities from time to time in connection with a registration statement
pursuant to Rule 415 of the Commission);
(b) furnish to each Holder such numbers of copies of a summary
prospectus or other prospectus, including a preliminary prospectus or any
amendment or supplement to any prospectus, in conformity with the requirements
of the Act, and such other documents, as such Holder may reasonably request in
order to facilitate the public sale or other disposition of the securities owned
by such Holder;
(c) use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or blue sky
laws of such jurisdictions as the Holder, shall reasonably request, and do any
and all other acts and things which may be necessary or advisable to enable each
Holder to consummate the public sale or other disposition in such jurisdiction
of the securities owned by such Holder, except that the Company shall not for
any such purpose be required to qualify to do business as a foreign corporation
in any jurisdiction wherein it is not so qualified or to file therein any
general consent to service of process;
3
<PAGE>
(d) use its best efforts to list such securities on the NASDAQ
National Market System or any securities exchange on which any securities of the
Company is then listed, if the listing of such securities is then permitted
under the rules of such exchange or NASDAQ National Market System;
(e) enter into and perform its obligations under an underwriting
agreement, if the offering is an underwritten offering, in usual and customary
form, with the managing underwriter or underwriters of such underwritten
offering;
(f) notify each Holder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto covered
by such registration statement is required to be delivered under the Act, of the
happening of any event of which it has knowledge as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing.
Section 6. Information by Holder. Each Holder of Registrable
---------------------
Securities included in any registration shall furnish to the Company such
information regarding such Holder and the distribution proposed by such Holder
as the Company may request in writing and as shall be required in connection
with any registration, qualification or compliance referred to in this Section
6.
Section 7. Assignment. The rights granted the Holders under this
----------
Agreement shall not be assigned without the written consent of the Company,
which consent shall not be unreasonably withheld. In no event shall the rights
granted under this Agreement be transferred to a transferee, other than
affiliated companies of the Holder, of Registrable Securities having a value
less than $250,000. In the event of a transfer of the rights granted under this
Agreement, the Holders agree that the Company may require that the transferee
comply with reasonable conditions as determined in the discretion of the
Company. This Agreement is binding upon and inures to the benefit of the
parties hereto and their respective heirs, successors and permitted assigns.
Section 8. Termination of Registration Rights. The rights granted
----------------------------------
pursuant to this Agreement shall terminate as to each Investor (and permitted
transferee under Section 7 above) upon the occurrence of any of the following:
(a) all such Holder's securities subject to this Agreement have been
registered;
(b) such Holder's securities subject to this Agreement may be sold
without such registration pursuant to Rule 144 or Reg S promulgated by the SEC
pursuant to the Act;
4
<PAGE>
(c) such Holder's securities subject to this Agreement can be sold
pursuant to Rule 144(k); or
(d) three years after the Company's next registered offering to the
public.
Section 9. Indemnification.
---------------
(a) In the event of the filing of any Registration Statement with
respect to Registrable Securities pursuant to Section 3 hereof, the Company
agrees to indemnify and hold harmless the Holder and each person, if any, who
controls the Holder within the meaning of the Act ("Distributing Holders")
against any losses, claims, damages or liabilities, joint or several (which
shall, for all purposes of this Agreement, include, but not be limited to, all
costs of defense and investigation and all attorneys' fees), to which the
Distributing Holders may become subject, under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any such Registration Statement, or any
related preliminary prospectus, final prospectus, offering circular,
notification or amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading;
provided, however, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in such Registration Statement, preliminary prospectus, final
prospectus, offering circular, notification or amendment or supplement thereto
in reliance upon, and in conformity with, written information furnished to the
Company by the Distributing Holders, specifically for use in the preparation
thereof. This indemnity agreement will be in addition to any liability which
the Company may otherwise have.
