<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarter period ended December 31, 1999
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Exchange Act
For the transition period from _________ to _________
Commission File number 0-16449
OMNIS TECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 94-3046892
(State of incorporation) (IRS Employer Identification No.)
981 Industrial Road, Building B
San Carlos, CA 94070
(Address of principal executive offices)
(650) 632-7100
(Registrant's telephone number)
Check whether the issuer: (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act during the past 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 [ ]
As of February 1, 2000 there were 9,865,091 shares of registrant's Common
Stock, $.10 par value, outstanding.
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OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets -
December 31, 1999 and March 31, 1999 3
Condensed Consolidated Statements of Operations - Three and Nine
Months ended December 31, 1999 and 1998 4
Condensed Consolidated Statements of Cash Flows -
Nine Months ended December 31, 1999 and 1998 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 2. Changes in Securities 21
Item 3. Defaults upon Senior Securities 22
Item 4. Submission of Matters to a Vote of Security Holders 22
Item 5. Other Information 22
Item 6. Exhibits and Reports on Form 8-K 22
Signatures 23
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31, March 31,
1999 1999
------------ ------------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and equivalents $ 879,000 $ 271,000
Trade accounts receivable, less allowance
for doubtful accounts and returns of
$186,552 and $150,049, respectively 1,793,000 764,000
Inventory 17,000 13,000
Other current assets 291,000 609,000
------------ ------------
Total current assets 2,980,000 1,657,000
------------ ------------
Property, furniture and equipment, net 728,000 890,000
Other assets 10,000
------------ ------------
Total assets $ 3,708,000 $ 2,557,000
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Line of Credit $ 500,000 $
Accounts payable 519,000 240,000
Accrued liabilities 865,000 533,000
Current portion of long term debt 109,000 82,000
Deferred revenue 457,000 412,000
------------ ------------
Total current liabilities 2,450,000 1,267,000
------------ ------------
Long term debt 28,000
------------ ------------
Total liabilities 2,450,000 1,295,000
------------ ------------
Stockholders' Equity:
Preferred stock 300,000 300,000
Common stock 986,000 967,000
Paid-in capital 45,224,000 45,180,000
Accumulated deficit (45,376,000) (45,386,000)
Accumulated other comprehensive income 124,000 201,000
------------ ------------
Total stockholders' equity 1,258,000 1,262,000
------------ ------------
Total liabilities and stockholders'
equity $ 3,708,000 $ 2,557,000
============ ============
</TABLE>
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OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
------------------------------- -------------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net revenues:
Products $ 2,090,000 $ 1,175,000 $ 4,142,000 $ 2,954,000
Services 257,000 434,000 760,000 1,304,000
------------ ------------ ------------ ------------
Total net revenues 2,347,000 1,609,000 4,902,000 4,258,000
Costs and expenses:
Cost of product revenues 38,000 67,000 105,000 262,000
Cost of service revenues 46,000 96,000 144,000 298,000
Selling and marketing 916,000 505,000 2,015,000 1,579,000
Research & development 560,000 360,000 1,465,000 1,057,000
General and administrative 356,000 399,000 1,154,000 2,027,000
------------ ------------ ------------ ------------
Total costs and expenses 1,916,000 1,427,000 4,883,000 5,223,000
Operating income (loss) 431,000 182,000 19,000 (965,000)
------------ ------------ ------------ ------------
Other income (expense):
Interest income (3,000) (2,000) (7,000) (5,000)
Interest expense and
other, net 8,000 51,000 17,000 259,000
------------ ------------ ------------ ------------
5,000 49,000 10,000 254,000
------------ ------------ ------------ ------------
Income (loss) before income taxes 426,000 133,000 9,000 (1,219,000)
Income tax expense (5,000) 0 (1,000) 4,000
------------ ------------ ------------ ------------
Net income (loss) $ 431,000 $ 133,000 $ 10,000 $ (1,223,000)
============ ============ ============ ============
Basic net income (loss) per share $ 0.04 $ 0.06 $ 0.00 $ (0.58)
Weighted average number of
common shares outstanding 9,844,050 2,125,863 9,735,742 2,125,852
Diluted net income (loss) per
share $ 0.04 $ 0.05 $ 0.00 $ (0.58)
Fully diluted number of common
shares outstanding 11,224,322 2,689,064 10,905,567 2,125,852
</TABLE>
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OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
December 31,
-----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $ 10,000 $(1,223,000)
Adjustments to reconcile net income (loss) to
net cash provided by (used for) operating
activities:
Depreciation and amortization expense 260,000 341,000
Change in assets and liabilities:
Trade accounts receivable (1,029,000) (257,000)
Inventory (4,000) 54,000
Loss on disposal of property 1,000 95,000
Other assets 328,000 596,000
Accounts payable and accrued
liabilities 582,000 (1,146,000)
Deferred revenue 45,000 (331,000)
Bank overdraft (117,000)
----------- -----------
Net cash provided by (used for) operating
activities 193,000 (1,988,000)
----------- -----------
Cash Flows from Investing Activities:
Purchase of property, furniture and equipment (93,000) (24,000)
Proceeds from sale of fixed assets 1,000 57,000
----------- -----------
Net cash provided by (used for) investing
activities (92,000) 33,000
----------- -----------
Cash Flows from Financing Activities:
Proceeds from preferred stock issuance 1,000,000
Proceeds from incentive stock option exercise 2,000
Proceeds from stock issuance 89,000 1,000
Additions of debt 622,000 864,000
Repayments of debt (122,000) (100,000)
----------- -----------
Net cash provided by financing activities 591,000 1,765,000
----------- -----------
Effect of Exchange Rate Changes on Cash (84,000) 75,000
Net increase (decrease) in cash and equivalents 608,000 (115,000)
Cash and equivalents at beginning of period 271,000 242,000
----------- -----------
Cash and Equivalents at End of Period $ 879,000 $ 127,000
=========== ===========
</TABLE>
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OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The unaudited financial information furnished herein reflects all
adjustments, consisting only of normal recurring items, which in the opinion of
management are necessary to fairly state the Company's financial position, the
results of its operations and the changes in its financial position for the
periods presented. These financial statements should be read in conjunction with
the Company's audited financial statements for the year ended March 31, 1999.
The results of operations for the period ended December 31, 1999 are not
necessarily indicative of results to be expected for any other interim period or
the fiscal year ending March 31, 2000.
2. Compass Actions.
In March 1998, the Company was sued by Compass Software ("Compass") in
the Federal District Court for the Eastern District of Washington alleging
damages for software copyright infringement and related claims. On November 29,
1999, the Federal District Court dismissed the case and judgment was entered on
behalf of the Company. The period for an appeal of the dismissal has past
without any further action by Compass. As a result the Company has prevailed in
this action.
The Company previously had sued Compass in the same court in a separate
action in 1994, claiming that Compass had illegally infringed on and distributed
the Company's software products. This matter was settled with an agreement that
Compass would pay certain amounts and would not make illegal copies of the
Company's software in the future. Compass failed to pay the promised amounts
when due. The Company then obtained a judgment for breach of contract against
Compass. As part of its efforts to enforce the judgment against Compass, the
Company purchased, at a judgment lien sale, certain intangible property of
Compass including the rights to the now-dismissed 1998 infringement suit.
Compass then requested the applicable court to set aside the execution sale and
a claim for attorney's fees brought by the Company. The court granted the
request and the Company currently is appealing that portion of the judgment
disallowing attorney's fees. The appeal has been briefed and oral argument will
be held in February 2000.
The Company also filed in September 1998 a separate lawsuit seeking
monetary damages against Compass in the Federal District Court for the Western
District of Washington, alleging additional acts of copyright infringement by
Compass for later years. That lawsuit is currently pending.
BTN Action.
The Company entered into a professional development services agreement
with BTN Versandhandel GmbH ("BTN") of Leiferde, Germany for the development of
an OMNIS application. The Company developed and delivered a version of the
application to BTN. BTN failed to pay the Company as agreed, claiming there were
flaws in the application. The Company suspended the project awaiting BTN's
payment. BTN commenced legal action against the Company in Germany claiming
damages of approximately $128,600 (DM250,000) as of December 31, 1999 for
failure to perform under the service agreement. The Company has countersued BTN
claiming the balance owed under the contract of approximately $30,900 (DM60,000)
as of December 31, 1999. The Company believes that the claim by BTN is meritless
and intends to aggressively pursue its counterclaim against BTN.
6
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OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES
This report on Form 10-QSB includes a number of forward-looking
statements that reflect the Company's current views with respect to future
events and financial performance. These forward-looking statements are subject
to certain risks and uncertainties, including those discussed in "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
the Company's actual results may differ materially from historical or
anticipated results. The Company operates in one segment, the developing,
marketing and supporting of software products; however the Company manages its
businesses in two geographical locations: North America and Europe. The
following table presents information concerning the Company's North American and
European operations.
<TABLE>
<CAPTION>
Nine Months Ended
December 31,
-----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Revenue by geographic region(l):
Revenue from North America $ 2,429,000 $ 1,852,000
Revenue from Europe 2,473,000 2,406,000
----------- -----------
Total $ 4,902,000 $ 4,258,000
Operating income (loss) by geographic region(l):
Revenue from North America $ 278,000 $ (799,000)
Revenue from Europe (259,000) (166,000)
----------- -----------
Total $ 19,000 $ (965,000)
</TABLE>
(1) Revenues are broken out geographically by ship from location.
COMPREHENSIVE INCOME (LOSS)
Comprehensive income includes changes in the balance of items that are reported
directly in a separate component of stockholders' equity on the condensed
consolidated balance sheets. The reconciliation of net loss to comprehensive
loss is as follows.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
----------------------------- -----------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net income (loss): $ 431,000 $ 133,000 $ 10,000 $(1,223,000)
Other comprehensive (loss) gain
Foreign currency
translation adjustments (20,000) 4,000 (77,000) 72,000
----------- ----------- ----------- -----------
Total comprehensive income (loss) $ 411,000 $ 137,000 $ (67,000) $(1,151,000)
=========== =========== =========== ===========
</TABLE>
7
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ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
This Item 2, as well as other portions of this document, include certain
forward-looking statements about the Company's business, revenues, expenditures
and operating and capital requirements. In addition, forward-looking statements
may be included in various other Company documents to be issued concurrently or
in the future and in oral or other statements made by representatives of the
Company to investors and others from time to time. Forward-looking statements
are subject to risks and uncertainties that could cause actual results to differ
materially from predicted results. Such risks include, among others
- the Company's degree of liquidity and ability to obtain
additional financing,
- significant variability in operating results, including
variability in product revenues and gross margins,
- fluctuating demand for new and established products,
- dependence on development of new products,
- increasing expenses for marketing and development of new
products,
- historical lack of profitability,
- rapid technological change that affects the ability of the
Company to respond to customer or market demands,
- risks associated with global operations,
- the continued and future acceptance of the Company's products,
- the rate of growth in the industries in which the Company's
products are marketed,
- the presence of competitors with greater technical, marketing and
financial resources, and
- the ability of the Company to successfully expand its operations.
Any of such statements and this discussion should be read in conjunction with
the discussion of "Risk Factors" in this Item 2 and the Company's audited
consolidated financial statements, including the notes thereto, included in its
annual report for the fiscal year ended March 31, 1999, on Form 10-KSB/A filed
with the Commission on July 29, 1999.
OVERVIEW
The Company, through its domestic and international subsidiaries,
develops and markets software application development tools and related
technical services. Its main products are the
8
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OMNIS 7(3)(TM) client/server application development software group of products
and the more advanced OMNIS Studio(TM) and Web Client(TM) rapid application
development tools.(1)
A significant aspect of the Company's products is the products' ability
to run across several different operating system platforms. The OMNIS 7(3) runs
on both Macintosh OS and Windows 95/98/NT operating systems, while the more
advanced OMNIS Studio products run on Macintosh OS, Windows 95/98/NT and
Linux operating systems.
During the third fiscal quarter ending December 31, 1999, the Company
made some significant additions to its management team in North America,
principally with the hiring of James W. Dorst as Chief Operating Officer and
Chief Financial Officer and Jerald Lipscomb as Chief Evangelist. Mr. Dorst and
Mr. Lipscomb were hired in part to construct a North American team to take
advantage of OMNIS Studio's ability to provide advanced application solutions
to both the existing market and the emerging Linux marketplace.
The Company markets its products primarily through its indirect channel
consisting of software application developers, value added resellers,
distributors, and OEM relationships.
OMNIS STRATEGY
The Company's product strategy is to develop sophisticated object-based
application development tools to enable independent software developers and
enterprises to build custom software applications that have the following
features:
- Integrate with existing systems and execute across a variety of
platforms, databases and components.
- Extend the client/server model across the Internet.
- Deliver superior object-oriented functionality at a lower cost
than applications developed using other software development
tools.
- Develop reusable program components.
The Company's goal is to maintain a high level of technological
innovation and, through aggressive marketing and distribution, to significantly
increase the number of software developers and enterprises using OMNIS products.
- --------
(1) OMNIS is a registered trademark of OMNIS Software Limited. OMNIS Studio and
OMNIS 7 and OMNIS Studio Web Client are trademarks of OMNIS Technology
Corporation. All other products or service names mentioned herein are trademarks
of their respective owners.
9
<PAGE> 10
Consistent with this goal, the Company has begun to organize itself into
two operational business units, the Enterprise Business Unit ("EBU") and the
Linux Business Unit ("LBU"). The purpose for this division is to acknowledge and
focus on the requirements of each of these large and important discrete markets.
The EBU concentrates on increasing penetration of our existing customer base,
introducing OMNIS Studio and Web Client to new corporate customers. The LBU will
position and market OMNIS Studio and Web Client into the fast growing Linux
operating system marketplace.
The Company is a technology leader in the development and deployment of
component engineering software. The Company believes that its OMNIS Studio and
Web Client and OMNIS 7(3) product lines provide powerful tools for the
prompt development and deployment of Internet and client/server applications for
such markets as health care and pharmaceuticals, legal and administration, human
resources and accounting, manufacturing, education and government. These
products provide the capability to reuse software objects and to integrate
objects from different programming languages.
The Company's Products
OMNIS Studio(R)
The OMNIS Studio development tool is the Company's premium product line
and was one of the first commercially available application development tools
that integrated ActiveX and Java Beans components. OMNIS Studio is an
object-oriented rapid application development tool, offering efficient
visual assembly of components and objects. OMNIS Studio currently provides
cross-platform support for Linux, Microsoft Windows 95 and Windows 98, Windows
NT, Windows 3.1 and Macintosh OS operating systems; a powerful code inspector; a
report writer; a multiple-mode debugger; and support for localization and
multilingual implementation.
The OMNIS Studio programming language combines a fourth generation
object-oriented programming language and its own "dot notation", which is a
hierarchical language that permits the user to manipulate any object down to its
individual attributes and events. OMNIS Studio contains a proprietary set of
Data Access Modules that provide access to and seamless conversion between
industry-leading databases, including Oracle, Sybase, DB2, Informix, and most
other ODBC-compliant databases such as MS SQL Server and MySQL. From within one
integrated design environment, the OMNIS SQL Browser enables access to different
types of server databases and movement of objects and data from one database to
another.
The Linux version of OMNIS Studio was released in September 1999. This
version enables OMNIS developers to create and deliver their applications in
most Linux environments in addition to existing platforms. In addition,
certain of the external components of OMNIS Studio are presently available in
open source format to provide working examples for developers interested in
programming their own components for use with OMNIS Studio.
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OMNIS Studio Web Client(TM)
The OMNIS Studio Web Client was announced in late 1998 and released in
April 1999. The OMNIS Studio Web Client is designed to use object-oriented
programming for the development of Internet based forms, using drag and drop and
wizards, and includes controls such as dropdown lists, tabs and sidebars to ease
construction of web enabled applications.
Using the Web Client, a user can view OMNIS applications on the Internet
with a standard web browser, such as Microsoft Internet Explorer or Netscape
Navigator. The server application is developed using standard OMNIS technology
and runs a proprietary OMNIS engine that is located between the web server and
the database. Web Client requires no compilation or other operations requiring
server downtime, and provides for fast, rich web interfaces.
OMNIS 7(3)(TM)
The OMNIS 7(3) development tool is a cross-platform application
development tool for the development of form-based client/server software
applications. OMNIS 7(3) has been the Company's main product line for a number
of years and continues to be an important, although diminishing, source of
revenue for the Company.
The OMNIS Version Control System ("VCS") and OMNIS Change Management
System provide format and library storage, version tracking, and application
life-cycle support. OMNIS 7(3) applications can be deployed under Windows 3.1,
Windows 95/98, Windows NT, Power Macintosh and 68030 or 68040 Macintosh systems.
The OMNIS Web Enabler SDK permits the application to be adapted to
access information via the Internet.
OMNIS 7(3) is currently available in two editions, the Workgroup and
Enterprise editions. OMNIS 7(3) Workgroup includes the OMNIS relational database
and the OMNIS Web Enabler SDK. OMNIS 7(3) Enterprise includes all of the
components of the Workgroup (to access any server database using the SQL
Browser) and the OMNIS VCS.
The Company does not anticipate adding significant enhancements to the
functions of OMNIS 7(3). In general, the Company licenses OMNIS 7(3) only to
existing OMNIS 7(3) users desiring to upgrade to the latest version of OMNIS
7(3).
Applications developed with OMNIS Studio or OMNIS 7(3) require the OMNIS
Runtime software, which acts as a software environment shell for the
application, and the Company licenses OMNIS Runtime to end users and to certain
developers, who sublicense OMNIS Runtime to end users of those developers'
applications.
11
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RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 1999 AND
DECEMBER 31, 1998
REVENUES
Total net revenues for the three months ended December 31, 1999 were
$2,347,000, representing an increase of 46% as compared to total net revenues of
$1,609,000 for the three months ended December 31, 1998. Total net revenues for
the nine months ended December 31, 1999 were $4,902,000 representing an increase
of 15% as compared to total net revenues of $4,258,000 for the nine months ended
December 31, 1998. This increase is due primarily to a single large sale to one
company in North America during the quarter.
Product revenues increased during the three months ended December 31,
1999 to $2,090,000 from $1,175,000 in the three months ended December 31, 1998.
Product revenues increased during the nine months ended December 31, 1999 to
$4,142,000 from $2,954,000 in the nine months ended December 31, 1998. This
increase also is due primarily to a single large sale to one company in North
America.
Service revenues for the three months ended December 31, 1999 decreased
41% to $257,000 from $434,000 for the three months ended December 31, 1998.
Service revenues for the nine months ended December 31, 1999 decreased 42% to
$760,000 from $1,304,000 for the nine months ended December 31, 1998. The
majority of this decrease is due to the Company's decision to phase out its
consulting offerings. Maintenance revenue, which primarily consists of fees from
email and telephone support to the Company's customers, decreased during the
period ending December 31, 1999 due to a decrease in the annual support fees
being charged to customers.
The Company does not expect to receive significant service revenues
related to consulting projects in future periods as it focuses on higher margin
product related revenue and shifts consulting opportunities to its external
customers.
COST OF SALES
Cost of product revenues is comprised of direct costs associated with
software product sales including software packaging, documentation, and physical
media costs. Cost of service revenues is comprised of customer support
(maintenance) expenses, including technical support salaries and related
expenses, and consulting related costs, including consultant salaries and
related costs incurred in delivering customer consulting and training services.
Cost of product revenues as a percentage of product revenues decreased
to 2% in the three months ended December 31, 1999 as compared to 4% in the three
months ended December 31, 1998. Cost of product revenues as a percentage of
product revenues decreased from 9% in the nine months ended December 31, 1998 to
3% in the nine months ended December 31, 1999. This is due primarily to the
reduction in headcount in the production department during the nine months ended
December 31, 1999 and an inventory obsolescence write-off during the nine months
ended December 31, 1998.
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Cost of service revenues decreased as a percentage of service revenues
from 22% in the three months ended December 31, 1998 to 18% in the three months
ended December 31, 1999. Cost of service revenues decreased as a percentage of
service revenues from 23% in the nine months ended December 31, 1998 to 19% in
the nine months ended December 31, 1999. This decrease was primarily due to a
significant reduction in headcount in the consulting division, resulting in
significantly better utilization of the Company's consulting resources.
Currently the Company retains very few consultants and the Company's remaining
consultants are typically fully utilized. In addition, the Company has very
little, if any, management resources assigned to the consulting division,
thereby reducing overhead costs. At the same time, the Company's technical
support group continues to generate favorable gross margins, and represents the
majority of the related revenues and costs within service revenues.
SALES AND MARKETING EXPENSE
Sales and marketing expenses increased to $916,000 for the three months
ended December 31, 1999 as compared to $505,000 for the three months ended
December 31, 1998. Sales and marketing expenses increased to $2,015,000 for the
nine months ended December 31, 1999 as compared to $1,579,000 for the nine
months ended December 31, 1998. The increase in sales and marketing expenses was
primarily due to increased commission expense incurred with the closing of the
single large sale to one company during the quarter noted above. The Company
further anticipates that its sales and marketing expenses will increase
substantially in the fourth quarter of the 2000 fiscal year to expand sales and
marketing operations in North America and for related activities.
RESEARCH AND DEVELOPMENT EXPENSE
Research and development costs increased to $560,000 for the three
months ended December 31, 1999 as compared to $360,000 for the three months
ended December 31, 1998. Research and development costs increased to $1,465,000
for the nine months ended December 31, 1999 as compared to $1,057,000 for the
nine months ended December 31, 1998. This increase was due primarily to an
increase in headcount at the Research and Development Center of the Company in
the United Kingdom. The Company continues to invest in the development of its
newer product line, OMNIS Studio, aimed at sales opportunities that the Company
believes will expand its installed base of customers.
GENERAL AND ADMINISTRATIVE EXPENSE
General and administrative expenses decreased to $356,000 for the three
months ended December 31, 1999 as compared to $399,000 for the three months
ended December 31, 1998. General and administrative expenses decreased to
$1,154,000 for the nine months ended December 31, 1999 as compared to $2,027,000
for the nine months ended December 31, 1998. This decrease was primarily due to
a decrease in headcount.
OTHER INCOME (EXPENSE)
Other income (expense) is comprised primarily of interest income earned
on cash and cash equivalents, interest expense, and any gain or loss on foreign
currency transactions. Interest income increased slightly to $3,000 for the
three months ended December 31, 1999 from $2,000 for the three months ended
December 31, 1998. Interest income increased to $7,000 for the nine months ended
December 31, 1999 from $5,000 for the nine months ended December 31, 1998. This
increase was primarily due to higher average balances of cash and cash
equivalents. The Company has secured a $3.0 million short-term line of credit
from a significant shareholder and has drawn down $500,000 during the three
months ended December 31, 1999. Interest and other net expense decreased to
$8,000 during the three months ended December 31, 1999 from $51,000 during the
three months ended December 31, 1998 and $17,000 for the nine months ended
December 31, 1999 compared to $259,000 for the nine months ended December 31,
1998.
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These decreases are primarily due to the conversion to equity of a promissory
note from the Company to a significant shareholder in March 1999.
PROPERTIES
During the initial part of the fiscal year ended March 31, 1999, the
Company had leased approximately 22,178 square feet of office space in San
Bruno, California under a lease which expired in May 2002 and required payment
of base monthly rental payments of $58,772 plus a percentage of operating costs
and property taxes. The base monthly rent increased to $60,990 per month during
1998. The Company negotiated a termination of this lease in August 1998 and now
occupies 3,800 square feet of office space in San Carlos, California under a
lease which expires on August 31, 2000, at a base monthly rent of $7,706.
The Company owns property in the United Kingdom that it uses for
research and development. The Company also leased 2,738 square feet of office
space for the European sales headquarters office in Bracknell, England. The
Bracknell lease, which was to expire in February 2001, had monthly rental
payments of approximately $5,009 plus approximately $2,161 for common area
maintenance. The Company agreed to an early termination of this lease with the
landlord and moved on June 15, 1999, to new offices near Watford, England. This
will result in substantial savings on rent and service charges over a full year.
The Company also leases 2,370 square feet of office space in London, England
(formerly its London sales office). That lease, which expires on November 1,
2012, has monthly rental payments of approximately $3,831. During the 1999
fiscal year, the Company sublet all of the London office space, for which it
received a rental of approximately $2,259 per month plus 100% reimbursement for
common area maintenance. As a result of a sublease review, the sublease rent
charged subsequently increased to approximately $3,831 per month, backdated to
November 1997. The sublease terminated on December 25, 1999, and the Company
currently is negotiating with the landlord for an early termination of the main
lease.
The Company leases property in Germany for use as a sales office. The
space is 457 square meters and has monthly rental payments of approximately
$6,222. The lease will expire May 14, 2007, although the Company has an option
to terminate the lease in May 2002. The Company believes that these facilities
are more than adequate to meet its requirements for fiscal year 2000.
All of the foregoing rental obligations are payable in the local
currency but for purposes of this discussion have been translated into U.S.
Dollars using the exchange rate at December 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1999, the Company's principal sources of liquidity
consisted of cash and cash equivalents of $879,000, as compared to $271,000 at
March 31, 1999. The Company's working capital position increased to $530,000 at
December 31, 1999 from $390,000 at March 31, 1999.
The Company operated at a profit for the nine months ended December 31,
1999. The Company's new management team has taken steps to improve the Company's
cash flow through (1) focusing research and development expenditures on products
that have a shorter return or "payback" period; (2) improving operational
efficiencies; (3) significantly reducing operating expenses; and (4) securing
short term financing through a line of credit of $3.0 million from a significant
shareholder in December 1999. With these improvements, the Company reduced cash
used in operations from $6,180,000 in fiscal year 1998 to $2,514,000 in fiscal
year 1999. The Company had positive cash flow provided by operating activities
of $193,000 in the nine months ended December 31, 1999 compared to negative cash
flow from operating activities of $1,988,000 in the nine months ended December
31, 1998. The Company also had a net profit of $10,000 in the nine months ended
December 31, 1999 compared to a net loss of $1,223,000 in the nine months ended
December 31, 1998. However, there can be no assurance that the Company will be
able to continue the trend of profitability in the near future or thereafter.
In February 1998, the Nasdaq Stock Exchange de-listed the Company from
the Nasdaq SmallCap Market. The Company is now traded on the Nasdaq Bulletin
Board. This has had a negative impact on the liquidity of the Company's
outstanding common shares. The Company has recently applied for relisting on the
Nasdaq SmallCap Market; however it is not known at this time when or if the
Company will be re-listed.
Management believes that with the $3.0 million short-term financing, the
Company's plan to focus research and development expenditures on products that
have a shorter "payback" period, improved operational efficiencies and the
aggressive management of operating expenses, cash to fund ongoing operations
should be sufficient to sustain operations through May 31, 2000. It is
anticipated, however, that the Company will have to obtain a line of credit
facility or sell additional equity or debt securities before June 1, 2000.
The Company does not currently have an established line of credit with a
commercial bank. Such a credit facility may be difficult to obtain with the
Company's historical operating results. Accordingly, in order to obtain
additional funds in the future, the Company will need to seek additional debt or
equity capital. The sale of additional equity would be dilutive to current
stockholders, while the sale of additional debt securities would decrease the
overall equity of current stockholders in the Company. The Company is currently
attempting to raise additional capital; however there can be no assurance that
the Company will be able to raise additional capital on commercially reasonable
terms.
RISK FACTORS
QUARTERLY FLUCTUATIONS
The Company has experienced significant quarterly fluctuations in
operating results and anticipates such fluctuations to continue in the future.
The Company generally ships orders as they are received and, as a result,
typically the Company has little or no backlog. Quarterly revenues and operating
results, therefore, depend on the volume and timing of orders received during
the quarter, which are difficult to forecast. The Company has typically sold to
large corporate enterprises, significant customers, and distributors that often
purchase in significant quantities, and therefore, the timing of the receipt of
such orders could cause significant
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<PAGE> 15
fluctuations in operating results. Historically, the Company has often
recognized a substantial portion of its license revenues in the last month of
the quarter.
The Company's operating results may also fluctuate due to factors such
as
- the demand for its products,
- the size and timing of customer orders,
- changes in the proportion of revenues attributable to licenses
and service fees,
- changes in pricing policies by the Company or its competitors,
- the number, timing, and significance of product enhancements and
new product announcements by the Company and its competitors,
- the Company's ability to develop, introduce, and market new and
enhanced versions of its products on a timely basis,
- changes in the level of operating expenses,
- changes in the Company's sales incentive plans,
- budgeting cycles of the Company's customers,
- customer order deferrals in anticipation of enhancements or new
products offered by the Company or its competitors,
- product life cycles,
- software bugs and other product quality problems,
- personnel changes, including the Company's ability to hire and
retain key employees,
- changes in the Company's strategy,
- the level of international expansion,
- seasonal trends and general domestic and international economic
and political conditions, and
- the Company's liquidity and the availability of funds, among
others.
The development and introduction of new or enhanced products also
requires that the Company manages the transition from older, displaced products.
The transitional process must be managed effectively in order to (1) minimize
disruptions in customer ordering patterns, (2) avoid excessive levels of older
product inventory, and (3) ensure that adequate supplies of
15
<PAGE> 16
new products can be delivered to meet customer demand. Because the Company is
continuously engaged in this product development and transition process, its
operating results may be subject to considerable fluctuations, particularly when
measured on a quarterly basis.
For the reasons described above, the Company believes that
period-to-period comparisons of its operating results are not necessarily
meaningful and should not be relied upon as indications of future performance.
In addition, revenues in quarters after a new product release may be
significantly affected by the amount of product upgrade revenue, which tends to
increase soon after the release of a new product and then decline rapidly.
EXPENSE LEVELS
The Company's expense levels are based, in significant part, on the
Company's expectations as to future revenues and are therefore relatively fixed
in the short term. If revenue levels fall below expectations, net income is
likely to be disproportionately adversely affected because a proportionately
smaller amount of the Company's expenses vary with its revenues. There can be no
assurance that the Company will be able to achieve profitability on a quarterly
or annual basis in the future. Due to all of the foregoing factors, it is likely
that in some future quarter the Company's operating results will be below the
expectations of public market analysts and investors. In such event the price of
the Company's common stock would likely be materially adversely affected.
FUTURE OPERATING RESULTS
The Company's future operating results will depend, to a considerable
extent, on its ability to rapidly and continuously develop new products that
offer its customers enhanced performance at competitive prices. Inherent in this
process are a number of risks. The development of new, enhanced software
products is a complex and uncertain process requiring high levels of innovation
from the Company's designers as well as accurate anticipation of customer and
technical trends by the marketing staff. Once a product is developed, the
Company must rapidly bring it into production in order to achieve acceptable
product costs.
The Company participates in a dynamic high technology industry and
believes that changes in any of the following areas could have a material
adverse effect on the Company's future financial position or results of
operations: advances and trends in new technologies; competitive pressures in
the form of new products or price reductions on current products; the volume,
mix, and timing of orders; changes in product mix; changes in overall demand for
products and services offered by the Company; changes in certain strategic
partnerships or customer relationships; litigation or claims against the Company
based on intellectual property, regulatory or other factors; risks associated
with changes in domestic or international economic and/or political conditions
or regulations either in the industries the Company serves or generally; and the
Company's ability to attract and retain employees necessary to support growth.
INTELLECTUAL PROPERTY PROTECTION
The OMNIS products include technologies developed by the Company. The
Company relies primarily on a combination of trade secret, copyright and
trademark laws and contractual
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<PAGE> 17
provisions to protect its proprietary rights in such technologies. There is no
assurance that such laws and contractual provisions will adequately protect the
intellectual property and other proprietary rights of the Company. The Company
is in the process of preparing appropriate patent applications for certain of
its Web Client and other technologies and has engaged legal counsel for this
purpose. At this time the Company has not filed any final patent applications
and has not been granted any patents on any of its proprietary technologies and
there is no assurance that any such patents will be granted. Patent protection
may become important in the protection of the commercial viability of the
Company's innovative products, and the failure to obtain such patent protection
could have an adverse effect on the commercial viability of such products. The
Company's success, therefore, may in part depend on its ability to obtain patent
protection or licenses to patents in the future. It is not possible to
anticipate the breadth or degree of protection that patents would afford any
product of the Company or the underlying technologies. There can be no assurance
that any patents issued or licensed to the Company will not be successfully
challenged in the future or that any OMNIS product will not infringe the patents
or other intellectual property rights of third parties.
INTERNATIONAL OPERATIONS
The Company operates on a global basis with offices or distributors in
Europe and Asia as well as in North America. International operations are
subject to inherent risks, including costs and difficulties in staffing and
managing foreign operations; difficulties in obtaining and managing local
distributors; the costs and difficulties in localizing products into languages
other than English for foreign markets; political or economic instability,
unexpected regulatory changes and fluctuations in interest or exchange rates in
the specific countries in which the Company distributes its products or in
international markets in general; longer receivables collection periods and
greater difficulty in accounts receivable collection; import/export duties and
quotas; reduced protection for intellectual property rights in some countries;
and potentially adverse tax consequences. Also, as the Company continues to
operate more internationally, seasonality may become an increasing factor in its
financial performance. There can be no assurance that these factors or any
combination of these factors will not adversely affect the international
revenues or overall financial performance of the Company.
YEAR 2000
Many existing computer programs use only two digits to define the
applicable year in a date field. These programs were designed without
considering the impact of the change in the century that occurred at the end of
1999. If not corrected, computer applications could fail or create erroneous
results during the year 2000 and, potentially, beyond.
Year 2000 compliance means that neither performance nor functionality of
the computer system is affected by dates prior to, during or after the year
2000. In particular (1) no value for a current date will cause any interruption
in operation; (2) date based functionality must operate consistently for dates
prior to, during and after year 2000; (3) in all interfaces and data storage,
the century in any date must be specified explicitly or by unambiguous algorithm
or inferencing rules whenever possible; and (4) year 2000 must be recognized as
a leap year. The Company only certifies the latest versions of the OMNIS 7 and
OMNIS Studio product lines, which are OMNIS 7(3) version 7.0 and above and OMNIS
Studio 2.0 and above, as Year 2000 compliant
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<PAGE> 18
as herein defined. All new versions of OMNIS products will be tested to ensure
continued compliance. Earlier versions of OMNIS 7(3) and OMNIS Studio will store
date data correctly, but may fail on some date calculations, some of which
involve the year 2000. Users of OMNIS products have been advised of this issue,
and the Company provides for the downloading of the latest version of the date
functions applicable to the particular platform.
Provided that developers use the current version of OMNIS 7(3) or OMNIS
Studio in the manner designed, they should generate year 2000 compliant OMNIS
applications. It must be noted that both OMNIS Studio and OMNIS 7(3) provide a
programming interface to other programs and external functions written by
external developers and can access data stored in remote databases. In all cases
the date data passed to the remote database from the OMNIS storage should
contain the full 4 character year representation. However the Company cannot be
responsible for compliance within individual applications written by external
applications developers. The Company also does not accept any responsibility for
year 2000 compliance with respect to any hardware on which the Company's
products are used or any other software, including but not limited to operating
system software, server databases, data file systems and other software
utilities. The Company believes it has designed its current products to
effectively handle the year 2000 issue.