(b) Each Distributing Holder agrees that it will indemnify and hold
harmless the Company, and each officer, director of the Company or person, if
any, who controls the Company within the meaning of the Act, against any losses,
claims, damages or liabilities (which shall, for all purposes of this Agreement,
include, but not be limited to, all costs of defense and investigation and all
attorneys' fees) to which the Company or any such officer, director or
controlling person may become subject under the Act or otherwise, insofar as
such losses claims, damages or liabilities (or actions in respect thereof);
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in a Registration Statement requested by such
Distributing Holder, or any related preliminary prospectus, final prospectus,
offering circular, notification or amendment or supplement thereto, or arise out
of or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, but in each case only to the extent that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in such Registration Statement, preliminary prospectus, final prospectus,
offering circular, notification or amendment or supplement thereto in reliance
upon, and in conformity with, written information furnished to the Company by
such Distributing Holder, specifically for use in the preparation thereof and,
provided further, that the indemnity agreement contained in this Section 9(b)
shall not inure to the benefit of the Company with respect to any person
5
<PAGE>
asserting such loss, claim, damage or liability who purchased the Registrable
Securities which are the subject thereof if the Company failed to send or give
(in violation of the Act or the rules and regulations promulgated thereunder) a
copy of the prospectus contained in such Registration Statement to such person
at or prior to the written confirmation to such person of the sale of such
Registrable Securities, where the Company was obligated to do so under the Act
or the rules and regulations promulgated thereunder. This indemnity agreement
will be in addition to any liability which the Distributing Holders may
otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section, notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve the indemnifying
party from any liability which it may have to any indemnified party otherwise
than as to the particular item as to which indemnification is then being sought
solely pursuant to this Section. In case any such action is brought against any
indemnified party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate in, and, to the
extent that it may wish, jointly with any other indemnifying party similarly
notified, assume the defense thereof. Subject to the provisions herein stated
and after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation, unless the
indemnifying party shall not pursue the action to its final conclusion. The
indemnified party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and expenses of
such counsel shall not be at the expense of the indemnifying party if the
indemnifying party has assumed the defense of the action with counsel reasonably
satisfactory to the indemnified party; provided that if the indemnified party is
the Distributing Holder, the fees and expenses of such counsel shall be at the
expense of the indemnifying party if (i) the employment of such counsel has been
specifically authorized in writing by the indemnifying party, or (ii) the named
parties to any such action (including any impleaded parties) include both the
Distributing Holder and the indemnifying party and the Distributing Holder shall
have been advised by such counsel that there may be one or more legal defenses
available to the indemnifying party different from or in conflict with any legal
defenses which may be available to the Distributing Holder (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the Distributing Holder, it being understood, however, that the
indemnifying party shall, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable only for the reasonable
fees and expenses of one separate firm of attorneys for the Distributing Holder,
which firm shall be designated in writing by the Distributing Holder). No
settlement of any action against an indemnified party shall be made without the
prior written consent of the indemnified party, which consent shall not be
unreasonably withheld.
Section 10. Contribution. In order to provide for just and equitable
------------
contribution under the Act in any case in which (i) the Distributing Holder
makes a claim for indemnification
6
<PAGE>
pursuant to Section 9 hereof but is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
the express provisions of Section 9 hereof provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of any
Distributing Holder, then the Company and the applicable Distributing Holder
shall contribute to the aggregate losses, claims, damages or liabilities to
which they may be subject (which shall, for all purposes of this Agreement,
include, but not be limited to, all costs of defense and investigation and all
attorneys' fees), in either such case (after contribution from others) on the
basis of relative fault as well as any other relevant equitable considerations.
The relative fault 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 on the one hand or the applicable Distributing Holder,
on the other hand, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Distributing Holder agree that it would not be just and
equitable if contribution pursuant to this Section 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 this Section. The amount paid or
payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this Section
shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
Section 11. Notices. Any notice pursuant to this Agreement by the
-------
Company or by the Holder shall be in writing and shall be deemed to have been
duly given if delivered by (i) hand, (ii) by facsimile and followed by mail
delivery or (iii) if mailed by certified mail, return receipt requested, postage
prepaid, addressed as follows:
(a) If to the Holder, to its, his or her address set forth on the
signature page of this Agreement, with a copy to the person designated in the
Agreement.
(b) If to the Company, at the address set forth herein, or to such
other address as any such party may designate by notice to the other party.
Notices shall be deemed given at the time they are delivered personally or five
(5) days after they are mailed in the manner set forth above. If notice is
delivered by facsimile to the Company and followed by mail, delivery shall be
deemed given two (2) days after such facsimile is sent.
Section 12. Counterparts. This Agreement may be executed in
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 13. Headings. The headings in this Agreement are for
--------
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
7
<PAGE>
Section 14. Governing Law, Venue. This Agreement will be construed
--------------------
and enforced in accordance with and governed by the laws of the State of New
York, except for matters arising under the Act, without reference to principles
of conflicts of law. Each of the parties consents to the jurisdiction of the
federal courts whose districts encompass any part of the State of New York or
the state courts of the State of New York in connection with any dispute arising
under this Agreement and hereby waives, to the maximum extent permitted by law,
any objection, including any objection based on forum non conveniens, to the
----- --- ----------
bringing of any such proceeding in such jurisdictions. Each party hereby agrees
that if another party to this Agreement obtains a judgment against it in such a
proceeding, the party which obtained such judgment may enforce same by summary
judgment in the courts of any country having jurisdiction over the party against
whom such judgment was obtained, and each party hereby waives any defenses
available to it under local law and agrees to the enforcement of such a
judgment. Each party to this Agreement irrevocably consents to the service of
process in any such proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to such party at its address set forth herein.