The majority of the Company's internal applications were built using
OMNIS products which it believes are year 2000 compliant. Therefore, the Company
believes that it has substantially mitigated its risks on the year 2000 issue
with its internal applications. The Company has completed the testing and
assessment of year 2000 compliance for all third party hardware and software and
non-information technology ("non IT") systems used by the Company, and the
Company believes that all such systems are year 2000 compliant. As of February
1, 2000, the Company has not suffered any material year 2000 problems.
The Company has occasionally received updates from its software
suppliers, and the Company has installed those updates as soon as practical
after receiving them. If the Company receives updates from its suppliers in the
future, the Company will install those upgrades or replace the applicable
hardware, software or other systems as soon as practical. In the event that any
hardware, software or non IT system, or any upgrade or replacement, is not year
2000 compliant, the Company plans to have adequate technical staff available to
respond promptly to address any failure that may occur.
The internal costs of such year 2000 compliance are not known at this
time. The Company cannot assure that it has been fully year 2000 compliant or
that year 2000 compliance issues will not arise in the future with respect to
products furnished by third party manufacturers, the Company's own products, or
suppliers, in each case potentially resulting in unforeseen costs or delays to
the Company and therefore having a material adverse effect on the Company.
This section is a Year 2000 Readiness Disclosure pursuant to the Year
2000 Information and Readiness Disclosure Act of 1998.
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<PAGE> 19
CHANGES IN PRICING STRUCTURE
The Company announced a reduction in certain portions of its pricing
structure for fiscal year 1999 and beyond and intends other price reductions or
adjustments for one or more products in the future. In this connection, on
February 1, 2000 the Company announced the introduction of new Omnis Partner
Programs for the North American users of its Omnis Studio and Web Client
products. These programs will result in additional price reductions for those
products in the North American market.
There is no guarantee that such reductions in prices will lead to
increased unit volume or other additional revenue streams to replace any lost
revenue, which could lead to a significant cash flow strain on the core
operations of the Company. Additionally, the Company is relying on increased
revenues related to its new OMNIS Studio and Web Client product lines, which
have not generated revenues as originally projected by the Company. There is no
assurance that these product lines will generate the revenues needed to sustain
the Company in coming quarters and beyond. The Company has committed to
decreasing sales conflicts with its key customers, particularly in the service
revenue area, and has already taken a number of steps in this regard. This has
had and will continue to have a negative effect on service revenues as compared
to previous quarters and years. There can be no guarantee that the Company will
be able to replace the decreasing service revenues with new product revenues.
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 contains certain
safe harbors regarding forward-looking statements. From time to time information
provided by the Company or statements made by its directors, officers or
employees may contain "forward-looking" information subject to numerous risks
and uncertainties. Any statements made herein that are not statements of
historical fact are forward-looking statements including, but not limited to,
statements concerning the characteristics and growth of the Company's markets or
customers, the Company's objectives or plans for future operations and products
and the Company's expected liquidity and capital resources. Such forward-looking
statements are based on a number of assumptions and involve a number of risks
and uncertainties, and therefore actual results could materially differ. These
risks and uncertainties include, among others, continuing liquidity problems,
significant variability in operating results, including variability in product
revenues and gross margins, fluctuating demand for new and established products,
dependence on the development of new products, increasing expenses for marketing
and the development of new products, historical lack of profitability, rapid
technological change that affects the ability of the Company to respond to
customer or market demands, risks associated with global operations, the
continued and future acceptance of the Company's products, the rate of growth in
the industries in which the Company's products are marketed, the presence of
competitors with greater technical, marketing and/or financial resources, and
the ability of the Company to successfully expand its operations.
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<PAGE> 20
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Compass Actions.
In March 1998, the Company was sued by Compass Software ("Compass") in
the Federal District Court for the Eastern District of Washington alleging
damages for software copyright infringement and related claims. On November 29,
1999, the Federal District Court dismissed the case and judgment was entered on
behalf of the Company. The period for an appeal of the dismissal has past
without any further action by Compass. As a result the Company has prevailed in
this action.
The Company previously had sued Compass in the same court in a separate
action in 1994, claiming that Compass had illegally infringed on and distributed
the Company's software products. This matter was settled with an agreement that
Compass would pay certain amounts and would not
20
<PAGE> 21
make illegal copies of the Company's software in the future. Compass failed to
pay the promised amounts when due. The Company then obtained a judgment for
breach of contract against Compass. As part of its efforts to enforce the
judgment against Compass, the Company purchased, at a judgment lien sale,
certain intangible property of Compass including the rights to the now-dismissed
1998 infringement suit. Compass then requested the applicable court to set aside
the execution sale and a claim for attorney's fees brought by the Company. The
court granted the request and the Company currently is appealing that portion of
the judgment disallowing attorney's fees. The appeal has been briefed and oral
argument will be held in February 2000.
The Company also filed in September 1999 a separate lawsuit seeking
monetary damages against Compass in the Federal District Court for the Western
District of Washington, alleging additional acts of copyright infringement by
Compass for later years. That lawsuit is currently pending.
BTN Action.
The Company entered into a professional development services agreement
with BTN Versandhandel GmbH ("BTN") of Leiferde, Germany for the development of
an OMNIS application. The Company developed and delivered a version of the
application to BTN. BTN failed to pay the Company as agreed, claiming there were
flaws in the application. The Company suspended the project awaiting BTN's
payment. BTN commenced legal action against the Company in Germany claiming
damages of approximately $128,600 (DM250,000) as of December 31, 1999 for
failure to perform under the service agreement. The Company has countersued BTN
claiming the balance owed under the contract of approximately $30,900 (DM60,000)
as of December 31, 1999. The Company believes that the claim by BTN is meritless
and intends to aggressively pursue its counterclaim against BTN.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On December 23, 1999, the Company obtained a $3,000,000 line of credit
from Astoria Capital Partners, L.P. ("Astoria") pursuant to the terms of a
Credit Facility Agreement dated as of December 21, 1999. The line of credit has
a term of six months, and the Company may draw up to $500,000 from the line of
credit per month as set forth in the Credit Facility Agreement. In connection
with the issuance of the line of credit, the Company issued a Promissory Note in
the principal amount of up to $3,000,000 to Astoria dated as of December 21,
1999. All principal and accrued interest on the Promissory Note is due and
payable on May 31, 2000 or upon a Change of Control (as such term is defined in
the Credit Facility Agreement), if earlier. The Promissory Note bears interest
at 8% per annum and has a default rate of interest of 10% per annum. The
Promissory Note is secured by certain assets of the Company. While any debt is
outstanding or the line of credit remains in effect, except for any debt owing
to Astoria or debt issued contemporaneously with payment of the debt in full and
termination of the line of credit, the Company shall not incur any indebtedness
without the written consent of Astoria, except the Company may incur junior debt
in the aggregate principal amount of up to $500,000 in connection with the
purchase or lease of property (whether or not in the ordinary course of
business).
In addition, and also in connection with the issuance of the line of
credit, the Company issued to Astoria a Non-Transferable Warrant to purchase
shares of capital stock of the Company. The Company issued the Warrant pursuant
to an exemption from registration under section 4(2) of the Securities Act of
1933, as amended. The Warrant may be exercised, and
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<PAGE> 22
shares of capital stock of the Company will be issued upon exercise of the
Warrant, only in connection with one or more Qualifying Offerings (as such term
is defined in the Warrant) of securities of the Company. The Warrant may be
exercised for up to $3,000,000 of shares of the capital stock of the Company
issued in one or more Qualifying Offerings at the price per share of such
securities in each such Qualifying Offering, as further provided and qualified
by the Warrant. The Company has granted to Astoria certain registration rights
with respect to any shares of capital stock issued upon exercise of the Warrant
as described in the Warrant. The Warrant terminates on May 31, 2001; in this
connection the Company has no independent obligation to issue any securities,
consummate any offering of its securities or accept any offer to issue or sell
any of its securities on or before such date. Copies of the Credit Facility
Agreement and forms of the Promissory Note and Non-Transferable Warrant are
filed herewith as Exhibits 10.3, 10.4 and 10.5; and the foregoing is only a
summary of and is subject to all of the terms and conditions of such documents.
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) Exhibits:
10.1 At-Will Employment Agreement between the Company and James W.
Dorst dated as of November 23, 1999.
10.2 Incentive Stock Option Agreement between the Company and James W.
Dorst dated as of November 23, 1999.
10.3 Credit Facility Agreement between the Company and Astoria
Capital Partners, L.P. dated as of December 21, 1999.
10.4 Form of Promissory Note dated as of December 21, 1999 issued by
the Company to Astoria Capital Partners, L.P.
10.5 Form of Non-Transferable Warrant dated as of December 21, 1999
issued by the Company to Astoria Capital Partners, L.P.
27.1 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended December 31,
1999.
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<PAGE> 23
SIGNATURES
In accordance with the Exchange Act, the registrant caused this report
to be signed on its behalf by the undersigned thereunto duly authorized.
Date: February 14, 2000
OMNIS TECHNOLOGY CORPORATION
(Registrant)
/s/ GWYNETH GIBBS
-----------------------------------------
Gwyneth Gibbs, President and Interim Chief
Executive Officer
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<PAGE> 24
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
10.1 At-Will Employment Agreement between the Company
and James W. Dorst dated as of November 23, 1999.
10.2 Incentive Stock Option Agreement between the
Company and James W. Dorst dated as of November
23, 1999.
10.3 Credit Facility Agreement between the Company and
Astoria Capital Partners, L.P. dated as of
December 21, 1999
10.4 Form of Promissory Note dated as of December 21,
1999 issued by the Company to Astoria Capital
Partners, L.P.
10.5 Form of Non-Transferable Warrant dated as of
December 21, 1999 issued by the Company to Astoria
Capital Partners, L.P.
27.1 Financial Data Schedule
</TABLE>
24
<PAGE> 1
EXHIBIT 10.1
AT-WILL EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") is made as of November 23,
1999 (the "Effective Date"), by and between OMNIS TECHNOLOGY CORPORATION, a
Delaware corporation (the "Company"), and JAMES DORST (the "Employee"). Except
as the context otherwise requires the term "Company" as used in this Agreement
shall refer to Omnis Technology Corporation and its subsidiaries. In
consideration of the mutual covenants contained in this Agreement, the Company
and the Employee agree as follows:
1. Employment. The Company agrees to employ the Employee and the
Employee agrees to be employed by the Company on the terms and conditions set
forth in this Agreement.
2. Capacity. The Employee shall initially serve the Company as its Chief
Financial Officer and Chief Operating Officer. The Employee shall report
directly to the Chairman of the Board of Directors of the Company ("Chairman").
The Employee shall also serve the Company in such other or additional offices as
the Employee may be requested to serve by the Board of Directors of the Company
(the "Board of Directors"). In such capacity or capacities, the Employee shall
perform such services and duties in connection with the business, affairs and
operations of the Company as may be assigned or delegated to the Employee from
time to time by or under the authority of the Board of Directors.
3. At-Will. The Employee's employment under this Agreement by the
Company ("Employment") shall commence on the Effective Date and shall be
terminable at-will but otherwise shall be subject to all of the provisions of
this Agreement. "Terminable at will" means that Employee is free to end the
Employment of the Employee at any time for any reason or no reason, with or
without cause and with or without notice; and similarly the Company may end the
Employment of the Employee at any time for any legal reason, with or without
cause and with or without notice.
4. Compensation and Benefits. The regular compensation and benefits
payable to the Employee by the Company under this Agreement shall be as follows:
(a) Salary. Commencing on the Effective Date, for all services
rendered by the Employee under this Agreement, the Company shall pay the
Employee a base salary (the "Base Salary") at the annual rate of One Hundred
Fifty Thousand Dollars ($150,000). The Base Salary shall be payable in periodic
installments in accordance with the Company's usual practices for its senior
employees. The Board of Directors of the Company further may, but shall not be
obligated to, authorize additional compensation for Employee in the form of
bonuses or otherwise as the Board deems appropriate in its sole discretion from
time to time.
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<PAGE> 2
(b) Stock Option. The parties acknowledge that as of the
Effective Date the Board of Directors appointed the Employee as a Director of
the Company to fill a vacancy on the Board of Directors, and that the Company
granted to the Employee (as a director) as of the Effective Date options to
purchase 96,825 shares of the Company's Common Stock ("Common Stock") pursuant
to a separate Stock Option Agreement between the Company and the Employee; such
options shall vest over a period of three (3) years or sooner as specified in
the Option Agreement and shall have an option exercise price of 100% percent of
the closing price of the Common Stock on the Effective Date. Neither the
Employee's position as a director of the Company nor such Option Agreement shall
affect the terms or conditions or the at-will nature of the Employment of the
Employee.
(c) Regular Benefits. The Employee shall also be entitled to
participate in any employee benefit plans, medical insurance plans, retirement
plans and other benefit plans which the Company may from time to time have in
effect for senior employees or for all or most of its employees. Such
participation shall be subject to the terms of the applicable plan documents,
generally applicable policies of the Company, applicable law and the discretion
of the Board of Directors, the Compensation Committee of the Board of Directors
or any administrative or other committee provided for by any such plan. Nothing
in this Agreement shall be construed to create any obligation on the part of the
Company to establish any such plan or to maintain the effectiveness of any such
plan which may be in effect from time to time.
(d) Vacation. The Employee shall be entitled to the same weeks
of paid vacation during each full year that Employee is employed hereunder as
generally available to senior managerial employees of the Company with the same
period of service. In the event the employment of Employee is terminated,
Employee shall be paid for all accrued and unused vacation time.
(e) Expenses. The Company shall reimburse Employee for all
appropriately documented, reasonable business expenses incurred by Employee in
accordance with the established the Company policies for managerial employees
which the Company may amend in its sole discretion.
(f) Taxation of Payments and Benefits. The Company shall have
the right to make deductions, withholdings and tax reports with respect to
payments and benefits under this Agreement to the extent that it reasonably and
in good faith believes it is required to do so under applicable law. Payments to
Employee under this Agreement shall be in amounts net of any such deductions or
withholdings. Nothing in this Agreement shall be construed to require the
Company to make any payments to compensate the Employee for any adverse tax
effect associated with any payment or benefit or for any deduction or
withholding from any payment or benefit.
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<PAGE> 3
(g) Exclusive. The Employee shall not be entitled to any payment
or benefit other than as provided in this Agreement.
5. Duties. During the Employment of the Employee, the Employee shall,
subject to the direction and supervision of the Chairman of the Company or the
Chairman's designee, devote the Employee's full business time, best efforts and
business judgment, skill and knowledge to the advancement of the Company's
interests and to the discharge of the Employee's duties and responsibilities
under this Agreement. Employee shall further duly, punctually and faithfully
perform and observe any and all rules and regulations which the Company may now
or shall hereafter establish governing the conduct of its business or its
employees. Employee's performance of his duties shall at all times be rendered
to the Company's satisfaction.
6. Confidential Information; Non-Competition.
(a) Confidential Information. For these purposes "Confidential
Information" shall be collectively defined as any and all technical or
engineering information, know-how, data, designs, diagrams, plans,
specifications, structures, computer codes, documents, patent applications,
trade secrets, ideas, concepts, inventions, products, prototypes, processes,
formulae, works in process, systems, technologies, marketing plans, the identity
of or other information regarding actual or potential customers or trade
contacts, business or other financial information, and other confidential and
proprietary information of the Company or any of its customers, in whatever
form, whether disclosed by the Company or otherwise observed or learned by
Employee during the course of employment, and whether or not labeled or
identified as confidential or proprietary. "Confidential Information" shall also
include any confidential or proprietary information of a third party disclosed
to the Company or any of its customers pursuant to a nondisclosure or
confidentiality agreement to which the Company is a party; and any Invention as
herein defined.
(b) Protection of Confidential Information.
(i) Employee acknowledges and agrees that the
Confidential Information of the Company is proprietary, constitutes a valuable
asset of the Company, and is the sole property of the Company. Without limiting
the foregoing, Employee acknowledges and agrees that all writings and other
tangible materials in any form that contain Confidential Information of the
Company that are produced by Employee or others or that otherwise come into
Employee's possession are and will remain the property of the Company, and will
be treated as Confidential Information.
(ii) Employee agrees that at all times during and after
the Employment of the Employee, Employee shall hold in trust, maintain as
confidential and not disclose to any third person or entity or make any use of
any of the Confidential Information, except for the benefit of the Company or as
is strictly required in the course of the Employment of the Employee. Employee
acknowledges that the unauthorized disclosure of
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Confidential Information may be highly prejudicial to their interests, an
invasion of privacy, and an improper disclosure of trade secrets.
(c) Injunction. The Employee agrees that it would be difficult
to measure any damages caused to the Company which might result from any breach
by the Employee of the promises set forth in this Section, and that in any event
money damages would be an inadequate remedy for any such breach. Without
limiting any other remedies or rights of the Company hereunder, the Employee
agrees that if the Employee breaches, or proposes to breach, any portion of this
Agreement, the Company shall be entitled to an injunction or other appropriate
equitable relief to restrain any such breach without showing or proving any
actual damage to the Company.
7. Inventions.
(a) Inventions. For purposes of this Agreement, "Inventions"
means any and all inventions, discoveries, designs, developments, innovations,
concepts, improvements, techniques, processes, systems, structures,
technologies, software, hardware, formulas, know-how, products, work product and
data, whether or not patentable or reduced to practice or in a commercially
useable form, and all original works of authorship, whether or not
copyrightable, and all derivative works thereof, which result from work
performed by Employee for the Company (either alone or in cooperation with
others) or with the tools or equipment of the Company or which relate to or may
be useful in any business or any actual or demonstrably anticipated research or
development engaged in or planned by the Company.