Nothing herein shall affect the right of any party to serve process in any other
manner permitted by law.
Section 15. Severability/Defined Terms. If any provision of this
--------------------------
Agreement shall for any reason be held invalid or unenforceable, such invalidity
or unenforceablity shall not affect any other provision hereof and this
Agreement shall be construed as if such invalid or unenforceable provision had
never been contained herein. Terms not otherwise defined herein shall be
defined in accordance with the Convertible Preferred Stock Subscription
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, on the day and year first above written.
Attest: CONSILIUM, INC.
By: By:
----------------------- -------------------------
Name: Name:
Title: Title:
-------------------- ----------------------
PURCHASER:
----------------------------
By:
-------------------------
Officer
8
<PAGE>
Exhibit 4.3
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR QUALIFICATION UNLESS THE SECURITIES ARE
REGISTERED UNDER THE 1933 ACT, OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE 1933 ACT IS AVAILABLE.
STOCK PURCHASE WARRANT
To Purchase ___________ Shares of Common Stock of
CONSILIUM, INC.
THIS CERTIFIES that, for value received, ____________ , located at 201
East ________________ (the "Investor"), is entitled, upon the terms and subject
to the conditions hereinafter set forth, at any time on or after _________ from
the date hereof and on or prior to ______________ (the "Termination Date") but
not thereafter, to subscribe for and purchase from CONSILIUM, INC., a Delaware
corporation, located at 485 Clyde Avenue, Mountain View, CA 94043 (the
"Company"), ________________ shares of Common Stock (the "Warrant Shares"). The
purchase price of one share of Common Stock (the "Exercise Price") under this
Warrant shall be One Hundred Twenty Five (125%) percent of the average closing
bid price on the NASDAQ National Market System, over the five (5) day trading
period prior to August 19, 1997 (the "Closing Date"), per share. The Exercise
Price and the number of shares for which the Warrant is exercisable shall be
subject to adjustment as provided herein. This Warrant is being issued in
connection with a Placement Agreement dated August 8, 1997 between the Company
and Investor.
1. Title of Warrant. Prior to the expiration hereof and subject to
----------------
compliance with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company by the
holder hereof in person or by duly authorized attorney, upon surrender of this
Warrant together with the Assignment Form annexed hereto properly endorsed.
2. Authorization of Shares. The Company covenants that all shares of
-----------------------
Common Stock which may be issued upon the exercise of rights represented by this
Warrant will, upon exercise of the rights represented by this Warrant, be duly
authorized, validly issued, fully paid and nonassessable and free from all
taxes, liens and charges in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously with such issue).
3. Exercise of Warrant. Exercise of the purchase rights represented
-------------------
by this Warrant may be made at any time or times, in whole, before the close of
business on the Termination Date, or such earlier date on which this Warrant may
terminate as provided in paragraph 11 below, by the surrender of this Warrant
and the Subscription Form annexed hereto duly executed, at the office of the
Company (or such other office or agency of the Company as it may designate by
notice in writing to the registered holder hereof at the address of such holder
<PAGE>
appearing on the books of the Company) and upon payment of the Exercise Price of
the shares thereby purchased; whereupon the holder of this Warrant shall be
entitled to receive a certificate for the number of shares of Common Stock so
purchased. Certificates for shares purchased hereunder shall be delivered to
the holder hereof within ten (10) business days after the date on which this
Warrant shall have been exercised as aforesaid. Payment of the Exercise Price
of the shares may be by certified check or cashier's check or by wire transfer
to an account designated by the Company in an amount equal to the Exercise Price
multiplied by the number of shares being purchased.
4. No Fractional Shares or Scrip. No fractional shares or scrip
-----------------------------
representing fractional shares shall be issued upon the exercise of this
Warrant.
5. Charges, Taxes and Expenses. Issuance of certificates for shares
---------------------------
of Common Stock upon the exercise of this Warrant shall be made without charge
to the holder hereof for any issue or transfer tax or other incidental expense
in respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of the holder of this Warrant or in such name or names as may be directed by the
holder of this Warrant; provided, however, that in the event certificates for
-------- -------
shares of Common Stock are to be issued in a name other than the name of the
holder of this Warrant, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the holder
hereof; and provided further, that upon any transfer involved in the issuance or
-------- -------
delivery of any certificates for shares of Common Stock, the Company may
require, as a condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.
6. Closing of Books. The Company will at no time close its
----------------
shareholder books or records in any manner which interferes with the timely
exercise of this Warrant, except as otherwise permitted herein.
7. No Rights as Shareholder until Exercise. This Warrant does not
---------------------------------------
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company prior to the exercise thereof. If, however, at the time of the
surrender of this Warrant and purchase the holder hereof shall be entitled to
exercise this Warrant, the shares so purchased shall be and be deemed to be
issued to such holder as the record owner of such shares as of the close of
business on the date on which this Warrant shall have been exercised.
8. Assignment and Transfer of Warrant. This Warrant may be assigned
----------------------------------
by the surrender of this Warrant and the Assignment Form annexed hereto duly
executed at the office of the Company (or such other office or agency of the
Company as it may designate by notice in writing to the registered holder hereof
at the address of such holder appearing on the books of the Company); provided,
however, that this Warrant may not be resold or otherwise transferred except (i)
in a transaction registered under the Securities Act, or (ii) in a transaction
pursuant to an exemption, if available, from such registration and whereby, if
requested by the
2
<PAGE>
Company, an opinion of counsel reasonably satisfactory to the Company is
obtained by the holder of this Warrant to the effect that the transaction is so
exempt.
9. Loss, Theft, Destruction or Mutilation of Warrant. The Company
-------------------------------------------------
represents and warrants that upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of any Warrant
or stock certificate, and in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it, and upon reimbursement to the Company of
all reasonable expenses incidental thereto, and upon surrender and cancellation
of such Warrant or stock certificate, if mutilated, the Company will make and
deliver a new Warrant or stock certificate of like tenor and dated as of such
cancellation, in lieu of this Warrant or stock certificate.
10. Saturdays, Sundays, Holidays, etc. If the last or appointed day
---------------------------------
for the taking of any action or the expiration of any right required or granted
herein shall be a Saturday, Sunday or a legal holiday, then such action may be
taken or such right may be exercised on the next succeeding day not a legal
holiday.
11. Effect of Certain Events.
------------------------
(a) If at any time the Company proposes (i) to sell or otherwise
convey all or substantially all of its assets or (ii) to effect a transaction
(by merger or otherwise) in which more than 50% of the voting power of the
Company is disposed of (collectively, a "Sale or Merger Transaction"), in which
the consideration to be received by the Company or its shareholders consists
solely of cash, the Company shall give the holder of this Warrant thirty (30)
days' notice of the proposed effective date of the transaction specifying that
the Warrant shall terminate if the Warrant has not been exercised by the
effective date of the transaction.
(b) In case the Company shall at any time effect a Sale or Merger
Transaction in which the consideration to be received by the Company or its
shareholders consists in part of consideration other than cash, the holder of
this Warrant shall have the right thereafter to purchase, by exercise of this
Warrant and payment of the aggregate Exercise Price in effect immediately prior
to such action, the kind and amount of shares and other securities and property
which it would have owned or have been entitled to receive after the happening
of such transaction had this Warrant been exercised immediately prior thereto.
(c) "Piggy-Back" Registration. The Holder of this Warrant shall have
-------------------------
the right to include all of the shares of Common Stock underlying this Warrant
(the "Registrable Securities") as part of any registration of securities filed
by the Company (other than in connection with a transaction contemplated by Rule
145(a) promulgated under the Act or pursuant to Form S-8); provided, however,
-------- -------
that if any registration pursuant to this Section shall be underwritten, in
whole or in part, the Company may require that the Registrable Securities
requested for inclusion pursuant to this Section be included in the underwriting
on the same terms and conditions as the securities otherwise being sold through
the underwriters. If in the good faith judgment of the underwriter, of such
offering only a limited number of Registrable
3
<PAGE>
Securities should be included in such offering, or no such shares should be
included, the Holder shall be limited to registering such proportion of its
respective shares as shall equal the proportion that the number of shares of
selling stockholders permitted to be registered by the underwriter in such
offering bears to the total number of all shares then held by all selling
stockholders desiring to participate in such offering. Those Registrable
Securities which are excluded from an underwritten offering pursuant to the
foregoing provisions of this Section (and all other Registrable Securities held
by he selling stockholders) shall be withheld from the market by the Holders
thereof for a period, not to exceed one hundred eighty (180) days, which the
underwriter may reasonably determine is necessary in order to effect such
underwritten offering.
12. Adjustments of Exercise Price and Number of Warrant Shares. The
----------------------------------------------------------
number and kind of securities purchasable upon the exercise of this Warrant and
the Exercise Price shall be subject to adjustment from time to time upon the
happening of any of the following.