(b) Disclosure. Employee shall promptly disclose in writing to
the Chairman or Board of Directors any and all Inventions made, conceived,
reduced to practice, or learned by Employee, either alone or in cooperation with
others, during the period of the Employment of the Employee with the Company
(including off-duty hours) that to any extent relate to or may be useful in any
business or any actual or demonstrably anticipated research or development
engaged in or planned by the Company, even if any such invention is claimed for
any reason to belong to Employee or to a person or entity other than the
Company.
(c) Assignment. Employee agrees that all Inventions made,
conceived, reduced to practice, or learned by Employee during the Employment of
the Employee (including off-duty hours), either alone or in cooperation with
others, are "works made for hire" and belong to and are the sole property of the
Company and are Inventions of the Company subject to the provisions of this
Agreement. Employee hereby assigns to the Company, without royalty or further
compensation, all right, title, and interest Employee has or may have or may
acquire in and to any and all such Inventions and all modifications and
enhancements and derivations thereof, including but not limited to patents and
copyrights. Employee agrees that the Company or its designee will be the sole
owner of all domestic and foreign patents, patent rights, copyrights, and all
other rights pertaining to all such Inventions.
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(d) Evidence of Assignment. At the request of the Company,
Employee agrees to sign and deliver to the Company, either during or subsequent
to the Employment of the Employee, such other documents or instruments as the
Company considers desirable to evidence the assignment to the Company of any and
all rights of Employee, if any, in any Inventions and the Company's ownership of
the Inventions. Employee further agrees as to all such Inventions to assist the
Company as requested, either during or subsequent to the Employment of the
Employee, in obtaining, registering, and from time to time enforcing in any
country, the Company's rights to the Inventions, including without limitation
the testifying in a suit or other proceeding involving any Invention. If such
assistance is rendered by Employee subsequent to the Employment of the Employee
with the Company, Employee shall be reimbursed for all reasonable expenses
incurred and for any and all lost wages or salary related thereto.
(e) California Labor Code Section 2870. Any provision in this
Agreement that requires Employee to assign rights to an Invention shall not
apply to any Invention that is exempted pursuant to the provisions of California
Labor Code Section 2870, the text of which is attached to this Agreement as
Exhibit A. This section provides that the requirement to assign "shall not apply
to an invention that the employee developed entirely on his or her own time
without using the employer's equipment, supplies, facilities, or trade secret
information except for those inventions that either: (1) relate at the time of
conception or reduction to practice of the invention to the employer's business,
or actual or demonstrably anticipated research or development of the employer;
or (2) result from any work performed by the employee for the employer."
8. Prior Knowledge and Inventions. Except as is disclosed on Schedule 1
to this Agreement, Employee has no knowledge of the Confidential Information,
other than information Employee has learned or observed from the Company.
Employee has disclosed on Schedule 1 a complete list of all inventions, original
works of authorship, developments, improvements and trade secrets that Employee
claims are proprietary to Employee, and that Employee desires to exclude from
the application of this Agreement. Employee represents that this list is
complete to the best of his knowledge, and that the exclusion of any inventions
from the list will not materially affect Employee's ability to perform his
obligations under this Agreement. The Company agrees to receive and hold all
such disclosures in confidence.
9. Prior Commitments. Employee has no other agreements, relationships,
or commitments to any other person or entity that conflict with Employee's
obligations to the Company under this Agreement, except as disclosed on Schedule
1. Employee shall not disclose to the Company, or use, or induce the Company to
use, any proprietary or confidential information or trade secrets of others.
Employee represents and warrants that Employee has returned all property and
confidential information belonging to all prior or concurrent companies
employing or engaging Employee.
10. Non-Competition and Non-Solicitation. At all times during which the
Employee is employed by the Company and for one (1) year after termination of
the
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Employment of the Employee hereunder, except in connection with such Employee's
duties as an employee or consultant of the Company or its subsidiaries, the
Employee (i) will not, directly or indirectly, whether as an officer, director,
consultant, agent, employee, contractor, owner, partner, joint venturer or
stockholder of another entity, engage, participate, assist or invest in any
Competing Business (as hereinafter defined), other than as a stockholder of less
than one percent (1%) of the equity securities of a publicly held corporation;
(ii) will not in any manner directly or indirectly solicit any of the Company's
employees for a Competing Business or otherwise induce or attempt to induce such
employees to terminate their employment with the Company during the period of
Employment of the Employee and for a period of one (1) year thereafter except as
described on Schedule 1; and (iii) will refrain from soliciting or encouraging
any customer or supplier to terminate or otherwise modify adversely its business
relationship with the Company. The Employee understands that the restrictions
set forth in this Section are intended to protect the Company's interest in its
Confidential Information and established employee, customer and supplier
relationships and goodwill, and agrees that such restrictions are reasonable and
appropriate for this purpose. "Competing Business" shall mean a business which
directly competes against the application development or RAD tool products
designed or distributed by the Company or any of its subsidiaries during the
period of employment of the Employee.
11. Cooperation. During and after the Employment of the Employee, (i)
the Employee shall cooperate fully with the Company in the defense or
prosecution of any claims or actions now in existence or which may be brought in
the future against or on behalf of the Company which relate to events or
occurrences that occurred while the Employee was employed by the Company, and
(ii) the Employee shall cooperate fully with the Company in connection with any
investigation or review of any federal, state or local regulatory authority
related to events that occurred during the Employment of the Employee. The
Employee's cooperation shall include, but not be limited to, meeting with
counsel to prepare for discovery or trial and to act as a witness on behalf of
the Company at mutually convenient times. The Company shall reimburse the
Employee for any actual out-of-pocket expenses incurred by the Employee in
connection with this Section.
12. Termination. The Employment of the Employee shall terminate as set
forth in this Section:
(a) Termination by the Company for Cause. In addition to its
other rights and remedies, the Company may terminate the employment of Employee
immediately "for cause" upon the occurrence of any of the following events:
(i) Materially dishonest statements or acts of the
Employee with respect to the Company or any affiliate;
(ii) Unethical practices or conduct by the Employee in
connection with the business of the Company or any affiliate;
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(iii) The commission of any felony (excluding DWI and
similar traffic offenses) or any crime involving moral turpitude;
(iv) The use of alcohol or drugs by the Employee if the
Company determines, in its sole discretion, that such use of such alcohol or
drugs materially affects the performance of Employee's duties under this
Agreement or otherwise violates Company policy;
(v) Gross negligence or willful misconduct of the
Employee with respect to the Company or any affiliate of the Company;
(vi) The imparting, disclosure or use of any
Confidential Information in material violation of this Agreement; or
(vii) Material breach by the Employee of any of the
Employee's obligations under this Agreement.
(b) Termination At Will by Either Party. Either party also may
terminate this Agreement without cause immediately upon written notice to the
other party at any time without cause.
(c) Other Events of Termination. This Agreement shall also
terminate in the event of the death of Employee; or the medically determinable
physical or mental impairment of Employee which prevents Employee from fully
performing the essential functions of his position with the Company, which
impairment can be expected to result in death or which has lasted or can be
expected to last for a continuous period of not less than twelve (12) months.
(d) No Termination Benefits. Except as otherwise required by
law, all compensation and other benefits payable to the Employee under this
Agreement shall terminate on the date of termination of the Employment of the
Employee.
13. Duties Upon Termination.
(a) Documents. Upon termination of the Employment of Employee,
Employee shall not retain and shall promptly and without request deliver to the
Company all documents and data and all copies thereof pertaining to (i) his
employment, (ii) the Confidential Information, and (iii) the Inventions, whether
prepared by Employee or otherwise in the possession or control of the Employee
or the Employee's agent. The Employee also agrees to sign and deliver the
Termination Certification attached hereto as Exhibit B to this Agreement or a
substantially similar certification as may be requested by the Company.
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(b) Continuing Obligations. The Employee further agrees that
following termination of his employment, he shall continue to be bound by the
terms and restrictions of this Agreement relating to nonsolicitation of
employees except as described on Schedule 1, Confidential Information and
Inventions.
14. Integration. This Agreement and all exhibits and schedules attached
hereto contain the entire agreement of the parties relating to the subject
matter hereof and supersede any and all other agreements, discussions or
understandings of any kind between the parties with respect thereto; provided
however that (a) this Agreement shall not supersede any separate stock option
agreement between the Company and the Employee, and (b) any confidential or
proprietary information disclosed between the parties pursuant to any prior or
superseded agreement shall be part of the "Confidential Information" for all
purposes hereof. No waiver, amendment or modification of any provision of this
Agreement shall be effective unless in writing and signed by authorized
representatives of both parties.
15. Assignment; Successors and Assigns. This Agreement and the rights
and obligations of the Employee under this Agreement are personal and may not be
assigned, transferred, pledged or encumbered by the Employee. The Company shall
be entitled to assign any and all of its rights and obligations hereunder.
Subject to the foregoing, this Agreement shall inure to the benefit of and be
binding upon the parties hereto, the officers, directors, employees, agents,
owners, shareholders, representatives, successors and assigns of the Company,
and the heirs, devisees, spouses, agents, representatives, successors and
assigns of the Employee.
16. Enforceability. If any portion or provision of this Agreement
(including, without limitation, any portion or provision of any section of this
Agreement) shall to any extent be declared illegal or unenforceable by a court
of competent jurisdiction, then the remainder of this Agreement, or the
application of such portion or provision in circumstances other than those as to
which it is so declared illegal or unenforceable, shall not be affected thereby,
and each portion and provision of this Agreement shall be valid and enforceable
to the fullest extent permitted by law.
17. Waiver. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of any party to
require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
18. Notices. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and delivered
in person or sent by a nationally recognized overnight courier service or by
registered or certified mail, postage prepaid, return receipt requested, to the
Employee at the last address the Employee has filed in writing with the Company
or, in the case of the Company, at its principal place of business in
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the United States, attention of the Chairman, and shall be effective on the date
of delivery in person or by courier or five (5) days after the date mailed.
19. Amendment. This Agreement may be amended or modified only by a
written instrument signed by the Employee and by a duly authorized
representative of the Company.
20. Governing Law. This Agreement shall be governed by the laws of the
State of California without reference to principles of conflicts of law.
21. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be taken to be
an original; but such counterparts shall together constitute one and the same
document.
22. Legal Counsel; Certifications.
a. Employee acknowledges, represents and warrants that he has
had the opportunity to be represented by and to fully consult with independent
legal counsel of Employee's own choosing in connection with the terms and
conditions of this Agreement and all matters or issues related thereto; and that
Employee has conducted such an independent investigation of the Company and its
business and prospects as Employee has deemed necessary.
b. EMPLOYEE FURTHER CERTIFIES THAT EMPLOYEE HAS CAREFULLY READ
THIS AGREEMENT, UNDERSTANDS ITS TERMS, AND FREELY AND VOLUNTARILY AGREES TO
THESE TERMS. EMPLOYEE FURTHER ACKNOWLEDGES THAT EMPLOYEE HAS REVIEWED EXHIBIT A
AND SCHEDULE 1 AND IN THIS CONNECTION HAS RECEIVED A COPY OF THE WRITTEN
NOTIFICATION TO EMPLOYEE CONTAINING THE TEXT OF CALIFORNIA LABOR CODE SECTION
2870.
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IN WITNESS WHEREOF, this Employment Agreement has been executed and
entered into by the parties as of the date first above written.
OMNIS TECHNOLOGY CORPORATION
By: /s/ GWYNETH GIBBS
---------------------------------
Gwyneth Gibbs, President
EMPLOYEE:
/s/ JAMES DORST
------------------------------------
James Dorst
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EXHIBIT A
WRITTEN NOTIFICATION TO EMPLOYEE
In accordance with California Labor Code Section 2870, you are hereby
notified that the Employment Agreement between you and Omnis Technology
Corporation (the "Company") does not require you to assign to the Company any
invention for which no equipment, supplies, facility, or trade secret
information of the Company was used, and that was developed entirely on your own
time, and that does not relate to the business of the Company or to the
Company's actual or demonstrably anticipated research or development, and does
not result from any work performed by you for the Company.
The text of California Labor Code Section 2870 is set forth below:
"CALIFORNIA LABOR CODE Section 2870
INVENTION ON OWN TIME -- EXEMPTION FROM AGREEMENT.
"(a) Any provision in an employment agreement which provides
that an employee shall assign, or offer to assign, any of his or her
rights in an invention to his or her employer shall not apply to an
invention that the employee developed entirely on his or her own time
without using the employer's equipment, supplies, facilities, or trade
secret information except for those inventions that either:
"(1) Relate at the time of conception or reduction to
practice of the invention to the employer's business, or actual or
demonstrably anticipated research or development of the employer; or
"(2) Result from any work performed by the employee for
the employer.
"(b) To the extent a provision in an employment agreement
purports to require an employee to assign an invention otherwise
excluded from being required to be assigned under subdivision (a), the
provision is against the public policy of this state and is
unenforceable."
I hereby acknowledge receipt of this written notification.
Dated: As of ______________, 1999 ____________________________
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SCHEDULE 1
In the event the Company is sold, the following employees (or future
employees) may be solicited, if such solicitation would not materially impact
the sale:
[INTENTIONALLY OMITTED]
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EXHIBIT B
TERMINATION CERTIFICATION
This is to certify that I do not have in my possession, nor have I
failed to return, any Confidential Information as defined in the Employment
Agreement between Omnis Technology Corporation and me ("Agreement") or any
copies of such information, or other documents or materials, equipment, or other
property belonging to the Company or any of its customers or subject to any
agreement between the Company and any third party.
I further certify that I have complied with and will continue to comply
with the terms of the Agreement which remain enforceable by their terms
following termination of my employment, including but not limited to (a) the
disclosure and reporting of any Inventions as defined in the Agreement, and (b)
all confidentiality, nondisclosure and/or use restrictions imposed by the
Agreement.
Dated:
---------------------------- -------------------------------
Name:
-------------------------------
<PAGE> 1
EXHIBIT 10.2
OMNIS TECHNOLOGY CORPORATION
INCENTIVE STOCK OPTION AGREEMENT
This Incentive Stock Option Agreement ("Agreement") is made and entered
into on November 23, 1999 ("Grant Date") by and between Omnis Technology
Corporation, a Delaware corporation (the "Company"), and JAMES DORST
("Optionee").
W I T N E S S E T H:
A. The Board of Directors of the Company ("Board") has adopted the Omnis
Technology Corporation 1999 Stock Option Plan to create additional incentives
for certain valued employees, directors, consultants and advisors of the Company
or its parent or subsidiary and to promote the financial success and progress of
the Company and such parents and subsidiaries. For purposes hereof the "Plan"
and all section references therein shall be defined as said 1999 Stock Option
Plan as amended or superseded during the term of this Agreement.
B. Optionee is a valued employee and director of the Company or a parent
or subsidiary thereof, and this Incentive Stock Option Agreement is executed
pursuant to, and is intended to carry out the purposes of, the Plan in
connection with the grant by the Company to Optionee of an incentive stock
option as defined by Section 422 of the Internal Revenue Code of 1986, as
amended or superseded (the "Code").
NOW, THEREFORE, it is agreed as follows:
1. Grant of Option. Subject to and upon the terms, conditions and
restrictions set forth in this Agreement and the Plan, the Company hereby grants
to Optionee as of the Grant Date an incentive stock option ("Option") to
purchase up to Ninety Six Thousand Eight Hundred Twenty Five (96,825) shares
("Option Shares") of the common stock of the Company during the Term hereof (as
defined in Section 3 hereof) at the Option Price of Six Dollars and Eighty Seven
and Five Tenths Cents ($6.875) per share. For these purposes "Option Shares"
also shall include such stock or other securities as defined by the Plan.
2. Right to Exercise; Vesting.
a. Subject to the expiration or earlier termination of the Term
of the Option hereunder and to Section 2(b) hereof, Optionee shall have the
right to exercise the Option in accordance with the following three (3) year
vesting schedule ("Vesting Period"):
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(i) Optionee shall have no right to exercise any part of
the Option at any time prior to the expiration of one (1) year from the
Grant Date;
(ii) The Option shall become exercisable with respect to
Thirty Three and Three Hundred Thirty Three Thousandths Percent
(33.333%) of the Option Shares upon the expiration of one (1) year from
the Grant Date; and
(iii) The Option thereafter shall become exercisable
with respect to an additional Two Point Seven Hundred Seventy Seven
Thousandths Percent (2.777%) of the Option Shares on the last day of
each month thereafter.
b. Exercisable installments may be exercised by Optionee in
whole or in part and to the extent not exercised shall accumulate and be
exercisable as provided. The Company shall not be required to issue fractional
shares at any time; and any fractional shares remaining in the Option following
any exercise thereof shall be rounded down to the next nearest whole number of
Shares.
3. Option Term. The specified term of the Option ("Term") shall be the
period commencing as of the Grant Date and ending on the earlier of (i) the
expiration of ten (10) years from the Grant Date ("Expiration Date") or (ii) the
termination of this Agreement in accordance with Section 4 hereof. Upon the
expiration of the Term or earlier termination of the Option as herein provided,
the Option shall cease to be exercisable and shall be of no further force or
effect.
4. Earlier Termination of Option Term.
a. The Term of the Option shall terminate prior to the
Expiration Date upon the later to occur of any of the following events during
the Vesting Period:
(i) Termination of Directorship Other Than For Cause. If
(i) Optionee resigns as a director of the Company, or (ii) Optionee is
removed as a director of the Company without cause as defined by
applicable law, or (iii) Optionee is not re-elected as a director of the
Company by the shareholders following the end of the term of his
directorship ("Director Termination"), then the Option shall terminate
and cease to be exercisable upon the earlier of (A) the expiration of
sixty (60) days from the date of such Director Termination or (B) the
Expiration Date. No additional right to exercise the Option with respect
to any Option Shares shall vest from and after the date of such Director
Termination. The Term of the Option shall not be affected by any
Director Termination occurring after the end of the Vesting Period.
(ii) Termination of Employment or Engagement. If (i) the
employment of Optionee with the Company is terminated for any reason,
provided Optionee was so employed as of the date of the Director
Termination;
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or (ii) the engagement of Optionee as a consultant of the Company
pursuant to a written consulting agreement is terminated for any reason,
provided Optionee was so engaged as of the date of the Director
Termination; as the case may be, then the Option shall terminate and
cease to be exercisable upon the earlier of (A) the expiration of sixty
(60) days from the date of such termination of employment or engagement
or (B) the Expiration Date. No additional right to exercise the Option
with respect to any Option Shares shall vest from and after the date of
such termination of employment or engagement. The Term of the Option
shall not be affected by any termination of employment or engagement
occurring after the end of the Vesting Period.
b. Removal as a Director For Cause. Notwithstanding Section 4(a)
hereof, if Optionee is removed as a director "for cause" as defined by
applicable law at any time during the Term or Optionee resigns as a director
while his removal for cause is pending, then the Option shall terminate and
cease to be exercisable upon the earlier of (i) such termination of the
directorship of Optionee or (ii) the Expiration Date. No additional right to
exercise the Option with respect to any Option Shares shall vest from and after
the date of such termination of the directorship of Optionee.
c. Death or Disability. Notwithstanding Section 4(a) hereof, in
the event of the death or permanent and total disability of Optionee, then the
Option shall terminate and cease to be exercisable as provided in the Plan.
d. No Effect on Relationship. Nothing herein shall alter the "at
will" nature of the employment of Optionee by the Company; shall be deemed any
obligation by the Company to enter into or continue any consulting agreement
with Optionee; or shall be deemed an agreement that Optionee shall be elected as
or continue to be a director of the Company.
5. Non-Transferable. The Option shall not be transferable or assignable
by Optionee other than by will or the laws of descent and distribution, and the
Option may be exercised during the lifetime of Optionee solely by Optionee.
Subject to the foregoing, all transfers or assignments or attempted transfers or
assignments of the Option or this Agreement shall be void ab initio.
6. Plan; Controlling Terms.
a. The Option granted hereunder and this Agreement shall be
governed by and subject to each and all of the terms and provisions of the Plan,
which is hereby incorporated by reference in its entirety. All capitalized or
other terms not defined herein shall have the same meaning as in the Plan. In
the event of any conflict between the Plan and this Agreement, the Plan shall
control, except if any provision of the Plan conflicts with Section 4 hereof
related to earlier termination of the Option, such Section 4 shall control.
Optionee acknowledges receipt of a copy of the Plan and the opportunity to
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review the Plan and to consult with his or her legal advisors concerning the
Plan and this Agreement.
b. OPTIONEE ACKNOWLEDGES AND AGREES THAT THE PLAN CONTAINS
IMPORTANT TERMS AND PROVISIONS THAT WILL APPLY TO AND CONTROL THE OPTION AND
THIS AGREEMENT. THOSE TERMS INCLUDE WITHOUT LIMITATION IMPORTANT CONDITIONS AND
LIMITATIONS ON THE RIGHT OF OPTIONEE TO EXERCISE THE OPTION; IMPORTANT
RESTRICTIONS ON THE RIGHT OF OPTIONEE TO TRANSFER THE OPTION OR THE OPTION
SHARES RECEIVED UPON EXERCISE OF THE OPTION; EARLY TERMINATION OF THE OPTION
FOLLOWING THE OCCURRENCE OF CERTAIN EVENTS, INCLUDING TERMINATION OF THE
EMPLOYMENT OF OPTIONEE FOR ANY REASON; PROCEDURES FOR EXERCISING THE OPTION; TAX
WITHHOLDING AND NOTICE OBLIGATIONS; AND OTHER SUBSTANTIAL RESTRICTIONS AND
OBLIGATIONS IN ADDITION TO THOSE IN THIS AGREEMENT.
7. Tax Status of Option.
a. The Option is intended to be an incentive stock option as
defined by Section 422 of the Code for United States tax purposes, but the
Company does not represent or warrant that the Option so qualifies. Optionee
should consult with his or her own tax advisors regarding the tax effects of the
Option and the requirements for favorable tax treatment under Section 422 and
other provisions of the Code and other tax consequences of the Option under
applicable law, including but not limited to holding period requirements. In the
event that the aggregate exercise price of the Option Shares under the Option
and all other incentive stock options held by Optionee (whether granted by the
Company or any parent or subsidiary corporation thereof) exceeds the dollar
amount or other limitation then applicable under the Code when such options are
first exercisable or in the event Optionee does not meet all requirements when
applicable under the Code, all or part of the Option may not qualify as an
incentive stock option under the Code.
b. Optionee hereby acknowledges that the rules and requirements
of Section 83 of the Code, including without limitation the election available
under Section 83(b) thereof, may be applicable to the receipt of Option Shares
by Optionee pursuant to this Agreement and the Plan. In the event that the
Option or any part thereof is not classified as an incentive stock option under
Section 422 of the Code, Optionee acknowledges that the exercise of the Option
and the filing or failure to file an election under Code Section 83(b) in timely
manner may result in adverse tax consequences to Optionee.
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8. Acceleration of Exercise Right In Certain Events.
a. Acceleration Events. Notwithstanding any other right to
exercise the Option, the Option shall become fully exercisable during the
fifteen (15) day period ("Accelerated Exercise Period") immediately prior to the
scheduled consummation of:
(i) The sale or other transfer of more than Fifty
Percent (50%) of the capital stock of the Company in one or more related
transactions for material consideration to any person or entity or group
of persons or entities not previously shareholders of the Company and
not owned or controlled by a majority of the previous shareholders of
the Company, with such shareholder status determined immediately prior
to the transaction; or
(ii) The sale or other transfer of all or substantially
all of the assets of the Company in one or more related transactions not
in the ordinary course of the business of the Company to unrelated third
parties, whether by sale, exchange, merger, consolidation,
reorganization, dissolution or liquidation (collectively "Acceleration
Events");
other than (1) any public offering of capital stock of the Company in a Public
Market (as defined in the Plan); (2) any transaction in which the Company is a
surviving parent of the transferee corporation or entity or is a surviving
subsidiary of a transferee parent corporation or entity owned or controlled by a
majority of the previous shareholders of the Company, with such shareholder
status determined immediately prior to the transaction; (3) any sale or transfer
of the capital stock owned or controlled by the majority shareholder or
shareholders of the Company to trusts or comparable entities for the primary
benefit of such shareholders or their family members or to the estate, heirs or
devisees of any such shareholder in the event of his or her death; or (4) any
transaction in which the Company reincorporates in another jurisdiction or
engages in other internal reorganization or changes in corporate structure
without the receipt of consideration; none of which shall be Acceleration Events
hereunder.
b. Substitution or Assumption of Option. Notwithstanding any
other provision hereof, no accelerated exercise of the Option shall be permitted
if the terms of the Acceleration Event provide, as a condition of the
consummation of such transaction, that the Option (or class of outstanding
options of which the Option is a part) shall either be assumed by a successor
corporation (or parent thereof) or be replaced with a comparable substitute
option to purchase shares of capital stock of a successor corporation (or parent
thereof), which substitution or assumption shall comply with Sections 422 and
424 of the Code; and the Option may be assumed or replaced pursuant to such
transaction. Determination of comparability in the case of any substitute option
shall be made by the Board of Directors of the Company and shall be final,
binding and conclusive on Optionee.
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Optionee agrees to execute and deliver such documents as reasonably required to
effect such assumption or substitution hereunder.
c. Conditional Exercise; Termination. Any permitted exercise of
the Option during the Accelerated Exercise Period hereunder shall be conditioned
upon the consummation of the Acceleration Event and shall be effective only
immediately prior to such consummation, provided that Optionee may indicate in
writing that such exercise is unconditional with respect to all or part of the
Option then exercisable without regard to the acceleration provisions of this
Section. Upon consummation of the Acceleration Event, the Option shall terminate
and cease to be exercisable, unless assumed by the successor corporation or
parent thereof. In the event such Acceleration Event is not consummated, the
Option shall revert to being exercisable in accordance with the vesting
schedule.
d. Exercise Period. In the event the expiration or earlier
termination of the Term of the Option shall occur prior to the expiration of the
Accelerated Exercise Period provided in this Section, then the Accelerated
Exercise Period shall be shortened to said expiration or earlier termination of
the Term.
9. Limitations on Share Transfer; Mandatory Notice of Disposition.
Optionee shall transfer or dispose of the Option Shares only in accordance with
the provisions of this Agreement and the Plan. Without limiting the foregoing,
mandatory notice of disposition of any Option Shares must be made to the Company
as provided in the Plan and such disposition may be subject to tax withholding
or payments by Optionee.
10. Securities Laws; Restrictions on Grant or Issuance. THE RESTRICTIONS
ON THE TRANSFER OF THE OPTION OR THE OPTION SHARES SHALL BE IN ADDITION TO ANY
OTHER LIMITATIONS ON TRANSFER OR EXERCISE OF THE OPTION OR ISSUANCE OR TRANSFER
OF THE OPTION SHARES IMPOSED BY APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
THE GRANT OF THE OPTION AND THE EXERCISE OF THE OPTION AND THE ISSUANCE OF THE
OPTION SHARES UPON EXERCISE OF THE OPTION AND ANY RESALE OR OTHER TRANSFER OF
SUCH OPTION SHARES BY OPTIONEE SHALL BE SUBJECT TO COMPLIANCE WITH ALL
APPLICABLE REQUIREMENTS OF FEDERAL OR STATE LAW WITH RESPECT TO SUCH SECURITIES.
Notwithstanding any contrary provision of this Agreement:
a. Optionee understands that since the Option is not
transferable, and since the Option Shares have not been and may not be
registered or exempt under applicable statutes, Optionee may bear the economic
risk of the investment for an indefinite period of time. The Option Shares may
not be sold or otherwise disposed of until such time as the Option Shares are
registered under the Securities Act of 1933 ("Securities Act") or the Option
Shares may be sold pursuant to an applicable exemption from the registration
requirements of the Securities Act. Optionee understands that the
6
<PAGE> 7
Company has no obligation to file a registration statement under the Securities
Act for the Option or the Option Shares or to otherwise assist Optionee in
complying with any exemption from registration.
b. Optionee represents and warrants that the Option is being
acquired and the Option Shares will be acquired upon exercise for his or her own
account and not with a view to or for sale in connection with any distribution
of such securities. Optionee further acknowledges that any investment in the
Common Stock of the Company is inherently speculative and illiquid and subject
to material risks.
c. As a condition to the exercise of the Option, the Company may
require Optionee to satisfy any qualifications that may be necessary or
appropriate in the sole judgment of the Company or its counsel to evidence
compliance with any applicable law or regulation and to make any written
representation or warranty with respect thereto as may be requested by the
Company.
d. Notwithstanding any contrary provision hereof, the inability
of the Company with reasonable efforts to obtain approval from any regulatory
body having authority deemed by the Company to be necessary for the lawful
issuance and sale of any Option Shares pursuant to the Option shall relieve the
Company of any liability in respect of the non-issuance or sale of the Option
Shares as to which such approval shall not have been obtained.
11.Assignment; Binding Effect.
a. The Company may transfer or assign any of its rights or
obligations under this Agreement or the Plan. Optionee shall have no right to
transfer or assign any of the rights and obligations of Optionee under the
Option or this Agreement, subject to Section 5 hereof in the case of a will or
the laws of descent and distribution.
b. Subject to the foregoing, this Agreement shall inure to the
benefit of and be binding upon each of the parties hereto and the officers,
directors, employees, shareholders, owners, agents, representatives, parents,
subsidiaries, affiliates, successors and assigns of the Company, and the
spouses, representatives, executors, administrators, heirs, devisees, agents,
successors and assigns of Optionee.
12. Representations and Warranties.
a. Optionee represents and warrants that he or she has read the
Plan and this Agreement and has had the opportunity to consult with his or her
legal advisors concerning the legal and tax effects of the Plan and this
Agreement and the Option.
b. Each party represents and warrants that such party has the
full right, power, legal capacity and authority to enter into and execute this
Agreement and to
7
<PAGE> 8
discharge all of its obligations under the terms hereof, and that such party
does not have any outstanding obligation and is not a party to any outstanding
agreement which obligation or agreement is inconsistent with this Agreement.
This Agreement has been duly executed and delivered by said party, and
constitutes its valid and legally binding agreement and obligation and is
enforceable in accordance with its terms.
13. Miscellaneous.
a. This Agreement together with the Plan sets forth the entire
agreement of the parties relating to the subject matter hereof, subject to the
provisions of the Plan; and the Plan and this Agreement shall supersede any
prior discussions, understandings and agreements concerning the grant of stock
options or the issuance of option stock between the parties, provided however
that this Agreement shall not supersede and shall be in addition to any separate
fully executed written stock option agreement between the parties pursuant to
any separate stock option grant by the Company. This Agreement may be amended by
further written agreement signed by each of the parties.
b. This Agreement shall be construed in accordance with and
governed by the laws of the State of California without reference to the
principles of conflicts of law.
c. Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law. In
the event that any provision of this Agreement shall be held by the final
judgment of a court of competent jurisdiction to be invalid or unlawful or
unenforceable, then the remaining provisions of this Agreement shall remain in
full force and effect and shall be construed to give the fullest effect to the
purpose of the Plan and this Agreement and the intended qualification of the
Plan and this Agreement pursuant to Section 422 of the Code and pursuant to
Section 25102(o) of the California Corporations Code and the respective
regulations and rules thereunder (as amended or superseded).
d. No remedy conferred by this Agreement or the Plan shall be
exclusive of any other remedy, and each and all such remedies shall be
cumulative. The waiver of any breach or violation of this Agreement in whole or
in part shall not operate as a waiver of any subsequent breaches or violations
of the same or a different kind. Any exercise or failure to exercise by a party
of any rights or remedies under this Agreement shall not operate as a waiver of
the right of such party to exercise the same or different rights or remedies in
a subsequent event.
e. Both parties agree to execute any additional documents or
instruments necessary or appropriate to fully effectuate out the purposes of
this Agreement and which are consistent with the Plan.
8
<PAGE> 9
f. Section headings in this Agreement are for the convenience of
the parties and are not part of the agreement of the parties and shall not be
used in the construction hereof. Whenever in this Agreement the context
requires, references to the plural shall include the singular and the singular
the plural, and each gender shall include all other genders. No provision in
this Agreement shall be interpreted or construed against any party because such
party or its counsel was the drafter thereof.
g. THIS AGREEMENT AND THE TERMS AND CONDITIONS HEREOF ARE
CONFIDENTIAL AND OPTIONEE SHALL NOT DISCLOSE ANY OF THE TERMS OR CONDITIONS
HEREOF TO ANY OTHER EMPLOYEE OF THE COMPANY OR TO ANY OTHER PERSON FOR ANY
PURPOSE, OTHER THAN TO THE SPOUSE, LEGAL COUNSEL OR ACCOUNTING AND FINANCIAL
ADVISORS OF OPTIONEE, OR TO THE APPROPRIATE EMPLOYEES OR REPRESENTATIVES OF THE
COMPANY AS NECESSARY IN CONNECTION WITH THE ENFORCEMENT, MODIFICATION OR
EXERCISE OF THIS AGREEMENT, OR AS REQUIRED IN CONNECTION WITH LEGAL PROCEEDINGS
IN WHICH OPTIONEE IS A PARTY OR WITNESS.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
and delivered in duplicate on its behalf by its duly authorized officer, and
Optionee has also executed and delivered this Agreement in duplicate, all on the
date first above written.
OMNIS TECHNOLOGY CORPORATION
By: /s/ GWYNETH GIBBS
---------------------------------
Name: Gwyneth Gibbs
-----------------------------
Title: President
---------------------------
OPTIONEE
/s/ JAMES DORST
------------------------------------
Name: JAMES DORST
9
<PAGE> 10
CONSENT OF SPOUSE
I, Amy J. Christensen, the spouse of JAMES DORST ("Optionee"), have read
and approved the foregoing Incentive Stock Option Agreement between Omnis
Technology Corporation ("Company") and my spouse and the Omnis Technology
Corporation 1999 Stock Option Plan. In consideration of granting of the Option
to my spouse to purchase shares of the common stock of the Company under the
terms and conditions in the Agreement and the Plan, I hereby appoint my spouse
as my attorney-in-fact in respect to the exercise of any rights under the
Agreement and the Plan and any stock issued thereunder, and agree to be fully
bound by the provisions of the Agreement and the Plan insofar as I may have any
rights under such Agreement and the Plan or in any stock issued thereunder under
any community property laws or similar laws relating to marital property then in
effect. I further acknowledge that in the event of the exercise of such Option,
such shares of the common stock of said Company shall be issued in the name of
my spouse and that the Company shall have no other obligations with respect
thereto.
Dated: January 5, 2000
---------------------------------
/s/ AMY J. CHRISTENSEN
- ---------------------------------------
Name: Amy J. Christensen
---------------------------------
10
<PAGE> 1
EXHIBIT 10.3
CREDIT FACILITY AGREEMENT
This CREDIT FACILITY AGREEMENT (the "Agreement") is entered into as of
December 21, 1999 by and among OMNIS TECHNOLOGY CORPORATION, A DELAWARE
CORPORATION (the "Company"), and ASTORIA CAPITAL PARTNERS, L.P., A CALIFORNIA
LIMITED PARTNERSHIP ("Lender").