In case the Company shall (i) declare or pay a dividend in shares of
Common Stock or make a distribution in shares of Common Stock to holders of its
outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock,
(iii) combine its outstanding shares of Common Stock into a smaller number of
shares of Common Stock or (iv) issue any shares of its capital stock in a
reclassification of the Common Stock, the number of Warrant Shares purchasable
upon exercise of this Warrant immediately prior thereto shall be adjusted so
that the holder of this Warrant shall be entitled to receive the kind and number
of Warrant Shares or other securities of the Company which he would have owned
or have been entitled to receive had such Warrant been exercised in advance
thereof. Appropriate adjustments will also be made to the Exercise Price per
share, but the aggregate purchase price payable for the total number of Warrant
Shares purchasable under this Warrant as at such date shall remain the same. 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.
13. Voluntary Adjustment by the Company. The Company may, at any
-----------------------------------
time during the term of this Warrant, reduce the then current Exercise Price to
any amount and for any period of time deemed appropriate by the Board of
Directors of the Company.
14. Notice of Adjustment. Whenever the number of Warrant shares or
--------------------
number or kind of securities or other property purchasable upon the exercise of
this Warrant or the Exercise Price is adjusted, as herein provided, the Company
shall promptly mail by registered or certified mail, return receipt requested,
to the holder of this Warrant notice of such adjustment or adjustments setting
forth the number of Warrant Shares (and other securities or property)
purchasable upon the exercise of this Warrant and the Exercise Price of such
Warrant Shares after such adjustment, setting forth a brief statement of the
facts requiring such adjustment and setting forth computation by which such
adjustment was made. Such notice, in absence of manifest error, shall be
conclusive evidence of the correctness of such adjustment.
4
<PAGE>
15. Authorized Shares. The Company covenants that during the period
-----------------
the Warrant is outstanding, it has reserved from its authorized and unissued
Common Stock a sufficient number of shares to provide for the issuance of Common
Stock upon the exercise of any purchase rights under this Warrant. The Company
further covenants that its issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for shares of the
Company's Common Stock upon the exercise of the purchase rights under this
Warrant. The Company will take all such reasonable action as may be necessary
to assure that such shares of Common Stock may be issued as provided herein
without violation of any applicable law or regulation, or of any requirements of
NASDAQ or any domestic securities exchange upon which the Common Stock may be
listed.
16. Miscellaneous.
-------------
(a) Issue Date; Jurisdiction. The provisions of this Warrant shall
------------------------
be construed and shall be given effect in all respects as if it had been issued
and delivered by the Company on the date hereof. This Warrant shall be binding
upon any successors or assigns of the Company. This Warrant shall constitute a
contract under the laws and jurisdictions of Delaware and for all purposes shall
be construed in accordance with and governed by the laws of said state without
regard to its conflict of law, principles or rules.
(b) Restrictions. The holder hereof acknowledges that the Common
------------
Stock acquired upon the exercise of this Warrant, if not registered, may have
restrictions upon its resale imposed by state and federal securities laws.
(c) Modification and Waiver. This Warrant and any provisions hereof
-----------------------
may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought.
(d) Notices. Any notice, request or other document required or
-------
permitted to be given or delivered to the holders hereof of the Company shall be
delivered or shall be sent by certified or registered mail, postage prepaid, to
each such holder at its address as shown above.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officers thereunto duly authorized.
Dated: August 19, 1997 CONSILIUM, INC
By
------------------------------
Officer
5
<PAGE>
NOTICE OF EXERCISE
------------------
To: CONSILIUM, INC.
(1) The undersigned hereby elects to purchase ________ shares of
Common Stock of CONSILIUM, INC. pursuant to the terms of the attached Warrant,
and tenders herewith payment of the purchase price in full, together with all
applicable transfer taxes, if any.
(2) Please issue a certificate or certificates representing said
shares of Common Stock in the name of the undersigned or in such other name as
is specified below:
----------------------------------
(Name)
----------------------------------
(Address)
----------------------------------
Dated:
----------------------------------
Signature
6
<PAGE>
ASSIGNMENT FORM
---------------
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights
evidenced thereby are hereby assigned to
_______________________________________________ whose address is
_______________________________________________________________.
_______________________________________________________________
Dated: ______________, 1997
Holder's Signature:
------------------------------------
Holder's Address:
------------------------------------
------------------------------------
Signature Guaranteed:
-------------------------------------------------
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in an fiduciary or other representative
capacity should file proper evidence of authority to assign the foregoing
Warrant.
7
<PAGE>
EXHIBIT 10.23
SECURITY AND LOAN AGREEMENT
(ACCOUNTS RECEIVABLE)
This Agreement is entered into between CONSILIUM, INC.
, a Delaware corporation
(herein called "Borrower") and IMPERIAL BANK (herein called "Bank").
1. Bank hereby commits, subject to all the terms and conditions of this
Agreement and prior to the termination of its commitment as hereinafter
provided, to make loans to Borrower from time to time in such amounts as may
be determined by Bank up to, but not exceeding in the aggregate unpaid
principal balance, the following Borrowing Base:
80.000 % of Eligible Accounts
and in no event more than $ $5,000,000.00
2. The amount of each loan made by Bank to Borrower hereunder shall be debited
to the loan ledger account of Borrower maintained by Bank (herein called
"Loan Account") and Bank shall credit the Loan Account with all loan
repayments made by Borrower. Borrower promises to pay Bank (a) the unpaid
balance of Borrower's Loan Account on the earlier of March 15, 1998, or the
occurance of an event of default hereunder and (b) on or before the tenth day
of each month, interest on the average daily unpaid balance of the Loan
Account during the immediately preceding month at the rate of No percent
( 0.00%) per annum in excess of the rate of interest which Bank has
announced as its prime lending rate ("Prime Rate") which shall vary
concurrently with any change in such Prime Rate. Interest shall be computed
at the above rate on the basis of the actual number of days during which the
principal balance of the loan account is outstanding divided by 360, which
shall for interest computation purposes be considered one year. Bank at its
option may demand payment of any or all of the amount due under the Loan
Account including accrued but unpaid interest at any time. Such notice may be
given verbally or in writing and should be effective upon receipt by
Borrower. The amount of interest payable each month by Borrower shall not be
less than a minimum monthly charge of $ 250.00 . Bank is hereby authorized to
charge Borrower's deposit account(s) with Bank for all sums due Bank under
this Agreement.
3. Requests for loans hereunder shall be in writing duly executed by Borrower in
a form satisfactory to Bank and shall contain a certification setting forth
the matters referred to in Section 1, which shall disclose that Borrower is
entitled to the amount of loan being requested.
4. As used in this Agreement, the following terms shall have the following
meanings:
A. "Accounts" means any right to payment for goods sold or leased, or to be
sold or to be leased, or for services rendered or to be rendered no
matter how evidenced, including accounts receivable, contract rights,
chattel paper, instruments, purchase orders, notes, drafts, acceptances,
general intangibles and other forms of obligations and receivables,
B. "Collateral" means any and all personal property of Borrower which is
assigned or hereafter is assigned to Bank as security or in which Bank
now has or hereafter acquires a security interest.
C. "Eligible Accounts" means all of Borrower's Accounts excluding, however,
(1) all Accounts under which payment is not received within 90 days from
any invoice date, (2) all Accounts against which the account debtor or
any other person obligated to make payment thereon asserts any defense,
offset, counterclaim or other right to avoid or reduce the liability
represented by the Account and (3) any Accounts if the account debtor or
any other person liable in connection therewith is insolvent, subject to
bankruptcy or receivership proceedings or has made an assignment for the
benefit of creditors or whose credit standing is unacceptable to Bank and
Bank has so notified Borrower. Eligible Accounts shall only include such
accounts as Bank in its sole discretion shall determine are eligible from
time to time.
5. Borrower hereby assigns to Bank all Borrower's present and future Accounts,
including all proceeds due thereunder, all guaranties and security therefor,
and hereby grants to Bank a continuing security interest in all moneys in
the Collateral Account referred to in Section 6 hereof as security for any
and all obligations of Borrower to Bank, whether now owing or hereafter
incurred and whether direct, indirect, absolute or contingent. So long as
Borrower is indebted to Bank or Bank is committed to extend credit to
Borrower, Borrower will execute and deliver to Bank such assignments,
including Bank's standard forms of Specific or General Assignment covering
individual Accounts, notices, financing statements, and other documents and
papers as Bank may require in order to affirm, effectuate or further assure
the assignment to Bank of the Collateral or to give any third party,
including the account debtors obligated on the Accounts, notice of Bank's
interest in the Collateral.
Page 1 of 3
<PAGE>
6. Until Bank exercises its rights to collect the Accounts pursuant to
paragraph 10, Borrower will collect with diligence all Borrower's Accounts,
provided that no legal action shall be maintained thereon or in connection
therewith without Bank's prior written consent. Any collection of Accounts
by Borrower, whether in the form of cash, checks, notes, or other
instruments for the payment of money (properly endorsed or assigned where
required to enable Bank to collect same), shall be in trust for Bank, and
Borrower shall keep all such collections separate and apart from all other
funds and property so as to be capable of identification as the property of
Bank and deliver said collections daily to Bank in the identical form
received. The proceeds of such collections when received by Bank may be
applied by Bank directly to the payment of Borrower's Loan Account or any
other obligation secured hereby. Any credit given by Bank upon receipt of
said proceeds shall be conditional credit subject to collection. Returned
items at Bank's option may be charged to Borrower's general account. All
collections of the Accounts shall be set forth on an itemized schedule,
showing the name of the account debtor, the amount of each payment and such
other information as Bank may request.