In consideration of the premises and the mutual covenants and agreements
herein set forth, the parties hereto agree as follows:
1. CREDIT FACILITY AMOUNT AND TERMS.
1.1. AMOUNT. During the Availability Period described below,
Lender will provide a line of credit to the Company ("line of credit"). The
amount of the line of credit is Three Million Dollars ($3,000,000) (the
"Commitment"). This is a non-revolving line of credit. Any amount borrowed, even
if repaid before the Maturity Date of the line of credit, permanently reduces
the remaining available line of credit.
1.2. ADVANCES; DISBURSEMENTS. During the first ten (10) days of
each month of the Availability Period (except for December 1999, during which
advances may be requested until December 31), the Company may request one or
more advances in an aggregate monthly amount of up to Five Hundred Thousand
Dollars ($500,000). The Company agrees not to permit the outstanding principal
balance of the line of credit to exceed the Commitment. Each advance must be for
at least One Hundred Thousand Dollars ($100,000), or for the amount of the
remaining available line of credit if less. Each disbursement request shall be
made in writing and shall be delivered to the Lender in the manner described in
Section 7.6 hereof. The Lender shall make all disbursements by wire transfer to
an account or accounts designated by the Company within three (3) business days
after delivery of a disbursement request. The first advance shall be made to the
Company within one (1) business day after the Effective Date (as defined in
Section 1.4 below) in the amount of Five Hundred Thousand Dollars ($500,000)
(and this Agreement shall be deemed to be the Company's disbursement request for
such amount).
1.3. AVAILABILITY PERIOD. The "Availability Period" of the line
of credit commences on the Effective Date and expires on May 31, 2000 (the
"Maturity Date") unless there is a Change of Control (as defined below). If
there is a Change of Control, then in addition to the Lender's other remedies,
the Lender may terminate the Availability Period and may require the Company to
immediately repay any amounts of principal and interest accrued and unpaid under
the Note (as defined below). The term "Change of Control" shall mean the
consummation of:
(a) The sale or other transfer of more than Fifty
Percent (50%) of the voting capital stock of the Company in one or more related
transactions for material consideration to any person or entity or group of
persons or entities not previously shareholders of the Company and not owned or
controlled by any previous shareholders of the Company, with such shareholder
status determined immediately prior to the transaction; or
<PAGE> 2
(b) The sale or other transfer of all or substantially all of
the assets of the Company in one or more related transactions not in the
ordinary course of the business of the Company to unrelated third parties,
whether by sale, exchange, merger, consolidation, reorganization, dissolution or
liquidation;
other than (1) any transaction in which the Company (with the same identity of
ownership after such transaction as before such transaction) is a surviving
parent of the transferee corporation or entity or is a surviving subsidiary of a
transferee parent corporation or entity owned or controlled by persons who,
immediately prior to such transaction, owned a majority of the outstanding
voting stock of the Company; (2) any sale or transfer of the capital stock owned
or controlled by the majority shareholder or shareholders of the Company to
trusts or comparable entities for the primary benefit of such shareholders or
their family members or to the estate, heirs or devisees of any such shareholder
in the event of his or her death; or (3) any transaction in which the Company
reincorporates in another jurisdiction or engages in other internal
reorganization or changes in corporate structure without the receipt of
consideration and with the same identity of ownership as immediately before such
transaction; none of which shall be a Change of Control hereunder.
1.4. LOAN DOCUMENTS; DELIVERY; EFFECTIVE DATE. The "Loan Documents" are
the documents indicated below, each dated as of the date of this Agreement
unless indicated otherwise. A capitalized term used in this Agreement but not
defined herein has the meaning given in the other Loan Documents.
(a) The Agreement
(b) The Note
(c) The Warrant (as defined below)
Each party shall execute and deliver to the other party counterpart copies of
the Loan Documents by telefacsimile or hand delivery on or before the Effective
Date (as defined in this Section 1.4). In addition, on or before the Effective
Date (as defined in this Section 1.4), (a) the Company shall deliver to the
Lender at its address set forth on the signature page hereof (or to Lender's
counsel at its San Francisco office, att'n: Jeff L. Schaffer) an original
executed counterpart of the Credit Facility Agreement bearing an authorized
signature on behalf of the Company, and (b) the Lender shall deliver to the
Company at its address set forth on the signature page hereof (or to the
Company's counsel at its San Francisco office, att'n: Scott Kline) an original
executed counterpart of the Credit Facility Agreement. Finally, on or before the
Effective Date (as defined in this Section 1.4), the Company shall obtain the
Lender's signature in the "ACCEPTANCE BY HOLDER" signature line on the last page
of the Warrant, and the Company shall deliver by Federal Express or other
overnight courier directly to ING Barings, LLC, 350 Park Ave., 3rd Floor, New
York, New York, 10022, Att'n: Dave Johnson, both of the following documents: (i)
the executed original Note bearing an authorized signature on behalf of the
Company, and (ii) the executed original Warrant bearing authorized signatures on
behalf of the Company and the Lender. For purposes of this Agreement, the
"Effective Date" shall be the date that the last of all
<PAGE> 3
of the executions and deliveries specified in this Section 1.4 (including,
without limitation, Furham Selz's actual receipt of the executed original Note
and Warrant) has occurred.
2. PROMISSORY NOTE.
2.1. ISSUANCE OF NOTE; INTEREST RATE. Subject to the terms and
conditions of this Agreement, at the time of the execution and delivery of this
Agreement by the parties, the Company will issue a promissory note of the
Company payable to the Lender in the maximum principal amount of the Commitment
and bearing interest at the rate of eight percent (8%) per annum (except that
upon the occurrence of a Default and for so long as any Default remains
outstanding, the outstanding principal amount of such Note shall bear interest
at the Default rate of ten percent (10%) per annum), in substantially the form
of Exhibit A hereto (the "Note"), and such Note shall be delivered for the
benefit of the Lender as provided in Section 1.4. Notwithstanding any provision
herein, the Company and Lender intend that the total liability for payments in
the nature of interest shall not exceed the applicable limits imposed by any
applicable state or federal interest rate laws. If any payments in the nature of
interest, additional interest, and other charges made hereunder are held to be
in excess of the applicable limits imposed by any applicable state or federal
laws, it is agreed that any such amount held to be in excess shall be considered
payment of principal and the indebtedness evidenced thereby shall be reduced by
such amount in the inverse order of maturity so that the total liability for
payments in the nature of interest, additional interest and other charges shall
not exceed the applicable limits imposed by any applicable state or federal
interest rate laws.
2.2. TERM AND PREPAYMENT OF NOTES. All unpaid principal and all
accrued and unpaid interest on the Note shall be due and payable on the Maturity
Date. The Company may prepay all or part of the Note at any time without penalty
and, upon payment of the Debt (as defined herein) in full, may terminate the
line of credit. Under all events and circumstances, the line of credit shall
terminate no later than the Maturity Date.
2.3. FEES AND EXPENSES. In addition to principal and interest
with respect to the Note, the Company agrees on the Closing Date, to reimburse
the Lender for (or pay to the Lender's counsel directly) up to Twenty-Five
Thousand Dollars ($25,000) of the reasonable fees and expenses of Lender's
counsel in connection with the drafting and negotiation of this Agreement and
the other Loan Documents (including a reasonable estimate of post-closing fees
and expenses of such counsel). To the extent that they are not paid on the
Closing Date, the fees and expenses described in this Section 2.3 (collectively,
"Fees and Expenses") shall be payable within thirty (30) days after invoice by
the Lender.
2.4. SECURITY FOR THE NOTES.
(a) GRANT OF SECURITY INTEREST. The Company hereby
grants to the Lender a security interest in the property described in Section
2.4(c) below (collectively, the "Collateral") to secure payment of all amounts
due under this Agreement or the Note, including without limitation the principal
amount of all advances and all accrued interest thereon (collectively, the
"Debt") and performance by the Company of all of the Company's covenants,
liabilities, undertakings and obligations to the Lender hereunder, whether
absolute or contingent.
<PAGE> 4
(b) UCC-1 FINANCING STATEMENTS. Concurrently with the
execution of this Agreement, the Company shall (1) execute and deliver to Lender
UCC-1 Financing Statements ("UCC-1 Financing Statements") in favor of the Lender
covering the Collateral in form and substance reasonably satisfactory to Lender.
In addition, at Lender's request from time to time after delivery of the
Financing Statement, the Company will execute and deliver to Lender such other
documents as Lender may reasonably request to perfect Lender's security interest
in the Collateral.
(c) COLLATERAL. The Collateral shall consist of all
tangible and intangible property of the Company (and all of the Company's right,
title and interest therein and thereto), whether now owned by the Company or
acquired by the Company after the date hereof at any time, including, but not
limited to, goods, inventories, machinery, equipment, fixtures, documents,
patents, patent applications, customer lists, contract rights, instruments,
books, records, files, licenses of patents and technology, computer programs in
source or object code, general intangibles, goodwill, chattel paper, accounts
receivable and accounts, including all cash and non-cash proceeds of all such
property, the products and increase of all such property, and all additions to
and replacements of all such property. For purposes hereof, the term "proceeds"
includes whatever is receivable or received by the Company when Collateral is
sold, leased, collected, exchanged or otherwise disposed of, whether such
disposition is voluntary or involuntary, and includes, without limitation, all
rights to payment, including return premiums, with respect to any insurance
relating thereto. The Company hereby represents and warrants to the Lender that
the Company is the owner of the Collateral (or, in the case of after-acquired
Collateral, at the time the Company acquires rights in such Collateral, will be
the owner thereof) and such Collateral is free and clear of all liens and
encumbrances, except for any liens and encumbrances that arise by operation of
law (such as mechanic's or materialmen's liens) and that do not secure any
past-due amount owing by the Company or as set forth on Schedule 2.4(c) attached
hereto.
(d) WAIVER BY THE COMPANY. To the maximum extent
permitted by law, the Company hereby waives (i) any right to require the Lender
to pursue any particular remedy against the Company or any other person; (ii)
any right to the benefit of, or to direct the application of, any Collateral
until the Debt shall have been paid and performed in full; and (iii) any right
of subrogation to the Lender until the Debt shall have been paid and performed
in full.
(e) DEFAULT. The Company shall be deemed in default
("Default") under this Agreement if (1) the Company shall fail to make payment
of the principal amount of all advances hereunder and all accrued interest
thereon as and when due, (2) The Company shall fail to make payment of any Fees
and Expenses hereunder within ten (10) days of when due, (3) the Company shall
file a petition in bankruptcy or for reorganization, arrangement, composition,
readjustment, liquidation, dissolution or other relief of the same nature under
any Federal or state law, or the Company is adjudicated a bankrupt or insolvent
or makes an assignment for the benefit of creditors, or any petition or other
proceeding is filed by the Company for appointment of a trustee, receiver,
conservator or liquidator of all, or substantially all, of the Company's
property, or if any involuntary petition in bankruptcy or other proceeding of a
similar nature shall be filed against the Company and shall not be dismissed
within forty-five (45) days after such
<PAGE> 5
filing, (4) the Company shall fail to observe or perform any other term or
condition of this Agreement in any material respect, and such failure or breach
shall continue for a period of twenty-one (21) days, or (5) any representation
or warranty of the Company contained in any Loan Document was false or
misleading in any material respect when made or deemed made.
(f) REMEDIES. Upon the occurrence of any such Default,
the Lender may, in addition to all rights and remedies available to the Lender
hereunder or under the California Commercial Code, do any one or more of the
following:
(1) foreclose or otherwise enforce the Lender's
respective security interest in any manner permitted by
law or provided for in this Agreement;
(2) recover from the Company all costs and expenses,
including without limitation reasonable attorneys' fees
and costs, incurred or paid by the Lender in exercising
any right, power or remedy provided by this Agreement or
by law;
(3) require the Company to assemble the Collateral and
make it available to the Lender at the Company's
facilities;
(4) enter onto property where any Collateral is located
and take and maintain possession thereof and remove the
Collateral therefrom with or without judicial process;
(5) prior to the disposition of the Collateral, store,
process, repair or recondition it or otherwise prepare
it for disposition in any commercially reasonable manner
and to the extent the Lender deem appropriate; and
(6) declare all or any of the Debt to be immediately due
and payable (and upon which declaration the Debt shall
be so due and payable); provided, however, that in the
event of any Default under clause (1), (2) or (3) of
Section 2.4(e), all Debt shall automatically and
immediately become due and payable without declaration,
notice or any other action whatsoever.
If a sufficient sum is not realized from the disposition of Collateral to pay
the Debt then outstanding, the Company shall be liable for and agrees to pay any
deficiency.
(g) CUMULATIVE RIGHTS. The rights, powers and remedies
of the Lender hereunder shall be in addition to all rights, powers and remedies
given to the Lender by virtue of any statute or rule of law, all of which
rights, powers and remedies shall be cumulative and may be exercised
successively or concurrently without impairing the Lender's security interest in
the Collateral.
<PAGE> 6
2.5. ADMINISTRATION.
(a) LOAN ACCOUNT. The Lender shall maintain in its
records a loan account for the line of credit hereunder (the "Loan Account") in
which shall be recorded (i) the principal amount of the advances made under the
line of credit, (ii) the amount of interest accrued on the line of credit; (iii)
all other appropriate debits and credits as and when due in accordance with this
Agreement; (iv) all Fees and Expenses; and (v) all payments made by the Company
on the line of credit. All entries in the Loan Account shall be made in
accordance with the customary accounting practices of the Lender as in effect
from time to time. All payments hereunder shall be applied first, to Fees and
Expenses, second, to accrued and unpaid interest, and third, to principal
payments then due and owing.
(b) STATEMENTS. The Lender shall deliver to the Company
a written statement each calendar month setting forth the balance of the
principal amount of the line of credit outstanding, all accrued and unpaid
interest thereon, all Fees and Expenses and the remaining available amount of
line of credit. Each such statement shall be subject to subsequent review by the
Company and shall be binding upon the Lender.
3. THE WARRANT. Concurrently with the issuance of the Note, and subject
to the terms and conditions of this Agreement, at the Closing the Company will
issue to the Lender a non-transferable warrant to purchase shares of capital
stock of the Company (the "Warrant Shares") in substantially the form of Exhibit
B hereto (the "Warrant"). The Warrant Shares shall be subject to the
registration rights set forth in the Warrant. The Warrant shall be delivered by
the Company for the benefit of the Lender in accordance with Section 4.1
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to the Lender as follows:
4.1. ORGANIZATION AND STANDING; ARTICLES AND BYLAWS. The Company
is a corporation duly organized and existing under, and by virtue of, the laws
of the state of Delaware and is in good standing under such laws. The Company
has the requisite corporate power to own and operate its properties and assets,
and to carry on its business as presently conducted and as proposed to be
conducted. The Company is qualified or licensed as a foreign corporation in
California.
4.2. CORPORATE POWER. The Company has all requisite legal and
corporate power to enter into this Agreement, to issue the Note and Warrant, and
to carry out and perform its obligations under the terms hereof and thereof,
subject to applicable federal and state securities laws.
4.3. AUTHORIZATION. All corporate action on the part of the
Company, its officers, directors, and stockholders necessary for the sale and
issuance of the Note and Warrant pursuant hereto and the performance of the
Company's obligations hereunder and thereunder has been taken. This Agreement is
a legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws of general application
affecting enforcement of
<PAGE> 7
creditors' rights, and except as limited by application of legal principles
affecting the availability of equitable remedies.
4.4. NO CONFLICT. To the actual knowledge of the Company, (i)
the execution and delivery of the Loan Documents and the consummation of the
transactions contemplated thereby will not materially conflict with any legally
enforceable contract or agreement between the Company and any third person or
entity; and (ii) the Company is not a party to any outstanding agreement which
any material obligation or agreement is inconsistent with the Loan Documents.
4.5. USE OF PROCEEDS. The Company shall use the advances
hereunder for general corporate purposes and working capital as deemed necessary
or appropriate by the Board of Directors and Management of the Company.
4.6. DISCLOSURE. To the actual knowledge of the Company, (i) the
Loan Documents, including the exhibits thereto, and the information delivered to
the Lender pursuant to the Loan Documents do not contain any untrue statement of
a material fact and do not omit to state a material fact necessary in order to
make the statements contained therein or herein not misleading and (ii) there is
no fact which materially adversely affects the business, prospects, condition,
affairs or operations of the Company or any of its properties or assets which
has not been set forth in the Loan Documents, or exhibits thereto.
Each of the foregoing representations and warranties automatically shall be
deemed brought down and remade anew by the Company each time, and as of the
date, it requests an advance from the Lender pursuant to Section 1 above.
5. REPRESENTATIONS AND WARRANTIES OF THE LENDER.
5.1. DUE EXECUTION. The Loan Documents have been duly executed
and delivered by the Lender, and, upon execution and delivery by the Company,
will be valid and legally enforceable in accordance with their terms, except as
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws of
general application affecting enforcement of creditors' rights, and except as
limited by application of legal principles affecting the availability of
equitable remedies.
5.2. AUTHORITY. The Lender has all right, power and authority to
enter into the Loan Documents and to consummate the transactions contemplated
thereby, and the Loan Documents, once executed by the Company and the Lender,
will constitute the legally binding valid obligations of the Lender enforceable
in accordance with their terms, such enforceability being subject only to laws
of general application relating to bankruptcy, insolvency and the relief of the
Company and rules of law governing specific performance, injunctive relief or
other equitable remedies.
5.3. BROKERS OR FINDERS. The Company has not incurred and will
not incur, directly or indirectly, as a result of any action taken by the
Lender, any liability for brokerage or
<PAGE> 8
finders' fees or agents' commissions or any similar charges in connection with
this Agreement or the transactions contemplated hereby.
5.4. COMPLIANCE WITH SECURITIES LAWS. The Lender hereby
represents, warrants and covenants that (1) the Note, Warrant and Warrant Shares
shall be acquired for investment only and not with a view to, or for sale in
connection with, any distribution (within the meaning of the Securities Act of
1933, as amended (the "Securities Act"), and rules, regulations and
interpretations thereunder and thereof) thereof; (2) the Lender has had such
opportunity as the Lender has deemed adequate to obtain from representatives of
the Company such information as is necessary to permit the Lender to evaluate
the merits and risks of its loan to the Company and any investment in the
Company; (3) the Lender is able to bear the economic risk of holding the Note,
Warrant and Warrant Shares for an indefinite period; and (4) the Lender
understands that (i) the Note and Warrant will not be registered under the
Securities Act, (ii) the Warrant Shares will not be registered under the
Securities Act unless and until the Lender's rights under the Warrant are
exercised in accordance with the terms thereof, and until such registration is
effected, (iii) the Note, Warrant and Warrant Shares will be "restricted
securities" within the meaning of Rule 144 under the 1933 Act and (iv) the
exemption from registration under Rule 144 will not be available for at least
one year from the date of purchase of the Note and Warrant or exercise of the
Warrant, as the case may be, and even then will not be available unless a public
market then exists for the stock, adequate information concerning the Company is
then available to the public, and other terms and conditions of Rule 144 are
complied with. The Company acknowledges that a transfer of the Note or a
fractional portion of the Note to one or more of the partners who comprise the
Lender as a distribution without consideration (whether upon liquidation of
Lender or a withdrawal of capital by such a partner in accordance with Lender's
agreement of limited partnership) will not require any registration of the Note
or any consent of the Company.
5.5. LEGENDS. The Lender understands that the Warrant Shares
will bear restrictive legends as deemed necessary by the Company or its counsel
with regard to the matters set forth in this Agreement or otherwise as necessary
or appropriate.
6. NO ADDITIONAL DEBT. So long as there is any Debt outstanding or the
line of credit remains in effect, except for any Debt owing to the Lender or
debt issued contemporaneously with payment of the Debt in full and termination
of the line of credit, the Company shall not incur or issue or permit to exist
any indebtedness for borrowed money (whether or not evidenced by any note,
indenture, mortgage or other instrument), including without limitation any
deferred portion of the purchase price for property or services (other than
trade payables incurred in the ordinary course of business that are not past
due) without the written consent of Lender (which consent shall not be
unreasonably withheld, conditioned or delayed); provided, however, that the
Company may, without the consent or approval of the Lender, incur junior debt in
the aggregate principal amount of up to Five Hundred Thousand Dollars ($500,000)
in connection with the purchase or lease of property (whether or not in the
ordinary course of business).
<PAGE> 9
7. MISCELLANEOUS.
7.1. WAIVERS AND AMENDMENTS.
(a) DELAYS. No failure or delay by any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided shall be cumulative and not exclusive of
any rights or remedies provided by law.
(b) AMENDMENTS. This Agreement may not be amended,
modified or supplemented other than by a written instrument signed by all
parties, which are, at the time of such amendment or modification, subject to
this Agreement.
(c) WAIVERS. Any provision of this Agreement may be
waived if, but only if, such waiver is in writing and is signed by the party
against whom the enforcement of such waiver is sought.
7.2. GOVERNING LAW; ATTORNEYS' FEES. This 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. he Company shall reimburse Lender for all
costs and expenses, including attorneys' fees, reasonably incurred by Lender in
connection with the administration or enforcement of any Loan Document (but
subject to the $25,000 limitation specified in Section 2.3 above respecting the
drafting and negotiation of the Loan Documents) if Lender is the prevailing
party, whether or not suit if filed. In addition, in the event any action or
proceeding is commenced concerning the interpretation or enforcement of any Loan
Document, the prevailing party in such action or proceeding shall be entitled to
recover reasonable attorneys' fees and costs of suit from the non-prevailing
party.
7.3. SURVIVAL. The representations, warranties, covenants, and
agreements made herein shall survive the closing of the transactions
contemplated hereby.
7.4. SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the respective directors, officers, parents, subsidiaries,
affiliates, representatives, agents, successors, and assigns of each of the
parties.
7.5. ENTIRE AGREEMENT. This Agreement and the other documents
delivered. pursuant hereto constitute the full and entire understanding and
agreement between the parties hereto with regard to the subjects hereof and
thereof.
7.6. NOTICES. All notices and other communications required or
permitted hereunder shall be in writing and shall be transmitted by personal
delivery, telefacsimile, or overnight courier addressed to the applicable party
at its address or fax number set forth below its signature on the signature page
hereof, or at such other address or fax number furnished to the
<PAGE> 10
other party in writing in accordance with this Section 7.6. Any such notice
shall be effective on receipt during business hours on a business day.
7.7. SEPARABILITY. In case any provision of this Agreement shall
be invalid, illegal, or unenforceable, the validity, legality, and
enforceability of the remaining provisions shall not in any manner be affected
or impaired thereby.
7.8. OTHER DOCUMENTS. The parties to this Agreement shall in
good faith execute such other and further instruments, assignments or documents
as may be necessary or appropriate to carry out the transactions contemplated by
this Agreement.
7.9. INDEMNITY. The Company agrees to indemnify and save
harmless Lender, the Lender's officers, directors, partners, employees and
agents, and each person who controls such other party within the meaning of the
Securities Act or the Exchange Act, from and against any and all costs,
expenses, damages, claims, actions or other liabilities, including costs of
investigation and defense (collectively, "Damages") suffered or incurred by any
such indemnified party as a result of any breach by the Company of any of its
agreements, representations, warranties or covenants contained in this
Agreement, other than Damages resulting, directly or indirectly from the gross
negligence or willful misconduct of the indemnified party; provided, however,
that if and to the extent that such indemnification is unenforceable for any
reason, the Company shall make the maximum contribution to the payment and
satisfaction of such indemnified liability which shall be permissible under
applicable laws.
7.10. TITLES; INTERPRETATION. 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 Agreement. References herein to exhibits to
this Agreement shall be deemed to incorporate all exhibits by reference. Where
the context requires, the singular shall include the plural and the plural the
singular.
<PAGE> 11
7.11. COUNTERPARTS. This Agreement may be executed in any number
of counterparts which may be delivered by facsimile and each of which shall be
an original, but all of which together shall constitute one instrument, and
which shall become effective when there exist copies signed by the Company and
the Lender.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by their duly authorized representatives effective as of the date set
forth on the first page hereof
COMPANY: OMNIS TECHNOLOGY CORPORATION,
A DELAWARE CORPORATION
BY: /s/ JAMES DORST
---------------------------------
NAME: JAMES DORST
-------------------------------
TITLE: CFO/COO
------------------------------
981 INDUSTRIAL WAY
SAN CARLOS, CALIFORNIA 94070-4117
FAX NUMBER: 650-632-7130
LENDER: ASTORIA CAPITAL PARTNERS, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
BY: ASTORIA CAPITAL MANAGEMENT, INC.
ITS GENERAL PARTNER
BY: /s/ RICK KOE
------------------------------
RICK KOE, PRESIDENT
6600 92ND AVENUE S.W.
SUITE 370
PORTLAND OREGON 97223
FAX NUMBER: (503) 244-3801
<PAGE> 1
EXHIBIT 10.4
NEITHER THIS PROMISSORY NOTE NOR THE SHARES OF CAPITAL STOCK ISSUABLE HEREUNDER
HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO SALE OR
DISPOSITION MAY BE EFFECTED EXCEPT IN COMPLIANCE WITH RULE 144 UNDER SAID ACT OR
AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL FOR
THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE ACT OR RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE
COMMISSION.
PROMISSORY NOTE
$3,000,000
8% p.a. December 21, 1999
For value received, OMNIS TECHNOLOGY CORPORATION, a Delaware
corporation, whose principal place of business is 981 Industrial Way, San
Carlos, California 94070-4117 ("Maker"), hereby promises to pay to the order of
ASTORIA CAPITAL PARTNERS, L.P., a California limited partnership, ("Payee"), at
its principal place of business, 6600 92nd Avenue S.W., Suite ____, Portland,
Oregon 97223, or at such other place as Payee may from time specify, the
principal sum of THREE MILLION DOLLARS ($3,000,000) or so much thereof as may be
advanced and be outstanding hereunder plus interest thereon, in legal and lawful
money of the United States of America.
This Note is made pursuant to that certain Credit Facility Agreement by
and between Maker and Payee dated as of the date hereof (the "Credit Facility
Agreement"), as amended from time to time, the terms of which are incorporated
herein by reference. Additional terms of this Note, including, without
limitation, the rate of interest, default rate of interest, terms of repayment,
security, terms of default, governing law and venue and costs and attorneys'
fees are set forth in the Credit Facility Agreement.
Maker hereby waives diligence, demand, presentment for payment, notice
of non-payment, protest and notice of protest, and specifically consents to and
waives notice of any renewals or extensions of this Note, whether made to or in
favor of Maker or any other person or persons. The pleading of any statute of
limitations as a defense to any demand against Maker is expressly waived by each
and all of said parties to the fullest extent permitted by law. The rights,
powers and remedies of Payee under this Note shall be in addition to all rights,
powers and remedies given to Payee by virtue of any statute or rule of law,
including but not limited to the California Commercial Code. All such rights,
powers and remedies shall be cumulative and may be exercised successively or
concurrently in Payee's sole discretion. Any forbearance, failure or delay by
Payee in exercising any right, power or remedy shall not preclude further
exercise thereof, and every right, power or remedy of Payee shall continue in
full force and effect until such right, power or remedy is specifically waived
in a writing executed by Payee.
<PAGE> 2
Notwithstanding the legend at the top of this Note, the Maker
acknowledges that a transfer of this Note or a fractional portion of this Note
to one or more of the partners who comprise Payee as a distribution without
consideration (whether upon liquidation of Payee or a withdrawal of capital by
such a partner in accordance with Payee's agreement of limited partnership) will
not require registration of this Note, any opinion of counsel for the Payee, or
any consent of the Maker.
IN WITNESS WHEREOF, this Note has been executed and delivered as of the
date first above written by the duly authorized representative of Maker.
OMNIS TECHNOLOGY CORPORATION,
A DELAWARE CORPORATION
By: /s/ JAMES DORST
---------------------------------
Name: JAMES DORST
-------------------------------
Title: CFO/COO
------------------------------
2
<PAGE> 1
EXHIBIT 10.5
NEITHER THIS WARRANT NOR THE CAPITAL STOCK ISSUABLE HEREUNDER HAS BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR WITH ANY STATE
SECURITIES COMMISSIONER. NEITHER THIS WARRANT NOR THE CAPITAL STOCK MAY BE SOLD
OR TRANSFERRED UNLESS REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND QUALIFIED UNDER ALL APPLICABLE STATE SECURITIES LAWS, OR UNLESS EXEMPTIONS
FROM SUCH REGISTRATION AND QUALIFICATION ARE AVAILABLE.
OMNIS TECHNOLOGY CORPORATION.
NON-TRANSFERABLE WARRANT
December 21, 1999
Reference is hereby made to that certain Credit Facility Agreement (the
"Credit Facility Agreement") by and between Omnis Technology Corporation., a
Delaware corporation (the "Company") and Astoria Capital Partners, L.P., a
California limited partnership (the "Holder") and the $3,000,000 Promissory Note
(the "Note") dated December 21, 1999 of the Company in favor of the Holder, the
terms of which are incorporated by this reference.
The Company hereby certifies that, for value received, Holder is
entitled to purchase from the Company, on or before the Expiration Date (as
defined below), the number of shares or other units of securities of the Company
(the "Warrant Securities") set forth herein under the terms and conditions set
forth herein.
1. EXPIRATION DATE. This Warrant shall be exercisable in whole or in
part until 5:00 p.m. (San Francisco time) on May 31, 2001 (the "Expiration
Date").
2. TERMS AND CONDITIONS OF EXERCISE OF THIS WARRANT.
2.1. QUALIFYING OFFERINGS. (i) This Warrant may only be
exercised in connection with one or more Qualifying Offerings (as such term is
defined below) as set forth herein and (ii) the Warrant Securities issuable upon
exercise hereof shall only be issued at the closing of a Qualifying Offering.
The term "Qualifying Offering" shall mean the offer and sale by the Company of
any equity securities of the Company, or securities convertible into equity
securities ("Reference Securities"), in one transaction or a series of
transactions with aggregate net proceeds of at least $1,000,000 consummated on
or before the Expiration Date, excluding any securities issued pursuant to any
of the Company's stock incentive plans for the benefit of employees, officers,
directors or agents or securities issued upon exercise or conversion of any such
securities. Notwithstanding anything to the contrary herein, the Company shall
have no obligation to issue any securities, consummate any offering of its
securities or accept any offer to issue or sell any of its securities on or
before the Expiration Date.
1
<PAGE> 2
2.2. OFFERING NOTICE. In the event that the Company (i) issues a
written offering memorandum, offer letter or other binding written offer to sell
or issue securities in a Qualifying Offering to one or more persons or (ii)
receives a binding offer to purchase securities in a Qualifying Offering from
one or more persons, the Company shall provide prompt written notice of such
offer to Holder. Holder shall notify the Company in writing within thirty (30)
days after receipt of such notice of its election to exercise all or part of
this Warrant. Notwithstanding the foregoing, the Company shall have no
obligation to provide notice to Holder of (i) any written or oral communications
relating to a potential offer, sale or issuance of its securities in advance of
an offer to purchase or sell such securities that the offeree could accept, or
(ii) offers to buy, sell or issue its securities that will not be (either alone
or together with any preceding offers), if consummated, Qualifying Offerings.
2.3. EXERCISE OF THIS WARRANT. Subject to the following
sentence, in each Qualifying Offering, the Holder may, through exercise of all
or part of this Warrant, purchase the number of Warrant Securities offered in
connection therewith in an amount up to the amount of the Commitment specified
in the Credit Facility Agreement, whether or not the Company has actually
borrowed the full amount and regardless of whether any amounts actually borrowed
have been paid in full or remain outstanding (the "Commitment Amount"), divided
by the price per share of the Warrant Securities issued in such offering. The
maximum aggregate number of Warrant Securities that may be purchased upon
exercise of the Warrant shall be limited to the number of shares issuable upon
payment of an aggregate Exercise Price (as defined below) in an amount equal to
the Commitment Amount. The issuance of Warrant Securities hereunder shall be
subject to the terms of the applicable Qualifying Offerings. In connection
therewith, Holder shall execute and deliver, in addition to the Subscription
Form described below, any joinder agreement, subscription agreement or other
documents or instruments with respect to the Qualifying Offering reasonably
requested by the Company. If any Qualifying Offering is not consummated pursuant
to the terms thereof and shares or not issued to the Holder hereunder, the
applicable exercise hereof shall be deemed void and the Company shall promptly
return any exercise price paid in connection with such exercise without
deduction.
2.4. EXERCISE PRICE. Upon exercise of this Warrant, in whole or
in part, and subject to the limitations on the number of Warrant Securities
issuable hereunder set forth above, the Holder shall pay to the Company an
exercise price equal to the price per Warrant Security in the applicable
Qualifying Offering times the number of shares to be issued upon exercise hereof
(the "Exercise Price"). The Exercise Price shall be paid in cash, provided, that
the Holder may elect to cancel any outstanding debt and/or accrued interest,
including the Note, as payment of the Exercise Price. The Holder may also
exchange other securities of the Company held at the market price thereof in
payment of the Exercise Price.
2.5. EXERCISE PROCEDURES. This Warrant shall be exercised by
surrendering it to the Company at its principal office, with a duly executed
Subscription Form (in substantially the form appearing at the end of this
document), together with payment of the Exercise Price. Promptly after exercise
and in accordance with the terms of the applicable Qualifying Offering, the
Company shall issue and deliver to or upon the order of the Holder a certificate
or certificates for the number of Warrant Securities issuable upon such
exercise, and the Company will pay all issue taxes in connection therewith. All
Warrant Securities that may be issued upon exercise of
2
<PAGE> 3
this Warrant will, upon issuance by the Company in accordance with the terms of
this Warrant, be validly issued, fully paid and non-assessable, and free from
all taxes and liens with respect to the issuance thereof. The Company shall not
be required to pay any tax or other charge imposed in connection with any
transfer involved in the issuance of any certificate for Warrant Securities in
any name other than that of the Holder, and in such case the Company shall not
be required to issue or deliver any stock certificate or security until such tax
or other charge has been paid, or it has been established to the Company's
reasonable satisfaction that no tax or other charge is due.
3. WARRANT SECURITIES ISSUABLE ON EXERCISE OF WARRANT. The parties
acknowledge that the number of authorized but unissued shares of Preferred Stock
of the Company as of the date hereof would not be sufficient as of the date of
this Warrant to effect the exercise of this Warrant if the Warrant Securities
were preferred stock. The Company agrees, however, to use its best efforts to
take such corporate action as may be necessary, in the opinion of its counsel,
to increase its authorized but unissued shares of Preferred Stock to such number
of shares as would be sufficient to allow a Qualifying Offering to be made of
preferred stock and for the issuance of preferred stock as Warrant Securities
immediately prior to or concurrently with the consummation of a Qualifying
Offering of preferred stock and at any time thereafter as shall be necessary to
effect the exercise of this Warrant.
4. FRACTIONAL SHARES. If the Warrant Securities are issued at a price of
less than $100 per share or other unit, no fractional Warrant Securities will be
issued in connection with any exercise of this Warrant, but in lieu of such
fractional shares the Company shall make a cash payment therefor upon the basis
of the Exercise Price then in effect.
5. TRANSFER.
5.1. TRANSFER. This Warrant may not be transferred, in whole or
in part, except in accordance with the procedures and limitations as set forth
below. In addition, the Warrant Securities issuable upon exercise hereof will be
subject to any transfer restrictions contained in the Company's Bylaws that
apply to the Warrant Securities.