7. Until Bank exercises its rights to collect the Accounts pursuant to
paragraph 10, Borrower may continue its present policies with respect to
returned merchandise and adjustments. However, Borrower shall immediately
notify Bank of all cases involving returns, repossessions, and loss or
damage of or to merchandise represented by the Accounts and of any credits,
adjustments or disputes arising in connection with the goods or services
represented by the Accounts and, in any of such events, Borrower will
immediately pay to Bank from its own funds (and not from the proceeds of
Accounts or Inventory) for application to Borrower's Loan Account or any
other obligation secured hereby the amount of any credit for such returned
or repossessed merchandise and adjustments made to any of the Accounts.
8. Borrower represents and warrants to Bank: (i) If Borrower is a corporation,
that Borrower is duly organized and existing in the State of its
incorporation and the execution, delivery and performance hereof are within
Borrower's corporate powers, have been duly authorized and are not in
conflict with law or the terms of any charter, by-law or other incorporation
papers, or of any indenture, agreement or undertaking to which Borrower is a
party or by which Borrower is found or affected; (ii) Borrower is, or at the
time the collateral becomes subject to Bank's security interest will be, the
true and lawful owner of and has, or at the time the Collateral becomes
subject to Bank's security interest will have, good and clear title to the
Collateral, subject only to Bank's rights therein; (iii) Each Account is, or
at the time the Account comes into existence, will be, a true and correct
statement of a bona fide indebtedness incurred by the debtor named therein
in the amount of the Account for either merchandise sold or delivered (or
being held subject to Borrower's delivery instructions) to, or services
rendered, performed and accepted by, the account debtor; (iv) That there are
or, to the best of Borrower's knowledge, will be no defenses, counterclaims,
or setoffs which may be asserted against the Accounts; and (v) any and all
financial information, including information relating to the Collateral,
submitted by Borrower to Bank, whether previously or in the future, is or
will be true and correct.
9. Borrower will: (i) Furnish Bank from time to time such financial statements
and information as Bank may reasonably request and inform Bank immediately
upon the occurrence of a material adverse change therein; (ii) Furnish Bank
periodically, in such form and detail and at such times as Bank may require,
statements showing aging and reconciliation of the Accounts and collections
thereon; (iii) Permit representatives of Bank to inspect Borrower's books
and records relating to the Collateral and make extracts therefrom at any
reasonable time and to arrange for verification of the Accounts, under
reasonable procedures, acceptable to Bank, directly with the account debtors
or otherwise at Borrower's expense; (iv) Promptly notify Bank of any
attachment or other legal process levied against any of the Collateral and
any information received by Borrower relative to the Collateral, including
the Accounts, the account debtors or other persons obligated in connection
therewith, which may in any way affect the value of the Collateral or the
rights and remedies of Bank in respect thereto; (v) Reimburse Bank upon
demand for any and all legal costs, including reasonable attorneys' fees,
and other expense incurred in collecting any sums payable by Borrower under
Borrower's Loan Account or any other obligation secured hereby, enforcing
any term or provision of this Security Agreement or otherwise or in the
checking, handling and collection of the Collateral and the preparation and
enforcement of any agreement relating thereto; (vi) Notify Bank of each
location and of each office of Borrower at which records of Borrower
relating to the Accounts are kept; (vii) Provide, maintain and deliver to
Bank policies insuring the Collateral against loss or damage by such risks
and in such amounts, forms and companies as Bank may require and with loss
payable solely to Bank, and, in the event Bank takes possession of the
Collateral, the insurance policy or policies and any unearned or returned
premium thereon shall at the option of Bank become the sole property of
Bank, such policies and the proceeds of any other insurance covering or in
any way relating to the Collateral, whether now in existence or hereafter
obtained, being hereby assigned to Bank; and (viii) In the event the unpaid
balance of Borrower's Loan Account shall exceed the maximum amount of
outstanding loans to which Borrower is entitled under Section 1 hereof,
Borrower shall immediately pay to Bank, from its own funds and not from the
proceeds of Collateral, for credit to Borrower's Loan Account the amount of
such excess.
10. Bank may at any time upon the occurance and continuance of a default
hereunder, collect the Accounts and may give notice of assignment to any and
all account debtors, and Borrower does hereby make, constitute and appoint
Bank its irrevocable, true and lawful attorney with power to receive, open
and dispose of all mail addressed to Borrower, to endorse the name of
Borrower upon any checks or other evidences of payment that may come into
the possession of Bank upon the Accounts; to endorse the name of the
undersigned upon any document or instrument relating to the Collateral; in
its name or otherwise, to demand, sue for, collect and give acquittances for
any and all moneys due or to become due upon the Accounts; to compromise,
prosecute or defend any action, claim or proceeding with respect thereto;
and to do any and all things necessary and proper to carry out the purpose
herein contemplated.