5.2. REGISTRATION OR EXEMPTION. This Warrant and Warrant
Securities issuable upon exercise hereof shall not be sold or transferred unless
either (i) they first shall have been registered under the Securities Act of
1933, as amended (the "Act"), or (ii) the Company first shall have been
furnished with an opinion of legal counsel, reasonably satisfactory to the
Company, to the effect that such sale or transfer is exempt from the
registration requirements of the Act. The Company acknowledges that a transfer
of a portion of the Warrant or of Warrant Securities to one or more of the
partners who comprise Holder as a distribution without consideration (whether
upon liquidation of Holder or a withdrawal of capital by such a partner in
accordance with Holder's agreement of limited partnership) will not require such
registration and will not require an opinion of counsel in connection with such
a distribution.
5.3. LEGEND. Each certificate representing Warrant Securities
issuable upon exercise hereof shall bear a legend substantially in the following
form:
3
<PAGE> 4
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and may
not be offered, sold or otherwise transferred, pledged or
hypothecated unless and until such securities are registered
under such Act or an opinion of counsel satisfactory to the
Company is obtained to the effect that such registration is not
required."
The foregoing legend shall be removed from the certificates representing any
such shares, at the request of the holder thereof, at such time as they become
eligible for resale by the Holder pursuant to Rule 144(k) under the Act or
otherwise.
6. REGISTRATION RIGHTS.
6.1. PIGGYBACK REGISTRATION. If the Company proposes to register
any of its securities at any time on or before May 31, 2002, the Company shall
notify the Holder in writing at least thirty (30) days prior to filing any such
registration statement under the Securities Act for purposes of effecting a
public offering of securities of the Company (excluding registration statements
relating to any employee benefit plan or a corporate reorganization, including
securities issued by the Company in an acquisition transaction). The Holder
shall have the right to include in such registration statement all or any part
of the Holder's Warrant Securities or other securities into which the Warrant
Securities have been or may be converted ("Registrable Securities"). If the
Holder elects to include in any such registration statement all or any part of
the Holder's Registrable Securities, then the Holder shall, within twenty (20)
days after receipt of the above-described notice from the Company, so notify the
Company in writing, and in such notice shall inform the Company of the number of
Registrable Securities the Holder wishes to include in such registration
statement. If the Holder decides not to include all of its Registrable
Securities in any registration statement thereafter filed by the Company, the
Holder shall nevertheless continue to have the right to include any Registrable
Securities in any subsequent registration statement or registration statements
as may be filed by the Company on or before the date set forth above with
respect to offerings of its securities, all upon the terms and conditions set
forth herein.
(a) UNDERWRITING. If a registration statement under
which the Company gives notice under this Section is for an underwritten
offering, then the Company shall so advise the Holder. In such event, the right
of the Holder to include its Registrable Securities in a registration pursuant
to this Section shall be conditioned upon the Holder's participation in such
underwriting and the inclusion of the Holder's Registrable Securities in the
underwriting to the extent provided herein. The Holder shall enter into an
underwriting agreement in customary form with the managing underwriter or
underwriter(s) selected for such underwriting. Notwithstanding any other
provision of this Agreement, if the managing underwriter determine(s) in good
faith that marketing factors require a limitation of the number of shares to be
underwritten, then the managing underwriter(s) may exclude shares (including
Registrable Securities) from the registration and the underwriting, and the
number of shares that may be included in the registration and the underwriting
shall be allocated, first, to the Company, and second, to the Holder. The Holder
may elect to withdraw from any offering by written notice to the Company and the
underwriter, delivered at least twenty (20) days prior to the effective date
4
<PAGE> 5
of the registration statement. Any Registrable Securities excluded or withdrawn
from such underwriting shall be excluded and withdrawn from the registration.
The Company covenants that it will not grant to any other person any piggyback
registration rights without including a provision that, if a managing
underwriter excludes any securities from a registration and underwriting, the
securities sought to be included by such other person shall be included only to
the extent all of the Warrant Securities the Holder sought to include in the
registration have been included.
(b) EXPENSES. All expenses incurred in connection with a
registration pursuant to this Section (excluding underwriters' and brokers'
discounts and commissions; and the fees and disbursements of special counsel for
the Holder), including, without limitation all federal registration and
qualification fees, "blue sky" registration and qualification fees for up to
five (5) states, printers' and accounting fees, fees and disbursements of
counsel for the Company shall be borne by the Company.
6.2. DEMAND REGISTRATION.
(a) REQUEST BY HOLDER. If the Company shall receive a
written request from the Holder (a "Demand Request") that the Company file a
registration statement under the Securities Act covering the registration of at
least twenty percent (20%) of the outstanding Eligible Registrable Securities
(as defined below) pursuant to this Section, and if such Shares have not been
heretofore registered pursuant to Section 6.1 hereof, then the Company shall
within thirty (30) days after the receipt of such Demand Request, file a
registration statement under the Securities Act with respect to the Eligible
Registrable Securities that the Holder has requested to be registered and
included in such registration and use its reasonable best efforts to effect the
registration as soon as practicable thereafter and to maintain the effectiveness
of such registration until the earlier of (i) the date all the Holder's
Registrable Securities have been sold , (ii) the date the Holder's Registrable
Securities are eligible for resale by Holder pursuant to Rule 144(k) or (iii)
the third anniversary of the effectiveness of the registration statement,
subject only to the limitations of this Section. The term "Eligible Registrable
Securities" means any Registrable Securities held by Holder that were issued
pursuant to the exercise of this Warrant at least twelve (12) months, but not
more than twenty-four (24) months, before the date of the Demand Request.
(b) UNDERWRITING. If the Holder intends to distribute
its Eligible Registrable Securities by means of an underwriting, then it shall
so advise the Company as a part of its Demand Request. The Holder shall enter
into an underwriting agreement in customary form with the managing underwriter
or underwriters selected for such underwriting by the Company and the Holder.
Notwithstanding any other provision of this Section, if the underwriter(s)
advise(s) the Company in writing that marketing factors require a limitation of
the number of securities to be underwritten then the Company shall so advise the
Holder and the number of Eligible Registrable Securities that may be included in
the underwriting shall be reduced as required by the underwriter(s); provided,
however, that the number of shares of Eligible Registrable Securities to be
included in such underwriting and registration shall not be reduced unless all
securities proposed to be registered for the account of the Company are first
entirely excluded from the underwriting. Any Eligible Registrable Securities
excluded and
5
<PAGE> 6
withdrawn from such underwriting shall be withdrawn from the registration.
(c) MAXIMUM NUMBER OF DEMAND REGISTRATIONS. The Company
is obligated to effect only one (1) such registration pursuant to this Section.
(d) DEFERRAL. Notwithstanding the foregoing, if the
Company shall furnish to the Holder, a certificate signed by the President or
Chief Executive Officer of the Company stating that in the good faith judgment
of the Board of Directors of the Company, it would be seriously detrimental to
the Company and its shareholders for such registration statement to be filed and
it is therefore essential to defer the filing of such registration statement,
then the Company shall have the right to defer such filing for a period of not
more than 120 days after receipt of the request notice; provided however, that
the Company may not utilize this right more than once.
(e) EXPENSES. All expenses incurred in connection with a
registration pursuant to this Section, including without limitation all
registration and qualification fees, printers' and accounting fees, fees and
disbursements of counsel for the Company, (but excluding underwriters' discounts
and commissions), shall be borne by the Company. The Holder shall bear all
discounts, commissions or other amounts payable to underwriters or brokers in
connection with such offering and the fees and disbursements of any counsel for
the Holder. Notwithstanding the foregoing, the Company shall not be required to
pay for any expenses of any registration proceeding begun pursuant to this
Section if the registration request is subsequently withdrawn at the request of
the Holder; provided however, that (i) if at the time of such withdrawal, the
Holder has learned of a material adverse change in the condition, business, or
prospects of the Company not known to the Holder at the time of their request
for such registration and have withdrawn their request for registration with
reasonable promptness after learning of such material adverse change or (ii) the
Company exercised its right to defer the filing of a registration statement
pursuant to subsection (d) above and, after the deferral but before the filing
of the registration statement, the Holder withdraws its request, then the Holder
shall not be required to pay any of such expenses and shall retain its rights
pursuant to this Section.
6.3. INDEMNIFICATION. In the event any Registrable Securities
are included in a registration statement pursuant hereto:
(a) BY THE COMPANY. To the extent permitted by law, the
Company will indemnify and hold harmless the Holder, the partners, officers and
directors of the Holder, any underwriter (as defined in the Securities Act) for
Holder and each person, if any, who controls the Holder or underwriter within
the meaning of the Securities Act or the Securities Exchange Act of 1934, as
amended, (the "1934 Act"), against any losses, claims, damages, or liabilities
(joint or several) to which they may become subject under the Securities Act,
the l934 Act or other federal or state law, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations
(collectively, "Violations" and, individually, a "Violation"):
(1) any untrue statement or alleged untrue statement of
a material fact
6
<PAGE> 7
contained in such registration statement, including any
preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto;
(2) 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,
or
(3) any violation or alleged violation by the Company of
the Securities Act, the 1934 Act, any federal or state
securities law or any rule or regulation promulgated
under the Securities Act, the 1934 Act or any federal or
state securities law in connection with the offering
covered by such registration statement;
and the Company will reimburse the Holder, each partner, officer or director,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them, as incurred, in connection with investigating or defending any
such loss, claim, damage, liability or action; provided however, that the
indemnity agreement contained in this subsection shall not apply to amounts paid
in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by such Holder, partner, officer, director, underwriter
or controlling person of the Holder.
(b) BY THE HOLDER. To the extent permitted by law, the
Holder will indemnify and hold harmless the Company, each of its directors, each
of its officers who have signed the registration statement, each person, if any,
who controls the Company within the meaning of the Securities Act, any
underwriter, against any losses, claims, damages or liabilities (joint or
several) to which the Company or any such director, officer, controlling person,
or underwriter may become subject under the Securities Act, the 1934 Act or
other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by the Holder expressly for use in connection with such registration;
and the Holder will reimburse any legal or other expenses reasonably incurred by
the Company or any such director, officer, controlling person, or underwriter in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided however, that the indemnity agreement contained in
this subsection shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Holder, which consent shall not be unreasonably withheld; and
provided further, that the total amounts payable in indemnity by the Holder
under this Section in respect of any Violation shall not exceed the net proceeds
received by the Holder in the registered offering out of which such Violation
arises.
(c) NOTICE. Promptly after receipt by an indemnified
party under this
7
<PAGE> 8
Section of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential conflict of interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section, but the omission so to deliver written
notice to the indemnifying party will not relieve it of any liability that it
may have to any indemnified party otherwise than under this Section.
(d) DEFECT ELIMINATED IN FINAL PROSPECTUS. The foregoing
indemnity agreements of the Company and the Holder are subject to the condition
that, insofar as they relate to any Violation made in a preliminary prospectus
but eliminated or remedied in the amended prospectus on file with the SEC at the
time the registration statement in question becomes effective or the amended
prospectus filed with the SEC pursuant to SEC Rule 424(b) (the "Final
Prospectus"), such indemnity agreement shall not inure to the benefit of any
person if a copy of the Final Prospectus was furnished to the indemnified party
and was not furnished to the person asserting the loss, liability, claim or
damage at or prior to the time such action is required by the Securities Act.
(e) "MARKET STAND-OFF" AGREEMENT. The Holder hereby
agrees that it shall not, to the extent requested by the Company or an
underwriter of securities of the Company, sell or otherwise transfer or dispose
of any Warrant Securities or securities into which they have been or may be
converted (other than to donees or partners of the Holder who agree to be
similarly bound) for up to ninety (90) days following the effective date of a
registration statement of the Company filed under the Securities Act for a firm
commitment underwritten offering of newly-issued common stock of the Company
with expected net proceeds of at least $20 million; provided, however, that all
executive officers, directors and 1% shareholders of the Company then holding
Common Stock of the Company enter into similar agreements. In order to enforce
the foregoing covenant, the Company shall have the right to place restrictive
legends on the certificates representing the shares subject to this Section and
to impose stop transfer instructions with respect to the Warrant Securities (and
the Warrant Securities of every other person subject to the foregoing
restriction) until the end of such period.
7. MISCELLANEOUS.
7.1. REPLACEMENT OF WARRANT. Upon 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) upon delivery of
an indemnity agreement or bond in such
8
<PAGE> 9
reasonable amount as the Company may determine or (in the case of mutilations)
upon surrender and cancellation hereof, the Company, at its expense, will issue
a replacement.
7.2. NOTICES. All notices and other communications required or
permitted hereunder shall be in writing and shall be transmitted by personal
delivery, telefacsimile, or overnight courier addressed to the applicable party
at its address set forth below its signature on the signature page hereof, or at
such other address furnished to the other party in writing in accordance with
this section. Any such notice shall be effective on receipt during business
hours on a business day.
7.3. SURVIVAL OF COVENANTS, REPRESENTATIONS AND WARRANTIES, ETC.
All covenants, representations and warranties made in, pursuant to, or in
connection with this Warrant shall survive the execution and delivery hereof.
7.4. SEVERABILITY. Should any one or more of the provisions of
this Warrant be determined to be illegal or unenforceable, all other provisions
of this Warrant shall be given effect separately from the provision or
provisions determined to be illegal or unenforceable and shall not be affected
thereby.
7.5. PARTIES IN INTEREST. Except as otherwise expressly provided
herein, all the terms and provisions of this Warrant shall be binding upon and
inure to the benefit of and be binding upon, the respective directors, officers,
parents, subsidiaries, affiliates, representatives, agents, successors, and
assigns of each of the parties.
7.6. CHANGES; WAIVER. Neither this Warrant nor any term hereof
may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
7.7. GOVERNING LAW. Because the issuer of this Warrant is a
California corporation, this Warrant shall be construed in accordance with and
governed by the laws of that State. Any litigation or arbitration between the
parties which arises out of this Warrant shall be instituted and prosecuted only
in the appropriate California or Federal court or other tribunal, situated in
San Francisco, California. The Company hereby specifically submits itself and
its properties to the exclusive jurisdiction of such courts for purposes of any
such action and the enforcement of any judgment or order arising therefrom. The
parties hereto each waive any right to a change of venue and any and all
objections to the jurisdiction of the California courts. Notwithstanding the
foregoing, the Purchasers may take such actions in a foreign jurisdiction with
they deem necessary and appropriate to enforce or collect any court judgment in
any dispute arising out of the Warrant or to seek and obtain other relief as is
necessary to enforce the terms of this Warrant. Each party agrees that service
upon such party in any such action or proceeding maybe made as provided above
for the giving of notices.
7.8. EXPIRATION. If the last day on which this Warrant may be
exercised, or on which it may be exercised at a particular Exercise Price, is a
Sunday or a legal holiday or a day on which banking institutions doing business
in the City of San Francisco are authorized by law to close, this Warrant may be
exercised prior to 5:00 p.m. (San Francisco time) on the next
9
<PAGE> 10
succeeding full business day with the same force and effect and at the same
Exercise Price as if exercised on such last day specified herein.
7.9. TITLES; INTERPRETATION. The titles of the Sections and
subsections of this Warrant are for convenience of reference only and are not to
be considered in construing this Warrant. Where the context requires, the
singular shall include the plural and the plural the singular.
10
<PAGE> 11
IN WITNESS WHEREOF, the Company has caused this Stock Purchase Warrant
to be duly executed and delivered on the date first set forth above.
OMNIS TECHNOLOGY CORPORATION,
a Delaware corporation (the
"Company")
By: /s/ JAMES DORST
---------------------------------
Name: JAMES DORST
-------------------------------
Title: CFO/COO
------------------------------
981 Industrial Way
San Carlos, California 94070-4117
Fax Number: 650-632-7130
ACCEPTANCE BY HOLDER:
ASTORIA CAPITAL PARTNERS, L.P.,
a California limited partnership
By: Astoria Capital Management, Inc.
Its General Partner
By: /s/ RICK KOE
---------------------------------
Rick Koe, President
Dated: DEC. 22, 1999
------------------
6600 92nd Avenue S.W.
Suite 370
Portland Oregon 97223
Fax Number: (503) 244-3801
11
<PAGE> 12
SUBSCRIPTION FORM
The undersigned hereby irrevocably elects to exercise the Stock Purchase
Warrant issued by Omnis Technology Corporation on December ___, 1999 (the
"Warrant") to the extent of purchasing _______ shares of the
_________________________ Stock of Omnis Technology Corporation and
[CHECK ONE]
[ ] hereby delivers $______________ in payment of the Exercise Price thereof, in
accordance with the Warrant.
[ ] hereby irrevocably forgives and cancels $______________ of principal and
$_______________ of accrued interest of the Promissory Note issued by the
Company of December ___, 1999 in payment of the Exercise Price thereof, in
accordance with the Warrant.
Dated: ________________, 1999
Astoria Capital Partners, L.P.,
a California Limited Partnership
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
12
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 879,000
<SECURITIES> 0
<RECEIVABLES> 1,793,000
<ALLOWANCES> 0
<INVENTORY> 17,000
<CURRENT-ASSETS> 2,980,000
<PP&E> 728,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,708,000
<CURRENT-LIABILITIES> 2,450,000
<BONDS> 0
0
300,000
<COMMON> 986,000
<OTHER-SE> (28,000)
<TOTAL-LIABILITY-AND-EQUITY> 3,708,000
<SALES> 0
<TOTAL-REVENUES> 4,902,000
<CGS> 249,000
<TOTAL-COSTS> 4,634,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (10,000)
<INCOME-PRETAX> 9,000
<INCOME-TAX> (1,000)
<INCOME-CONTINUING> 10,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,000
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