11. Until Borrower's Loan Account and all other obligations secured hereby shall
have been repaid in full, Borrower shall not sell, dispose of or grant a
security interest in any of the Collateral other than to Bank, or execute
any financing statements covering the Collateral in favor of any secured
party or person other than Bank, except as permitted in the Credit Terms and
Conditions referenced below.
12. Should: (i) Default be made in the payment of any obligation, or breach be
made in any warranty, statement, promise, term or condition, contained
herein or hereby secured; (ii) Any statement or representation made for the
purpose of obtaining credit hereunder prove false; (iii) Bank deem the
Collateral inadequate or unsafe or in danger of misuse; (iv) Borrower become
insolvent or make an assignment for the
Page 2 of 3
<PAGE>
benefit of creditors; or (v) Any proceeding be commended by or against
Borrower under any bankruptcy, reorganization, arrangement, readjustment of
debt or moratorium law or statute; then in any such event, Bank may, at its
option and without demand first made and without notice to Borrower, do any
one or more of the following: (a) Terminate its obligation to make loans to
Borrower as provided in Section 1 hereof; (b) Declare all sums secured
hereby immediately due and payable; (c) Immediately take possession of the
Collateral wherever it may be found, using all necessary force so to do, or
require Borrower to assemble the Collateral and make it available to Bank at
a place designated by Bank which is reasonably convenient to Borrower and
Bank, and Borrower waives all claims for damages due to or arising from or
connected with any such taking; (d) Proceed in the foreclosure of Bank's
security interest and sale of the Collateral in any manner permitted by law,
or provided for herein; (e) Sell, lease or otherwise dispose of the
Collateral at public or private sale, with or without having the Collateral
at the place of sale, and upon terms and in such manner as Bank may
determine, and Bank may purchase same at any such sale; (f) Retain the
Collateral in full satisfaction of the obligations secured thereby; (g)
Exercise any remedies of a secured party under the Uniform Commercial Code.
Prior to any such disposition, Bank may, at its option, cause any of the
Collateral to be repaired or reconditioned in such manner and to such extent
as Bank may deem advisable, and any sums expended therefor by Bank shall be
repaid by Borrower and secured hereby. Bank shall have the right to enforce
one or more remedies hereunder successively or concurrently, and any such
action shall not estop or prevent Bank from pursuing any further remedy
which it may have hereunder or by law. If a sufficient sum is not realized
from any such disposition of Collateral to pay all obligations secured by
this Security Agreement, Borrower hereby promises and agrees to pay Bank any
deficiency.
13. If any writ of attachment, garnishment, execution or other legal process be
issued against any property of Borrower, or if any assessment for taxes
against Borrower, other than real property, is made by the Federal or State
government or any department thereof, the obligation of Bank to make loans
to Borrower as provided in Section 1 hereof shall immediately terminate and
the unpaid balance of the Loan Account, all other obligations secured hereby
and all other sums due hereunder shall immediately become due and payable
without demand, presentment or notice.
14. Borrower authorizes Bank to destroy all invoices, delivery receipts, reports
and other types of documents and records submitted to Bank in connection
with the transactions contemplated herein at any time subsequent to four
months from the time such items are delivered to Bank.
15. Nothing herein shall in any way limit the effect of the conditions set forth
in any other security or other agreement executed by Borrower, but each and
every condition hereof shall be in addition thereto.
16. Additional Provisions*: Subject to the conditions and limitations contained
in the Credit Terms and Conditions dated April 1, 1997.
Executed this 1st day of, April 1997
CONSILIUM, INC.
---------------------------------------
(Name of Borrower)
IMPERIAL BANK By:
------------------------------------
(Authorized Signature and Title)
By: By:
---------------------------------- ------------------------------------
(Title) (Authorized Signature and Title)
- ----------------------------------
* If none, insert "None"
Page 3 of 3
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> JUL-31-1997
<CASH> 5,474
<SECURITIES> 0
<RECEIVABLES> 14,360
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 20,958
<PP&E> 4,510
<DEPRECIATION> 0
<TOTAL-ASSETS> 29,659
<CURRENT-LIABILITIES> 22,524
<BONDS> 0
0
0
<COMMON> 7,103
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 29,659
<SALES> 30,574
<TOTAL-REVENUES> 30,574
<CGS> 14,327
<TOTAL-COSTS> 14,327
<OTHER-EXPENSES> 22,153
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 75
<INCOME-PRETAX> (5,981)
<INCOME-TAX> 262
<INCOME-CONTINUING> (5,906)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,243)
<EPS-PRIMARY> (0.78)
<EPS-DILUTED> 0
</TABLE>
